tag:theconversation.com,2011:/fr/topics/disruptive-forces-7839/articlesDisruptive forces – The Conversation2017-03-24T09:43:01Ztag:theconversation.com,2011:article/739672017-03-24T09:43:01Z2017-03-24T09:43:01ZDangers of the witch hunt in Washington<figure><img src="https://images.theconversation.com/files/162312/original/image-20170324-4938-idddo4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">FBI Director James Comey and National Security Agency Director Michael Rogers at hearing on allegations of Russian interference in the 2016 U.S. presidential election.</span> <span class="attribution"><span class="source">AP Photo/Manuel Balce Ceneta</span></span></figcaption></figure><p>As an anthropologist, I know that all groups of people use informal <a href="http://www.cambridge.org/us/academic/subjects/anthropology/social-and-cultural-anthropology/witchcraft-sorcery-rumors-and-gossip">practices of social control</a> in day-to-day interactions. Controlling disruptive behavior is necessary for maintaining social order, but the forms of control vary.</p>
<p>How will President Donald Trump control behavior he finds disruptive? </p>
<p>The question came to me when Trump called the investigation of Russian interference in the election “<a href="http://talkingpointsmemo.com/livewire/trump-russia-focus-political-witch-hunt">a total witch hunt</a>.” More on that later. </p>
<h2>Ridicule and shunning</h2>
<p>A common form of social control is ridicule. The disruptive person is ridiculed for his or her behavior, and ridicule is often enough to make the disruptive behavior stop. </p>
<p>Another common form of social control is shunning, or segregating a disruptive individual from society. With the individual pushed out of social interactions – by sitting in a timeout, for example – his or her behavior can no longer cause trouble.</p>
<p>Ridicule, shunning and other informal practices of social control usually work well to control disruptive behavior, and we see examples every day in the office, on the playground and even in the White House. </p>
<h2>Controlling the critics</h2>
<p>Donald Trump routinely uses ridicule and shunning to control what he sees as disruptive behavior. The most obvious examples are aimed at the press. For example, he refers to The New York Times as “<a href="http://www.politico.com/blogs/on-media/2017/02/new-york-times-ceo-takes-on-trumps-false-failing-claims-234541">failing</a>” as a way of demeaning its employees. He infamously <a href="http://www.people.com/politics/trump-denies-mocking-journalist-disability-watch-video/">mocked a disabled reporter</a> who critiqued him. </p>
<p>On the other side, the press has also used ridicule, calling the president <a href="http://www.dailykos.com/story/2017/2/8/1631304/-The-world-has-taken-Donald-Trump-s-measure-toxic-incompetent-and-weak">incompetent</a>, <a href="https://www.nytimes.com/2017/02/17/opinion/is-it-time-to-call-trump-mentally-ill.html">mentally ill</a> and even making fun of the <a href="http://www.esquire.com/news-politics/news/a47296/donald-trump-hand-size-chart/">size of his hands.</a> </p>
<p>Trump has shunned the press as well, <a href="http://money.cnn.com/2016/06/14/media/donald-trump-media-blacklist/">pulling press credentials</a> from news agencies that critique him. Press Secretary Sean Spicer used shunning against a group of reporters critical of the administration by <a href="https://www.nytimes.com/2017/02/24/us/politics/white-house-sean-spicer-briefing.html">blocking them from attending</a> his daily briefing. And Secretary of State Rex Tillerson shook off the State Department press corps and headed off to Asia with <a href="http://www.politico.com/story/2017/03/rex-tillerson-reporters-asia-state-236109">just one reporter invited along</a>. </p>
<p>Again, the practice cuts both ways. The media has also started asking themselves if they should shun Trump’s surrogates – such as Kellyanne Connway – <a href="http://www.gq.com/story/heres-an-idea-stop-putting-kellyanne-conway-on-tv">in interviews</a> or <a href="http://pressthink.org/2017/01/send-the-interns/">refuse to send staff reporters</a> to the White House briefing room.</p>
<h2>Accusations of witchcraft</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/161639/original/image-20170320-9114-1hbuhky.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/161639/original/image-20170320-9114-1hbuhky.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=431&fit=crop&dpr=1 600w, https://images.theconversation.com/files/161639/original/image-20170320-9114-1hbuhky.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=431&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/161639/original/image-20170320-9114-1hbuhky.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=431&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/161639/original/image-20170320-9114-1hbuhky.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=542&fit=crop&dpr=1 754w, https://images.theconversation.com/files/161639/original/image-20170320-9114-1hbuhky.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=542&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/161639/original/image-20170320-9114-1hbuhky.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=542&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Witches persecuted in Colonial era.</span>
<span class="attribution"><a class="source" href="https://www.loc.gov/item/2003677981/">Library of Congress</a></span>
</figcaption>
</figure>
<p>But what happens when informal means of control don’t work?</p>
<p>Societies with weak or nonexistent judicial systems may control persistent disruptive behavior by accusing the disruptive person of being a witch.</p>
<p>In an anthropological sense, <a href="https://global.oup.com/ushe/product/witchcraft-oracles-and-magic-among-the-azande-9780198740292?cc=us&lang=en&">witches</a> are people who cannot control their evil behavior – it is a part of their being. A witch’s very thoughts compel supernatural powers to cause social disruption. If a witch gets angry, jealous or envious, the supernatural may take action, whether the witch wants it to or not. In other words: Witches are disruptive by their very presence.</p>
<p>When people are threatened with an accusation of witchcraft, they will generally <a href="https://www.amazon.com/Navaho-Witchcraft-Clyde-Kluckhohn/dp/0807046973">heed the warning</a> to curb their behavior. Those who don’t are often those who are already marginalized. Their behavior – perhaps caused by mental disease or injury – is something they cannot easily control. By failing to prove they aren’t a “witch” – something that’s not easy to do – they give society a legitimate reason to get rid of them. </p>
<p>When communities and their leaders turn to accusation of witchcraft as a means of social control, it usually leads to executions. From the 15th to the 17th century, as many as 100,000 accused witches were put to death <a href="http://www.routledgetextbooks.com/textbooks/9781138808102/">in Europe</a>. And in Salem, Massachusetts, 20 people were executed during the notorious <a href="http://www.smithsonianmag.com/history/a-brief-history-of-the-salem-witch-trials-175162489/">witch trials</a> of 1692 and 1693.</p>
<h2>Modern societies aren’t immune</h2>
<p>While few people today believe in witches that doesn’t mean that modern societies have given up the idea that there are people who are inherently disruptive or even dangerous to society. We might not always use the word “witch,” but the idea of purifying society of uncontrollable evil is still with us. </p>
<p>In the <a href="http://americanhistory.si.edu/brown/history/1-segregated/jim-crow.html">Jim Crow South</a> blacks were seen as inherently disruptive to white society and formally segregated. In some cases, they were lynched. </p>
<p>The <a href="https://www.ushmm.org/wlc/en/article.php?ModuleId=10005143">Holocaust</a> followed the pattern of a modern witch hunt. The Nazis saw Jews as inherently dangerous and disruptive to social order. At first they humiliated and ridiculed them, then they segregated them in ghettos and finally they executed them. </p>
<p>One could argue that Americans are already accusing immigrants and Muslims of being the witches of our time. Both groups are seen by some in power as disruptive to social order by their very presence. Some even see them as inherently <a href="http://www.nationalreview.com/article/442565/muslim-immigration-ohio-state-stabbing-shows-dangers-lets-be-honest">dangerous</a>. Indeed, there are ongoing efforts to separate them from the United States, both by deportation and blocking their entry into the country.</p>
<p>Still, the U.S. has a strong judicial system, so why worry that Americans might turn to accusations of witchcraft – albeit by another name – to control behavior? </p>
<p>The worry is that the Trump administration has shown itself to be highly effective in exploiting informal means of social control to shape public discourse, and has <a href="http://www.politico.com/story/2017/02/trump-judge-attack-backfire-234649">repeatedly berated</a> the judicial system as ineffective or corrupt. </p>
<p>If the judicial system continues to block the administration’s efforts to control Muslims and immigrants, what will the administration do next?</p>
<p>We need to be mindful of the consequences of identifying people as inherently disruptive to social order, as unable to control an innate evilness, or as being, in anthropological terms, witches. When we start to see witches among us, the end game is death.</p><img src="https://counter.theconversation.com/content/73967/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Neal Peregrine does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A ‘witch hunt’ is what Trump called investigations into his campaign and Russian interference in the 2016 election. An anthropologist explains the connection between witch hunts and social control.Peter Neal Peregrine, Professor of Anthropology and Museum Studies, Lawrence UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/436442015-07-08T05:28:14Z2015-07-08T05:28:14ZUber and Gojek just the start of disruptive innovation in Indonesia<figure><img src="https://images.theconversation.com/files/87443/original/image-20150706-17504-6eoes1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Governments should allow flexible regulations to capture the wave of disruptive innovations. </span> <span class="attribution"><span class="source">Eskay/ Shutterstock.com</span></span></figcaption></figure><p>People in Indonesia’s capital Jakarta, where public transport is poor and the traffic horribly congested, have eagerly welcomed ride-hailing apps such as <a href="https://en.wikipedia.org/wiki/Uber_(company)">Uber</a> for car rides and <a href="https://www.techinasia.com/go-jek-indonesia/">Gojek</a> for motorcycle rides.</p>
<p>San Francisco-based <a href="https://theconversation.com/au/topics/uber">Uber</a> entered Indonesia in August last year as part of its expansion across <a href="https://www.uber.com/cities">the Asia-Pacific region</a>. Gojek, a local company that has been operating since 2011, has an average of 200 new drivers per month. </p>
<p>But these apps that connect drivers to passengers are creating competition for established taxis and corner-street <em>ojek</em> (informal motorcycle taxis). And they are not happy. </p>
<p>The Organisation of Land Transportation Owners (Organda) has <a href="http://www.ft.com/intl/cms/s/0/2e6d982c-1a62-11e5-a130-2e7db721f996.html#axzz3f4xSBiEq">questioned the legality</a> of Uber cars operating in Jakarta. Last month, Jakarta police confiscated five Uber cars following the complaint. They have since been returned.</p>
<p>Jakarta governor <a href="http://news.metrotvnews.com/read/2015/06/19/138467/disebut-ilegal-perwakilan-uber-taxi-datangi-ahok">Basuki Tjahaja Purnama</a> also considers Uber’s operations in Jakarta to be illegal. </p>
<p>Tensions between local <em>ojek</em> and Gojek drivers are also simmering. <em>Ojek</em> drivers have <a href="http://www.thejakartapost.com/news/2015/06/11/go-jek-drivers-fearing-violent-resistance-traditional-ojek.html">reportedly stopped</a> Gojek drivers, who wear flashy green jackets and helmets, from picking up their passengers. </p>
<h2>New competitors</h2>
<p>Uber and Gojek are basically referral services. The apps work with Android, iOS and Windows phones. The GPS capabilities of smartphones allow both drivers and passengers know each other’s location. This removes the question of when the ride will arrive. </p>
<p>The competition from these new technologies is disrupting the market for traditional players. Given the relatively low price and ease of access for Uber and Gojek, these apps are entering a head-to-head war with established operators. </p>
<p>Conflicts arise since these “modern operators” are creating competition for “conventional operators” within the same market. This does not apply for relatively similar apps such as <a href="https://en.wikipedia.org/wiki/GrabTaxi">GrabTaxi</a>, which utilises existing taxis.</p>
<h2>Disruptive innovations</h2>
