News Feature

Great customer service is growth edge for SMEs

A CONCENTRATION on customer service may be the vital edge Australian small and medium enterprises can develop to shore up their local markets and progress into new ones, according to research into customer service globally by American Express.

The big message for Australian small business, from the American Express 2014 Global Customer Service Barometer, is that they can not only compete with bigger businesses but also win customers away from them through a concentration on high calibre customer service. 

According to American Express vice president for customer service, Andrew Carlton, the research showed not only the power of recommendation that results from a good experience – on average a customer will tell nine people about their positive service experience – it also warned about the multiplier effect of poor customer service.

Research showed customers in Australia would vent their frustrations at bad service to an average of 18 people.

Furthermore, Mr Carlton said the research found 72 percent of Australians claim to have spent more with a company where they’ve had a good customer experience. On average, Australians are willing to spend 12 percent more.

“Our key message is that the brand is important but service that comes with that brand is more important,” Mr Carlton said.

“We see this with many of our customers; they vote with their wallets after they receive great service. Globally, American Express card members who are highly satisfied with their service interactions spend 16 percent more on their cards. It’s why we are so committed to delivering our award-winning customer service.”

The American Express 2014 Global Customer Service Barometer surveyed 10 major markets throughout the world including the United States, Canada, Mexico, Italy, The United Kingdom, India, Japan, Singapore and Hong Kong.

Of the 10 nations surveyed Australians were found most likely to use companies based on the recommendations of family and friends with 45 percent citing this as a key influence on choosing to do business with a company. Australia was ahead of the UK and Canada (both 44 percent) and the US (42%), while India (22%) and Japan (20%) were at the bottom of that table but both were prominent in seeing a company’s reputation as the most likely influence.

“Australians place a higher importance on the personal touch than other nations, with about 40 percent of respondents preferring to speak to a ‘real’ person over the phone for difficult inquiries, and 31 percent a face to face conversation,” Mr Carlton said.

Social media is a sideline in this game, according to Mr Carlton.

“Face-to-face, word of mouth is the preferred way to communicate views on service,” he said. “Social media is more commonly used when people are getting frustrated.”

He said even recommendations through social media were not nearly as powerful as a personal verbal recommendation.

“For a single enquiry, consumers prefer to go to the company website or get in touch by e-mail. For more complex things, they prefer to talk to somebody. The preference is the phone for most service enquiries.

“The majority are meeting expectations but can improve.

“But there is a difference between information and service,” Mr Carlton said. “More information is available today. Most customers will go online for that.

“Click to chat (for service through a website) is becoming more important. In fact about 10 percent of people have click to chat as a preference now.”

The rise of unified communications and a preference for Skype-style links were also changing things. Mr Carlton said the increase of video chat may raise that kind of service.

“Phone at the moment is a 41 percent preference,” he said. “Video may soon prove to be as prevalent as instant messaging. But the key is wanting to talk to a real person.

“The main component is that customers want to talk to someone knowledgeable.”

Mr Carlton said the research outcomes “really are a pat on the back for Australian businesses, but they also serve as a clear reminder to businesses at the busiest time of year that people have no hesitation in telling others about their service experiences, good or bad” .

“What does good customer service really mean? About 24 percent count that as individual recognition,” Mr Carlton said American Express’s research showed

“And 23 percent is about product and service. Another 23 percent is the value promise at the right price.

“Customers who believe they get good customer service are loyal and re-use – and recommend – and that means new business.”

Mr Carlton said recommendation outcomes tended to be about who was being listened to, who was a trusted source.

“The channel is not nearly as important.”

www.americanexpress.com.au

 

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ASIC hit by Senate criticism over ‘small’ multinationals

 

THE Senate Standing Committee on Economics has heard damning criticisms of the Australian Securities and Investments Commission (ASIC) and Taxpayers Australia is highlighting ASIC’s poor handling of how multinational corporations represent themselves in Australia.

Senator Christine Milne’s probing of ASIC’s ‘check-and-rein’ protocols has produced worrying insights, according to Taxpayers Australia, which also submitted to the enquiry “at worst, the government regulator has an ineffectual standing among multinational corporations, who are playing fast and loose with basic compliance and self-determination processes”. 

Taxpayers Australia’s head of tax, Mark Chapman said ASIC’s primary misstep — highlighted by Sen. Milne in session last week — was best summarised as “an inability to regulate Australian subsidiaries operating as part of larger, overseas parent companies”. 

ASIC’s current Class Orders only require large organisations and large Australian-based groups to submit financial statements. 

