Driverless Buses: The Specific Medium Trip Proposition: Luxury and Space

cold class cinemas recliners for luxury bus travel

In a previous post, I have explored the problems with short haul bus travel once driverless electric cars are a car ride service. There is a possibility that there may be a sweet spot between long-haul bus and short haul bus services. Bus companies can save significant costs by using driverless electric vehicles. If they use those savings to pamper passengers instead of cutting costs, they may well win the medium haul travel war.

The change of buses to driverless electric buses will make them more competitive with air travel. This is especially true over distances up to the 300-km mark. Most flights in Australia are longer than that, but there are plenty of short-haul flights in other countries. Once the distances get too long the faster speed of planes starts to take a competitive toll. Bus companies might be able to offer a significantly lower price to catch a driverless electric bus from Melbourne to Adelaide (727 km). The problem is that the flight is 1 hour and 20 minutes and the bus trip is around 10 hours depending on traffic. Even allowing for the delays of getting to the airport and moving through through security we are probably talking 3.5 hours versus 11 hours. Only people who cannot afford the fare are going to be taking that bus. Especially when you can get tickets that are sometimes close to competitive with the bus fare if you travel at the right times.

As an example of the medium length trip, let’s take the Sydney to Canberra flight which is 283 km. The flight time is 55 min, and a discount airfare is about $151 plus $25 for a taxi at the other end. Flights to Canberra are often more expensive than most other major city flights in Australia. This is due to the significant demand for flights during the weeks that the Federal Parliament sits. Between the Parliamentary sitting weeks, there are a limited number of flights. According to Greyhound Buses, the bus travel time is 3 hours and 30 minutes to 4 hours.

The reality is that while the flight time is 55 minutes the real travel time is by air is closer to 3 hours. You must be at the gate 30 minutes before the flight leaves. Airport traffic congestion means leaving the CBD at least an hour before that to avoid the risk of missing your flight. At the other end, you need 20 minutes to get a taxi and get to the CBD. Of course, there is some extra time for the bus as well, but it is minimal. So, let’s say it is 3 hours for the flight versus 4.5 hours for the bus. The current saver fare for Greyhound is A$38. If we use our previous assumptions on cost reductions for driverless electric buses (see The Coming Bus Apocalypse) we could get the price down to $23.

You might not be able to attract many more passengers by that cost reduction when the airfare plus taxi is already five times the current bus cost. That is a fair argument. What you can do though is take that price reduction and put it into more comfort and services. This produces a fantastic value proposition when the airlines are just trying to cram in more people. Imagine efficient workstations, Gold Class cinema type recliner chairs, and even nap pods for customers. What about soundproof gaming rooms so your children can game while you relax and take in a movie. Two adults and two kids for $152 for a luxury bus trip versus $625 on the plane sounds like a killer value proposition. The price might remain the same but comfort and experience are much better because the bus company can offer the same price but 60 or 70% more space.
Smaller buses with much better space than planes can come and pick you up from your house or business and take you in luxury. Eliminating the driver from a smaller bus has a much more significant impact per passenger than removing a driver from a larger bus.

Most of the current airline and bus transport models use the principle of maximising capacity utilisation. Most of the costs of driving a bus or flying a plane are fixed costs. Every extra passenger contributes an enormous percentage of their ticket price to the bottom line. Electric driverless buses are likely to head in the opposite direction for journeys where bus trips take not much time than flights.

It is a matter of changing the model where costs per passenger kilometre drive all thinking.

This will have significant implications for bus companies, and bus manufacturers. Bus companies will have to rethink routes and bus configurations. They will also have to rethink customer service. Bus manufacturers will have to rethink bus size, bus interiors, and bus power systems.

Paul Higgins

I am writing a book on autonomous vehicles with Dr Chris Rice . It is called Rise of the Autobots: How Driverless Vehicles will Transform our Economies and our Communities. Follow us here to see more excerpts as we write.

Come visit our website to see more of my work.