<p>During the advent of the internet in the 1990s, Harvard Business School professor Clayton Christensen foresaw the possibilities for market disruption caused by new technologies. </p>
<p>In 1995, Christensen made a speech on technology and innovation that later evolved into his theory on <a href="http://www.claytonchristensen.com/key-concepts/">“disruptive innovation”</a>. This term is used to describe products and services that make use of new technologies and business models. These innovations disrupt the market by creating new demands and new type of consumers. Eventually these innovations will replace products and services from established business players. </p>
<p>In 2013, Christensen observed the collapse of “sustaining” companies: those that are not innovating using new technologies, but only improving their existing services. Examples of these sustaining firms are companies that produce giant mainframe computers and those that manage fixed line telephony. These companies charge the highest prices to their most demanding and sophisticated customers to achieve the greatest profits. </p>
<p>According to Christensen, these great firms are collapsing since they are reluctant in opening the door towards “disruptive innovations”.</p>
<p>Disruptive innovation allows a new population of consumers to access products or services that were historically only accessible to rich consumers. </p>
<p>The term “disruptive innovation” is rooted in the <a href="http://www.econlib.org/library/Enc/CreativeDestruction.html">“creative destruction” theory</a> by economist Joseph Schumpeter. The theory describes a:</p>
<blockquote>
<p>… process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one. </p>
</blockquote>
<p>Gojek and Uber are not the typical disruptive technologies hailed by Christensen. They are not creating new markets and value chains. But these apps exist because the disruptive trend of <a href="http://www.disruptivetelephony.com/2012/07/what-is-an-over-the-top-ott-application-or-service-a-brief-explanation.html">over-the-top services</a>, where businesses provide services over the internet, bypasses traditional distribution. </p>
<h2>Making the best of technological disruptions</h2>
<p>Indonesia’s task in the coming years is to find a way to elegantly monetise this wave of disruptive technologies. </p>
<p>In my forthcoming research on disruptive innovations with Agung Trisetyarso, we found that the wave of disruptive technology has significantly contributed to the recent world economic growth. Our preliminary findings using the
<a href="http://www.unc.edu/%7Ejbhill/Solow-Growth-Model.pdf">Solow growth model</a> suggest that disruptive innovations will create significant capital accumulation, which is more than enough to accelerate global economic growth in the long run.</p>
<p>On the other hand, technological disruption can cause losses of potential revenue in the short term due to business shifting. The telecommunications industry is predicted to lose a total of <a href="http://fortune.com/2014/06/23/telecom-companies-count-386-billion-in-lost-revenue-to-skype-whatsapp-others/">US$386 billion between 2012 and 2018</a> due to over-the-top messaging services such as Skype, WhatsApp and other third-party internet voice applications.</p>
<p>Disruptive innovation follows evolution theory. The fittest survive. Capital, knowledge, and labour of disruptive innovation will remain, while capital, knowledge, and labour in mainstream technology will not. </p>
<h2>Flexible regulations</h2>
<p>Trisetyarso and I predict there will be 25 billion connected devices and about US$2 trillion of potential world market for disruptive technologies in 2015. This will grow to 50 billion connected devices and US$7 trillion by 2020. This can dramatically change the way people sell and buy products and services. </p>
<p>Governments should catch the wave of technological disruption. Regulation holds an essential role in harnessing disruptive innovations. However, regulation could also preclude quality-enhancing, lower-cost innovations from entering the market. </p>
<p>Flexible regulations should be there to cope with this trend. Indonesia’s regulations are currently too rigid to be able to adapt to the entrance of disruptive technologies.</p>
<p>For example, taxi services in Jakarta are obliged to have a licence and pay taxes to the government. The rate/tariff for taxis in Indonesia is highly regulated. The tariffs are determined by transportation ministry and it applies to all public transportation company without any exception. </p>
<p>Uber considers its business model as different to the traditional taxi service. This rigid regulation is creating a barrier for new service providers such as Uber and Gojek. </p>
<p>Rigid regulation will only create technological anarchy that is “a catalyst for change that creates a new and different world”, to quote Jeff Garzik, one of Bitcoin’s most prolific developers. In other words, disruptive innovations will always outsmart regulators eventually. </p>
<p>So the choice is, are you with us or against us? History tells us disruption always wins.</p><img src="https://counter.theconversation.com/content/43644/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Fithra Faisal Hastiadi does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ride-hailing apps such as Uber and Gojek are disrupting the market for traditional transportation services in Jakarta.Fithra Faisal Hastiadi, Research and Community Engagement Manager at Faculty of Economics , Universitas IndonesiaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/423042015-06-10T19:59:50Z2015-06-10T19:59:50ZHow to guard your career against rapid technological change<figure><img src="https://images.theconversation.com/files/84492/original/image-20150610-6796-1e8kwub.jpg?ixlib=rb-1.1.0&rect=0%2C75%2C2313%2C1322&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There are a lot fewer workers on the assembly line today. And it's not just car manufacturing that has seen jobs lost to automation.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/fordeu/5709826282/in/photolist-9GymqJ-8XH8Jg-8XLdgj-5fuJCB-eZoWsf-8XL53C-cuCmkW-nWLqwz-cuCkMu-9B3oBS-dvXmXk-dw3PtS-dp2N1G-dp2Fjz-cxwT6A-dp2J6j-di3xJk-5UmiKY-8zHHxB-8zHJf4-8zHHJa-8zHHuk-8zHHCx-8zLRay-8zLR7Y-8XLdds-9Qi2PA-gsCDS-d3HoD9-qgCPhr-n6CnHn-ekvTET-8e8hH7-8zHH6c-eAtiXf-8zLR4L-8zLQYy-8zHH54-fo9tn4-8zLRwm-8zLRtb-8zLRrL-8zLRPJ-8zHJ6T-8zHH8n-8zHHW2-8zLRD9-8zLRGb-8XHa9D-gofPoJ">Ford Europe/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>Disruptive technologies are nothing new. From the development of steam power in the early 1800s to today’s digitally-enriched world, the impact of technology on the employment landscape has been substantial.</p>
<p>What <em>is</em> new is the speed, extent and unpredictability of modern digital technology-induced disruption, and that this rate of change is dramatically increasing.</p>
<p>More importantly, these changes are impacting the employment landscape at all levels. Having a university degree or entering a profession is no longer a guarantee of a rich and productive working career. </p>
<p>So the question is: if you were about to leave school and begin a university degree or embark on your career, what should you study or do in order to give you the best chances of weathering future technology-induced disruption? </p>
<h2>Disruptive change</h2>
<p>Technology is changing the employment landscape in a number of ways that are affecting many careers. </p>
<p>Robotics and smart technologies are increasingly able to perform high level, cognitively complex tasks, which impacts a lot of skilled jobs. For example, IBM is working with the Cleveland Clinic in the US to train Watson (IBM’s “thinking” computer) <a href="http://ibmdatamag.com/2014/11/cognitive-computing-the-new-frontier-in-machine-intelligence/">to become board-certified in medicine</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/84052/original/image-20150605-14111-ho35u9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/84052/original/image-20150605-14111-ho35u9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/84052/original/image-20150605-14111-ho35u9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=533&fit=crop&dpr=1 600w, https://images.theconversation.com/files/84052/original/image-20150605-14111-ho35u9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=533&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/84052/original/image-20150605-14111-ho35u9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=533&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/84052/original/image-20150605-14111-ho35u9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=670&fit=crop&dpr=1 754w, https://images.theconversation.com/files/84052/original/image-20150605-14111-ho35u9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=670&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/84052/original/image-20150605-14111-ho35u9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=670&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Tthe assembly line of tomorrow. Note the difference in the number of workers compared to the assembly line above.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/jurvetson/7408451314/in/photolist-chEftd-brfREu-bs52Uo-oorCEE-nyQfhw-dxpQbA-bUQDXp-nzsKMa-8f57tm-6yVYWS-5ys3Mx-5MsJqJ-5ubGnz-26mSuz-6Ma1p7-idrDu-nUs5Yi-dzWzpb-fApb78-BNSWX-7W1cYh-8NYNaD-nzsRuw-kLTEAx-bVaCi8-eetu61-bUyuii-afSPEY-uQVN-eZMCMT-5ywswU-du3xzw-edVr6K-cx4ibL-6aHe6S-ccdkPb-gmadck-gbcQBy-7MtKuS-csUc7h-nQCdv9-6jjGvF-7MukWW-5BoPWV-6awhmd-iaMpT-67cYZy-3gV3mY-dUC39k-7PYNBG">Steve Jurvetson/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Similar technologies are also encroaching on other white-collar and professional jobs. Oxford University researchers have <a href="http://www.oxfordmartin.ox.ac.uk/publications/view/1314">recently suggested</a> that, in certain instances, the computerised results of complex non-routine cognitive tasks are superior to human “experts” because they do not have our biases.</p>
<p>Their research on the likelihood of technology disrupting more than 700 occupation categories makes for gripping reading for those who take their future career prospects seriously. The researchers suggest that sophisticated digital technologies could <a href="https://theconversation.com/machines-on-the-march-threaten-almost-half-of-modern-jobs-18485">substitute for</a> approximately 140 million full-time knowledge workers worldwide in the near future.</p>
<p>Anyone whose work can be outsourced to low-cost countries could also be at risk, such as we’ve already seen in manufacturing, <a href="http://www.nytimes.com/2013/03/28/health/trainees-in-radiology-and-other-specialties-see-dream-jobs-disappearing.html">medical radiology</a> and even <a href="http://www.lexisnexis.com/communities/corporatecounselnewsletter/b/newsletter/archive/2014/03/17/legal-process-outsourcing-a-billion-dollar-industry-complete-with-trade-shows-fierce-competition-amp-risks.aspx">legal services</a>. Accounting, engineering or architectural design services are also increasingly being offered from low cost countries at a fraction of the cost. </p>
<p>With the global market size of outsourced services standing at more than <a href="http://www.statista.com/statistics/189788/global-outsourcing-market-size/">US$100 billion</a>, the outsourcing industry is already big business.</p>
<h2>Career planning</h2>
<p>Earning a university degree is increasingly becoming the default position of many school leavers, thus eliminating the point of difference a degree once offered. So holding a degree is <a href="http://theconversation.com/just-graduating-from-university-is-no-longer-enough-to-get-a-job-36906">no longer enough to guarantee a job</a>.</p>
<p>While the personal benefits of acquiring knowledge are indisputable, the hypothesis that attending a university will result in a <a href="http://www.economist.com/news/united-states/21646220-it-depends-what-you-study-not-where">net positive return</a> in the investment in time and money is less so.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/84059/original/image-20150605-14135-pjlc22.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/84059/original/image-20150605-14135-pjlc22.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/84059/original/image-20150605-14135-pjlc22.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/84059/original/image-20150605-14135-pjlc22.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/84059/original/image-20150605-14135-pjlc22.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/84059/original/image-20150605-14135-pjlc22.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/84059/original/image-20150605-14135-pjlc22.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/84059/original/image-20150605-14135-pjlc22.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">These graduates will face a very different employment landscape than their parents or grandparents.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/shawncalhoun/4645459444/in/photolist-85vcfm-oqbwnz-qh7S5R-okzBdK-onkBkn-9CPTwu-9EMX3A-soCNSq-86M23V-ffHpfx-nZhUFt-osdCaH-c8TXWU-4Uk3DT-io6a6G-okwwdF-g99Db3-KEpsj-LhFEx-8e11eM-dWJUm-8r96G7-ex9jfn-eipuPa-a9W8gS-em2TQ9-dWJSu-ex9jCr-oumtgT-2Cww-4Uk418-a9W8ku-2ifH2-85s5yT-2uGjS-6GY3ZJ-ego8TY-6xU1GK-4FXNjV-qf1ENm-bV2eZH-SWbbi-3TkHm-9WT4Ka-9WT1QB-o9B4uE-dvywm-bXEaVs-nukf1u-9G3J1R">Shawn/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>So the challenge facing anyone at the start of their working life lies in finding a career that will be rewarding, fulfilling and, more importantly, <em>resilient</em>, not just <em>resistant</em> to change. Individuals wishing to be successful in their careers should expect to take a more deliberate and planned approach, and regard their career as their own business.</p>