“The rub is this:  businesses self-determine their size, and thus their eligibility to report to ASIC,” Mr Chapman said. “Self-determination requires an honour-based compliance standard. 

“Therefore less-than-honourable businesses can dodge regulation by determining themselves ‘small’ with little apparent fear of ASIC validation.”

Taxpayers Australia claims Facebook Australia “looks to have done this, being an Australian subsidiary of a larger overseas parent company”.

“Given the size of the Facebook global empire, questions need to be asked about Facebook Australia’s ‘small company’ self-determination,” Mr Chapman said. “Its practices are sobering proof an overhaul is needed.”

In a submission to the Senate Standing Committee on Economics, Taxpayers Australia has sought to tackle the legislative grey area Facebook Australia – and Facebook US, being the parent – may be operating in.

“The fact remains, ASIC has not defined large multinational group disclosure arrangements,” Mr Chapman said. “Taxpayers Australia notes that under current law, ASIC’s existing Class Orders do not require multinational corporations to submit financial statements in respect of their Australian subsidiaries.

“Therein lies the worrying likelihood of ASIC missing out on critical financial information.”

Mr Chapman said Taxpayers Australia advocated it essential that not only ASIC follow the law in relation to self-determination, but that the law was appropriate in the first place.

“And clearly it isn’t,” Mr Chapman said. “We’re not calling for over-regulation but clearly when the parent company of one of the world’s largest corporations is able to legitimately describe itself as small – with all the implications that carries for the amount of scrutiny it will receive by ASIC and later the Tax Office – there is something very wrong with the rules.”
Taxpayers Australia said its understanding was that the Australian Taxation Office (ATO) can request financial statements from relevant subsidiaries of foreign multinationals, but ASIC’s laws do not support any such procedures. 

“The two bodies should work in tandem,” Mr Chapman said. “As it is right now, any financial statements provided independently to the Tax Office would not be legally subject to audits by an independent third party, nor would they be need to be prepared in accordance with Chapter 2M of the Corporations Act 2001 (Cth).”
Taxpayers Australia is calling on the Senate Committee to clarify the extent to which ASIC consults with the ATO and other powers when formulating Class Orders. 

“The partnership of ASIC and the ATO, with respect to multinational compliance, must be seen to deliver clear legislative strength,” Taxpayers Australia said in a statement. “If it does not, the government must act to strengthen the law covering the  verification of self-determination processes.

“Proof the Tax Office is receiving quality information from foreign multinationals to aid ongoing compliance must be given, and ASIC must address glaring holes in Class Orders stipulating company self-determination criteria.”

www.taxpayer.com.au

 

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Harvard academic rates big-thinking Qld small business

ONE of the world’s leading researchers of small business, Harvard Business School professor John Lerner, will headline the official launch of the 2014 Queensland Small Business Week by State Premier Campbell Newman on Tuesday at Brisbane City Hall.

State Minister for Tourism, Major Events, Small Business and the Commonwealth Games, Jann Stuckey said Prof. Lerner would address the theme, When small business thinks BIG at the official business luncheon launch event at which about 200 business, government, industry and community leaders can join a panel discussion led by the international business expert. 

Ms Stuckey said the event was one of five Ministerial events and more than 100 activities planned across Queensland during the Week, which runs from September 1-6.

“We have invited Professor Josh Lerner from Harvard’s Business School to discuss how Queensland business is performing on the world stage,” Ms Stuckey said.

“I am excited about the opportunity to join some of our 400,000-strong hard-working small businesses in celebrating 2014 Queensland Small Business Week.

“Small businesses employ about one million Queenslanders, that’s more than 50 percent of all private sector workers.”

Ms Stuckey said the When small business thinks BIG event would focus on what business can achieve when it thinks globally.

She said 2014 Queensland Small Business Week celebrates the role small business plays in the Queensland economy.

Prof. Lerner is the Jacob H. Schiff professor of investment banking at Harvard Business School, and head of the Entrepreneurial Management unit.

Prof. Lerner sits on the World Economic Forum and presents annually on small business and entrepreneurship.

Business leaders can register for the event on the Queensland Government’s business and industry portal.

www.business.qld.gov.au/smallbusinessweek

 

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ACCC chairman wants Australia’s ‘competition culture’ reinvigorated

AUSTRALIA has retreated from its culture of fair business competition and Australian Competition and Consumer Commission (ACCC) chairman Rod Sims is eager to redress the situation.

Mr Sims told the Committee for Economic Development of Australia (CEDA) State of the Nation Conference in Canberra on June 23 that the current ACCC-supported Harper Review provides an ideal opportunity to reinvigorate Australia’s competition culture. 

