5 Pillars of Tech

Aside from my work as an entrepreneur with Internetrix and Hiive Systems, I’m also pretty active in my community as a board member of Regional Development Australia (Illawarra).

The Board of our RDA is made up of some pretty impressive people from lots of walks of life, leaders and achievers with very diverse and interesting perspectives. For a range of reasons, I’ve generally focused my efforts around projects related to technology, entrepreneurship and to a lesser extent youth issues (I’m the youngest face around the table, but at 31 I’m not what you would call representative of youth anymore unfortunately).

Anyway, I’ve been invited to speak at a few things around the traps recently as a bit of a champion of the sector, and often people want to know a bit about the shape of the sector. While the team at IRIS have great statistics, the perspective they’re looking for from me often relates to how they can help, work with or engage with the sector – they’re more interested in colour, experiences and challenges than numbers. Over the course of doing a few of these lately, I’ve come up with the following way to explain the 5 Pillars of Tech from my perspective, at least as they apply to a regional setting like here in the Illawarra.

  1. The Smiths
  2. The Firemen
  3. The Suits
  4. The Scientists
  5. The Startups

The Smiths

The Smiths, as in “Blacksmith”, are generally speaking services companies. They are labour intensive, are based in the region, are privately held and your classic example of an SME. They derive the majority of their revenue from the area, and they range from one-man-bands through to more established local players like AVC, Unitech and Accent. They sell to businesses (because B2C is largely uneconomic in a professional services context today).

Because the barriers to entry of setting up an IT business are laughably low – you just need to know more about technology than whoever your intended client is – this sector often has difficulty playing nice together. It isn’t at all uncommon for a company to start out doing anything someone will pay for – websites, cabling, networks, custom application development, training, you get the drift – which creates problems because in a small market that has a reputation for being frugal, companies in this category are almost always fighting for scraps. The big money – what there is of it – usually goes to the Suits, or is kept in house to feed the Firemen (who often aren’t that capable at obtuse tasks, but the desire for job security and information asymmetry with management means this often doesn’t matter, or isn’t known until too late, if at all).

So, what can we do to help the Smiths develop their businesses and their contribution to the economy are? There’s lots of things, but the two that stand out are:

  1. Connecting with potential clients – particularly the ones with budgets and an investment mentality that value advice – to get to know them a little better and to give them a look in on the projects they’re doing.
  2. Fighting the hate – the fact so many of these businesses are fighting for crumbs and depend on new projects and clients to feed their families next month makes them very competitive. This is natural in markets, but the problem with IT (as opposed to other professions, like legal, financial, medical) is that there aren’t really anything that makes it clear you’re complimentary, not competitive. Also, since people are desperate and hungry when they’re getting started, the first time you find out about a new player is often when they’ve nabbed one of your clients (and then proceed often to screw up the project), or even worse, a loyal client shares the stories the new player has been telling to try and steal the business. This has happened to me a lot over the years, and with a first impression like that, it is often hard not to write someone off.

The Smiths play a really important part in the ecosystem, particularly in the Illawarra, in that they provide a great way for people to get started. Often businesses you’d class as a Startup are actually running off the profits or at very least revenue earned by the founders being part time Smiths, part time Startups.

The Firemen

The firemen are technology professionals who work on a full time basis inside companies large enough to have IT departments. As with all larger organisations, there’s a fair degree of difference between the awesome world class experts on one side, and the plodders who’re just there for a paycheck on the other.

One of the unfortunate things for the Firemen is that in almost all cases, they’re seen as a cost centre in the company, someone who works hard to keep the lights on and the business running, but they don’t get showered in praise for corporate performance, they’re rarely seen as strategically critical to the business and if things break or stop, everyone looks at them like they’ve screwed up. In this sense, they’re more like the firemen on a train than the ones on a big red truck (but they’re often racing around the organisation putting out fires – Lulzsec anyone?)

How can we help the firemen contribute to the value our sector provides to the economic base? It is a bit tricky, since they’re not driving the trains they work on, but there are probably two things that can make a difference:

  1. Skills/knowledge development – if you’re part of a small team – or all by yourself – in a larger business who doesn’t really care about IT until it all goes wrong, then you tend to be pretty professionally isolated. Technology moves really fast, and even if your business doesn’t, staying sharp and current can only be good for your organisation, as well as your career prospects. Regular lunch style events, especially where you get exposed on a professional and social level with the other parts of the industry can help reduce the isolation and will hopefully spawn new ideas that add value to the company.
  2. Helping the best ones become startups – there are some people who’s skills and talents are that could, that potentially world class, that keeping them shovelling coal in the cab of the steam engine isn’t the best result for the industry and the region. Things like Startup Weekends (where the top quality folks can have a taste of what startups are all about without having to burn their boats), and encouraging participation while they’re Wantrepreneurs at things like Silicon Beach drinks will be critical.