<p>Being employed is no different to running your own business, in that you are deriving an income from your one client – that being your current employer. Most importantly, while your current employer may dictate the terms of your employment, you should be the one in charge of your career. Employees need to think of themselves and their careers as if it were a business enterprise – that must be evolved, grown, sometimes re-directed and above all – protected.</p>
<p>The question is: can you recognise these career-shaping changes before your employer notices them? If so, you’re well down the path of building career resilience.</p>
<h2>Choosing a career</h2>
<p>So what to study or train in? There are a number of trades and professions that are likely to be more resilient to automation and/ or outsourcing and can enable you to run your career like a business. </p>
<p>A useful guide is to consider work that fulfils a number of criteria. These include:</p>
<ol>
<li><p>The delivery of a service in real-time</p></li>
<li><p>Being physically present at the point of service delivery</p></li>
<li><p>The need for a high degree of skill, training and experience, and </p></li>
<li><p>There is likely to be a sustained need for your service.</p></li>
</ol>
<p>For example, as an electrician, you have to be trained and certified to handle live electrical services as well as be on-site to do the job. It is also an excellent foundation for the subsequent acquisition of complementary or supplementary skills and experience that reinforce your future employability prospects. </p>
<p>You could expand into fields such as electronics, control systems, high voltage and industrial systems, communications or electrical engineering – any one could open up rewarding career options as well as protecting your future earning potential.</p>
<p>Other examples of careers that meet these criteria include nurse, physiotherapist, plumber, special needs teacher, surveyor, veterinarian, air traffic controller, surgeon or firefighter. All are highly skilled and hands-on, and are unlikely to be replaced by machines any time soon.</p>
<p>Even though many of these careers exist in constantly evolving environments that are themselves rapidly changing, the fundamentals remain: none are at high risk of being outsourced overseas or completely automated. The same can’t be said of programmer, legal aid or accountant.</p><img src="https://counter.theconversation.com/content/42304/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rob Livingstone has no financial interests in, or affiliations with any organisation mentioned in this article. Other than his role at UTS, he is also the owner and principal of an independent Sydney based IT advisory and mentoring practice, and the author of the book “Direction through Disruption.”</span></em></p>If you leaving school today to embark on a career, what should you study to protect your job from automation and outsourcing?Rob Livingstone, Fellow of the Faculty of Engineering and Information Technology, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/372442015-02-11T11:39:13Z2015-02-11T11:39:13ZPrivacy is fast becoming the real disruptive force in digital technology<figure><img src="https://images.theconversation.com/files/71620/original/image-20150210-24679-14i05l0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Facebook knows what you're doing. What you're watching. How you're feeling.</span> <span class="attribution"><span class="source">Khakimullin Aleksandr/Shutterstock/Wired</span></span></figcaption></figure><p>Did you recently buy a Samsung smart TV? If you are worried about privacy, you may be wondering how smart that decision was following the manufacturer’s warnings that its <a href="http://www.bbc.co.uk/news/technology-31296188">voice-activated televisions may record personal information</a> – that is, your conversations – and transmit them to a third party. </p>
<p>The voice-activated television monitors spoken conversations to listen for commands and transmits them to another firm which performs the voice analysis. Samsung stated that the televisions may even do so when the voice-activation feature is turned off.</p>
<p>Such privacy snafus seem to be the norm these days: only recently Google, following a UK <a href="https://ico.org.uk/about-the-ico/news-and-events/news-and-blogs/2015/01/google-to-change-privacy-policy-after-ico-investigation/">Information Commissioner’s Office ruling</a>, agreed to rewrite its privacy policy to make it “more accessible” and “to allow users to find its controls more easily” and, most pertinently, for its privacy policy to comply with the UK Data Protection Act. The Netherlands, too, threatened Google with <a href="http://www.bbc.co.uk/news/technology-30492833">a £12m fine</a> if it didn’t put its affairs in order.</p>
<p>Facebook had to take similar steps in 2014, yet the changes do not fundamentally improve privacy, but simply ensure that the way our privacy is treated is easier to understand – especially where our data is part of a business model based on targeted advertising. Simply put, when we sign up, we still agree to share our data.</p>
<h2>An open-door approach to data</h2>
<p>Most of the changes to <a href="http://www.google.com/policies/privacy/">Google’s privacy policy</a> concern clearly informing users how their information will be treated. The default setting for users will still be allow the use of their data unless they specifically opt out. Getting this data out of you and passing it around is the deal users make in exchange for free, advertising-based web services.</p>
<p>But it’s endlessly apparent how firms that are evangelical about the need for user data to be accessible to them are nevertheless vague about how they then use it. Terms and conditions are <a href="https://theconversation.com/googles-terms-and-conditions-are-less-readable-than-beowulf-19215">long and bamboozling</a>. The Information Commissioner described Google’s guidelines on privacy as “baffling”. And Google isn’t acting proactively, but dragging its feet until the regulator demands action.</p>
<p>Facebook’s apparently easier-to-read and more accessible privacy policy now permits data to pass between Facebook, WhatsApp and Instagram – an approach that has brought the <a href="http://www.bloomberg.com/news/articles/2015-01-28/facebook-s-privacy-policy-reviewed-by-hamburg-data-regulator-i5gttxog">scrutiny of German and Dutch data regulators</a>. Facebook’s reasoning is that we’ll see adverts that are more relevant – the company is only trying to help. Yet consumer concerns remain, largely because the pace of change and this transition to a default of openness has arrived so quickly. When people find out what happens to their data, many are shocked at what they’ve signed up to.</p>
<p>So, what is really going on here, and what should we be concerned about?</p>
<h2>Privacy is a disruptive technology</h2>
<p>The term <a href="http://www.mckinsey.com/insights/business_technology/disruptive_technologies">disruptive technology</a> is often found alongside terms such as 3D printing, robotics, or artificial intelligence. According to the <a href="https://hbr.org/1995/01/disruptive-technologies-catching-the-wave">Harvard Business Review</a>: </p>
<blockquote>
<p>Disruptive technologies introduce a very different package of attributes from those mainstream customers historically value, and they often perform far worse along one or two dimensions that are particularly important to those customers… At first, then, disruptive technologies tend to be used and valued only in new markets or new applications.</p>
</blockquote>
<p>Data harvesting, data mining and analysis has transformed the way we look at our mobile devices and computer screens. Content is now adaptive and responsive to our behaviour. But that does not necessarily mean that these are technologies many of us want or need.</p>
<p>Our online communication tools such as email and social media, largely free at point of use, are based upon optimising revenue through targeted advertising. For this to be cost-effective, the underlying technology was required to be disruptive – both in the way we socially interact and in its capacity to deliver commercial value. We have all noticed how social media has fundamentally disrupted our lives, but until fairly recently the underlying systems and software that can unravel who we are and what we are doing, and share this data in order to influence our consumer behaviour, have been paid little attention.</p>
<p>Not everyone is against this disruption: as Edward Snowden <a href="http://www.theguardian.com/world/2013/oct/20/public-indifference-nsa-snowden-affair">pointed out in 2013</a>, public indifference is one of Google’s biggest allies in the privacy war. So Google’s reluctance should come as no surprise, because its current direction is based on disrupting its users’ privacy. </p>
<p>As is often the case, one disruptive technology gives rise to another: the dark web is one reaction to the attempt to disrupt our freedom to be private, but the jury is out on whether efforts to reframe the current debate will succeed. The privacy-friendly Facebook competitor, Ello, was <a href="http://www.theguardian.com/media/2014/sep/26/ello-anti-facebook-privacy-lgbt-social-neetwork">given considerable publicity</a> but has <a href="http://techcrunch.com/2015/01/22/remember-ello-no-i-dont-either/">already been written-off by many</a>, while the privacy-regarding cloud storage <a href="http://www.theregister.co.uk/2014/08/14/spideroak_says_youll_know_its_secure_because_a_little_bird_told_you/">Spideroak</a> seeks to challenge the likes of Google Drive and Dropbox. </p>
<p>But these are just tiny eddies in a river of free-to-use online services which treat user privacy as a saleable, tradeable commodity for corporations.</p>
<h2>Measure and counter-measure</h2>
<p>So there seems to be a growing battle between corporations and users. Google, Microsoft, Amazon and other firms have been using their muscle to <a href="http://uk.businessinsider.com/google-microsoft-amazon-taboola-pay-adblock-plus-to-stop-blocking-their-ads-2015-2">pay firms creating ad-blocking software to stop blocking</a>. I believe this war has only really just begun, with the tweaks to manage privacy – both to strip it away and to protect it – representing a volatile, emerging disruptive force. </p>
<p>Even as Google Glass <a href="https://theconversation.com/google-glass-finally-cracks-it-was-a-product-looking-for-a-market-36440">freaked most users out</a>, the battle for access to our private thoughts and concerns is just getting going. The challenge for those innovating to protect privacy is to come up with viable alternatives that can change the current status quo. In the meantime perhaps you should, <a href="https://digitalinferno.wordpress.com/2015/02/09/your-digital-devices-are-watching-and-listening-to-you/">be careful what you say in your own living room</a>.</p><img src="https://counter.theconversation.com/content/37244/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Levy owns shares in CATS3000 Ltd</span></em></p>Did you recently buy a Samsung smart TV? If you are worried about privacy, you may be wondering how smart that decision was following the manufacturer’s warnings that its voice-activated televisions may…Paul Levy, Senior Researcher in Innovation Management, University of BrightonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/353602014-12-11T16:56:35Z2014-12-11T16:56:35ZUber bans will not stop fears for safety amid digital disruption of taxi services<figure><img src="https://images.theconversation.com/files/67008/original/image-20141211-6060-1vg3et5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">'This so-called Hansom cab is a seriously disruptive technology - regulate the hell out of it!'</span> <span class="attribution"><a class="source" href="http://commons.wikimedia.org/wiki/File:HansomCab.jpg">Andrew Dunn</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>The incredible rise of Uber demonstrates how technology can be simultaneously a disruptive and useful business idea popular with its users, while causing significant controversy elsewhere. </p>
<p>The way Uber works is straightforward: the mobile app connects passengers wanting to travel with nearby drivers willing to transport them. While this mirrors the long-established process of taking a cab, it’s the fact that Uber is not a taxi company and its drivers are not cabbies that has muddied the waters. </p>
