Deirdre Macken’s Cal­i­for­nian pil­grim­age

Aus­tralian cor­po­rate heavy­weights on a pil­grim­age to Sil­i­con Val­ley find a very dif­fer­ent vi­sion of the fu­ture

The Australian - The Deal - - Front Page - Story by: DEIRDRE MACKEN Il­lus­tra­tions by: STEVEN MOORE

IN A room heavy with suits, an en­tre­pre­neur am­bles up to Michael Chaney and asks, “Hey man, what do you do?” There is a com­mu­nal in­take of breath. This hip­ster, with his blonde-tipped mo­hawk, scratchy beard and hooded jacket, is ask­ing Michael Chaney, chair of Wes­farm­ers and all-round pa­tri­arch of Aus­tralian busi­ness, what he does for a job? “I re­ally en­joyed talk­ing with him,” says Fred Schebesta, the founder of Finder.com, of the 20-minute con­ver­sa­tion that fol­lowed. “He has a very in­ter­est­ing view on my busi­ness and how it worked with his and the ef­fect it would have on the in­dus­try we work in.” Sil­i­con Val­ley is full of serendip­i­tous en­coun­ters. And, if you be­lieve the hype around the most scru­ti­nised land­scape in busi­ness, it’s the way the rest of the world should work.

Last month, Austrade took a group of 40 chief ex­ec­u­tives, chair­men, academics, start-ups, ven­ture cap­i­tal­ists and su­per­an­nu­a­tion chiefs through the Val­ley to learn the se­crets of dig­i­tal suc­cess.

It’s be­come some­thing of a pil­grim­age for CEOs and di­rec­tors of Aus­tralia’s big­gest com­pa­nies and one that’s prompted many to ask, why are they mak­ing the trip, what are they get­ting out of it and, why don’t they just get a briefing pa­per? In short, how did Sil­i­con Val­ley be­come Dis­ney­land for di­rec­tors?

Af­ter a week trail­ing the del­e­gates and tak­ing notes (the only per­son in the Val­ley us­ing pa­per and pen), I can con­dense the lessons from the Cal­i­for­nia class­room to a list of take­aways – be­cause what hap­pens in the Val­ley does not stay in the Val­ley.

You are not am­bi­tious enough

At the end of a fire­side chat, Google Aus­tralia man­ag­ing di­rec­tor Maile Carnegie (since hired by ANZ as group ex­ec­u­tive for dig­i­tal bank­ing) asks an Aus­tralian en­tre­pre­neur why “a start-up in Sil­i­con Val­ley has an as­pi­ra­tion to change the world while the as­pi­ra­tion of Aus­tralian start-ups is to get ac­quired?”

It’s im­me­di­ately ap­par­ent to new­com­ers in the Val­ley that ev­ery young per­son wants to change the world and be­come a uni­corn (a bil­lion-dol­lar com­pany). If Los An­ge­les is full of young writ­ers pitch­ing scripts, San Fran­cisco is full of en­gi­neers pitch­ing start-ups. As the founder of Rock­etS­pace, Dun­can Lo­gan, tells del­e­gates: “Ev­ery­one here is deadly se­ri­ous about chang­ing the world. It’s hard to imag­ine that if you’re not sur­rounded by it, so hang out with peo­ple who are as deadly se­ri­ous as you.”

Aus­tralian com­pa­nies are rou­tinely told they are not aim­ing high enough, but our en­trepreneurs are also too mod­est. Y Com­bi­na­tor, the world’s most pow­er­ful in­cu­ba­tor, gets 12,000 ap­pli­ca­tions a year from would-be start-ups but only an av­er­age of 20 from Aus­tralia.

The shift from “good to great” to “global and good” has hap­pened fast but it makes sense. In or­der to change the world, you need to be big – ergo the bil­lion-dol­lar am­bi­tions – and dig­i­tal busi­nesses are the eas­i­est type of busi­ness to scale to global.

It’s a sen­ti­ment that is cap­tur­ing the hearts of Aus­tralian busi­ness peo­ple. Says Elmer Funke Kup­per, man­ag­ing di­rec­tor and CEO of the ASX: “Aus­tralians don’t talk about chang­ing the world but we should bloody well do it. There’s no rea­son why we can’t. As a coun­try that in­vents, we’re one of the lead­ing coun­tries but we some­times miss the point that th­ese things can change the world.”

Deanne Weir, in­vestor and phi­lan­thropist, agrees: “I love the fact that they have that dream of chang­ing the world. Per­haps we should have more of that, to have ev­ery­one as­pire to change the world. It’s a wor­thy as­pi­ra­tion but also in­cred­i­bly en­er­gis­ing.”