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Leadership in a Post-Capitalist (???) World

On Wednesday night I gave the opening address at Leadership Victoria on this topic. The audience was a group of 60 leaders across a range of organisations in Victoria. The question focused around some articles from Steve Denning, Jeremy Rifkin, and Paul Mason (see links at the end of this post). My purpose was to frame the rest of the discussion for the night, and highlight some possibilities about key leadership skills for the future.

As the background articles are now 2-3 years old it is an ideal time look at what has happened in the interim. The thrust of Paul Mason’s writing was that new tools were in the early stages of ushering in a new economic system. These changes included collaborative production, reducing information scarcity, and automation of work . Steven Denning was more circumspect about what was happening. While in broad agreement with some of the principles Paul was espousing, he had differing views on their effects and implications. Denning believed that it was a new era of capitalism rather than post capitalism. Jeremy Rifkin examined the implications of areas of the economy where the marginal cost of production is almost zero. In doing so he was more in agreement with Denning than Mason, while arguing that the collaborative commons was having a significant effect.

To clearly show my biases before I argued my proposition I put up the following quote from Amory Lovins:

 

“The markets make a good servant, but a bad master, and a worse religion”

 

because while it would appear I am arguing for hyper-competition, the outcomes need to be focused on how the system benefits the general population in our societies.

 

The Proposition

 I began my presentation, as is my wont, by arguing against the proposition of the title of the session. My view is that we are not entering a post capitalist world, but rather a real capitalist world. The technologies discussed in the articles are changing the way the world works. In doing so they are moving us towards real capitalism rather than the monopoly seeking, and rent seeking behaviours of the past. For the purposes of this discussion I defined real capitalism as:

“hyper-competition within the boundaries of a socio-regulatory system that steers the benefits to the general population rather than the few”

The reality is that true competition is hard, and so companies try to position themselves in protected positions . I have just been reading Kerry O’brien’s book on Paul Keating. In the chapter which deals with privatisation, Keating describes the Qantas and TAA privatisation process.  Peter Abeles who was part owner and CEO of Ansett Transport Industries but also a good friend of Prime Minister Bob Hawke was deeply involved. According to Keating the privatisation discussions were frequently attended by Peter Abeles who was interested in keeping a cosy duopoly. Keating states that this was because although Abeles thought they could compete with a restructured and privatised government airline, it was better if they did not have to.

This was the main purpose of strategic frameworks such as Porter’s Five Forces: position yourself where you had a strong position relative to suppliers, existing competitors, customers, and new entrants. True competition, where there is a relentless focus on the customer, continual innovation, and where new entrants can appear from anywhere is a highly uncomfortable environment. Therefore, companies and people have to have true competition forced upon them. This is fair enough, you would be stupid to force additional competition upon yourself (in the short term). This is partly the role of government and society in terms of the rules and norms that govern how things should work. The new tools and capabilities that the articles described are contributing additional forces.

Part of the arguments of the authors of the background articles was that increasing connectivity, improved collaboration tools, and wider access to information was increasing the capacity of the smaller players to compete with the bigger players. My proposition is that is true, but that but power is again accruing to the larger players. The combination is creating a world of hyper-competition. Let’s look at what some of the evidence says:

In 2011 I presented to a number of tourism conferences about Airbnb. At that stage it had been running for 3 years. I was continually surprised at the lack of knowledge about it in the tourism industry. The promise of Airbnb is that individuals can gain value from their existing assets, increasing the power of the individual. Putting aside some of the more outrageous events in rented out properties Airbnb has mostly delivered on that promise.

Yet, in these sorts of large platform business models power naturally moves back to the centre. Once there are enough buyers and sellers on the platform, it is hard for others to compete with the model because of network effects. The sellers are in hyper-competition with all the other sellers, hence it is a good example of a hypercompetitive world. It is a large market with transparent pricing.

In the more egregious cases of platform models we are seeing big problems. Uber stands out as a major example. Uber has serious internal problems which I think stem from excessive power issues. There are also lots of stories of low paid drivers, and conflicts about their status as employees or contractors. There is definitely a power imbalance with power accruing to the centre of the network.

