The 10 Mistakes We Can't Afford To Make

The Information Economy Conference

Dr Terry Cutler

Managing Director Cutler & Company

CEDA, Sydney, 16 March 1998

This is not necessarily the definitive list of things we can't afford to get wrong, but it is certainly a checklist of issues that need to receive our priority attention as we plot our course into the brave new world of the information economy.

Mistake # 1. Not going the last mile with broadband.

Australia had one of the earliest and fastest roll-outs of broadband cable. But then we seemed to lose the plot - the only argument is when and by whom - and now we are getting little return on this sunk asset, let alone extending it.

In Britain, more than half of the country now has access to a cable network after a very rapid build-out over the last couple of years. The revenue derived from this infrastructure is increasingly dominated by telecommunications rather than broadcasting applications.

By contrast, in Australia Telstra recently paid a sizeable penalty to its Pay TV joint venture partner, News Corporation, just to get out of its broadband rollout obligations, dropping the number of homes passed to a little over 60 percent of its original target. A Telstra cable passes my office door, and I cannot get into it! Virtually no one is looking at 28Ghz local wireless distribution for broadband. Australia is not leading the pack in signing up for Project Oxygen. I could go on and on about the risks of failing to keep up ...

Failing to go the last mile with broadband is linked to a wider point: the danger of failing to get the right telecommunications outcomes in terms of price and bandwidth to support a user-driven information economy. We kid ourselves if we believe we are yet globally competitive.

Mistake # 2. Overlooking next generation skills for next generation jobs.

All countries and companies are reporting skills shortages and the difficulty of recruitment is one of the key constraints on industry development.

The Economist reports that in 1996/7 average pay in Silicon Valley rose by 5 percent in real terms to almost USD44,000. Average pay in the software sector was nearly double that. Compare those numbers with the rest of America's workforce, where real wages grow by less than one percent to USD28,000 . In the valley, workers are in such short supply that Cisco Systems - the leading supplier of Internet routers - has had to rent advertising space on billboards to find the 400 people a month it has been adding to its payroll.

The availability of a stable, skilled and flexible labour market in the information industries is a key source of comparative national advantage. Effort needs to be focused on a national education strategy for the information economy.

Mistake # 3. Perishing by not publishing.

The information economy should be an effective means of encouraging media diversity and greater local content. The content scene is changing quickly. The unfailingly global BBC - for example - recently launched an online news service in Cantonese that leverages off the local language skills of its Hong Kong correspondents.

In Australia we talk a lot about new media, but not many new voices are heard. The battle is on between PBL and Fairfax to create the most popular online sites. After Fairfax launched its CitySearch Web guide to Melbourne and Sydney, the Microsoft-PBL joint venture - nineMSN - has switched on SideWalk, its own online guide to Sydney. Whilst these developments are encouraging, it is essentially a case of existing media interests spreading their influence to new delivery mechanisms.

It is very different when we look elsewhere. Firms such as CNET (San Francisco) Bloomberg (New York), ASTRO (Kuala Lumpur), and CITY TV (Toronto), to name but a few, have come from nowhere and carved out important roles in highly competitive markets through the creative deployment of new media and new approaches to content. In each case there is the same combination of market focus, creativity and technology innovation. We are missing this kind of innovation in Australia. None of these vibrant new entrants is a creature of regulatory fiat or the kind of obsession with rearranging the regulatory deck chairs that we are seeing, yet again, in the debate over Digital TV.

Mistake # 4. Backing the wrong horses in a global game.

Industry geo-politics are becoming the central driver in the context of the global information economy.

Although local firms need to be closely aligned to the realities of market developments in the United States, Australia must also recognise the political imperatives of wider international online policy and regulatory positions. We must internationalise our policy and industry perspectives if we are to play a role in shaping the emerging information environment which will in turn shape our economic and community future.

In positioning ourselves within the geo-politics of the information revolution, we ignore Asia at our peril. Using the current phase of economic adjustment sweeping across Asia as an alibi for shifting our market focus away from Asia would be a grave mistake.

Mistake # 5. Failing to realise it's not just size that matters.

With vision, leadership and the right alliances, small scale companies, regions and countries can succeed in this game (eg: Ireland, North Carolina, New Brunswick). The information revolution is changing the dynamics of traditional economies of scale and scope. We all pay too little attention to trying to understand the ramifications of the new economics of the information revolution. What is it that matters? The it - the I, T, - word in this context is intellectual capital, both at a company and country level. As I think Mae West could have said, it's all about what you do with what you've got. And we should never forget that intellectual capital includes smart leadership.

Mistake # 6. Taking liberties with copyright

Just as maritime piracy dogged the emergence of mercantile trade, today the piracy of intellectual property and the abuse of copyright has emerged as one of the key factors in determining the relative attractiveness of markets for production and marketing.

Mistake # 7. Buying all our books from the Amazon.

In Australia, the ratio of Internet traffic to, and from, the United States is currently running at around 70:30. With 25 percent of Australian Internet subscribers having already made at least one online purchase, the trade balance for e-commerce is likely to be even more pronounced because online market leaders such as and Tower Records are all headquartered in the United States.

Given the importance of strong global brands and distribution channels, there is a clear imperative for Australian organisations to brand and market existing initiatives as the basis for accelerated growth. We must face up to the reality that within an information economy more and more economic activities are becoming trade exposed, whether we are ready or not.

Mistake # 8. Postponing a true convergence policy.

The much talked about convergence that fuels the information economy is making many areas of industry and economic regulation obsolete. It is time to ask whether legacy arrangements for telecommunications and broadcasting are now holding us back. Within a digital world, we need policy frameworks that promote new consumer and service outcomes, not frameworks that attempt to preserve obsolescent industry arrangements and the narrow interests of incumbent suppliers.

Mistake # 9. A partial strategy that marginalises regional Australia.

One of the key challenges of the information economy is that of structural adjustment to put all Australian's on an equal footing. Given the distinctive characteristics of our Australian setting, we should be aiming to capitalise on the opportunities arising from the information revolution to create a situation where the economic and community wellbeing of our people is truly location independent. The risk - and this relates back to matters of telecommunications policy - is that we will end up with a two-tiered nation: a wired-up Eastern seaboard, and the rest of the country an analogue desert.

Mistake # 10. Missing the information economy wood for the technology trees

The information economy is not about technology: it is about rediscovering business fundamentals, and using the power of information - networked information - to access new and expanded markets.

The information economy's most important contribution may well end up being organisational - not technological. In developed economies around the world, companies are rapidly deploying new business models. Small, nimble technology-based entrepreneurial firms now account for 75 percent of new jobs in the United States (and probably much the same in Europe, Japan and Australia). The organisation of large corporations is becoming looser - either because they are being broken up into smaller units or because increasing levels of power are being divested to front-line workers. Information processing is the glue in the new corporate forms.

Technology is the enabler, not the driver of market outcomes. We will make grave mistakes if we, whether governments, industry, or community lobbies, do not focus attention of finding competitive solutions to consumer requirements within an online economy. Key attributes of successful electronic interfaces revolve around the people issues of trust, the desire for personal control, legitimisation and authentication, assurance of outcomes, confidence and reliance, and the ability to make informed choices.

A successful service delivery infrastructure within the information economy will be build upon the seven pillars of: security, privacy, authentication, recourse, credentialling, labelling and disclosure and reliability.

In summary, if Australia is to be successful within the global information economy we must:

It is the right time to be talking about the information economy. Steve Case the CEO of America On Line commented recently that the information economy is now "big enough to matter, but still small enough to shape". This opportunity will not be there for ever: now is the time for all of us to roll up our sleaves.