“Australia has lost a lot of its pro-competition culture that it gained from the 1990s National Competition Policy. Clearly we need ‘Hilmer Mark 2’, as the current Harper Review is styled,” Mr Sims told the conference.

The review was instigated by the Federal Government, out of an election promise, as a ‘root and branch’ examination of competition law and University of Melbourne emeritus professor Ian Harper is heading it up. Prof. Harper  is also a partner at Deloitte Touche Tohmatsu and a director of Deloitte Access Economics.

The ACCC chairman said effective competition policy depends on using competition and other incentives to boost productivity, effective competition laws and creating processes and institutions that continually foster competition.

In listing areas where competition has taken a back seat, Mr Sims said the prevailing approach to privatisation raises particular concern.

“Where governments are increasingly failing is in ‘how’ to privatise,” Mr Sims said.

“Privatising in ways that limit competition in order to maximise the one-off sale proceeds is the wrong way. Such an approach increases the sale proceeds by effectively taxing future generations and Australia’s future competitiveness.”

In discussing micro economic reforms, Mr Sims said infrastructure is a major area of unfinished business. He identified road supply and usage, congestion pricing and shipping as three areas that could be tackled.

“I always find it irritating when people say Australia has picked all the low hanging micro economic reform fruit. We have not; and besides, there is never only one crop,” Mr Sims said.

In foreshadowing the ACCC’s submission to the Harper Review, Mr Sims said principles including efficiency, universality and clarity are important in determining where competition laws could be improved.

“While the ACCC recognises competition laws must strike a careful balance, and not inhibit healthy competitive behaviour, if competition laws are too weak there are large efficiency and welfare losses from systematically poor conduct,” he said.

Mr Sims nominated Section 46 of the Competition and Consumer Act as a provision that is particularly deficient, and outlined two areas for improvement.

Mr Sims said a key success story of Australia’s competition policy is the integration of competition enforcement, consumer protection, and economic regulation into a single agency with the sole purpose of making markets work as they should.

“Given this common objective the current ACCC structure provides many synergies and economies of scale; it also avoids the many gaps that would arise if these complementary functions were separated; and it avoids the overlap that would arise as the same behaviour could be pursued by more than one agency,” Mr Sims said.

To address Australia’s diminished commitment to competition, Mr Sims said the role of market studies needs to be considered in order to gain an in-depth understanding of how sectors, markets, or market practices are working.

“The inability of the ACCC to initiate market studies using our information gathering powers means we are out of step with overseas regulators, and Australia is losing an opportunity for a continuing competition focus on particular sectors and activities,” Mr Sims said.

“The result of these studies can be enforcement action, recommendations to governments, simply shining a light on particular practices or, often more important, they can explain clearly to the public why there is not a problem,” Mr Sims said.

www.ceda.com.au

www.accc.gov.au

 

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Digital disruption year: 2014

SUBSCRIBER EXTRA / 

A DIGITAL business researcher is tipping 2014 will play out as a landmark year in disruption – and the recent industry closures and job losses appear to bear out his analysis.

Digital Business insights (DBi) CEO, John Sheridan, is using his 13 years of research and 50,000 in-depth surveys of Australian businesses  to develop systems and digital tool sets to assist business leaders in developing capability within their organisations.

Mr Sheridan and his team at DBi use the evidence of those surveys to help shape knowledge delivery to business leaders, based upon their individual business profiles, and encourage new collaboration. 

But the research also often throws up accelerative trends, blockages and opportunities that are not following the conventional business, government or educational wisdom.

For example, Mr Sheridan’s research has been predicting a long-term and lasting hit to Australia’s commercial property market, largely because of mobility and the almost universal practice of business teleworking. Online retail has critically disrupted ‘high street’ retailing forever, he believes, and many ‘mum and dad’ retailers will leave the industry forever.

One of the biggest worries for CEOs is where the next challenge will come from. Most now acknowledge that the toughest competition may be yet to come – but some entrepreneur and start-up is likely to arrive out-of-the-blue and gain critical market share with lightning speed.

Australia may not have time to get used to it, but it has no choice but to adapt to it.

“Full time, well-paid jobs will disappear forever in manufacturing, mining, retail, real estate, construction and government only to be partially replaced by a range of government sponsored infrastructure developments,” Mr Sheridan said.

“Digital disruption will continue to pummel all industry sectors. Sixty percent – up from 40 percent last year – of US CEOs worry about competition from new market entrants. And competition can come from anywhere.

“Teleworking will increase steadily promoted by government and office lease vacancies will grow further. They will move from the teens to the 20s in Brisbane, Perth, Melbourne and even Sydney. Retail vacancies will follow the same trend.”