 

Now lets look at the music industry which really should be a poster child for the sorts of changes the authors were describing. We have seen increased capacity to create and distribute music from musicians to their audiences. We have also seen marginal costs approaching zero with the creation of digital media. So what has happened? The following pictures from Digital Music News via Vox show some of the changes:

music sales 1998 from Vox

 

music sales 2013 from Vox

Digital technologies have transformed the way music is sold and consumed. Now streaming services have changed that again, as shown by the following graphic from Business Insider

streaming music from business insider and statista

all of this has resulted in the following revenue changes (via Benedict Evans)

global music recorded revenues from IFPI Benedict Evans

Buried in all this is the fact that Spotify is dominating the market for streaming services, with Apple a strong but distant second. Spotify’s revenue, according to Billboard is now over US$3 billion but it also lost US$581 million on those revenues.  So again we are seeing power accruing to the big players and many complaints from artists.

 

Hunter S Thompson once said:

“The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There’s also a negative side.”

I am not sure much has changed.

 

We are also seeing other examples of power accruing to the big organisations:

 

  • From 2001 to 2011 Walmart grew from 1.15million employees to 2.2 million employees.

 

  • Amazon is showing huge growth, and is now sending shudders through the retail food industry with its acquisition Whole Foods.

 

 

 

So my basic proposition is that:

  • The tools and changes described by the authors are not taking us into a Post Capitalist world. They are taking us into a true capitalist world. hyper-competitive world.

 

  • While small organisations and individuals now tools that make them more productive, and more able to connect to everyone else, power is still accruing to the large players.

 

  • The combination of those changes mean a changed way of doing things but only inside a world of hyper-competition.

 

So within my view of the world what are some key skills that people need to be leaders? I have chose four skills, that is by no means comprehensive:

Situational awareness

In a world where there are many more interconnected and moving parts, then we need better strategic understanding. What I mean by situational awareness is a detailed understanding of the various components of your sector or industry . It also encompasses a clear eyed view of where those components may be changing. Two of the models that we use for thinking about these things are Carlota Perez’s work on Technological Revolutions and Financial Capital, and Simon Wardley’s work on mapping.

Perez’s view is that there are clearly identifiable 50-60 year cycles of technological, financial and social change. Thinking about where we are in the current cycle can help us understand more about what strategic decisions we should be taking. These cycles run from technological revolution to a financial bubble, to collapse, to a golden age and then to political collapse. The five that she identifies are The Age of the Industrial Revolution, The Age of Steam and Railways, The Age of Steel and Electricity, The Age of Oil and Mass Production, and The Information Age.

Simon Wardley takes a more granular view while stil looking at cycles and movement. Simon posits that all technologies and practices move from their original genesis, then to custom built, then to product, and finally to utility or commodity. While this is a gross oversimplification of his work, understanding where each part of your value chain is is located within a map of this framework, and where it may be headed allows you to better understand where significant change may occur. He is writing a book on the subject and all the chapters are on Medium. I highly recommend you go read them.

 

 

Scepticism

I mean scepticism in its best possible meaning: questioning assumptions and evidence. This skill is vital when thinking about models. This is because all models are incomplete and inadequate representations of the real world . They are more useful when viewed with a sceptical eye. I can best express this in the statement:

Strong Views Weakly Held

For example if we look at Carlota Perez’s work it is clear that the cycles she has described are social constructs. Each occurred under a different set of political, technological and social  systems. It is also clear that 4 or 5 cycles, even if taken as true, are not a clear body of evidence of some sort of immutable laws in human society over time. So use models, think deeply about them but always with a sceptical eye.

 

The capacity to deal with uncertainty

The reality of the modern world is high levels of uncertainty. In my work I experience clients seeking to find certainty in the midst of uncertainty. An example is people trying to create scenarios in spreadsheets with probabilities attached to them. These sorts of reductionist approaches reduce the capacity of organisations and individuals to take effective action. They create an inherent disconnect between the organisations’ strategy and the real world they operate in.

While the scepticism I have described above is to some extent focused on making sure that we don’t take models as gospel, the capacity to deal with uncertainty is somewhat different.

