Interview Transcript

Question

Accepted Answer

Steve Price:	Special guest coming up in a moment. We're talking about disruption tonight, disruption of existing businesses, and a peek I guess into what sort of businesses are over the horizon that we don't even know about. Seems to me, Heidi, that every time Malcolm Turnbull stands up somewhere, the Prime Minister ...
Heidi Armstrong:	He says innovation?
Steve Price:	He says innovation.
Heidi Armstrong:	He's been doing that for so long. I mean, this is just a buzzword, that is ... it's had massive overkill done. We need to come up with something fresh.
Steve Price:	He talks about the modern economy and change and innovation. He does seem to get it though, I think Malcolm does get it. What's the biggest single change our special guest at the moment-
Heidi Armstrong:	Do you think so?
Steve Price:	I think he does, yeah. Well, this is a guy that made his fortune out of an early investment in ... you listening?
Heidi Armstrong:	I am.
Steve Price:	Ozemail, which was the first version of email.
Heidi Armstrong:	But he was the invest-
Steve Price:	He made a fortune.
Heidi Armstrong:	Yes, but, and I think we've had this discussion before, he was an investor. He wasn't actually the man in there with his sleeves rolled up doing things. I think there's a difference. Just my perspective.
Steve Price:	Okay, well our special guest Paul Broadfoot's got to have a view on that.

