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the cloud

The cloud: understanding opportunities

This is an edited transcript of a speech titled, ‘The cloud: understanding opportunities and challenges’, which was delivered by Dr Balan-Vnuk to the Committee for Economic Development of Australia (CEDA) in May 2016.

The conversation I’d like to have with you is around, “What is the cloud?” – but more importantly, “What is the potential of the cloud to power your business, and what innovation is available to you?”

I’d like to take you back about 150 years, to the invention of the steam locomotive. You can imagine that back in the 1860s people were used to horse drawn carriages – it was nice and quiet, and things moved at a certain pace. And then all of a sudden you had these upstarts with brand new technology that was quite frankly loud, scary and sometimes exploded.

People didn’t understand this new technology – they didn’t understand how steam worked – and so they were incredibly scared and incredibly nervous.

I’m not sure how many of you are aware of the Red Flag Act that was passed in 1865. The most intriguing aspect of that Act was the fact that someone had to walk 60 yards in front of a locomotive with a red flag to warn everyone that it was coming.

I think sometimes we might be a little bit like those folks who saw the first steam locomotive when we come across the cloud. What is it? We don’t understand it. Is it scary? How will it help me?

Embracing a safer future

If we fast forward about 150 years, we see these beautiful new driverless cars that, quite frankly, we would like to drive in. And the reason I think driverless cars are so incredibly important is because the car will be able to brake and react faster than any one of us in the room can.

How does that work? Through hundreds of sensors placed on the car – the tyres, the body of it – testing what surface that car is driving on? Is it bitumen, gravel, or sand? Is it wet, dry, or is there an oil slick? What objects are around that car? Are they stationary, are they moving? Are they moving towards the vehicle? It will react as it needs to in order to keep us safe.

But not only that. This data is also being sent up to the cloud. It’s being aggregated, analysed, dissected and the learnings are being sent back to every single other driverless car so that everyone can benefit from the same learnings to be safe.

My two girls are eight and six, and I’m pretty sure they’ll still get their driver’s licence. Not long after that we’ll probably be driving for fun, taking the car out for a spin, because these cars will actually keep us safer and get us places we need to go in a much more effective manner.

But not everyone has the luxury of having a Tesla, or a beautiful driverless car, for that matter.

Building solutions for those who can’t

I’d like to take you to somewhere very different, to a woman in a Sudanese refugee camp carrying a very heavy load of sticks, who is quite obviously pregnant. Unfortunately this is a scene we’d see in many parts around the world, including Australia. People who have no access to education, to healthcare, to sanitised water; they are at a real disadvantage, and their lives could be at risk.

Two medical students came across some really important information. Maternal anaemia accounts for 20% of maternal deaths globally. And that, in stark figures, is around 115,000 women every year dying from what is actually a preventable disease or condition.

These two students didn’t stop there. Of course the most reliable way to test, “Have I got anaemia?” is through a blood test. But if you can’t do that, the colour of the inside of your eyelid will apparently give a pretty good indication as to whether or not you might be anaemic.

And so these two students – not fazed by the question of, “How do I access technology?” – built a solution on the cloud. In fact, they built a selfie app.

They built an app where you hold on to your eyelid and, with the right lighting conditions, you take a photo of the inside of your eyelid. It gets sent up to the cloud, analysed, aggregated, and then the results come back to you and tell you the probability of you being anaemic.

Now, imagine you’re up in the Coober Pedy, APY lands, you’re pregnant, your nearest doctor is a few hundred kilometres away. You’d want to be able to tell pretty quickly if you’re anaemic and you need some medical assistance.

So these two students from Melbourne won Microsoft’s global Imagine Cup Competition, which is about young people solving solutions of the world using technology. They spent time with Bill Gates and Satya Nadella and they’re well on their way to commercialising that application.

This is the true power of the cloud. It’s the democratisation of technology.

You don’t have to be a BHP employee or an FBI agent or a NASA whiz to access really complex sophisticated technology. You can now access the bits you need to solve the problems that you’re interested in solving.