The critical leadership skill here is the balance between acknowledging and working with uncertainty, while instilling confidence, purpose, and direction in the people around you. Different people have different needs in this regard. Some people want to dive into the uncertainty. Others just want to get on with the job. In a previous session with a Leadership Victoria year group there was vigorous debate on this issue. The room split down the middle. Half the room believed that it was their job to deal with the uncertainty. The other half believed that exploring the uncertainty with their staff was a critical responsibility.

 

The capacity to coach and stimulate networks

Networks and collaboration are a reality now in many organisations. The day of the strong visionary leader is ending, and the ability to lead and stimulate networks is critical. This applies both inside organisations and in collaborations between organisations.

 

 

I finished my presentation by analysing my relative strengths in those skills. I am pretty good at the situational awareness, and scepticism skills. I am less able in the dealing with uncertainty area, although better at work than in my private life. I am poor to average in network leadership skills. My main reason for that assessment is that the world has changed enormously in the last fifteen years. In that time I have been focusedon foresight and situational awareness when working with clients. It is a long time since I led an organisation on a day to day basis and network leadership skills in particular need deep and continual practice. The same applies to situational awareness and scepticism but I have been practicing those.

 

Paul Higgins

 

Background reading links for the participants:

The end of capitalism has begun

The End of the Capitalist Era, and What Comes Next

Is Capitalism Ending?

 

Electric Cars and the Legacy Issue

Chris Rice and I are currently writing a book on the rise of autonomous vehicles and their widespread effects across our economies (entitled Rise of the Autobots: How Driverless Vehicles will change our Societies and our Economies). One of the keys to looking at what these changes might mean and the rate at which they will occur is the speed of adoption speed of electric cars and autonomous vehicles combined together.

There have been lots of excited announcements about electric cars over the last few months including:

India to make every single car electric by 2030 in bid to tackle pollution that kills millions
The Electric-Car Boom Is So Real Even Oil Companies Say It’s Coming
When Will Electric Cars Go Mainstream? It May Be Sooner Than You Think

The reality is that the adoption of electric cars will have several bottlenecks including but not limited to:

  • Battery availability.
  • Production capacity for manufacturing.
  • The reluctance of people to adopt the technology until they are completely sure that the charging issues and the range issue have been adequately dealt with.
  • The long-term nature of the turnover of the vehicle fleet.

Both battery production and electric car production are ramping up but the last point is very important when we start looking at the critical mass needed to disrupt a range of industries, including petrol stations and their supply chains, maintenance and repair systems, and the electric power grid. Even when it becomes a sensible economic decision to purchase a new electric car over an internal combustion engine (ICE) powered car, someone with a 7 year old vehicle is not going to immediately changeover. This is both due to the capital nature of the change and the fact that if electric cars are more economical than ICE cars the resale value of second hand ICE cars will fall dramatically, reducing the interest and capacity of people to purchase a new vehicle (if purchase is the model). This will be exacerbated if the new electric vehicles also have significant advantages in autonomy.

To illustrate this issue we took a look at the vehicle fleet in New South Wales in Australia If we look at the statistics at the end of the fourth quarter in 2016 it gives us a snapshot of the vehicle legacy issue. The following graph shows the year of manufacture for light vehicles registered in NSW at the end of 2016. The majority are passenger vehicles:

light vehicle registrations in NSW 2016 Q4

Source: http://www.rms.nsw.gov.au/about/corporate-publications/statistics/registrationandlicensing/tables/table113_2016q4.html  – accessed July 24th 2017

While the 2016 manufactured vehicles are under-represented in this graph as many 2016 vehicles are registered in 2017, it nevertheless gives a clear picture of the ownership structure of light vehicles. If we look deeper in the data we see that 20.1% of the registered light vehicles are manufactured prior to 2001.