Steve Price:	What's the biggest change, you think, in your working life, in terms of ...
Heidi Armstrong:	I think working remotely. Because I am in Regional Australia, I can work remotely. It means that I can part of meetings. I don't have to ... as you know, I do fly around the country quite a lot, but I also spend a lot of time at home. That's really changed my life.
Steve Price:	For me, I guess computers, because I'm old enough to know pre-computers. I know you wouldn't be. Joining us in the studio tonight, you have a special guest, who is it?
Heidi Armstrong:	Yes, I certainly do. I have somebody who's going to come and talk to us about disruption, and perhaps tell us that it is a thing of the past, or that you have to do more than just disrupt and more than just innovate. Paul Broadfoot, he's written a book called Xcelerate. Paul's quite interesting, because he's an entrepreneurial strategist. He works with small businesses, also large corporates, has a degree in chemical engineering as well as an MBA from the University of Chicago. Paul, a degree in chemical engineering. Was that a natural segue to get into business consulting from there?
Paul Broadfoot:	Well, absolutely not, I would say. I'd have to say that it taught me some good things around troubleshooting and solving problems, but it wasn't where my heart lay, it turned out.
Heidi Armstrong:	Welcome to the show.
Paul Broadfoot:	Thank you.
Heidi Armstrong:	Can you tell us about disruption, and I guess if you just start by saying whether you think I was right or Steve was right.
Paul Broadfoot:	About what?
Heidi Armstrong:	About Malcolm.
Paul Broadfoot:	Ah, well, I think raising the innovation agenda in Australia has been great, because it's desperately needed. It's floating a lot of boats at the moment, I think there's a lot of money sloshing around different places, perhaps not always being used wisely, but innovation for us in Australia is extremely important, because we're ranking towards the bottom of the 30 OECDcountries that have been surveyed.
Heidi Armstrong:	Exactly, but we're at the bottom. I think we're very good at talking about it. Are we doing enough?
Paul Broadfoot:	Not nearly, not even close.
Heidi Armstrong:	Yes, definitely.
Steve Price:	But I mean we're ... I'm not sure you can lay the blame at the feet of the current Prime Minister. I think in ... the point I was making about him is that he was brave enough to see something that most of the rest of us at that time couldn't contemplate where it was going to go, and he put in money. If you don't have seed capital, you don't have innovation, do you?
Paul Broadfoot:	Yeah, it's definitely increased the activity significantly in Australia.
Heidi Armstrong:	The challenge seems to be ... and Paul, this is where you can help us out, and maybe you can help the government out as well ... that yes, we have the dialogue, and we say that innovation is really important. And I think Malcolm Turnbull's been talking about this for a long time. But it's one thing, isn't it, to be in business, and to say, "Look, we're innovative." But how do you actually do that? How do you actually make sure that your business does survive beyond tomorrow? How do you actually think about, "Is the model that I've got happening in my business the right model? And what are the new things I've got to be thinking about?" I mean, are these the challenges for small and big businesses?
Paul Broadfoot:	Yeah, it's certainly, I think, people are definitely feeling that if they get in the room, and they do a bit of brainstorming, and they get a lot of coloured Post-It notes up around the walls, that that's innovation. I think there's been a lot of that in the last few years, and much less around getting some traction, and putting some things into place for that. If I was a business owner at the moment, I'd be looking at a portfolio of innovation. I think Australia's making a master class of process innovation, and making things cheaper and more efficient, but some of the big shifts are gonna come, and saving another 2% or 5% a year on costs is not gonna be enough.
Steve Price:	And if you don't realise your business is going to be disrupted and changed, and you have to go with it, you can devalue the value of your business very quickly. I mean I keep ... I've raised this with Heidi before, the classic examples are the classified ads that were once the rivers of gold in the Fairfax newspapers. Where they would sell cars and houses. You couldn't pick your Sydney Morning Herald or your Melbourne Age up off the front lawn on a Saturday morning because it was so heavy. It's now so thin it'll blow away.
	And the reason that's happened is Domain in real estate, carsales.com, REA, all of that stuff. Someone in the little garage somewhere said, "Look, people are not going to go and pay for a classified ad to sell a house anymore, it's all going to be done online." Someone had to have that idea, and then someone had to back it and make it work. And what it's done, is it's just shattered the business model of Fairfax, for example.
Paul Broadfoot:	Absolutely, media's had its day where it's been absolutely disrupted, and now retail's going through it. And retail's suffering, if you look at what's happening in the U.S., and the 3000 mall shops that have been closed down. It's happening here in Australia, we've had seven companies go under already this year, to date, in Australia. We've got ... Amazon hasn't even come yet. So what's happened to media is happening in retail now, and to others.
Steve Price:	The big suburban shopping malls are under threat, are they?
Paul Broadfoot:	Yeah.
Steve Price:	Is that happening around the world?
Paul Broadfoot:	Yep. Certainly happening in the developed world, yep.
Steve Price:	So in the United States, people are buying so much more online that those big, big operations that companies like Westfield run are perhaps now not as viable.
Paul Broadfoot:	Yeah. And just like Netflix disrupted Blockbuster. Blockbuster had their bricks and mortar. It doesn't take much off the top line ...
Steve Price:	I saw a picture today of the last video shop operating in Sydney. Last one, there's no more. Isn't that amazing?
Paul Broadfoot:	Yeah.
Heidi Armstrong:	Sad day.
Steve Price:	Is it? You used to like going to the video shop, did you?
Heidi Armstrong:	Sure. Sure did.
Steve Price:	Drive-ins, they're gone as well.
Heidi Armstrong:	In Regional Australia, our local video store has only just departed.