He said all indications were that, between 2014 and 2017, Australia will “haemorrhage thousands of full time, well paid jobs”.

“They will disappear forever,” Mr Sheridan said.

It was plain from the research that the future for Australia rested in start-up businesses that were fleet of foot, highly adaptable, innovative and ready to employ to sustain their high trajectory growth. He said US research showed clearly that established firms tend to shed jobs over time, when challenges strike, but new companies were always where the high job growth actions was.

“And yet, it is the least understood sector and the least supported, especially by government and the banks,” he said.

“Government cut backs and redundancies in Canberra and in other state governments will result in thousands of white collar workers moving into early retirement or possibly starting new business ventures.

“Retraining for the new business environment will be critical.  But what are the new skills required and do the traditional vocational training facilities have the knowledge, vision and capability to train people to be successful in this new world?” Mr Sheridan asked.

“No,” he said. “Independent contracting will grow. No job security or little job security means less borrowing and spending, and more saving where possible. Banks and other finance providers will wrestle with how to rate this new ‘worker’ and manage risk.

“The nature of a job will shift from full time to permanently part time or ongoing contracts. Job security? Forget it.”

Mr Sheridan warned the biggest impact on Australia will be the drop in income levels “as newly redundant workers move from high paying jobs to low paying jobs, if they can get any jobs at all”.

“The baby boomers are now starting to retire in droves, conserving their resources, downsizing and only spending where it suits them,”  Mr Sheridan said. “Retired people save money and don’t spend as much.

“Less money to spend will impact retail, personal and business services even further.

“As interest rates slowly rise again, the housing market will be hit hard. Mortgage defaults will increase. The overall number of people able to buy property will fall further and the price of housing will drop. There aren’t enough Chinese investors to go around.”

Mr Sheridan is living out his own deductions that the digital world offers the best solutions to combatting and working past its own disruption.

“How can we use the internet and web based services in a more intelligent manner to support individuals in this new environment?” he said. “Not based on the presentation of old world 20th century resources and information but really tailored to the new condition – starting with the customer and working back.”

He said the organisations and business leaders who got their heads around this core issue would thrive in the new digital economy.

“The only room for real job growth is in startups. And value adding,” Mr Sheridan said.

“And for them to have any hope of success they will need support. Net job growth – full time, part time, contract, self employed – will come from startups.

“We have to provide the right resources for startups to have more chance of success – the business intelligence, the mentorship and support, the connections and introductions, the export resources and support, the networks – both real world and virtual world.

“The new disruptive condition and business environment is upon us. It isn’t going away. 2014 will be a shocking year.

“Shocks, but also huge opportunities. The two go hand in glove,” Mr Sheridan said.

“It requires cooperation, collaboration and sharing. It requires the putting down of political dogma and the acceptance that the only viable strategy is shared value.

“The old way doesn’t work.”

www.db-insights.com

  • Turn to Business Acumen’s Digital Disruption feature, pages 18-25.

 ends

 

POSTED MAY 2014

 

Can innovation save manufacturing in Queensland? Innovation in tech procurement will sure help ...

By Rowan Gilmore >> 

THE MEDIA has been quick to explain why the last three big car manufacturers are pulling out of Australia. High costs, poor innovation, manufacturing is dying.

Is there any hope for a renaissance among smaller more agile firms that embrace innovative design and smart manufacturing?  

For example, EM Solutions, an innovative Brisbane-based firm designing and manufacturing broadband microwave radios for telecommunications and satellite links, exports more than 70 percent of its products. 

The company recently released the world’s fastest commercial radio transmitter and receiver, for carrying data traffic 20 times faster than the fastest mobile phone. Intended to carry heavy traffic in mobile or internet networks, the radio recently passed its acceptance tests on a trial between Brookfield and Springfield with flying colours. 

Technological innovation is important to compete in an industry such as telecommunications.

But home grown innovation is a tough sell, with our big telecommunications companies content to purchase equipment from large multinationals to reduce their commercial risk.

Innovation is often not enough. EM Solutions struggles to sell its products to large corporations and government agencies here at home, even while blue-chip customers overseas seek it out.

Why?

If taxpayers are spending $40 billion to lay a broadband network across Australia, why aren’t local innovators thriving on the back of that?

If Australian Defence is spending billions upgrading its telecommunications equipment, why is most imported?

It seems our large corporations don’t like to take risks, to work with SMEs, to nurture home grown innovative firms.

Even when prices are lower.

They work instead with accredited suppliers, other large organisations they think are more trustworthy than small local businesses.