<p>Recent events such as in Delhi, where an Uber driver has been charged with <a href="http://www.bbc.co.uk/news/world-asia-india-30390691">raping his female passenger</a> has prompted worldwide outcry, and led Delhi’s city government to <a href="http://edition.cnn.com/2014/12/09/world/asia/india-uber-rape-case">ban the service</a>. </p>
<p>The company’s app has also been <a href="http://www.cnet.com/news/uber-hits-roadblocks-in-thailand-spain/">banned in Spain and Thailand</a>, and <a href="http://www.wsj.com/articles/india-advises-all-states-to-ban-uber-and-other-car-hailing-services-1418119647">several US cities</a>.</p>
<p>All this negative attention is not unfamiliar territory for the company: an Uber driver in New York <a href="http://www.dailymail.co.uk/news/article-2866841/Uber-driver-ran-killed-six-year-old-girl-New-Year-s-Eve-finally-charged.html">ran down and killed a child</a>, while – in the firm’s home town of San Francisco – a driver have been charged with <a href="http://time.com/3625556/uber-manslaughter-charge-san-francisco/">causing death through dangerous driving</a>. Elsewhere, the Netherlands and Nevada had already banned the app, and it is <a href="http://uk.businessinsider.com/everywhere-uber-operates-2014-12">under review in Singapore</a>.</p>
<p>But banning Uber in isolation <a href="http://qz.com/308879/why-it-is-almost-impossible-to-ban-uber-and-ola-in-india">will not solve the safety concerns</a>. As is often the case there are other, equivalent but less well-known competitors, ready to step in: <a href="http://www.olacabs.com/">Ola</a> presents itself as easy to use, <a href="https://www.lyft.com/">Lyft</a> focuses on friendliness, <a href="http://www.side.cr/">Sidecar</a> competes on price, and <a href="http://www.ridescoutapp.com/">RideScout</a>, which offers a range of transport options, was convincing enough to be <a href="http://www.wsj.com/articles/daimler-moves-into-ride-sharing-economy-1409750844">bought by Daimler</a> in September.</p>
<p>There’s commercial appeal to all these apps and the businesses behind them. Uber was <a href="http://www.forbes.com/sites/aswathdamodaran/2014/06/10/a-disruptive-cab-ride-to-riches-the-uber-payoff">tentatively valued at US$17 billion</a> prior to the current controversy, even <a href="http://www.theregister.co.uk/2014/12/10/how_the_hell_is_uber_worth_40_billion/">up to US$40 billion by some</a>. But the reasons that make Uber a commercially exciting and disruptive technology are also the reasons why prospective travellers face the potential of genuine physical risk. </p>
<p>Uber has shed the core costs of running a taxi company: the vehicles, the local dispatch office and, critically, the vetting and licensing of drivers. Instead these ride-share apps favour a social media, <a href="https://theconversation.com/the-sharing-economy-is-a-triple-win-for-consumers-business-and-the-environment-34995">sharing economy</a>-type business model that connects people with a need to those who can fulfil it. Their advantage comes from removing the intermediation of traditional business models. </p>
<p>It’s the same sort of digital disruption that has already challenged music companies, newspapers and, through the likes of <a href="https://theconversation.com/its-bad-news-all-round-if-airbnb-bites-the-dust-in-new-york-19049">Airbnb</a>, the hotel industry. But when the model is applied to a taxi service it also removes a layer of traveller safety.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/67009/original/image-20141211-6051-4gxsd4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/67009/original/image-20141211-6051-4gxsd4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/67009/original/image-20141211-6051-4gxsd4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/67009/original/image-20141211-6051-4gxsd4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/67009/original/image-20141211-6051-4gxsd4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/67009/original/image-20141211-6051-4gxsd4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/67009/original/image-20141211-6051-4gxsd4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The bodywork’s changed, but the body of law is much the same.</span>
<span class="attribution"><a class="source" href="http://commons.wikimedia.org/wiki/File:For_hire.jpg">Russ London</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>With all the attention on Uber it is ironic (if unsurprising) to find that the key feature the company’s website currently focuses upon to distinguish itself from its competitors is <a href="https://www.uber.com/safety">safety</a>. Among its claims is the company’s emphasis on endeavouring to <em>exceed</em> the requirements of local regulations wherever the app functions. Clearly, the demands this would make of the company – operating in hundreds of cites across many legal jurisdictions – makes this sound like corporate marketing to satisfy investors <a href="http://www.deccanchronicle.com/141208/nation-current-affairs/article/uber-cabs-does-no-vetting-cabbies">without actually making passengers safer</a>.</p>
<p>So the reaction to Uber by many local governments has been to ban the service, but this is inevitably a short-term and traditional approach to a disruptive, non-traditional technology. Now that ride-sharing apps have been shown to work without the traditional taxi company infrastructure there’s nothing preventing a “taxi company” from starting up using any existing channel – social media sites such as Facebook or Twitter, for example.</p>
<p>The challenge for legislators is to respond to the new business model with a licensing approach that accepts services such as Uber while also ensuring the safety of passengers. Catching a cab can be a fraught experience – and it’s not as if only Uber drivers have in the past <a href="http://www.telegraph.co.uk/news/uknews/crime/10667340/100-victims-could-sue-in-black-cab-rapist-John-Worboys-case.html">attacked their passengers</a>. </p>
<p>Other lesser but more common infringements are taxi drivers licensed in one borough <a href="http://www.mancunianmatters.co.uk/content/310157085-taxi-driver-slapped-%C2%A3765-after-illegally-targeting-manchester-passengers-without">accepting fares in another borough</a>, or traditional black cabs that can be hailed from the street <a href="http://www.mancunianmatters.co.uk/content/240358233-growing-safety-concerns-stockport-council-target-hackney-carriages-outside-borough">working as radio cars</a> in different localities. This situation results in confused customers who hail the cabs and, when the fare is accepted, then travel in an uninsured vehicle. </p>
<p>The problem, and in it our collective reassurance of safety about using a cab, currently resides in legislation drafted in a time when a hackney carriage was <a href="http://www.legislation.gov.uk/ukpga/Vict/10-11/89/crossheading/hackney-carriages">a real carriage pulled by a horse</a>. Technology has significantly changed a passenger’s ability to find willing drivers, but that does not necessarily make it any safer. Bringing the two together is the challenge for legislators.</p><img src="https://counter.theconversation.com/content/35360/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gordon Fletcher does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The incredible rise of Uber demonstrates how technology can be simultaneously a disruptive and useful business idea popular with its users, while causing significant controversy elsewhere. The way Uber…Gordon Fletcher, Centre for Digital Business, University of SalfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/338292014-11-11T19:31:06Z2014-11-11T19:31:06ZWe need to put high-growth tech companies on the G20 agenda<p>The world was a very different place in December 1999 when the first G20 met in Berlin. Steve Jobs had just taken back the reins at Apple, but Facebook, Google, Twitter and the dot-com bust were figments of imagination. When government and central banking leaders meet in Brisbane this week, they will have a very different set of concerns, as well as a different set of levers to achieve the goal of “stable and sustainable world growth that benefits all”. </p>
<p>The path of least resistance is to make small adjustments in an effort to re-balance and re-ignite growth. Instead, they should be considering how to stimulate and harness the power of digital disruption to create companies that can grow fast and create jobs we can not even imagine. </p>
<p>The continued growth of the start-up culture and the “overnight” success of new businesses such as Uber, AirBnb and Dropbox demonstrate the economies of tomorrow are being shaped by companies which have became global players overnight. Rather than focusing on a few adjustments to re-stabilise the world’s economy, the G20 leaders need to understand the impact of digital disruptions on nations and industries. All will be impacted; none will be spared. </p>
<p>Deloitte Digital’s latest report, “<a href="http://www2.deloitte.com/content/dam/Deloitte/au/Documents/Building%20Lucky%20Country/Deloitte_au_technology_digital_disruption_harnessing_the_bang_2014.pdf">Harnessing the bang</a>”, identifies some of the impacts of this “digital disruption” to existing companies. It notes that 13 industries comprising 65% of the Australian economy are facing significant disruption by 2017. Google, for example, has revolutionised advertising, Amazon has re-invented the book publishing industry, streaming services like Netflix have changed the movie and entertainment sector, and internet banking has changed financial services.</p>
<p>It’s clear this is a worldwide phenomenon, not just one facing Australia. Digital disruption belongs on the G20 agenda.</p>
<h2>Threat or opportunity?</h2>
<p>As ancient Chinese wisdom says, every threat contains the seeds of opportunity.
The democratisation of markets brought about by the rise of technology represents boundless opportunities for companies that are innovative.</p>
<p>Henry Ford heard people say they wanted to travel faster, but instead of breeding a faster horse, he used new technology to create a motorised vehicle – and a manufacturing industry no one had imagined. Automobiles disrupted traditional modes of transportation and required workers to have new manufacturing skills. New companies were born and new hard infrastructure required: roads, bridges.</p>
<p>The same is happening with digital technology. The digital products and services require new skills, will generate new companies and need a different kind of infrastructure to support them (broadband internet, global paths to market, venture funding etc.) </p>
<p>Australia has some great start-up success stories: Atlassian provides software to the software makers all over the world, and <a href="https://www.canva.com/">Canva</a> is reaching 1,000,000 customers. Both are carving a global path to success in their particular industries.</p>
<p>The G20 <a href="http://www.choosebrisbane.com/g20-brisbane/global-cafe">Global Café</a> in Brisbane will showcase several more companies that are digital disruptors of traditional industries, are already going global and have the potential to grow big.</p>
<p>Some are concerned that tech companies don’t create jobs – they underestimate the impact that tech start-ups have on wealth and job creation. The IPOs of Google, Facebook and Twitter together created nearly 4,000 millionaires.</p>
<p>As for job growth, high-tech companies create a disproportionate share of high-value jobs. Between 2002 and 2008, for example, 6% of UK businesses with the highest growth rates created 50% of the new jobs. Professor <a href="http://www.gsb.stanford.edu/insights/enrico-moretti-geography-jobs">Enrico Moretti</a>, an economics professor at UC Berkeley, notes that for every job a tech company creates, five new jobs are created in other sectors – a multiplier effect three times higher than for extractive or traditional manufacturing industries. </p>
<h2>The focus should be start up, then grow up</h2>
<p>So it’s pretty simple: entrepreneurs whose businesses use digital technology to develop or deliver products and services that customers need and want will grow the fastest, create the most jobs and have the highest probability of success. This in turn has numerous economic benefits for countries that encourage and foster an entrepreneurial mindset and a high-tech-friendly environment. </p>
<p>Smart governments that have already figured this out are beginning to provide resources and support their start-up ecosystems. From science, technology, engineering and maths (STEM) and entrepreneurial education, through to direct government funding at the venture capital stage, they are placing a premium on developing more high-growth technology companies, teaching CEOs how to start and grow companies, and removing the barriers to growth.</p>
<p>So what does Australia, in particular, need to do to create the environment in which our digital disruptors can quickly become high-growth, global players?