Blurring the lines between the digital and the physical realms

The Fourth Industrial Revolution is incredibly topical. I would direct you to read an article by Klaus Schwab, who’s one of the co-founders of the World Economic Forum. Schwab really defines the fourth industrial revolution as this blurring between the digital and the physical spheres.

I’m not wearing one, but has someone got a Fitbit on? Or Garmin, a Health Band? We’re using these devices now; it’s testing our heart rate, whether we slept well, whether we’re getting enough exercise. If it’s not already connected to health insurance providers, it’s in progress. Maybe they’ll give me a rebate because I exercise every day.

All of this information about our physical condition is now being sent up to the cloud so we can learn from it. But there are some other really fundamental changes that are happening in this period.

Reaching a market value of $1 billion

It used to take a company around 20 years to reach $1 billion in market valuation. Think about Snapchat and Airbnb; it took them two to three years respectively to reach $1 billion dollars’ worth of valuation.

I can promise you they didn’t do it by signing up and by building on-premises infrastructure. They leveraged the power of the cloud to build a truly global innovative solution that solves major challenges.

Let’s refer to a pyramid, a model you’re all familiar with: Maslow’s Hierarchy of Needs. It’s from humanistic psychology and really saying, look, for us to evolve as people, as humans, we need to get the basics right. The basics are food and shelter. Then once I’ve got that I feel secure, I’ve got a safe place to be. Then I have friends, family, I have intimacy in my life. At that point I’m confident, I’ve got self-esteem, people respect me. And at that point I can really realise my own full potential.

So I’d like to make a comparison to that model, as a framework for thinking about what the cloud can deliver for you and your organisation.

Recognising what the cloud can deliver for your organisation

The very first layer (and this is not discounting the fact that many organisations have on-premises infrastructure, and it’s likely that’s going to have to stay. You’ve got mainframes, there is old legacy technology that needs to stay where it is, and that’s fine. But there are certainly new ways to take advantage of what the cloud is doing.)

The first layer, which is Infrastructure as a Service, we kind of like to call the plumbing. That’s the servers, it’s making sure you’ve got geo-redundancy, you’ve got the patching in place; that the system and the environment itself is healthy and operating successfully.

For many people this is the first step; they’re taking the infrastructure they’ve got on-premises or with a hosting provider and they’re moving it to a cloud that’s global and scalable. But it doesn’t stop there.

The next one is Platform as a Service. One of the Chief Information Officers I work with in the South Australian government said to me, “Look, I’ve got a great information technology (IT) team – fabulous. But they’re busy running IT. I want them to deliver business value. I don’t want them patching servers. I want them working on the business applications that deliver value to our internal stakeholders and to our citizens and our customers”.

So Platform as a Service is really saying, “Someone else takes care of all of the plumbing. I just need it to work, and I build my intellectual property (IP) and my value on top of that”.

Now, getting to Software as a Service, who’s using Twitter, LinkedIn, Hotmail, Gmail? Everyone. That software is a service. It’s there. You sign in, you log in, you use it for what you need to and then you sign out again.

And now this is a really interesting point. If you think about the two medical students, their product is called Eyenaemia. That is Software as a Service. They can make that globally available to anyone and they can earn some money from it.

Equally established businesses now would consume Software as a Service for a customer relationship management solution, or for a productivity and collaboration platform. But equally you can develop services that you can sell and thus create a new business model for your organisation.

Building value from a template

Now, where I think it gets really exciting, is when we start talking about things like machine learning and artificial intelligence (AI). What’s really important about all these things? This is about the commoditisation of data science.

This doesn’t mean we don’t need data scientists. We desperately need more data scientists. But what we then need these people to do is to build value on top of a template.

Why start from scratch if you need to build a fraud detection system? Take a template that exists and customise it with your domain knowledge and expertise, and tailor that for your internal organisation.

Your time to value is incredibly fast, because you’re not starting from scratch. All of the grunt work has been done. You tailor and customise.

There’s an amazing amount of data we’re getting; data could be seen as the new oil in terms of an unlimited resource. It’s how we harness it, and how we use it to glean insights that we’d otherwise have no idea even exist.

Hailing the democratisation of technology

And the part I guess I get most excited about is artificial intelligence. This is where you start to see really interesting things such as conversation as a platform. What does that mean?