The an­swer to Carnegie’s ques­tion from that en­tre­pre­neur, Pixc.com founder Holly Cardew, is: “Aus­tralians aren’t taught how to be a bil­lion-dol­lar com­pany.” They’re also suc­cinct in the Val­ley.

You are not fast enough

“Do­ing 10 per cent growth a month isn’t where it’s at. Do 10 per cent a day.” So says Lo­gan, whose Rock­etS­pace of­fices have launched 800 start-ups, in­clud­ing Uber.

Ex­po­nen­tial is a word you hear a lot in the Val­ley. It’s the growth curve of com­puter power out­lined by Moore’s law and it’s what start-ups must aim for if they are go­ing to be­come the dom­i­nant player in their field. This growth creates in­fant com­pa­nies that are worth a bil­lion dol­lars when they still have a few hun­dred staff. And it ex­cites Aus­tralian busi­ness lead­ers.

Vikram Sharma, CEO of QuintessenceLabs was pumped to dis­cover that in the Val­ley there is an equa­tion of one staff mem­ber to $US1 mil­lion ($1.4m) val­u­a­tion. “We are 27 peo­ple and I’ve thought for a while that 50 would be the ideal,” he says. “We hope to get rev­enue of $US50m so $US1m of rev­enue per per­son might be right for us. We’re on track.”

The need for speed is in­fil­trat­ing es­tab­lished busi­nesses. Funke Kup­per ad­mits he gave his staff “a com­pletely un­rea­son­able dead­line” to pro­duce a blockchain model (the kind of elec­tronic trans­ac­tion ledger that un­der­pins the dig­i­tal cur­rency bit­coin): six months from dis­cov­ery to “hands on key­boards”.

Richard Favero, founder of mo­bile mes­sag­ing com­pany So­prano, says: “The mes­sage about ex­po­nen­tial growth is the one that stays with me. Our growth is north of 30 per cent and I was happy with that last week, but now I’m not sure we’re hit­ting it.”

Speed doesn’t just dic­tate the start-up space; it also marks the pace at which start-ups are aban­doned.

Says Favero: “They [Amer­i­cans] let busi­nesses die so eas­ily, we don’t. I would die in a ditch for my busi­ness.”

If busi­ness is wor­ried about the speed of in­no­va­tion, GE’s guru of global strat­egy, Beth Com­stock, has more bad news. “It doesn’t mat­ter how fast you’re go­ing, things are mov­ing even faster.”

You don’t know what you need to know

“We are all soft­ware com­pa­nies no mat­ter what in­dus­try we’re in,” says Com­stock, out­lin­ing to del­e­gates how the in­ter­net of ev­ery­thing is re­shap­ing the 140-year-old man­u­fac­turer. “If we fig­ure it out in one in­dus­try you can be pretty sure you can use it in the next in­dus­try.”

In the Val­ley, ex­cite­ment is shift­ing from con­sumer prod­ucts to busi­ness ap­pli­ca­tions. It’s about sen­sors in ma­chines and in­fra­struc­ture, blockchain, data col­lec­tion and aug­mented re­al­ity – and many of th­ese in­no­va­tions can be ap­plied to many busi­nesses.

Along the way, for in­stance, Op­tus chair­man Paul O’Sul­li­van re­vealed that the telco is look­ing at us­ing blockchain. Weir made con­tact with the in­ven­tor of an ed­u­ca­tional prod­uct that com­ple­ments her speech-to-text busi­ness and there was a lot of chat­ter about how dy­namic map­ping tech­nolo­gies could be used in their in­dus­try.

As Weir says: “It’s the chats along way that give you ideas. We’ve found a few peo­ple who we may end up work­ing with be­cause they’re in par­al­lel spa­ces but I wouldn’t have met them

oth­er­wise. It’s the gen­eros­ity of Amer­i­cans that’s some­thing we could learn more about – how open they are here and gen­er­ous, be­cause they see it ul­ti­mately as a two-way process.”

You are not ag­ile enough

Out­side of Davos, the San Fran­cisco of­fice of Rock­etS­pace with its bare floors, un­cov­ered ca­bling and weary ping-pong ta­ble, might be one of the most vis­ited spa­ces for the world’s most pow­er­ful busi­ness peo­ple.

“I meet Top 500 com­pany CEOs ev­ery week,” says Lo­gan, “and I’ve found that if a CEO is in­volved in in­no­va­tion, it can work, but if we meet with the vice-pres­i­dent of in­no­va­tion, the chance of change is neg­li­gi­ble. It has to be driven from the top be­cause com­pa­nies are full of an­ti­bod­ies, those peo­ple whose ev­ery bone is re­sis­tant to in­no­va­tion, who cling on to nor­mal be­cause it’s com­fort­able.”