If we look at heavy vehicles we get a similar picture albeit with different percentages:

heavy vehicle registrations in NSW 2016 Q4

There are some differences in the data between light and heavy vehicles:

  • The first is that there are significantly more 2007 heavy vehicles registered than any other year. This probably relates to GFC issues.
  • The second is that the heavy vehicle curve is lower than the light vehicle curve. This probably reflects a pattern of use where heavy vehicles are sold into a secondary market that will discount vehicles significantly if the economic model is significantly different than the new vehicle one, extending the useful economic life of the vehicles. This means that the percentage of total registered heavy vehicles prior to 2001 is 34.2%, much higher than light vehicles.
  • The third is that there are many more vintage models in the light vehicle category, reflecting the motoring enthusiast and restoration market. So there are 3,379 registered light vehicles manufactured 1900-1949, but only 21 heavy vehicles for the same period.

A very simplistic look at this data says that even if every vehicle sold new in Australia was electric from say 2025 was an electric car, and the purchase patterns remained stable after 5 years we would have between 31% and 40% electric light vehicles on the road and in 10 years it would be somewhere between 50 and 60%. This pattern is highly unlikely and so the real adoption rates will be well short of that. Every year that the purchase pattern is 50% electric and 50% ICE will slow the transition as those ICE cars will be on the road for a long time.

This adoption cycle is complicated by our view that increasing automation will result in more fleet ownership models, and shared car rides, reducing the total sales of new vehicles. While this means that battery and electric car manufacturing do not have to ramp up as much to get to 100% of new sales it changes the adoption curve.

Now both those simplistic analyses assume the normal pattern of car purchases and ownership will remain in place. That is also unrealistic. All we do know is that the adoption rates will be relatively slow because of the legacy issues and the turnover of the vehicle fleet as a whole. Cars are not smartphones. We will be doing some more modelling on the possible scenarios over the next few weeks. Follow us here if you want to see them and help us think through the changes.

 

Featured Image is from :

Top 8 Secrets for Competitive Electric cars-Tips for Auto Manufacturers by Ameen Shageer

 

 

What Jobs Will Stay?

This week I had two very different experiences which had me thinking about the future of jobs. On Tuesday I was invited to a workshop host by Perpetual Trustees with the Stanford Centre for Philanthropy and Civil Society. I was there isn my role as a futurist and a venture philanthropist (I am a partner at Social Venture Partners Melbourne  See :  Summary Video). The subject for the session was Digital Technologies and Democratic Theory and involved a range of not for profit organisations, commercial businesses, and startups.

A lot of the discussion was on the effects of technology on our wider society, and our political systems in particular. Rob Reich and Lucy Bernholz from Stanford took the temperature of the room on whether we are optimists or pessimists about the effects and capabilities of technology. I was surprised by the fact that the overwhelming majority of the room was optimistic. I placed myself as pessimistic. I think that there is a lot to like about the capabilities of technology to connect people together, and for people to take action. I just think that the reality is a little more sobering, and that the effects of technology on our wider societies, in particular the future of work, will outpace the capacity of the technologies to bend the overall direction to the benefit of all.

While I am no means certain I fear a future where more jobs are eliminated than are created for the first time in our technological development. If such a change occurs it has the potential for both good and bad. The negative picture is one where more and more wealth accumulates in the hands of the few and is not distributed across the general population. That is a recipe for revolution. This is particularly troubling where public trust in our democratic institutions has fallen significantly.

driveway gate 1

My other experience is that we hired a handyman to move a gate in our driveway. For some reason I cannot understand the previous owners placed a gate part way down the driveway leaving a whole lot of unused space behind it. On top of that there are significant parking restrictions on our very steep street and so visitors have to park down the hill and walk up. This is getting to be a particularly serious issue as our parents age.

The original installation of the gate had not been particularly professional and so there were problems opening and closing the gate due to warping of the wood. When we got down to the details of the job we discovered that about 13 different types of bolts and screws had been used in the original gate installation. On top of that some were metric, and some were imperial (inches) and some seemed in between. On top of that some of the screws had been rounded out and were impossible to remove by standard methods. The problem was exacerbated by the fact that the concrete at the new position we were looking to install the gate on had three different levels.

Luckily we had hired an old time craftsman/handyman who had all the tricks and now the gate is safely installed (see picture). The dog has no chance of getting out, and our parents can now park in the driveway. Those are the sorts of jobs that are not going away in a hurry because of the levels of variation for each job. Our handyman (also Paul) says he reckons he has 20 years of work ahead of him in his semi-retirement. I think he is right and if you are concerned about the future employment of your children and they have aptitude for this sort of work (which includes plumbing) then keep encouraging them.