Steve Price:	Yeah, but there's only one left, apparently. To that, I saw a piece in the Financial Review the other day, and it involved BMW, the car retailer. They have a large block of land in Southbank, in Melbourne. And what they've decided to do ... many of these car businesses have been real estate plays, and just walked away, and let an apartment building go up. What BMW Australia have done, rather bravely, is said, "We're going to be part of this disruption. What we will do, is we will team up the developer, we'll develop the block, which we own." They're going to build two towers above it with massive apartments and hotel rooms, and they're going to retain their showroom in the bottom.
	But beyond that, the boss of BMW said, "We're now going to be equals, we're going to be a provider of mobility services." And he described how they're going to have electric cars, their self-drive cars, and even car sharing for the people who are living in the apartments above. That's clever.
Paul Broadfoot:	Very clever. And it's a new business model, and that's exactly the sort of thing that companies should be looking at at the moment.
Heidi Armstrong:	What about the small businesses? How do small businesses make a difference, and make sure that they're relevant for tomorrow?
Paul Broadfoot:	I think the challenge for small businesses is always getting out of the day-to-day operations. It takes so much for small business owners just to keep the company's operations going. A lot of it falls to them. A lot of them don't let go, as well. But to carve out 5% only needs a day or two, probably a quarter, to have a look at their market trends, have a look at what's happening in little pockets of their business. The sales line, is that under pressure? And which part of their businesses are under pressure.
	The sales line's the first one to get hit, and so if they're looking at that, looking for shifts in their marketplace, looking for new competition. And looking for the trends, the trends are quite predictable. Everyone wants everything on demand, right now, tailored for me. That's a trend. That's gonna be a trend for the next decade. So to look at those trends, rather than trying to absorb every new piece of technology that comes out, look for the macro streams of change. That's the way to go.
Steve Price:	We're talking to Paul Broadfoot, who's written a book Xcelerate. I understand you went and looked at 5000 businesses in the research for this book.
Paul Broadfoot:	Yeah, we did. We had a look at any business that had been listed in the ASX 200 since its inception, and 10 years back before that. And what we found was a bit fascinating, actually. We found that their survival rates in the big end of town was not that much better that the small end of town. So if 50% fail in five years, there's always been the [SME 00:09:12] space, and it was something like 44% of the ASX 200 that were delisted after five years.
Steve Price:	Because of disruption.
Paul Broadfoot:	Well, that could be M&A, it could be failure, it could be a number of things. But essentially the longevity of companies has more than halved in the last 40 years.
Steve Price:	You mentioned Amazon coming. What sort of revolution is that going to create? I mean, is it really going to be as big? They've just announced today ... I think last week, sorry, they announced that they'll be setting up a distribution centre in Dandenong, Victoria. And I think they're going to employ a couple of thousand people in that distribution centre, so that's good news for jobs in that area. But them coming could create a whole lot of unemployment in a lot of other areas, couldn't it?
Paul Broadfoot:	There's absolutely gonna be winners and losers out of Amazon coming. And I think the space they were originally looking for, I don't know what they've ended up with, was something like five MCGs, so it's huge. And the way they operate it, with robots delivering shelves to the pickers, that sort of thing, it's quite amazing. Basically if people are in the large companies, are in electronic goods and appliances, in anything that's non-perishable, they're going to be majorly impacted by Amazon. They probably won't start with a fresh food offering.
Steve Price:	But I did walk through a Harvey Norman store the other day, and Jerry's been very vocal about being not really wanting Amazon to come in, because it's going to impact on his business model. But when I was there, I bought a heater a little while ago, and I can't work out how to work it properly. I'm sure it's not broken, I'm just not pushing the right buttons. So I went into the Harvey Norman's and said, "Can I speak to the heater man?" Now I can't go into Amazon and do that, can I?
Paul Broadfoot:	No, you can't. So there's gonna be a number of people who like to keep buying from an actual store. But will it take a slice? It will. How big will depend on how great the service is when you go and take your heater back in. But I think there'll certainly be quite ... double digit percentage losses of revenue for a number of the big players.
Steve Price:	Paul's with us. Heidi ... can you stick around after the break, Paul?
Paul Broadfoot:	Can do.
Steve Price:	Back after this.
Announcer:	And now, Money To Love. With Heidi Armstrong. Brought to you by Liberty, helping you get financial.
	(jingle)
Steve Price:	Heidi, we've got Paul Broadfoot in the studio with us. You mentioned that working remotely was the biggest change for you, and I said computers. I think digitising everything. The digital phone, being able to buy and operate within the digital space is huge.
Heidi Armstrong:	It's good, but you know the flip side of this is, technology, it's a drain as well, because we have to absorb so much information constantly, and we're sort of bombarded with it all the time. Paul, do you think that it's fair to say that if you are going to be hacking the next market, it has to be led with a technology offering?
Paul Broadfoot:	I think a lot of people do focus on technology as innovation or disruption, and the reality is a lot of the companies that are disrupted, they've only used technology, they haven't invented it. So when Amazon started selling books online, selling over the internet was not something new. Netflix didn't invent DVD distribution by mail instead of by stores. So it's usually technology changes, and it facilitates a new business model.
	But companies that are sitting there thinking, "I need to invent a new product." Or, "I need to come up with some new product." It's not about about products often, it's just about changing the way an industry works. And that's where most of the major disruptors have done it. Location-based services for Uber were not new, on a phone. But they used them completely differently. So, coming up with something that adds value to a customer.
Steve Price:	Well, look at the banking industry that you've had some knowledge of, Heidi. You used to have to go in there, stand at the counter, try and work one of their pens that were invariably out of ink, fill out a bit of paper ...
Heidi Armstrong:	Absolutely.