While the plight of the Fireman isn’t very glamorous, firemen, scientists and to an extent suits have all been critical to the development of world class, high performing technology sectors. Boulder Colorado has lots of firemen working in their aerospace, health and education sectors, many of whom spin out and join things like TechStars to build their own startups.

The Suits

The Suits have a lot in common with the Firemen, but have the distinction that they are working in technology focused businesses who’s clients are mostly (all) based outside the region. This sector contributes a lot of grow the economic base of the region – because they’re bringing in income by exporting expertise of their local staff – and most of the time, these sorts of businesses are imported, not built. Local examples include CSC (who now earn >50% of their income from clients other than the BlueScope and OneSteel operations here) and the new Mphasis operation that the University of Wollongong has worked so hard to bring to the Innovation Campus.

When asking how we can help the Suits to grow the economic base of the region, the answer is simple (since we have so few of them): we need to attract more of them. In this sense, there’s probably three different things that can be done:

  1. Hunting them – this is where the University of Wollongong, the Council and Industry and Investment, and the efforts that they make on an ongoing basis at great expense (is Craig Peden in the country? Probably not – he’s out hunting in the subcontinent).
  2. Welcoming them – if one hunters (who we should now think of as suitors, since they will never close a deal without bringing them here to “meet the family”) brings home a new date, we should make sure the city and its industry is in a position to roll out the red carpet. Focus on the positives. Tell the good stories. Don’t take them to Bellambi. All the basics. And whatever we do, we need to make sure we never whinge, bitch and moan about our own lots in life when we’re trying to help one of our brothers impress a girl with how cool the new (potential) family is.
  3. Evangelising the city – in our own work and our own technology circles, we should do what we can to evangelise the city. One of our big advantages is our beautiful natural environment. Take photos and try and make people jealous. Beat the drum for the city when appropriate (my Silicon Beach friends are groaning right now at mentioning this. Again). We live in a beautiful city. You can walk to work, and if you commute, it will almost certainly take you less than 30 minutes. Our staff turnover in this city is 10 times less than Sydney. Our University turns out one in 7 technology graduates in the country. We’ve got a lot of be proud of and legitimately evangelize. Get out there and spread the word.

The biggest problem with the suits, unfortunately, is that we’re not the only ones hunting them. The competition is fierce, and as a country we’re suffering a nasty bout of Dutch disease. While the amazing efforts by our hunters need to be applauded, to assume that we’ll be able to have Suits alone transition our city from a coal and steel town to a high tech powerhouse would be very very dangerous and naive.

The Scientists

The Scientists are a particularly interesting group. We’ve got some incredible researchers at the University of Wollongong, and if you look at places like Waterloo in Canada, a lot of their strength and growth has come through commercialising, if not pure research, then by smart research minded folks going out and becoming The Startups. In our region, I can only really only think of one example – iTree Software – who you’d consider as being in this category so far.

The path to commercialisation for a university is a very very very tough one. The reasons that someone chooses a career in research – and the way they’re rewarded and recognised, by sharing rather than protecting knowledge – create some very strong tensions and limit the ability for a lot of scientific endeavour to be able to make a difference to the economic base of a region in the short or medium term. This isn’t to say we shouldn’t try – we definitely should, and it is fundamental research that led to the initial successes of Silicon Valley, the birth of Cochlear here in Australia, etc – but this is more of a long term play where better research, and perhaps even a spin-out company that commercialises it and employs lots of people can happen, but like the Suits, it is a bit out of our control the speed that this happens with.

The Startups

The last pillar of the tech industry as I see it is the Startup. While the Startup could look to an outsider to be the same as one of the Smiths – and often they moonlight as a Smith to pay the bills – a Startup is a very different creature.

Unlike the “services” focused nature of a Smith, a Startup is product focused. They’re often developing software (although hardware is still possibly, it is at least an order of magnitude harder to do, and requires a lot more capital than you can usually find in Australia.

The Startup is globally oriented – they might not be selling internationally, and their first 4 clients might be companies who share the same building as them, but generally speaking, your startup is trying to solve a niche problem in a new way.

By being product focused, often software-based with a zero marginal cost of production, a Startup is also highly scalable. With more than a billion people online now, and the growth in smartphones and their associate app marketplaces, distribution has never been easier or less tied to your geographic location. In this sense, being a city of a quarter of a million, in country with only 22 million (which makes us a flea on the back of a Chihuahua riding on an Frigate) doesn’t have to be a critical disadvantage.