I realise that these two subjects are different ends of the same issue and the second one has no real bearing on the wider societal issues. I will keep trying to make a contribution to those wider issues.

 

Paul Higgins

Re-Purposed Electric Car Batteries and Its Effects on Electric Car Adoption/Driverless Car Adoption

Last night I attended the Churchill Club event in Melbourne on the future of batteries. There was a great panel presenting and the discussions covered a range of battery technologies, including Ecoult which is commercialising the CSIRO ultracapacitor technology for lead acid batteries.

In particular I was interested in the presentation by Relectrify CEO and Co-Founder Valentin Muenzel who talked about Relectrify’s mission to use electric car batteries that were no longer useful in energy storage applications. This was interesting because as part of my research for a book that Chris Rice and I are writing on the future of driverless cars I had been looking at the adoption rates of electric cars as part of the rise of driverless cars. In that research I had come across an assessment by Ark Investments that had calculated the net present value of an electric car battery in a specific energy storage scenario as shown in the following table:

Ark Invest battery depreciation table

source: https://ark-invest.com/research/ev-batteries-value – accessed June 20th 2017

The basic principle is that while a battery in an electric car might have its performance degrade to a point where it is no longer useful for driving, that battery will still have significant storage capacity (think about your phone battery after 18 months – it still works but its capacity is reduced).  If you can buy that battery cheaply and adapt it to storage use then you have a cost effective solution.

Of course the Net Present Value calculation in the table is for a specified energy reserve use which has a higher price, and nobody buys an asset for its Net Present Value otherwise all you do is get your money back over time. In discussions with Valentin he told me that without giving away commercial secrets the model for them is about 50% of the value of a new battery. This is important because the cost of new car batteries is falling. An analysis of battery prices by Bloomberg New Energy Finance in January showed the pace of that change:

battery prices falling fast from Bloomberg

source: https://www.bloomberg.com/news/articles/2017-01-30/tesla-s-battery-revolution-just-reached-critical-mass  

Now this is the price of the battery itself which is not the same as an installed battery system but the progress has been amazing, and mirrors what we have seen in solar energy. No great basic technology breakthrough, but significant technology improvements driven by the cost learning curve. In a separate report Mckinsey has stated that electric vehicle batteries fell to $227/kWh in 2016 with Tesla claiming to be below $190 per kWh (Electric vehicle battery cost dropped 80% in 6 years down to $227/kWh – Tesla claims to be below $190/kWh) Rumours have also circulated that Tesla has got the battery costs down to $125 per kWh (Tesla is now claiming 35% battery cost reduction at ‘Gigafactory 1’ – hinting at breakthrough cost below $125/kWh) although the truth of that remains to be seen. There is no doubt about the rapid pace of changes occurring, just the quantum of that change.

Valentin and I also discussed the model for autonomous vehicles given that a fleet model or a car sharing model means that cars would travel far more kilometres in a year. For an electric car this means that the battery will reach its degradation limit more quickly as the battery would be charged and discharged more often. Interestingly for Valentin this meant that the battery would be worth more for repurposing, because outside of the energy capacity the battery still retained, its relative newness means the technology is likely to be more advanced, and safety and physical deterioration characteristics would be much better.

Given that storage is likely to become far more important in the future given changes in the energy generation mixes around the world it puts a slightly different complexion on the costs of electric cars. It is our view that the end game for driverless cars is mass fleets supplied as a service with hardly anybody owning a car. If electric car batteries only last 3 years in shared driverless vehicle but have significant re-sale value it lowers the lifetime cost of a kilometre travelled and therefore accelerates us to the point where the cost of running an electric car is lower than running a fossil fuel car. Lifetime cost factors less into individual car ownership decisions but if you own 50,000 cars in a mass fleet in a highly competitive market it becomes it becomes a much more important factor. This changes adoption rates and also the balance between fossil fuel and electric cars.

