My background briefing for today tells me that the Property Council of Australia is in the business of how to maximise companies' real estate assets. In the century where the global information economy has come of age the question of what are the value of the assets you manage is a really scary one.
Today I am standing in at the last minute for the Federal Minister, who has been sidelined by the very old world task of welcoming our colonial Head of State while we here are considering the new world. There is a delicious irony in this. Now I cannot fill the shoes of the a Minister of the Crown , because I am neither a politician nor a Monarchist . But let me talk to you about some of my personal views on where Australia stands at a moment of monumental global change.
The Chairman of the US Federal Communications Commission recently commented that we are experiencing something like an eleven on the Richter scale of global change. The global information revolution, the new information economy, the new digital era is not a passing fad, an Internet bubble. It is something we all have to come to terms with.
When my secretary first passed on the message about speaking today, my first reaction was to link your Property Council with the never ending drama of the endless renovation of my Central Business District warehouse. My immediate reaction was that I know something about property and the perils of the Information Economy. After all, my four level warehouse in the middle of Melbourne is a sort of metaphor. When I moved in I thought I could future proof the internal wiring. That was two years ago. I have been rewiring ever since. We talk about the crisis of bandwidth in the bush, I recently chaired the national Bandwidth Inquiry, but I felt smug about my access to bandwidth. Wrong. Right in the middle of this city I, and every one of my neighbours in the most filmed turn-of-the-century lane in Melbourne, cannot get access to high bandwidth wires. Fibre/coax modem access? Your joking. Every one of our roofs has a satellite dish - I have two - but we still wait for a cable modem. This is not in the middle of nowhere, but in the middle of Melbourne.
In the 1980s and early 1990s we talked about Intelligent buildings. Today we need to talk about networked buildings and networked people. Virtual buildings.
Inside buildings, my wiring problem in Guildford Lane, the solution is local wireless. Technologies like Bluetooth offer the prospect of wireless local area networks within a building or floor. At home, I can't wait for this. Externally, buildings, and particularly large buildings become key assets in the new Information Economy. My firm has, for years, advised in Hong Kong, a property manager's paradise. Here the local telecommunications loop is a series of high rise buildings. Telecommunications competition is about capturing buildings, and then meshing them into the world.
In Australia, a company called Davnet got this message quick. I'm proud that my firm wrote the market report for Davnet's prospectus. Davnet's strategy is to hub buildings straight into the world of the Information Economy. Smart, and Japan's largest Telco NTT bought into Davnet to get the intellectual property of this approach to new age e-communications.
Davnet is a good example of how Australia is placed in the new Information Economy. We have proved that we can be innovative and smart. And we need to be.
Australian's are great users of technology. After the US and Scandinavia we are up there at the forefront.
This is a good thing in the global Information Economy, because we are among the first countries internationally to reach the point of critical mass in the take up of the Internet and electronic interfaces.
A critical mass of users, deep penetration and take up, is important in the Information Economy, because it drives innovation and the development of application services, the key source of new wealth creation.
If Australia is a hot bed of smart users, it has not been so hot on the production side to date. The US dominates the supply side of the Information Economy and our local information industries; our current industries. Whether or not this stays the same depends on whether or not the goal posts change - to our advantage.
The prognosis for the future depends on what we regard as important in future global competitiveness. A lot of the supply side basics are now becoming commodities, like computer hardware and network platforms and bandwidth.
There is a robust wholesale market in bandwidth services in the US and Europe, but not yet in Australia. Ubiquitous digital networks, at the right price, are now the essential precondition for the rollout of applications, the take up of e-commerce, and the makeover of e-businesses.
The action we associate with the "dot.com" phenomenon is all about the digital software tools and content that run over and are delivered by digital networks. Firms like Microsoft, and vertical industry applications and electronic commerce - firms like Solutions 6, MYOB, Computershare - are at the heart of the electronic revolution.
All this changes the rules of competitive advantage. Innovation with new and smart applications grows out of markets with deep participation and usage. A good example is a small Victorian-based firm, SchoolsNet, in the education sector. Because the Australian education market is highly centralised and co-ordinated, unlike the United States, SchoolsNet has been able to build unique service delivery applications linking schools, teachers, students, and parent households. This user network creates a market.
The rules of competitive advantage will change with the internationalisation of the Internet. In the 90s the game was whether you could cut it in the US, the only online marketplace that mattered. As an advanced electronic community, Australia is well placed to capitalise on the internationalisation of the Internet. The major shift over the next few years is what happens as the Internet changes from being a US centric phenomenon to a truly global force as more and more country markets go online.