It’s pretty simple:</p>
<ol>
<li> Encourage more people to start companies and make jobs, not just take a job. Teach people the entrepreneurial mindset and support those who see opportunities and want to start and grow companies.</li>
<li> Provide more funding for research and education, especially in science, technology, engineering and maths (STEM).</li>
<li> Revamp systems that support the commercialisation of research with the goal of developing more technology companies.</li>
<li> Support the development of an ecosystem that provides entrepreneurs with what they need to grow companies: access to knowledge, talent, money and space.</li>
<li> Have a workforce ready and able to work in companies that make widespread use of technology.</li>
<li> Help existing businesses adapt to the world of digital disruption. </li>
</ol>
<p>The Australian government is beginning to understand that the future must include high-growth technology companies, as well as mining, gas and agriculture. It is beginning to engage with bodies such as StartupAUS (of which I am a board member). We are hopeful that the Department of Industry’s Entrepreneurs Infrastructure Program and additional programs will spur the development of more venture capital and more disruptive technology companies in Australia. </p>
<p>The G20 countries need to understand the power of digital disruption and develop economic and financial policies that actually capitalise on that disruption. Creative destruction of old industries is the norm; the internet is an accelerant to the pace of disruption. Innovation, digital disruption and entrepreneurship are not passing fads – they are the solution to the economic problems we are experiencing. Countries that understand this and develop polices and programs to support it will benefit the whole world.</p>
<hr>
<p><em>Dr Jana Matthews is chairing a G20 Global Café event entitled “The Digital Age - Entrepreneurship and Innovation” on Wednesday, 12 November 2014.</em></p><img src="https://counter.theconversation.com/content/33829/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The Centre for Business Growth receives funding from ANZ. ANZ Sponsor the ANZ Business Growth Programs, Sponsor the ANZ Chair in Business Growth appointed to Professor Jana Matthews and are the Foundation Partners of the Centre for Business Growth. Professor Jana Matthews is affiliated with StartupAus as a Board Member and Club Kidpreneur as an Advisory Board Member.</span></em></p>The world was a very different place in December 1999 when the first G20 met in Berlin. Steve Jobs had just taken back the reins at Apple, but Facebook, Google, Twitter and the dot-com bust were figments…Jana Matthews, ANZ Chair in Business Growth, Director, Centre for Business Growth, University of South AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/283832014-06-24T04:31:12Z2014-06-24T04:31:12ZBanking’s huge profits almost ready for the taking<figure><img src="https://images.theconversation.com/files/51968/original/cgzmq6yr-1403567937.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Could Bitcoin turn banking on its head?</span> <span class="attribution"><span class="source">Elentari86/Flickr</span>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Australia’s big four banks are the most <a href="http://www.businessinsider.com.au/a-report-says-australias-big-four-banks-are-the-most-profitable-in-the-developed-world-2013-6">profitable</a> in the world. Last year they <a href="http://www.news.com.au/finance/business/big-four-banks-make-27-billion-in-profits-in-record-year/story-fnda1bsz-1226752924738">made</a> A$27 billion in profit, up 9.5% on the previous year. Tech leaders in Australia <a href="http://www.smh.com.au/business/australian-startups-eyeing-big-banks-insane-profits-20140617-3ab5l.html">say</a> the financial industry is ripe for disruption by financial tech startups as well as the big tech companies like Google, Facebook, Apple and Amazon. </p>
<p>This warning has been echoed by the banks themselves, with their leaders constantly trying to downplay the massive profits by <a href="http://www.theaustralian.com.au/business/companies/tech-giants-pose-competitive-threat-says-cbas-ian-narev/story-fn91v9q3-1226652076823">suggesting threats</a> to their business are just around the corner. Certainly if you consider bank fees, it’s easy to see how companies could force more competition in the finance sector by undercutting the banks on transaction costs, especially those for electronic payments with credit and debit cards. </p>
<p>The problem here is that bank transaction costs for processing card payments are <a href="http://forums.whirlpool.net.au/archive/1876081">relatively</a> low. When you look at companies like <a href="https://squareup.com/pricing">Square</a>, an up-and-coming US tech company that provides credit card processing through mobile devices, the fees are actually higher. The issue with companies like Square is that they’re trying to compete with banks using an identical approach and it’s very hard to see how they can disrupt the incumbents on that basis.</p>
<p>The only way fees and transaction costs can be lowered is to cut out any middle men in the process and move to a peer-to-peer transaction system or cryptocurrency, the most notable of which is Bitcoin. Because the transaction can go directly between the buyer and seller, most, if not all, fees can be avoided. </p>
<p>Peer-to-peer finance systems are already established with a number peer-to-peer lending players in Australia. </p>
<p>The majority of bank revenue comes from income on lending. In <a href="http://www.bankers.asn.au/ArticleDocuments/192/Fact%20Sheet%20Banks%20Profits%20FAQs.PDF.aspx">Australia</a>, 86% of bank revenue comes from income off loans compared to the 14% from fees and charges. The difference in the rates offered by banks to their borrowers and investors is as much as 10%. This is an obvious disadvantage to the lenders as well as the borrowers. </p>
<p>Peer-to-peer lenders put lenders of money directly together with borrowers through internet platforms such as Facebook. US-based Lending Club <a href="http://www.societyone.com.au/blog/blog/2013/09/04/afr-capital-magazine-how-peer-to-peer-lending-is-revolutionising-debt-markets">started</a> as a Facebook application and attracted investment from Google that valued the company at US$1.6 billion. In Australia, <a href="http://www.societyone.com.au/">Society One</a> has developed its own platform for handling the mechanics of matching borrowers and lenders. Westpac <a href="http://www.societyone.com.au/blog/blog/2014/03/06/afr-westpac-buys-into-first-peer-to-peer-lender">invested</a> A$5 million in Society One via its venture capital fund earlier this year.</p>
<h2>When cryptocurrencies meet peer-to-peer lending</h2>
<p>Of course, cryptocurrencies become ideal vehicles for peer-to-peer lending and there is a growing number of companies offering this service. OKCoin, China’s largest Bitcoin exchange has <a href="http://www.cryptocoinsnews.com/news/okcoin-launches-margin-trading-p2p-lending-two-investment-funds/2014/06/20">recently</a> enabled customers to invest in funds that are effectively run on the back of peer-to-peer lending. </p>
<p>As a business, OKCoin has attracted investors both in China and from Silicon Valley. It joins other peer-to-peer Bitcoin lenders like <a href="https://btcjam.com/">BTCJam</a> which offers loans at rates well below that of major banks.</p>
<p>Peer-to-peer lending and currencies come with a history of high volatility and risk, but they are a clear warning to the finance industry that it can’t afford to be complacent. The whole notion of peer-to-peer lending and currencies has been dubbed the “Internet of Money,” in parallel to the next big move in connected devices on the internet called the “Internet of Things” - based on devices communicating directly with each other and not through any intermediaries.</p>
<p>The reaction of the banks worldwide so far to the threat of peer-to-peer finance has been to try and <a href="https://theconversation.com/nabs-bitcoin-ban-a-symptom-of-the-digital-currency-threat-25490">hinder</a> potential rivals’ progress by refusing to do business with companies that exchange cryptocurrencies. Australian bank NAB closed the accounts of several customers in the business of Bitcoin in April. This is by far the easiest strategy given their dominant position in the market and their general lack of interest in moving quickly on technological innovation.</p>
<p>How the peer-to-peer financial companies respond to work with or around the banks is going to be interesting to see. This is one of the things leaders in this space will be discussing at a <a href="http://www.mediabistro.com/insidebitcoins/australia/?c=mbprel">conference</a> on Bitcoin to be held in July in Melbourne. An event that the banks will presumably be watching closely.</p><img src="https://counter.theconversation.com/content/28383/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Glance owns 3 Bitcoins current value approximately $2,100</span></em></p>Australia’s big four banks are the most profitable in the world. Last year they made A$27 billion in profit, up 9.5% on the previous year. Tech leaders in Australia say the financial industry is ripe for…David Glance, Director of Innovation, Faculty of Arts, Director of Centre for Software Practice, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/212382014-01-01T20:44:32Z2014-01-01T20:44:32ZRocketing regions: the jobs of the future in gazelle headquarters<figure><img src="https://images.theconversation.com/files/38084/original/nhz7qvjz-1387327882.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">High growth enterprises, or 'gazelles', are a growing source of global employment.</span> <span class="attribution"><span class="source">Smithsonian's National Zoo/Flickr</span></span></figcaption></figure><p>Do you know someone who has lost their job in the last few years working in IT, media, finance or retail? These industries and many others are already feeling the pinch of “online gravity” - a special set of economic forces and drivers that increasingly govern business in the age of the web.</p>
<p>Much has been made of the disappearance of jobs due to the digitisation, automation and networking of many traditional industries — most notably in traditional media. But careful global economic analysis has shown the internet has in fact added more jobs than it has destroyed. </p>
<p>According to McKinsey and Company the internet has <a href="http://www.mckinsey.com/insights/high_tech_telecoms_internet/internet_matters">created</a> 2.6 new jobs for every 1 deleted. What’s becoming increasingly apparent however is the location and setting for <em>where</em> these new jobs appear is often not the same for those which were lost.</p>
<p>Online, business today is being influenced by a different set of economic forces than those that exist purely offline. I call these forces “online gravity” – not unlike the forces that led to the formation of our solar system. These forces favour the creation of planet-like superstructures with lots of white space in-between. In a former article (<a href="https://theconversation.com/why-theres-no-pepsi-in-cyberspace-19902">Why there’s no Pepsi® in cyberspace</a>) I outlined this phenomena and here I examine how online gravity is reshaping the future of work. </p>
<h2>Online gravity means more centralisation</h2>
<p>In the new digital economy, more and more companies are able to centralise their employment around their headquarters. This has potentially profound consequences for the future of employment everywhere that have yet to be fully understood.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/38019/original/ngvhgm3d-1387281599.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/38019/original/ngvhgm3d-1387281599.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/38019/original/ngvhgm3d-1387281599.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=585&fit=crop&dpr=1 600w, https://images.theconversation.com/files/38019/original/ngvhgm3d-1387281599.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=585&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/38019/original/ngvhgm3d-1387281599.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=585&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/38019/original/ngvhgm3d-1387281599.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=735&fit=crop&dpr=1 754w, https://images.theconversation.com/files/38019/original/ngvhgm3d-1387281599.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=735&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/38019/original/ngvhgm3d-1387281599.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=735&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Online gravity is leading to greater employment HQ-centricity.</span>
<span class="attribution"><span class="source">Research by Paul McCarthy based on LinkedIn data, December 2013.</span></span>
</figcaption>
</figure>
<p>Before the rise of the web in 2000, leading global companies such as Dell, the Personal Computer manufacturer based in Texas, or Westfield, the Retail Property Group in Sydney typically employed one in five, or 20% of their total global employees in their hometown headquarters. </p>
<p>This is great for the regional economies fortunate enough to call these companies home as the company headquarter jobs are generally higher paid, more global in scope and typically include roles in global marketing, global finance, research and development that are not found outside of HQ. </p>
<p>In the past there was a natural limit to the concentration of companies around their HQ. As global companies grew, regional headquarters necessarily emerged. Previously, companies typically became more decentralised as their geographic expansion unfolded, driven by the twin needs:</p>
<ul>
<li> to increase the sales of the company by selling in every territory possible and </li>
<li> to decrease the cost by making things wherever it was cheapest. </li>
</ul>
<p>Increasing the sales in every territory had an unintended consequence I refer to as the “Jaguar effect”. In the enterprise software business and many others where the products and services are expensive, complex and require a high degree of trust and confidence in the vendor, a local very talented and socially connected team in every market has been required to sell the products face-to-face.</p>
<h2>And Goodbye to Jaguar jobs</h2>