The effects of this will be lumpy as Valentin advised that different batteries have different degrees of difficulty for repurposing as stationary storage. This is related to the original design decisions made for the battery technology which were originally made with the purpose of electric cars in mind, not stationary storage. For example apparently Tesla has stated that their car batteries will not be repurposed and that is due to the design constraints in their battery technology.

A note of caution:

In a discussion with John Wood (CEO of Ecoult) he quite rightly warned me to be careful of the public statements of battery manufacturers and suppliers on their lifetime use. Given that we are talking about changes in technology and lifetimes of 10-15 years which are therefore untested in the real world, those are wise words.

 

Image credit: The featured image is from http://www.relectrify.com/

The Future for Accountants

The story for accountants the last few years has been increasing levels of outsourcing tasks to low wage environments such as India, and increasing levels of automation for their tasks and their clients. The early stage of that process has been the automation in accounting software systems such as QuickBooks and Mint. Increasingly this automation will move into more and more of the accounting space including real time artificial intelligence auditing systems, automatic preparation of increasing complex tax returns, and structuring credit arrangements.

These things generally start out small and at the less complex end of things and accelerate into more complex areas before people realise it has happened.

So where is the new value for accountants. Primarily this has to be in the process of value creation for clients. Therefore accountants need to move up the value chain and Examples include:

1/ Transformation of business processes around technology changes and the re-training of staff for their SME clients.

As I wrote in Questions on the Future of Work a recent McKinsey report has stated that

According to our analysis, fewer than 5 percent of occupations can be entirely automated using current technology. However, about 60 percent of occupations could have 30 percent or more of their constituent activities automated”

This supports the notion that apart from a few isolated cases (e.g. truck drivers with driverless trucks) technology does not replace jobs but replaces particular skills or tasks. More importantly business processes and the ways in which we serve customers are changed by the introduction of various forms of artificial intelligence into technologies. This can be a customised approach for vendors like Salesforce Einstein which is adding AI services to its sales, and customer service offerings at around US$50 to US$75 per user per month. Or it can be more fundamental changes to value propositions and business models and the underlying capabilities required to deliver them.

Either way we appear to be entering an era where the jobs people will do will change even more rapidly than they have over the last 10 years and will constantly change rather than be part of a single change management process. In my experience most organisations with under 1,000 employees have little idea on how to approach this problem. This is a huge opportunity for accountants who already have close contact with their clients.

2/ Assisting clients with understanding their strategic landscape

In a world that is moving faster and changing more rapidly than ever before operators of SME businesses are facing greater uncertainty than ever before. They are also facing a paradox. The pressure on them means that they must spend more time focusing on the operational matters in their business but they are doing so right at the time that looking around to see what is happening becomes more important. Just last week I was working with an SME business that is very well run and focused on all the right things that need to be done for the next 12 months. At the same time they were not thinking very deeply about the future and that their decisions (that were absolutely correct in a short term sense) might mean for their long term future.

This means that there is great value for an independent adviser that sees a wide range of other businesses and can:

  • Provide a better strategic understanding of the industry in which the client business operates. Examples include looking at possible industry scenarios for 5 years time and trying to understand what the interim competitive position might be.
  • Cross pollinate ideas and ways of doing things from other businesses in other business sectors. Sometimes very simple tools and approaches from somewhere else can significantly improve a businesses bottom line.
  • Look at the business from a dispassionate but involved perspective and ask questions the business is not asking itself. Examples might include – does your logical short term investment in cost improvements weaken your balance sheet and capacity to respond to x/y or z which are significant risks?  OR What custom built systems are you using which can be supplied via industry standard products or new utility services.
  • Run a structured red team/blue team process to attacking and defending the business from an outside perspective.

 

3/ In the future: utilisation of AI to augment their own capabilities

The reality of artificial intelligence is narrow expertise systems rather than a general intelligence. So we will see artificial intelligence systems that can aid sales people and customer service people but cannot do other things (see Einstein above). We will see narrow artificial intelligence systems that can assist doctors but not do much else. The list goes on.