One solution to prevent the further hollowing out of manufacturing in Australia is indeed to innovate; but another is for our big corporations to innovate in their technology procurement, and better manage the risk of working with small business.

The Queensland Government (through its Queensland Health payroll fiasco) has learned that ‘buying big’ did not protect it against failure, and is now adjusting its procurement practices to buy from small businesses that innovate. 

Being more innovative in their own procurement is one trend all Queensland corporations should emulate.

www.emsolutions.com.au

 

Rowan Gilmore is the managing director of EM Solutions Pty Ltd and a former CEO of the Australian Institute for Commercialisation. EM Solutions is also a current member of Queensland Leaders, the organisation helping to foster leading companies in Queensland.

ends

POSTED MAY 24, 2014.

 

Insolvencies up: agribusiness and mining services most at risk

 

AUSTRALIAN business continues to endure unprecedented levels of insolvencies and business liquidations and a legal specialist in the sector is warning that conditions are now heavily impacting agribusiness and mining services companies. 

Law firm Henry Davis York (HDY) is warning that a combination of local and global pressures could see the number of domestic insolvencies increase significantly over the next 12-24 months, particularly in the agribusiness and mining services sectors.

According to Mark Schneider, specialist restructuring and insolvency partner at HDY, international uncertainty and increasing international competition is compounding a generally subdued growth outlook for the Australian market. Investment and business activity is yet to return to pre-2008 levels.

Mr Schneider said the agribusiness sector is under significant pressure, particularly due to recent extreme weather events.

“Agribusinesses in Queensland, NSW and Victoria have struggled recently due to the drought,” Mr Schneider said. “However, before this, particularly in Queensland and northern NSW, there was severe flooding.

“Lately it seems the weather conditions have been one extreme or the other, with enormous impacts on cashflow, forward planning and crop prices for those in the agribusiness sector. When coupled with a high Australian dollar and disrupted markets, for example the live export trade, the agribusiness sector has really taken a beating.

“Financiers in the sector will want to review their customers’ positions to protect their exposures and farmers may need to keep in close contact with their financiers to retain their support in these tough times.”

Mr Schneider also drew attention to the mining services sector, which has been held out as propping up the Australian economy for some time now, but is also under increasing pressure.

“A number of mines and associated mining projects are moving from the construction phase to the operational phase and others have simply been mothballed completely as the big miners look to cut costs,” he said.

“This sector has also been affected by fluctuating commodity prices and exchange rates, and now the consensus view seems to be that growth in this sector is slowing.

“In the main, banks with large exposures in the mining services sector have been very considered in working with their customers to address the challenges they face. However the changes in the mining services industry have wide-reaching effects.

“Some businesses have had to deal with a yellow goods market where demand was once so high that second hand equipment was selling for more than brand new equipment, but where there is now no demand and an over-abundant supply of expensive parked-up equipment.

“In addition, there are a host of other businesses in mining areas that are affected by the decrease in activity in this sector, notably accommodation providers and other suppliers to the mines,” Mr Schneider said. 

Mr Schneider said a key trend to watch was the direction of investment into distressed assets.

“It is interesting that there is certainly available capital out there, both domestically and internationally, but there has not been a rush of investment into distressed assets in Australia,” he said.

“This could be for a range of reasons, including because of the perceived value of particular assets, regulatory and structural issues within industries and the relative number of opportunities in other depressed markets, for example, the US, UK and Europe.

“There remains much uncertainty about the global economy and in the meantime businesses in Australia will continue to face the pressures of subdued economic growth and increased international competition.”

HDY specialises in the banking, financial services and government sectors and focuses on ‘tier-one’ insolvency and restructuring expertise. Its latest research into Australian insolvency risks has thrown up the most vulnerable sectors as agribusiness and mining services.

According to HDY, the top five sectors at risk of insolvency at present are:

Agribusiness – because extreme weather conditions have caused significant financial pressures in this sector.

Mining services – with mining projects transitioning from development to operational phases and some projects being scrapped altogether, this has significantly reduced demand and the effects on associated businesses could see some suppliers facing difficulties in the next 12 months.

Manufacturing – the continuing strong Australian dollar and generally high cost of business operations in Australia have led major car manufacturers to announce their departure from the market.  This will have strong flow-on effects to manufacturing suppliers in the auto industry who need to urgently re-tool or restructure their businesses.

Retail – this sector is continually under pressure from online competitors and strongly-backed international retailers entering the domestic market.

Aviation – there are smaller airlines beginning to collapse (such as Brindabella Airlines) matched with continuing speculation around Federal Government intervention for larger players, such as Qantas.

www.hdy.com.au

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