Say I’ve got a claim; I don’t want to get on the phone to talk through it because I know I’m going to be on hold for about an hour or two or three. Instead I go to the company’s website. There’s a little bot there that says “chat”. I start to have a conversation.

That’s not a person sitting there. That’s artificial intelligence learning what the intent is behind the questions that people are posing, and responding and trying to probe to give me the information that I need in response. We’re going to see more and more of this, and there are some amazing new APIs and ways of testing and experimenting.

This is true democratisation of technology. You don’t need to be a big player to access this technology and build the billion-dollar data centres. Anyone, students, start-ups, existing businesses, everyone can test this and try it out and see how it works.

So hopefully that gives you a framework of how we see the evolution and the growth of the cloud, and I’m sure there will be more layers above that, which we haven’t even invented yet.

Experimenting within your organisation

If we boil it down to real essentials, the business leader is there to grow profit for the organisation, to retain and grow shareholder value. If you’re a government agency, it’s about delivering effective and efficient customer and citizen services.

How do you do that? With the speed of change that we’re in at the moment, you need to really be very proactive and agile in grasping the opportunities the cloud presents to you.

I’d like to share an example of how some organisations are creating that petri dish of experimentation within their organisation.

I think many of you would know Zara, the fashion house. Their manufacturing line runs at 75% capacity. And you might say, “Well, that’s corporate suicide. Why only run at 75%?”

There’s method behind their madness. When I go into their store, there are video cameras tracking what I’m doing. They’re watching what I look at. They’re watching what clothes I take off the hanger and what clothes I put back. When I walk into the change rooms, what clothes do I choose not to buy?

And you know what? The staff are trained to ask me, and I say, “Well, I didn’t like the jacket, the way the lapel sat, the colour wasn’t quite right”. And they will go back and actually redevelop and redesign their clothes on a four weekly cycle so that they’re much more closely attuned to what their customers want.

In this way, 75% capacity is perfect, because it gives them room and flexibility to be agile and to meet the needs of the customers that they want.

Remembering the value of people

What about our people? It’s challenging in a very, very fast moving time. Our lives, personal and professional, are blurring incredibly. I don’t know how many of you check your phone in the morning for email, check it late at night for email, and maybe in the day you’re doing something personal. Our lives are really blending together.

And so how do we help our people make sure that they don’t get lost in this cacophony? Some of our colleagues out there in the IT space are quite nervous because in reality this means a ton of change for the way that they operate and the way they deliver services and value back to the business.

So I would like to do a very shameless plug for one of our start-ups in Adelaide called Teamgage. They work with us through the Microsoft Innovation Centre.

The team was founded by some people who worked in some incredibly toxic teams. And it was a miserable work environment. And we all know the story: people join companies and they leave managers.

Their premise was, “Well, hang on. Surely if the manager knew or the team leader knew how toxic the environment was, they could have done something about it”.

So they’ve created this amazing 20 second survey. And it truly only takes 20 seconds – we’re piloting it in the Adelaide office, for the team to give feedback.

A dashboard gives me colour charts to see “How is my team feeling?” We take this to our branch meetings and we discuss as a team what the challenges are. What do we need to change? What do we need to address and do differently?

This is an amazing organisation, Teamgage, building an incredible solution, Software as a Service, on a platform where they don’t care what the infrastructure is. They only care about being able to develop their application to serve customers around the world, not just in Adelaide.

Taking advantage of cloud opportunities

We are riding this incredible wave of opportunity. There’s a ton of change. Some organisations are going to coast along the crest of that wave to amazing success. And some others are not going to make it.

We all know the Kodak example. They didn’t make it because they didn’t innovate, they didn’t challenge themselves, they didn’t disrupt themselves and say, “Someone else is going to cannibalise my business, well, I’d better do it first, otherwise I’m totally out of business”.

So as business leaders, as new business leaders and students, really the onus is actually on you to experiment and to try to see how can you take advantage of these technologies for your own business benefit – by delivering profit, shareholder value, and great citizen services that we all expect from our government.