Cor­po­rate chiefs are right to worry about scle­rotic boards, given that most di­rec­tors are over 50, tend to out­source tech­nol­ogy to as­sis­tants and were ap­pointed be­cause of their long ex­per­tise in busi­ness – an ex­per­tise now un­der chal­lenge. But as boards get up to speed, chiefs must worry about their staff.

To drive in­no­va­tion through­out their or­gan­i­sa­tion most have adopted the strat­egy of di­vide and – even­tu­ally – con­quer. That is, they set up sep­a­rate units of ag­ile work­ers to spear­head changes and hope that the cul­ture of those units sweeps into tra­di­tional parts of the busi­ness.

Most con­fess that cul­tural change, es­pe­cially in middle man­age­ment, is the most dif­fi­cult part of driv­ing in­no­va­tion.

Op­tus’s O’Sul­li­van cau­tions that chief ex­ec­u­tives can’t fake the in­no­va­tion agenda. “The im­por­tance of the CEO be­ing in­vested in it is re­ally im­por­tant,” he says. “Em­ploy­ees watch what you do – you can have all the nice emails and videos you like – but they want to know, when this pro­ject came up, did he give the money to it? Does he use the tech­nol­ogy we’re de­vel­op­ing, does he know the names of the peo­ple in the team?’

It’s all about tal­ent

If there’s one apho­rism that stuck in the minds of del­e­gates it was that the in­ter­net has moved us from cap­i­tal­ism to tal­en­tism and, with the av­er­age cost of start­ing a busi­ness hav­ing shrunk from $5 mil­lion to $5000, any­one with tal­ent can have a go.

“I was im­pressed with that idea,” says O’Sul­li­van. “It ex­plains how we could spend $800 mil­lion on a cy­ber-se­cu­rity busi­ness. You end up in­vest­ing in com­pa­nies just to get the ca­pa­bil­i­ties.”

In the Val­ley, the war for tal­ent is not a book ti­tle, it’s not about ping-pong ta­bles and it isn’t re­ally about the money. It per­me­ates ev­ery busi­ness de­ci­sion. As O’Sul­li­van says, many bil­lion-dol­lar takeovers are tal­ent ac­qui­si­tion moves (some­times for just one per­son). Tal­ent also dic­tates lo­ca­tion. For in­stance, GE lo­cated its soft­ware cen­tre in San Ra­mon be­cause it was an af­ford­able and pleas­ant place for young en­gi­neers to live. An en­tre­pre­neur said he set up across San Fran­cisco Bay be­cause he wanted to at­tract mid-level en­gi­neers and avoid “those new grad­u­ates, who want flex­i­ble work, big salaries and a San Fran­cisco work­place that they will leave af­ter a few months”.

The fo­cus on tal­ent is in the DNA of the Val­ley but not so in Aus­tralia. Pixc.com’s Cardew says: “Sil­i­con Val­ley takes a chance on the per­son and the team. In Aus­tralia, they fo­cus on rev­enue and where you are in terms of rev­enue.”

Funke Kup­per says: “Lis­ten­ing to that con­ver­sa­tion about tal­ent, I think, well how much are we do­ing that in my com­pany? Are we re­ally sure we’ve done ev­ery­thing we should? And the an­swer for al­most all tra­di­tional com­pa­nies is no, so then I think, what’s go­ing to have to change when I get back?

“We’ve done a lot of work fig­ur­ing out how we get this go­ing in a com­pany that is steeped in 150 years of his­tory and how we make sure it catches to make it real for the end cus­tomer. So, we re­or­gan­ise peo­plepeo on dif­fer­ent floors, give peo­ple more free­dom, look at teams d dif­fer­ently and we put some money down.”

You have to

re­think your re­la­tion­ships

There’s a con­cept in the Val­ley called co-oper-tition. It de­scribes how start-ups will of­ten co-op­er­ate to build a mar­ket and then com­pete once the mar­ket is formed.

The Val­ley is full of new and of­ten com­plex re­la­tion­ships. It’s about col­lab­o­ra­tions; it’s about men­tor­ing and shar­ing. Cap­i­tal is writ­ten in many dif­fer­ent con­tracts; help is of­ten free but full of obli­ga­tions and cus­tomers might be­come own­ers or col­lab­o­ra­tors, or even staff. For ex­am­ple, Airbnb is en­list­ing the help of hosts and guests to lobby govern­ment au­thor­i­ties against re­stric­tions on home share busi­nesses. They call it mo­bil­is­ing the com­mu­nity.

“When they started talk­ing about mo­bil­i­sa­tion, I thought it was about mo­bile tech­nol­ogy,” says Glenn Wightwick, deputy vice chan­cel­lor of re­search at Univer­sity of Tech­nol­ogy Syd­ney. “They talk of mo­bil­is­ing com­mu­ni­ties but they’re re­ally mon­etis­ing com­mu­ni­ties, and they’re a busi­ness so that’s

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