The modern approach to artificial intelligence systems is basically on of machine learning which requires large training data sets and a large market to justify to expenditure on development and training. Therefore we will see AI systems developing in markets where there are either a lot of customers, or high margin customers, or both. Given how many accounting practices there are around the world the accountancy business is one that is ripe for such a development.

Veterinary Schools as a Platform (VSaaP)

Late last year we worked with the Australian Veterinary Board Council and the Deans of all the Veterinary Schools in Australia and New Zealand looking at what the future of veterinary education and regulation might look like in 2031.  The date was chosen to be the time when a 12 year old just starting secondary school now would be a graduate of 2-3 years standing. We looked at a whole range of issues including availability of smart phone based diagnostic kits for pet owners, artificial intelligence systems for diagnosis, urban densification and its effects on pet ownership, veterinary practice corporatisation, international trade requirements, and the need for wide or narrow scope veterinary degrees.

One of the ideas that emerged from the process has stuck in my head and I think has great scope to revolutionise how we provide a much wider range of education at universities and for education post graduation.

Essentially the is one where  the veterinary school acts as the primary site of education for those subject areas that need face to face contact and technical expertise that cannot be achieved in an online, video, or virtual reality environment.

All other subjects/modules are accessed by the students via the school platform and the teaching material and processes that form the basis of those modules can be supplied by any accredited service across the globe. The model looks like the following diagram if we just look at one module, in this case cat medicine at the vet school at the University of Melbourne:

Vet school as a platform image

On the supply side of the platform (above the line in the diagram) cat medicine courses are supplied by all the possible services globally that wish to provide that service and who are able to meet the curriculum needs.  The platform would be agnostic on delivery systems as long as outcomes where met.

On the demand side (below the line in this diagram) each student in this model can choose who their supplier of education in cat medicine is. In the picture above Isabelle has chosen Sydney University because they have a great reputation but also provide face to face services at the school in Melbourne. Ivy and Anne have chosen Seoul National University because they have a great reputation and their virtual reality applications suit their learning style and they have been offered lifetime professional development at a low cost as part of  the deal.

The school accredits multiple providers from interstate and/or overseas for each module (the school itself can provide modules in competition with these modules if it desires). Students can choose the best provider for the module or subject they wish to complete.

Competition on the platform fosters innovation in teaching content, support and methodologies that best meet the student’s needs.

Collaboration may occur between schools with centres of excellence formed to compete with international providers. E.g. Sydney University could be the cat medicine centre of excellence that allows economies of scale to be achieve on content creation and methodologies (for example virtual reality technology is still quite expensive but spread over 1000 students the costs come down).

Uncertainty about the future education and information needs is dealt with by the system working as “plug and play” with new subject matter being able to be added as flexibly as possible, and many providers producing a much larger resource base. This should allow more rapid adoption of new content as the world changes (e.g. big data systems/network facilitation for clients with home diagnostic tests).

On top of the pre-registration process it could also be used for post registration professional development with or without limited degrees. Currently vets have to learn and qualify across a massive range of animal species but many go into small animal practice and never see a cow, sheep, or pig again. Shorter narrow species based degrees could be supplemented by post graduation systems that allow vets to qualify in other areas if they wish to change careers or specialties.

By taking advantage of education technologies to improve the efficiency and quality of education a school as a platform system. There are multiple advantages to this beyond what has been discussed above:

  • The time and costs of delivering some content can be reduced.
  • Greater value can be created in other areas by increasing the time and resources applied to the teaching of those areas.
  • Self paced degree systems could be put in place where the pace of learning is determined by the student rather than the needs of the lecturers or the school.

Regulatory/Accreditation issues could be relatively straightforward if the existing schools are accredited and the content partners are required to meet content and/or competency based assessments. Combined with limited degrees, intern models, etc. the issues can become quite complex. The accreditation process itself may need to become more flexible and capable of responding faster to changes in technology.

Technology in delivery of course and maximising flexibility in systems is rapidly advancing. For example the University of Texas has a major collaborative project going on with Salesforce:

UT System partners with tech industry leader to develop next-generation learning platform

The future is coming faster than we think and it has the potential to radically change education models.