The rules of the game change as the e-communications revolution goes mainstream. The real electronic revolution is happening at the level of the firm and of markets: the emergence of e-businesses and e-commerce. The key point here is that every firm will become a e-business, or go out of business. Electronic digital interfaces and networking affect every aspect of a firm's operations, from procurement, product design and manufacturing, through to distribution, marketing and customer relationship management.
It is fashionable just at the moment, to talk about an old economy and a new economy.
Models of black and white discontinuity are helpful for a while in ramming home the message of fundamental change to all the rules of the game.
Within the industry, we have talked about the conflict between Bell-heads and Netheads.
Within markets, we have talked about the contest between bricks and clicks.
As investors, we jump between the Dow Jones and Nasdaq, worrying all the time about an Internet bubble and corrections.
This was useful 90s talk, when we had to wake up to the magnitude of change.
But as the forces of change become the mainstream reality we simply have to accept the point that the new has changed the old for ever, and come to grips with the new rules of the game. That is the challenge this decade.
It is not old economy versus new economy, because every business has to become an e-business.
In this context Dot.coms cease to be a special breed, and become part of the mainstream. (And this will lead to "corrections" on all sides - and this is what is going to make markets very interesting).
The makeover of the old within the new economy is going to put the spotlight on a lot of interesting challenges, and will require us to reassess a lot of our business strategies. Especially our assumptions about location strategies versus people strategies. That is, the relationship between fixed and intangible assets.
Valuation of firms and assets has become really interesting. We confront issues of:
Location and place. Locations are branded centres of activity. And we all need to live somewhere. There is increasing global competition for where key people choose to live. (eg, Seattle and Washington State)
People clusters and links. New global networks of people; mobile people. People with roledexes.
New real estate: for example spectrum and intellectual property.
New assets: valuing customers (or eyeballs and hits), including building as customer aggregations. Valuing customer relationships and customer networks. Valuing the relative "stickiness" of a customer base.
New assets: skills. And the value of all employees as community marketers and networks of influence (eg Jack Nasser and Ford).
Finally, let me turn our attention to one other fundamental game we have to play out in Australia: the ultimate arcade game of telstra dot whereonearthisitgoing dot au. Computer games developers eat your heart out!
Telstra is in danger of becoming Australia's new economy BHP. This is new age hubris on a grand scale. As an ex-Telstra person this is a matter on which I can become a bit passionate. In the late 1980s the Telstra of which I was part of the top management team was a role model to the telco world: its innovation and adaptiveness was the matter of case studies and emulation around the telco world. Today it is a shareholder, stakeholder and political disaster zone. What has gone wrong? Two things. And it is worth dwelling on these two massive failings because they provide lessons for us all in how we can go wrong in the new global information economy.
First, work out what business you are in. There is a delicious irony in the way that, during the marketing of Telstra 2, the management boasted that the hardest message to get across was Telstra's unique positioning, as a Telco, as a "full services carrier", a fully vertically integrated operator in the Information Economy. Telstra marketed this around the world as a positive, and it has received negative market valuations!. Not surprisingly. The age of being all things to all people is over. That was the mindset of a state-owned or a privately-owned monopoly. Neither Microsoft or Telstra can think they can own and control the electronic world.
Secondly, Telstra has not accepted, nor has it promoted, the viewpoint that the era of a national, nation-wide carrier is dead. This is where Telstra is a victim of an outmoded national policy framework. Telstra is definitely not the natural owner of every customer, and every service delivered to each and every Australian. If it were, with the Information Economy and services sector convergence, it would have to aspire to own our entire Gross National Product. The idea of Telstra as "the carrier of last resort" or a "national flagship" is as dead as the dodo, and the sooner both Telstra and its majority Government owner wake up to this the better.
One of my own benchmark, "Damascus road", experiences occurred in 1995, when my firm undertook a major multi-client study which produced a seminal report, The Online Economy. It was 1995, and the majority of our large multinational and national clients, including Telstra and Microsoft, argued strongly with us during work-in-progress workshops that the Internet was not the future.
Five years later and it not clear to me that Telstra, nor parliament, have got the point of the Internet. Australia, and Australian communications policy, is no longer a erstwhile monopolist's monolithic entity: a national franchise for being everything to everyone. "one size fits all" policy model no longer works. The reality is that Australia, and Telstra, can only prosper as a network of networks within a borderless Information Economy. The tragedy is that the parts of Telstra are currently worth more than the whole; like BHP. Telstra needs both a BHP Paul Anderson and a shareholder revolt, including a revolt by its government shareholder, to get back on course. We need a national policy framework that is re-built around an Internet paradigm.
When Australia's corporate icons like BHP and Telstra go through an Information Economy induced crisis, it is time for all of us to look to our business fundamentals and our strategies for the global Information Economy. This is a matter of survival - a survival challenge for each and every one of us.