Dr Eva Balan-Vnuk

State Director for South Australia, Microsoft

This speech was first published by the Committee for Economic Development of Australia (CEDA). Read the original text and more of CEDA’s top 10 speeches on disruption and innovation here

Read next: CEO and Managing Director of Blackmores, Christine Holgate, looks at innovation that goes beyond the digital realm.

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intellectual capital

Thinking long-term: is innovation all digital?

This piece on is an edited transcript of comments on given by Christine Holgate as part of a discussion panel held by the Committee for Economic Development of Australia (CEDA) titled ‘Thinking long-term: can industry seize the innovation opportunity?’ Read the original text here.

So often when people talk about innovation they think it’s some new product, or new technological advancement. For me, innovation can be very broad ranging. It’s about doing things differently inside your organisation.

Personally, I think the people at the real coal-face of the organisation often have the best ideas. So by talking to your employees, or talking to your customers, you have a much better chance as an industry to really understand what innovation can do.

Intellectual capital doesn’t always pay off

I believe there’s an opportunity to invest more generally in innovation. Investing in intellectual capital is just like investing in anything else – it doesn’t always pay off.

You see, for every great 10 ideas, only one or two are going to get up. You don’t just need a return from that one or two ideas, you have to consider covering the cost of the ones that don’t work. So you need super-returns.

I went to Israel last year and I could have kicked myself that I hadn’t been earlier in my life. What a fabulous country: no natural resources, but abundant intellectual capital. And it’s a really great reminder what brilliant things can happen if intellectual capital is what you invest in.

Growth means looking beyond Australia

Australia has industries like health, food, education, financial services – not even taking into account our resources – where we are known to be the best in the world. We have the highest quality, the highest standards.

I’m extremely passionate about trying to encourage Australian companies to embrace and grow, not just in the Association of Southeast Asian Nations (ASEAN), but in Asia more broadly.

Thirty-five per cent of global growth is coming from China at the moment. Indonesia is forecast to be the third biggest economy in the world by the year 2030. And yet as a country, we’re investing more money in New Zealand in 2015 than we’re investing in Asia. Why would you do that? Why would you do that when the Australian and New Zealand economy only adds up to about 2% of the world’s economy, and when the other 98% is available to be cultivated?

To get super-returns, can I suggest – as much as I love this country – why would we not go just up the road to Asia? We are so lucky. Now is the time to do it. Because the advances in technology are enabling smaller companies in Australia to really go and take it via social media.

Small can make it big with social media

Blackmores ran a social media campaign on WeChat. If you aren’t familiar with WeChat, it’s how the Chinese communicate; they don’t use Facebook, they use WeChat.

We approached Li Na, the world’s number two women’s tennis player, to support a charity event. We were trying to raise awareness of congenital heart disease in China with children, and we asked Li Na to do it.

I believe we just recorded her in our own office, off the back of someone’s own camera. No big expense. We asked people to log on, hook their mobile phones on to our WeChat account, and to track their steps. And for so many steps we’d give money to the charity.

Within days we had five million hashtags, 800,000 people had logged on, and 25 million steps had been tracked. We just could not believe it.

But you see, that is an example of how small Australian companies can really exploit this wonderful opportunity and get their message out. You no longer have to spend millions to do it, so I think, if you do not go and grab hold of ASEAN: beware. Because the Germans are – and I hate saying that because I love Germany too – 23% of capital investment going into Indonesia is coming from Europe.

Not every milestone is financial

One of the learnings that I’ve experienced is that when change happens, or you’re trying to push for something like moving into China, and regulation evolves, it can be seen as risky.

I think what you have to do is try and educate the shareholders in the market – I don’t mean that in a patronising way. But we need to set milestones other than financial, and try and bring our shareholders on the journey. There are many ways to measure success, and they’re not just financial. I’ll give you an example.

I went to Blackmores’ Chairman of the Board Marcus Blackmore and said, “Marcus, I want to spend all this money in Asia, and try to turn it around, even though generally we aren’t making any profits there, and despite the fact we’ve already been there for 35 years. And I’m not sure when you’re going to see your cash back. I just know we need to do it.” That was my business case.