Steve Price:	Go up to a teller, get them to stamp it in your savings book. Banks shut at 4:00, Monday to Friday, and so if you didn't get any money by Friday, you couldn't get money from anywhere. You had to have a shoe box at home with a couple of hundred dollars sitting in it or you got no money.
Heidi Armstrong:	Well, that's where innovation's rife, isn't it, Paul? Is that when you've got these big behemoths, that are just doing business as they've always done. I mean, financial services, the fintechs, they're the ones that are coming out and they're realising, actually there's a better customer experience that's possible here, because the banks are just not putting themselves in the place of their customers.
Paul Broadfoot:	Yeah, and that's something I bang on about a fair bit, this idea that you ring up and wait on a phone for ages. That's gotta be a major friction that's gonna be completely displaced at some point in the near future by fintech. But one thing's for sure, the consumer always wins. The consumer either ... we've had microwaves, and dishwashers, and TV on demand, it's all this stuff is great for consumers. But the businesses that they displace, that the technology facilitate a business model to displace are not always the winners.
Steve Price:	Do we always win, though? Because I know that a lot of our audience get very upset, and cranky, because they can't talk to a human. They end up trying to deal with a machine. And you can't complain to anyone. You ring up and it's an offshore call centre. I mean, that's a product of saving costs, but face to face interaction ... I mean am I just being old fashioned?
Heidi Armstrong:	I think a lot of people these days are very happy to engage in different ways with organisations. Some people don't want face to face. I think some people want to use the phone, other people ... and I think the challenge for many customers is recognising there's not a one solution fits every customer. So it's ... you're going to have someone like yourself, Steve, and someone like me, who might want to use web chat, or send an email. What do you think, Paul, that businesses actually have to think about nurturing their offering to different, I guess, customer segments?
Paul Broadfoot:	Yeah, I think things like the banks wanting to get rid of checks, and having people that still use them, or want to go into the branch-
Steve Price:	That's me.
Paul Broadfoot:	... and speak to a human, there's always gonna be that thing. I think what is not every gonna be demanded is waiting on a phone queue, by anyone. So there's certain types of things that, if you got rid of them, no-one would miss it at all. If you got rid of all bank branch, probably a fairly large demographic at the moment that would be concerned about that.
Steve Price:	So you might end up having someone who's clever and goes into reverse disruption, and they go back to what things were, and they attract a niche market that wants that sort of services.
Paul Broadfoot:	Well that's absolutely ... you've nailed it on the head, Steve.
Heidi Armstrong:	He's a visionary.
Paul Broadfoot:	That's the future-
Heidi Armstrong:	He's a visionary.
Paul Broadfoot:	It's the future of retail. This what they call omnichannel, and they call Experience It. That everyone believes in the retail space, that the future of retail is actually the bricks and mortar places giving people an experience that is an emotional thing, that is beyond just going in and buying a garment.
Steve Price:	Here's something that was disrupted, and then I experienced recently that are reverse disruption. We used to always drive into a petrol station, and a man would, or ... invariably a man, would turn up and fill up your car with petrol. And then you'd give him the money, he'd wipe your windscreen down, and drive away. Now we haven't seen that in Australia probably for 30 years.
	I was in Japan three weeks ago. You drive into the petrol station in Hokkaido, in northern Japan. There's five men there in uniforms. The pumps come from the roof. You drive your car up. The man stands there and tells you where to park, fills your car up with fuel, does your windscreen, back and front. You give him money and drive out again. Easy, and it was fantastic. Better than standing out in the cold doing it yourself.
Heidi Armstrong:	What's this called? Reverse disruption, was it?
Paul Broadfoot:	Reverse disruption.
Steve Price:	There's a new book for you.
Paul Broadfoot:	You better coin this, Steve. Because I'm gonna jump all over that.
Steve Price:	I can see this as a new book.
Heidi Armstrong:	I say, Paul, run with it. It's all yours.
Paul Broadfoot:	Run with it, it's all mine. It's an interesting trend, that, you know. The idea that we get out of our cars and fill up with petrol. And we check ourselves out with our supermarket groceries now. This whole getting their customer to do the work. It's interesting now, when people go online, it's not easy for businesses, because they've gotta provide the labour. When we go and do the shopping ourselves, we're paying for the labour. When it gets delivered to our home, well Woolies or Coles or whoever have to pay for the labour, and that's what-
Heidi Armstrong:	And that's why they give you a window of four hours for delivery, because they don't really want to do it. That's what I see.
Paul Broadfoot:	No. And I think-
Steve Price:	Is that right?
Heidi Armstrong:	Yeah.
Steve Price:	Like with home-
Heidi Armstrong:	Well it used to be.
Steve Price:	Home delivery of groceries, you mean?
Heidi Armstrong:	It used to be, so I gave up doing it.
Paul Broadfoot:	It's free, yeah.
Steve Price:	So you go ... well, that's your point, that Heidi's gone back to the way it was, because they're deliberately making it difficult, because they don't want to pay the salary of the driver.
Paul Broadfoot:	Yeah. Absolutely. It's not ... it's something that Australia has embraced only partially, and when Amazon gets here, it will have to fully embrace it.
Steve Price:	Paul's book is called Xcelerate. Paul Broadfoot. It is innovate your business model, disrupt your market, and fast-hack into the future. Where can we buy this?
Paul Broadfoot:	Well ...
Steve Price:	Online, probably.
Paul Broadfoot:	Used to be, all good book stores. But any book stores still in survival are very good book stores. But yeah, you can just visit my website-
Steve Price:	Which is?
Paul Broadfoot:	paulbroadfoot.com.
Steve Price:	paulbroadfoot.com. Thanks for coming in, it's a fascinating conversation.
Paul Broadfoot:	Thanks, Steve. Thanks, Heidi.
Steve Price:	Heidi, from Money To Love-

Navigation

3AW and 2GB Interview with Steve Price and Heidi Armstrong – Disruption and Innovation (18 min radio interview)

3AW and 2GB Interview with Steve Price and Heidi Armstrong – Disruption and Innovation (18 min radio interview)

Reverse Disruption…

Comments are closed.