<p>From the point of view of expanding or aspirant new global companies, this traditional expansion route required a fleet of “Jaguars” in every major market you intended to serve, and talented team of local managers and sales executives to drive them. But now the days of these Jaguar jobs are numbered. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/38023/original/sk3s5gyb-1387285128.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/38023/original/sk3s5gyb-1387285128.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/38023/original/sk3s5gyb-1387285128.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=374&fit=crop&dpr=1 600w, https://images.theconversation.com/files/38023/original/sk3s5gyb-1387285128.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=374&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/38023/original/sk3s5gyb-1387285128.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=374&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/38023/original/sk3s5gyb-1387285128.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=470&fit=crop&dpr=1 754w, https://images.theconversation.com/files/38023/original/sk3s5gyb-1387285128.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=470&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/38023/original/sk3s5gyb-1387285128.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=470&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Previously global expansion needed highly networked sales staff in each local territory resulting in an abundance of Jaguar jobs.</span>
<span class="attribution"><span class="source">http://www.flickr.com/photos/gustavo/169129617/sizes/z/</span></span>
</figcaption>
</figure>
<p>In digital economy enterprises such as personal computing software leader Microsoft, around 40,000 or 40% of its total global workforce of 95,000 employees are concentrated in or around its headquarters in Seattle.</p>
<p>In online media and services, this figure climbs significantly to between 40-80% of the total team. Younger and early stage companies such as Facebook, LinkedIn, Atlassian and Zynga have well over half their employees in their city of initial establishment.</p>
<p>Amazon has developed a famously efficient centralised global e-commerce enterprise that ships to and trades in 66 countries around the world from Argentina to Venezuela yet without the need for the need for local operations, sales or distribution staff in most of these locations. Research based on current LinkedIn data indicates over 91% of Amazon’s 88,000 staff are located in only six of the countries where it has significant on-the-ground operations: US, UK, India, Ireland, China and Canada.</p>
<p>Similarly, Google, Facebook and most other online global ventures trade and derive revenue from customers in most countries around the world, yet have staff and on-the-ground operations in only a select few of these.</p>
<p>As a new generation of companies like Sydney-based <a href="https://www.atlassian.com/company">Atlassian</a> and Austin and Sydney-based <a href="https://www.atlassian.com/company">BigCommerce</a> have clearly demonstrated, without the expense of global field sales staff you can not only sell and support consumer services online but also enterprise solutions - globally and online from one or two well-resourced hubs.</p>
<p>This is increasingly important for policy makers as it means unless your city, region or country is home to and fosters the creation of global digital economy enterprises, the number of high-value jobs available in your area is likely to shrink dramatically over the next decade. </p>
<p>And it’s not just “traditional” industries where jobs are at risk. November’s <a href="http://hbr.org/2013/11/americas-incredible-shrinking-information-sector/">Harvard Business Review</a> chronicles the long-term decline in employment of America’s information industries. After manufacturing, the information sector has had the greatest employment contraction of any sector in the US in the past decade. </p>
<p>While online gravity is leading to many Jaguar jobs disappearing in Western countries through the centralisation and automation of many online services its not all bad news for the developing world.</p>
<p>The World Bank has made the point in its recent report <a href="http://www.worldbank.org/en/news/press-release/2013/09/10/icts-are-creating-new-jobs-and-making-labor-markets-more-innovative-inclusive-and-global-world-bank-study">“Connecting to Work”</a> the rise of open global online labour market places such as Freelancer.com, oDesk and elance means that once connected to the internet, many people in developing countries can now have direct access to employment opportunities that were previously impossible. </p>
<h2>And Hello to <em>Gazelles</em> and <em>Rocketships</em></h2>
<p>MIT economist David L. Birch showed in the 1970s that the majority of national job growth (and losses) in the US came from enterprises with fewer than 100 employees. Nearly 20 years on, Birch refined his thesis to show not all small businesses are equal, with only 4% of these companies - a high growth cohort he terms “gazelles” accounting for around 70% of jobs created. Gazelles are companies that routinely demonstrate consecutive, double-digit annual growth and are now seen by many as the engine room of much future economic development. Follow-on research <a href="http://link.springer.com/article/10.1007%2Fs11187-007-9052-3">“Employment effects of business dynamics: Mice, Gazelles and Elephants”</a> by Zoltan J. Acs and Pamela Mueller has identified Gazelles as “only start-ups with greater than 20 and less than 500 employees” and “only in large diversified metropolitan regions”.</p>
<p>Many of these Gazelles, such as Google, eBay and Freelancer.com, are fuelled by the winds of online gravity and also classify as “rocketships”.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/38026/original/nfkg79z9-1387285831.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/38026/original/nfkg79z9-1387285831.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/38026/original/nfkg79z9-1387285831.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=480&fit=crop&dpr=1 600w, https://images.theconversation.com/files/38026/original/nfkg79z9-1387285831.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=480&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/38026/original/nfkg79z9-1387285831.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=480&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/38026/original/nfkg79z9-1387285831.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=604&fit=crop&dpr=1 754w, https://images.theconversation.com/files/38026/original/nfkg79z9-1387285831.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=604&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/38026/original/nfkg79z9-1387285831.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=604&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Enabling ‘rocketship’ enterprises to thrive will be vital to future job creation. (Source: x ray delta one CC Rocketships)</span>
<span class="attribution"><span class="source">http://www.flickr.com/photos/x-ray_delta_one/4152453170/</span></span>
</figcaption>
</figure>
<p>“Rocketships” are a new generation of online high growth global enterprises defined as companies that grow from start-up to US$50m in revenue in their first five years of operation. Atlassian, Facebook and Google all fit this definition. </p>
<p>In his 2009 excellent article for the Wall Street Journal, <a href="http://blogs.wsj.com/venturecapital/2009/08/25/how-long-does-it-take-to-build-a-technology-empire/">“How Long Does It Take To Build A Technology Empire?”</a> Scott Austin showed a previous generation of global technology companies such as Micosoft, Oracle and SPSS don’t make it into the Rocketship club, having taken between eight, ten and fourteen years respectively to reach $50m of sales. </p>
<p>Employment is being reinvented and jobs being disrupted are reappearing in different settings and new global enterprises around the world. Policymakers, politicians and parents around the world should be mindful of these changes to best position for employment in a new era of online gravity. </p><img src="https://counter.theconversation.com/content/21238/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul McCarthy is writing a book entitled "Online Gravity".</span></em></p>Do you know someone who has lost their job in the last few years working in IT, media, finance or retail? These industries and many others are already feeling the pinch of “online gravity” - a special…Paul X. McCarthy, Adjunct Professor, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/205432013-11-20T19:18:28Z2013-11-20T19:18:28ZBig data and big business: it’s what you do with it that matters<figure><img src="https://images.theconversation.com/files/35673/original/9qz2wvvg-1384923673.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Corporate data, once resigned to magnetic tapes, is now able to be manipulated on a much finer grained scale.</span> <span class="attribution"><span class="source">TunnelBug/Flickr</span></span></figcaption></figure><p>The crucial thing about “big data” is the data. “Big” is relative, and while size often matters, real disruption can come from data of any size. </p>
<p>This is not a new idea, being several hundred years old. The key advance of the scientific revolution (and associated industrial revolution) was in order to understand something you had to measure it – that is gather the data. </p>
<p>The modern hoopla about “big data” is simply the scientific method applied to a wider range of problems. Doing this cheaply enough is the challenge.</p>
<p>While the idea of collecting the data is the most fundamental, it is not sufficient. Analysts need to make sense of the data. The field of statistics was developed well over a century ago to help do so, originally for kings so they could know how much tax they could raise (the word “statistics” shares etymology with “state”). </p>
<p>Statistical thinking involves computing functions of data. Until recently the ability to do these computations was a major bottleneck. The many orders of magnitude in reduction of cost per byte stored or computation done that we have seen in the last couple of decades (driven by technological advances in chip fabrication and disk drive manufacture) has removed the old bottlenecks. It is this reduction in cost that has enabled the “big data revolution”.</p>
<h2>Beyond marketing</h2>
<p>Many businesses and organisations are now gathering and keeping data on a much finer grained scale than before. Rather than tabulating aggregate sales figures, a large retailer can now store every single purchase made by every single customer. With this they can understand the patterns of consumer behaviour in a manner that allows them to tailor their offerings in a very personalised manner. </p>
<p>Taking the analogy with the methods of science, this allows business people of all types to approach their business as a scientist would an experiment. </p>
<p>The use of data-centric techniques for marketing and the analysis of customer behaviour is certainly the most visible use of big data in industry, but it is actually just the tip of the iceberg. It is perhaps popular now since businesses typically record a lot of this data for other purposes (such as payments). </p>
<p>The real disruptions are likely to occur when business leaders realise they can measure (and then potentially make sense of) any other aspects of their business. </p>
<p>For example:</p>
<ul>
<li><p>A bus company can measure every single journey on each bus by capturing the data from electronic payment systems. It can use this to optimise its routes and timetable in a much more fine grained manner than before. </p></li>
<li><p>A city can potentially control all of the traffic lights in the whole city on the basis of real-time information of the traffic across the whole city, rather than simply controlling locally at each intersection. </p></li>
<li><p>Energy companies can measure the output of rooftop solar panels and predict the energy produced 10 minutes hence. </p></li>
<li><p>Hospitals can mine the nurse’s daily records to detect deadly fungal diseases before they are noticed by other means.</p></li>
</ul>
<p>Any problem where there is something you can measure is amenable to doing better with the techniques of data science.</p>
<h2>A few hurdles</h2>
<p>What are the challenges and barriers to the radical use of data and disruption of diverse businesses? There are three important factors. </p>
<p>First, the tools for making sense of data are still very primitive in the sense of their usability and composability with other business processes. They have been developed by and for data scientists. It will take considerable engineering work to make them more widely usable. </p>
<p>Second, there is a growing concern about who owns data and what is done with it. It is not the NSA that is the worry here, but rather search/advertising companies, who not only can learn a lot about you, but then make their money precisely by subsequently manipulating you with this information. </p>
<p>While it seems impossible to reliably contain the spread and leaking of personal data, it is in principle possible to regulate its use – this is the premise behind the notion of “data accountability”. After all, it is not who knows certain things about you that matters, but what they do with it. Whether we can evolve to a system that provides adequate protection and transparency of data remains to be seen.</p>
<p>Third, there is likely to remain a substantial skill shortage for some time. Computation and storage even at a large scale has been commoditised with cloud computing. But the process of extracting sense and meaning out of data is far from being a commodity. </p>
<p>Many businesses from banks to transport companies are now hiring data scientists or machine learning experts to help them ask the right questions of their data and process it appropriately. Businesses also need to adapt the way they think about what they do and especially how they can deal with uncertainty. Merely measuring everything does not give certainty – all the data in the world will still not help you predict the future, but it will give you some clues. </p>
<p>The businesses and countries that stay ahead with big data analytics are going to be the winners of the 21st century.</p>
<hr>
<p><em>This is the fourth piece in our series on the disruptive forces hurting big business.</em></p>
<p><em>Read the other pieces:</em></p>
<p><a href="https://theconversation.com/why-theres-no-pepsi-in-cyberspace-19902">Why there’s no Pepsi in cyberspace</a></p>
<p><a href="https://theconversation.com/the-sharing-economy-spooking-big-business-19541">The sharing economy spooking big business</a></p>