The region actually has a reasonable track record of producing Startups. Infocomp, a true startup that developed and licenced software to some of the biggest names in global finance is just one example. They managed to live through the incredibly long sales cycles and risk aversion of their target market, selling a very very important software platform to conservative companies, all from Wollongong. Another example is the team from Oasis Asset Management, who built an incredible tech focused business, also for the financial services sector, all from here in Wollongong. While they’ve had to move to the US to raise funds, Stuart and Anthony, UOW alumni started Grabble and are kicking goals and showing that a couple of local lads can stand tall amongst the best in the world in Silicon Valley. I’m working on my own startup, and things are coming along well with our product, AffinityLive.

When it comes to the role that Startups can play in contributing to the economy of the region, the best thing about them is that they’re easy to start, they harness the things we have – smart people, lowish costs of living – and their development and cultivation is within our control.

They’re also great job creators – 20 companies with 10 staff creates the same opportunities of one Suit that the hunters bring in – and even if the companies fail, the experiences, lessons and skills developed by getting out there and doing it are incredibly valuable, whether the founders choose to do another startup, or join the ranks of the Firemen, Suits, Scientists or even switch back to be a Smith while they come up with their next idea.

What sorts of Startups should we be encouraging here in the region? My criteria/list for the ideal startup to be cultivating is as follows:

  • Globally oriented – we’re in a small market. We can use our local region, or our proximity to Sydney to help in the early stages of validating an idea and set of business hypotheses, but unless your Startup has a globally oriented mindset – you want to be the best in the world, and see the world as flat – you’re just not doing it right.
  • Highly scalable – as they say in The Social Network, “A million dollars isn’t cool. You know what’s cool? A billion dollars“. If we’re trying to really move the needle, we should be aiming high. The Startups we cultivate should be highly scalable.
  • Capital efficient – one thing that the region – and in fact the entire country – suffers compared to other places to build a startup is our access to capital. Raising seed or early stage money in a nation where our wealthy investor types know a lot about rocks, retailing and residential development means high-risk, early stage technology struggles to attract much investor interest. So, whatever Startups we cultivate, we need to accept that they will need to live in a capital constrained world.

So, what do we need to do to help this sector to grow and contribute to the economic base of the region? There’s a few things:

  1. Evangelising the opportunity to potential entrepreneurs – what did you want to be when you grew up? I’m pretty sure it wasn’t an entrepreneur. If I had a dollar for every time some guy in his mid 40’s looked at me, sighed, and said “I wish I’d started my own company when I was in my early 20’s, when I didn’t have financial responsibilities of kids, when I had more energy and youthful ignorance”, I’d be rich by now. Our education system, because of its roots in an industrial-age economy, is designed around creating employees. This is fine – because entrepreneurs are a small subset of the people who need to come together to make something happen – but the problem is that is almost never talked about or evanglised to our best and brightest. This needs to change. We need to get this story out in front of our best and brightest, show them how others just like them have done it, and then we’ll increase the number of people starting out on this journey.
  2. Supporting the early phases of startups – much like an infant child, and new Startup is a very very fragile. They are also very fast learning. They need advice, nurturing, and in some cases protection. If the barriers to starting include entering into a 5 year commercial lease, signing complex licencing agreements and spending thousands on professional advice and company registrations, you’re going to turn a lot of people away. A new breed of incubator, that is focused on incubating people and ideas, not selling square metres of office space is revolutionising the seed stage of startups around the world. Watch this space for more in the near future.
  3. Creating a startup community/culture – the other thing that we need to do is connect our Startups together. Being an entrepreneur is lonely. You face all sorts of challenges, and the usual places you go for advice – friends, family – are probably not going to be much help in the same way as if you had a problem with a bad boss or relationship hassles, the sorts of things most people have experience with. Creating a community of entrepreneurs, bringing them together to share their challenges and successes is critical to Startup success.

The Startup sector, more than any other, promises to be the most likely and most achievable source of the kinds of change our industry needs to help drive and lead in the region. The challenges are many, but the costs and barriers of getting started are relatively small. As they say, we need to JFDI.

Conclusion

The technology sector, even in a relatively small and tightly knit place like the Illawarra, is a very diverse creature with lots of needs amongst its actors. With our small undeveloped land area, strong university and international linkages (Mascot is close, and we have a very multicultural background which is great for being globally oriented), the technology sector – along with tourism and financial services – is where we need to be leaning to ensure our city has a strong future.

What do you think? What do you need? Feel free to share your thoughts in the comments or email me directly – geoff.mcqueen@gmail.com.

2 thoughts on “5 Pillars of Tech

  1. Pingback: Wollongong is on a burning platform - looking out from down under

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