Why? Because we needed to build a natural hedge in the business, because our raw materials came from overseas, we needed to have diversification of risk, and so I talked through the other strategic reasons.

Generally, Marcus says a business plan is out of date the day the board has signed it off. Which is true, isn’t it? It’s like budgets, budgets change the very next day and you’ve got a different view.

So I think we need to think differently about financial hurdles and how we invest in innovation and opportunities. It’s not just financial – there are very many different other ways to think about it.

Are banks right to consider overseas investment risky?

I don’t think Australian business are doing enough to innovate. But it’s not just because the CEOs or the boards don’t want to, it’s because of a set of circumstances.

If you go to the bank and say “I’d like to build a facility down in Adelaide, can you lend me $10 million?” they will say, “Sure”, and just give you whatever your margin rate is over cash.

Conversely, if you say “I’d like to spend $10 million building a business in China,” they are likely to say “Sure, that’s three times your normal rate.”

So to start off with the banks, they generally make it more expensive for overseas investments, they put that hurdle in because they say it’s higher risk. Potentially it is higher risk, but I would suggest it’s higher risk if you don’t do it.

Free trade agreements are just the first step

Saying all that, I think the free trade agreements with the government are a really positive sign and a really good first step, and I’m really encouraged that Federal Minister for Trade, Tourism and Investment, the Hon. Steve Ciobo is going to take on the great work of former Federal Trade Minister, the Hon. Andrew Robb AO and carry on with it.

It’s not really the tariffs that are the issue. They are a big impediment, but they’re not the issue. For us, for example, in food and health, it’s actually the ingredient strategies and the regulation when you go into a country.

For China I really want to see a recognition of our standards here in Australia, which are the highest in the world. And if we have recognition of them we would be able to take more products in.

China is booming because of the free trade zones. But really to serve a world market you need to be in the broader retail market, and that requires another level. The free trade agreements are just the first step. We now need to free up regulatory barriers.

We need to utilise our international student resources 

The Government can do one thing to help – well, they can do lots of things – but they can do one thing in particular. You ask a lot of small Australian businesses, “Why aren’t you embracing ASEAN or Asia?”

They’ll often say “Because there are so many risks” or “We don’t understand” or “We don’t have the skills”. The language barrier puts off a lot of people.

We have hundreds of thousands of students right now living in Australia. What I would love to see is the government changing the rules on the number of hours these Asian students can work in our society.

Legitimately, they’re only allowed to work 10 hours a week, and so what happens is they can’t get meaningful work. So they end up working as waiters and waitresses, and – whether we like this or not – so often not being paid the correct wage, working more than their 10 hours and being employed illegally.

I say this because I have first-hand experience of how great these students are. We took in a foreign student at Blackmores with the help of Sydney University; a young law student from Korea. He helped Blackmores launch in Korea, and he’s now our junior lawyer.

So as you can see, there’s this wonderful resource not being utilised. While students can legally stay on for a year after graduation, this clause is actually not good enough. These students need to go back to their families and they haven’t got the money for that luxury – and if they’re being sponsored in any way then those businesses want them back.

But while they’re here, let’s have them doing meaningful work. It’s good for them, it’s good for their countries, but selfishly, it’s good for our business.

Long-term government support

In terms of waiting on government for policy changes to encourage better regulation, we have a culture of knocking off politicians as soon as they get voted in. Maybe we need to support our politicians and it’s us as voters who are a part of the issue.

We should respect the people that are voted in, respect the people’s choice in voting them in, and get behind them and help them be successful. We need a long-term government.

Christine Holgate

Chief Executive Officer and Managing Director, Blackmores

This speech on intellectual capital and other innovation opportunities was first published by the Committee for Economic Development of Australia (CEDA). Read the original text and more of CEDA’s top 10 speeches on disruption and innovation here

Read next: Dr Eva Balan-Vnuk, Microsoft’s state director for South Australia, considers how the cloud can lead to the democratisation of technology.

Spread the word: Help Australia become digital savvy nation! Share this piece on intellectual capital and other innovation opportunities using the social media buttons below.

More Thought Leaders: Click here to go back to the Thought Leadership Series homepage, or start reading the Women in STEM Thought Leadership Series here.