<p><a href="https://theconversation.com/clouds-bear-down-on-computer-hardware-companies-19443">Clouds bear down on computer hardware companies</a></p><img src="https://counter.theconversation.com/content/20543/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert Williamson receives funding (via the ANU) from the Australian Research Council, and via NICTA, from the Commonwealth Government. He is affiliated with the Australian National University and NICTA.</span></em></p>The crucial thing about “big data” is the data. “Big” is relative, and while size often matters, real disruption can come from data of any size. This is not a new idea, being several hundred years old…Robert Williamson, Leader, Machine Learning Research Group, Data61Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/194432013-11-15T01:17:06Z2013-11-15T01:17:06ZClouds bear down on computer hardware companies<figure><img src="https://images.theconversation.com/files/34705/original/7zs9ztwp-1383867438.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Dell and IBM are two companies feeling the pinch by the growing corporate shift towards cloud computing.</span> <span class="attribution"><span class="source">Mauritz Antin/EPA</span></span></figcaption></figure><p>When Amazon, known by most as an online department store, extended its web services business into Australia in 2012, few outside the IT sector noticed.</p>
<p>Data released last week by the Australian Securities and Investments Commission revealed Amazon Web Services grew from a A$1 million business in Australia in 2011 to a A$25 million business in 2012.</p>
<p>A rapidly growing aspect of Amazon’s global business is in providing technological resources underpinning many of the internet’s household names such as Pinterest, Spotify, Reddit, Foursquare and <a href="http://aws.amazon.com/solutions/case-studies/all/">others</a>. This now extends to major Australian brands including the Commonwealth Bank, MYOB, Suncorp and Fairfax.</p>
<p>Amazon Web Services is not only a growing part of Amazon’s future but is part of a more general trend that is disrupting and changing the way most businesses utilise both computers, and the technologies supporting their operations. This is bad news for companies such as IBM, HP and Dell that have made their money from selling physical boxes to customers.</p>
<p>The premise behind cloud computing is fairly simple. Instead of buying your own dedicated computers and housing them in a computer room, you utilise “virtual computers” and associated computing resources provided by the cloud provider. These virtual computers may be located in data centres around the world. </p>
<p>To the cloud computing user, the physical aspects of the service are largely unimportant. What is important are the numerous advantages that cloud computing offers over buying, owning and running your own data centre. There is no up-front cost in buying the hardware, setting it up, paying for a facility to house the computers or manage it on an ongoing basis. You simply pay for what you need and use adding to the configuration as your requirements change.</p>
<p>Companies like Amazon Web Services even provide the ability for users to specify that they want to use computing resources at times when it is cheaper.</p>
<p>The impact on companies such as IBM that have traditionally made money selling computer hardware is already being seen in their declining sales figures. In IBM’s last quarter, <a href="http://www.techworld.com.au/article/529289/ibm_results_hampered_by_slowing_hardware_sales/">sales</a> from its various hardware operations fell by 17% from the same quarter a year ago. This result was a continuation of the previous 5 quarters of <a href="http://www.bloomberg.com/news/2013-10-16/ibm-sales-fall-for-sixth-straight-quarter-as-hardware-slumps.html">declining revenue</a>. </p>
<p>The story has been repeated at other hardware companies such as HP. Their enterprise <a href="http://www.theregister.co.uk/2013/08/22/hp_q3_f2013_numbers/">sales</a> have also steadily declined with server and storage revenue dropping in the last quarter around 10% from the previous year.</p>
<p>Like all companies that have a vested interest in preserving the status quo, companies like IBM had for some time turned a blind eye to the emergence of cloud computing and the meteoric rise of companies like Amazon and Microsoft in cloud services. IBM has now responded with a rapidly growing cloud platform business of its own, reportedly making US$1 billion in revenue for the third quarter of this year, but it is coming at the cost of not only operations but the loss of sales in hardware that these operations represent.</p>
<p>Cloud computing has largely been facilitated by virtualisation technology that allowed separate virtual computers to be run from a single physical computer. The advantages of this approach are that physical computers are rarely run at full capacity and running several virtual computers on a single physical box takes advantage of that fact. Also, computer data centres are constrained by space and the need for ever increasing amounts of power and cooling. For many data centres, it is the cost of the power to run them that becomes prohibitively expensive. Virtualisation partially addresses this issue, allowing for expansion without the increased demand for space and power.</p>
<p>Pioneers of virtualisation technology like VMWare have overseen the transformation of corporate data centres in moving from physical boxes running single computers to fully virtualised data centres. Even though VMWare has around 60% of <a href="http://readwrite.com/2013/08/26/vcloud-hybrid-service-cloud-vmware#awesm=%7EoltEFr072bzfoO">the market</a> for software virtualisation, their business has also been impacted by customers skipping the need for physical machines altogether and going straight to the cloud. Like the hardware vendors, VMWare is itself trying to offer a cloud service but like IBM, moving a customer to the cloud carries the penalty of lost revenue for its software.</p>
<p>With the number of companies offering cloud computing increasing daily, the future looks increasingly bleak for those companies that have relied on selling hardware and services associated with that. However, as with all things “cloudy”, the path of innovation never runs smoothly and there are some potential challenges for this industry too. </p>
<p>For non-US users of US cloud computing providers, issues of “data sovereignty” have long been an issue. Storing company data on computers that could potentially fall under US law or simply provide easy access to US security services is a significant risk. Even though companies such as Microsoft and Amazon have moved data centres outside of the US to try and tackle this issue, there is <a href="http://www.itnews.com.au/News/347687,quitting-the-cloud-over-prism.aspx">little faith</a> that this would protect European or Australian companies from US lawmakers should they wish to gain access.</p>
<p>As with all disruptive technological innovations, the move from old to new is gradual and it is unlikely that we will see everyone suddenly abandoning their data centres and moving all of their software onto the cloud. A recent <a href="http://www.zdnet.com/research-server-virtualization-and-mobile-computing-among-top-smb-technologies-7000017473/">report</a> showed the majority of the small to medium businesses surveyed were still working on virtualisation of their existing computing infrastructure. Given the investment in those changes, the subsequent move to the cloud will take longer. But in a world where most organisations will eventually utilise cloud computing in some capacity the future looks brighter for cloud services providers.</p>
<hr>
<p><em>This is the third piece in our series on the disruptive forces hurting big business.</em></p>
<p><em>Read the other pieces:</em></p>
<p><a href="https://theconversation.com/why-theres-no-pepsi-in-cyberspace-19902">Why there’s no Pepsi in cyberspace</a></p>
<p><a href="https://theconversation.com/the-sharing-economy-spooking-big-business-19541">The sharing economy spooking big business</a></p><img src="https://counter.theconversation.com/content/19443/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Glance has received a small grant from Amazon Web Services to investigate the use of Cloud Computing in tertiary education</span></em></p>When Amazon, known by most as an online department store, extended its web services business into Australia in 2012, few outside the IT sector noticed. Data released last week by the Australian Securities…David Glance, Director, Centre for Software Practice, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/195412013-11-14T01:56:58Z2013-11-14T01:56:58ZThe sharing economy spooking big business<figure><img src="https://images.theconversation.com/files/34721/original/mjyj2775-1383873232.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Sharing programs such as Melbourne's bicycle network encourage a 'collaborative consumption' culture. </span> <span class="attribution"><span class="source">flickr/avlxyz</span></span></figcaption></figure><p>Earlier this year, I travelled to Melbourne for a conference. Instead of paying to stay in a hotel like I normally would, I paid a local couple to stay in their spare room. On arriving at their clean and tasteful apartment high above the city streets, my hosts handed me a cold cider and we chatted about our lives. </p>
<p>This warm welcome was a sharp contrast to the experience of arriving alone to a lifeless hotel room. I thoroughly enjoyed my stay, it cost less than a typical hotel room and I was within a few minutes walk of the conference venue.</p>
<p>The business that facilitated this experience was <a href="https://www.airbnb.com.au">Airbnb</a>, one of the poster children of a movement known as <a href="http://www.collaborativeconsumption.com">collaborative consumption</a>. Established in 2008, Airbnb hooks up people who have room to spare with people who need somewhere to stay. More than <a href="https://www.airbnb.com.au/about/about-us">500,000 properties are listed</a> worldwide and more than 8.5 million people have stayed in them. Clearly, others are getting as much out of the Airbnb experience as I did. Last year, the company was <a href="http://www.forbes.com/sites/tomiogeron/2012/10/19/peter-thiel-in-talks-to-invest-150m-in-airbnb-report/">valued at US$2.5 billion</a>.</p>
<p>Airbnb is only one of <a href="http://www.collaborativeconsumption.com/directory/">a plethora of businesses</a> that are buying into the collaborative consumption model. It’s an economic model based on access rather than ownership. Collaborative consumption startups use the internet and social media to facilitate peer-to-peer exchanges, allowing people to share assets and services directly with those who require them. </p>
<p>This emerging sharing economy includes marketplaces like <a href="http://www.ebay.com.au">eBay</a> and <a href="http://www.gumtree.com.au">Gumtree</a>, car sharing services like <a href="http://www.goget.com.au">GoGet</a>, bike sharing services like <a href="http://www.melbournebikeshare.com.au">Melbourne Bike Share</a>, peer-to-peer rental services like <a href="http://www.openshed.com.au">Open Shed</a>, errand services like <a href="https://www.airtasker.com">Airtasker</a> and clothes swapping services like the <a href="http://clothingexchange.com.au">Clothing Exchange</a>. Many more startups focusing on diverse products and services are <a href="http://chrisriedy.me/collaborative-consumption-in-australia/">operating in Australia</a>.</p>
<p>Clearly, this emergent sharing economy is a potential threat to established business models. If consumers are sharing things they already have, then they don’t need to buy something new - or at least, they don’t need to buy so often. If I stay with a local in Melbourne, I’m not giving my money to a hotel chain. In short, if the sharing economy takes off, existing businesses will be selling fewer products and services.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/34713/original/7wxrggqp-1383871166.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/34713/original/7wxrggqp-1383871166.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/34713/original/7wxrggqp-1383871166.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/34713/original/7wxrggqp-1383871166.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/34713/original/7wxrggqp-1383871166.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=500&fit=crop&dpr=1 754w, https://images.theconversation.com/files/34713/original/7wxrggqp-1383871166.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=500&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/34713/original/7wxrggqp-1383871166.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=500&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Shared car services are becoming increasingly common in Australia.</span>
<span class="attribution"><span class="source">flickr/avlxyz</span></span>
</figcaption>
</figure>
<p>Collaborative consumption initiatives tap into idle capacity in the economy - unused rooms, tools that are gathering dust, spare seats during the morning commute and unused skills - and make this capacity available to consumers at a lower price than the incumbents. </p>
<p>As well as being financially attractive to consumers, participation in the sharing economy reduces environmental impact by making more efficient use of existing resources. On top of that, participants can make new social connections with the people they share with. It’s a win-win-win proposition for consumers - they can feel good about their environmental impact, build new social relationships and save money at the same time.</p>
<p>Despite this attractive business case, the sharing economy has so far been too small to pose much of a threat to existing business interests. For example, only <a href="http://www.businessweek.com/articles/2013-10-22/airbnb-says-it-has-a-huge-impact-on-nycs-economy-except-when-it-doesnt">1% of tourists visiting New York stay in Airbnb properties</a>. Globally, <a href="http://www.navigantresearch.com/research/carsharing-programs">there are about 1 billion cars, but only 2.3 million members of car sharing programs</a>. Nevertheless, the sharing economy constitutes a new disruptive element that is growing rapidly. Revenue in the global car sharing market is expected to <a href="http://www.navigantresearch.com/research/carsharing-programs">grow from US$1 billion in 2013 to more than US$6 billion in 2020</a>. </p>
<p>Just how big the sharing economy could grow remains uncertain, but there is some research on its market potential. In a <a href="http://www.collaborativeconsumption.com/2013/09/24/study-the-consumer-potential-of-collaborative-consumption/">Masters research project</a>, more than 84% of the Dutch respondents expressed interest in participating in collaborative consumption of some sort. While current uptake in Australia falls well short of these levels, new collaborative consumption startups are appearing on a regular basis and participation is growing.</p>
<p>Recent legal responses to the disruptive emergence of the sharing economy may indicate that it is indeed seen as a threat to the establishment. In New York, Airbnb <a href="http://www.businessinsider.com.au/attorney-general-eric-schneiderman-subpoena-airbnb-user-data-2013-10">is caught up in an investigation</a> into possible breaches of a 2010 law that makes it illegal to rent out your own apartment in the city. New York City’s Attorney General filed a subpoena for data on all Airbnb hosts in the city. Ride sharing startups in the United States have also <a href="http://pandodaily.com/2013/06/25/los-angeles-shocks-uber-sidecar-and-lyft-with-cease-desist-orders-despite-state-authorization/">run into legal trouble</a> in several cities. </p>
<p>The responses of businesses that may be threatened by the sharing economy are also instructive. Several car manufacturers have responded to the threat posed by car sharing startups by launching their own car sharing services. Earlier this year, Ford launched its <a href="http://corporate.ford.com/news-center/press-releases-detail/pr-ford-launches-pioneering-ford2go-37770">FORD2GO</a> car sharing service in Germany. BMW also offers a premium car sharing service called <a href="https://www.drive-now.com/international?language=en_US&L=2">DriveNow</a> in Germany and San Francisco. Presumably, these manufacturers are entering the market in response to the competition posed by car sharing.</p>
<p>Given the clear financial, environmental and social benefits of collaborative consumption, it makes sense for existing businesses to find ways to tap into the sharing economy. Rather than seeing the sharing economy as a threat, smart businesses will recognise it as an opportunity to find new, more sustainable ways to connect to consumers. </p>
<hr>
<p><em>This is the second piece in our series on the disruptive forces hurting big business.</em></p>
<p><em>Read the other pieces:</em></p>
<p><a href="https://theconversation.com/why-theres-no-pepsi-in-cyberspace-19902">Why there’s no Pepsi in cyberspace</a></p>
<p><a href="https://theconversation.com/clouds-bear-down-on-computer-hardware-companies-19443">Clouds bear down on computer hardware companies</a></p>
<p><a href="https://theconversation.com/big-data-and-big-business-its-what-you-do-with-it-that-matters-20543">Big data and big business: it’s what you do with it that matters</a></p><img src="https://counter.theconversation.com/content/19541/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Riedy does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Earlier this year, I travelled to Melbourne for a conference. Instead of paying to stay in a hotel like I normally would, I paid a local couple to stay in their spare room. On arriving at their clean and…Chris Riedy, Associate Professor, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/199022013-11-13T19:44:01Z2013-11-13T19:44:01ZWhy there’s no Pepsi® in cyberspace<figure><img src="https://images.theconversation.com/files/35157/original/4jfbj66j-1384331744.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Online, businesses are fuelled by a different set of economic forces than those that exist purely offline.</span> <span class="attribution"><span class="source">x-ray delta one/Flickr</span></span></figcaption></figure><p><em>The world of big business is littered with once popular but now discarded household names like Kodak, Borders and Blockbuster. In this disruptive forces series we find out who might be next, uncovering the new wave of disruptors taking on global brands.</em></p>
<hr>
<p>In most industries today global competition thrives. And typically within each market in each industry there are leaders, challengers and often multiple niche players who can all eke out a good living. For example in the non-alcoholic beverage business, market leaders Coca-Cola and Pepsi have competed vigorously for more than a century. Despite this, both continue to be very profitable global enterprises, each with a market value of more than US$100 billion. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/35016/original/3fhzg6zz-1384235525.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/35016/original/3fhzg6zz-1384235525.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/35016/original/3fhzg6zz-1384235525.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=383&fit=crop&dpr=1 600w, https://images.theconversation.com/files/35016/original/3fhzg6zz-1384235525.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=383&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/35016/original/3fhzg6zz-1384235525.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=383&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/35016/original/3fhzg6zz-1384235525.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=482&fit=crop&dpr=1 754w, https://images.theconversation.com/files/35016/original/3fhzg6zz-1384235525.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=482&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/35016/original/3fhzg6zz-1384235525.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=482&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Relative Market Share of Soft Drink Market Brands: United States (1970-2000)</span>
<span class="attribution"><span class="source">Chart by Paul McCarthy with data from Paul Miesing, University of Albany and Author</span></span>
</figcaption>
</figure>
<p>But in online global markets, the picture is quite different. For example, in the market for social media, one company, MySpace was the clear global leader in 2006 until its rival Facebook gained momentum and overtook it in less than two years. Once ahead Facebook went on to vanquish its rival and command almost complete control of the entire category, creating the first and only US$100 billion player in social media.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/35017/original/ffsng7xn-1384236600.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/35017/original/ffsng7xn-1384236600.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/35017/original/ffsng7xn-1384236600.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=383&fit=crop&dpr=1 600w, https://images.theconversation.com/files/35017/original/ffsng7xn-1384236600.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=383&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/35017/original/ffsng7xn-1384236600.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=383&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/35017/original/ffsng7xn-1384236600.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=481&fit=crop&dpr=1 754w, https://images.theconversation.com/files/35017/original/ffsng7xn-1384236600.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=481&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/35017/original/ffsng7xn-1384236600.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=481&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Market Share of Facebook vs Myspace : Global Online Social Media (2005-2011)</span>
<span class="attribution"><span class="source">Paul McCarthy chart with data from Google Insights.</span></span>
</figcaption>
</figure>
<p>Online, businesses are fuelled by a different set of economic forces than those that exist purely offline. I call these forces “online gravity” – not unlike the forces that led to the formation of our solar system. These forces favour the creation of planet-like superstructures with lots of white space in-between. </p>
<p>This is not an entirely new idea and anyone who has been working in the technology world will know it intuitively. Harvard Business Review executive editor Justin Fox has written of <a href="http://www.theatlantic.com/magazine/archive/2013/01/the-webs-new-monopolists/309197/?single_page=true">The Web’s New Monopolists</a>, echoing some of the issues highlighted in The Economist’s <a href="http://www.economist.com/news/leaders/21567355-concern-about-clout-internet-giants-growing-antitrust-watchdogs-should-treadhttp://www.economist.com/news/leaders/21567355-concern-about-clout-internet-giants-growing-antitrust-watchdogs-should-tread">Survival of the Biggest</a>. As more and more traditional industries such as media, travel, photography, and music are steadily consumed and transformed by online services, more and more of the world is coming under the spell of online gravity.</p>
<p>In 1996 economist Brian Arthur published an <a href="http://hbr.org/1996/07/increasing-returns-and-the-new-world-of-business/ar/1">article</a> in the Harvard Business Review arguing many new knowledge-intensive industries, especially those involving advanced technology have a tendency to produce special rewards for the market leaders. These rewards that flow to both consumers and producers emerge as standards are set and as the market share of the leader increases. </p>
<p>The more market share the leader gains, the more the benefits flow and hence you end up with a natural tendency towards monopolies in these markets governed by what Arthur calls “increasing returns”.</p>
<p>Once momentum is established and as more and more customers are drawn to the leading player the offer becomes more valuable and more difficult for rivals to challenge. Eventually the leader goes on to dominate or monopolise that category at the expense of all but the smallest of niche rivals.</p>
<p>A typical pattern for new markets subject to increasing returns involves:</p>
<ol>
<li><p>An initial period of jockeying for positions among a number of players </p></li>
<li><p>One player begins to assert dominance over its market rivals</p></li>
<li><p>Standards are set or de-facto standards emerge and gain market acceptance</p></li>
<li><p>Increasing returns start to kick in thus further favouring the leader</p></li>
<li><p>The leader’s market share increases often to the point of annihilating all but its niche competitors</p></li>
</ol>
<p>This contrasts to “traditional” industries, say for example in car manufacturing where there’s room and indeed drivers for a number of global players to compete. That’s because most traditional industries are subject to diminishing returns where, beyond a certain point, there are increased costs and diminishing benefits for competitors to take further market share from their competitors. In these industries, happily this leads to competition naturally flourishing. </p>
<p>One clear example of “increasing returns” Arthur gives is that of the home VCR market where two standards emerged at the same time – VHS and Beta. For about a year, when the market for VCRs was just beginning it was neck and neck until VHS for a number of reasons – planning, strategy and plain good luck – emerged slightly ahead. Then as more people had VHS machines, more video rental stores would stock larger ranges of rental tapes. Also, because people could only share tapes with family and friends who had the same kind of machine it became more and more valuable to have a VHS machine. And so the market moved quickly to one of total domination by one standard or “platform”.</p>
<p>Famously, the Beta videotape standard was thought by pundits to be technically superior. Whether it was or wasn’t remains irrelevant – the lesson is that while Sony’s Beta format was first to market in 1975, by 1978 JVC’s rival VHS format had overtaken and by 1989 VHS had achieved such market dominance that Sony’s Beta format wasn’t able to survive – even as a niche player.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/35151/original/8c4fcqsy-1384322853.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/35151/original/8c4fcqsy-1384322853.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=383&fit=crop&dpr=1 600w, https://images.theconversation.com/files/35151/original/8c4fcqsy-1384322853.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=383&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/35151/original/8c4fcqsy-1384322853.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=383&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/35151/original/8c4fcqsy-1384322853.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=481&fit=crop&dpr=1 754w, https://images.theconversation.com/files/35151/original/8c4fcqsy-1384322853.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=481&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/35151/original/8c4fcqsy-1384322853.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=481&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Global Market Share of Beta vs VHS Video Cassette Recorders by Format (1974-1989)</span>
<span class="attribution"><span class="source"> Source: Michael A. Cusumano, Yiorgos Mylonadis and Richard S. Rosenbloom (1992). Strategic Maneuvering and Mass-Market Dynamics: The Triumph of VHS over Beta. Business History Review, 66 , pp 51-94 doi:10.2307/3117053</span></span>
</figcaption>
</figure>
<p>Microsoft also experienced the good fortune of increasing returns in the PC operating system market. Firstly with DOS, their maiden product and later with Windows and Windows-based applications including Word, Excel, and Powerpoint. Indeed, Brian Arthur’s theories were brought to bear on the antitrust (anti-monopoly) case that was brought upon Microsoft in the 1990s by the United States government. Brian Arthur maintains increasing returns applies in “knowledge-based” industries.</p>
<p>In the internet-powered global digital economy, all businesses are knowledge-based and involve the sharing of rich information in particular formats and standards. Netscape founder Marc Andreesson <a href="http://online.wsj.com/news/articles/SB10001424053111903480904576512250915629460">has written</a> of how software is “eating” traditional industries, describing how various online businesses have completely annihilated their incumbent offline rivals like Amazon vs Borders and Netflix vs Blockbuster. </p>
<p>Online gravity loves big winners. And increasing returns is like high-octane fuel or perhaps aviation gas that is further accelerating the formation of new superstar companies on the one hand, while simultaneously completely decimating their foes and traditional economy rivals. </p>
<p>Online gravity is transforming many of our industries and warrants close attention and further study by government policy makers and business leaders alike.</p>
<hr>
<p><em>This is the first piece in our series on the disruptive forces hurting big business.</em></p>
<p><em>Read the other pieces:</em></p>
<p><a href="https://theconversation.com/the-sharing-economy-spooking-big-business-19541">The sharing economy spooking big business</a></p>
<p><a href="https://theconversation.com/clouds-bear-down-on-computer-hardware-companies-19443">Clouds bear down on computer hardware companies</a></p>
<p><a href="https://theconversation.com/big-data-and-big-business-its-what-you-do-with-it-that-matters-20543">Big data and big business: it’s what you do with it that matters</a></p><img src="https://counter.theconversation.com/content/19902/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul McCarthy is writing a book entitled "Online Gravity" He owns shares in Freelancer.com.</span></em></p>The world of big business is littered with once popular but now discarded household names like Kodak, Borders and Blockbuster. In this disruptive forces series we find out who might be next, uncovering…Paul X. McCarthy, Adjunct Professor, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.