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Thank
you. Good morning everybody. I just want to say two things before
I begin, because you're going to say, 'Where's this madman coming
from?'.
First of all, when I was asked to speak, I went through my portfolio
of slides and I had 45 slides that I wanted to use today. Well
that's impossible. So in cutting them back to twelve, I have really
tried to pick up the big points but the slides are still relatively
busy, and nowhere near explain what I think I've learnt over the
last five years about what is a salt-of-the-earth group of people
(SMEs), who are a massive part of our economy and are totally
erratic. And all these things are true in the context of the outcomes
of the PeCC Project.
The other thing to say is that all of my experience is only to
do with the procurement, supply chain consumer business. I'm not
interested in B2C or portals or websites or buying airline tickets
or such things. So it's my background in Soul Pattinson, retail
small business, and enabling solutions that are in this talk today.
As Ewan Brown mentioned, from the workshops, which I didn't attend,
there were ten issues. And these are the ten key issues identified
at the SME Roundtable in September 2001 that we, as corporate
blue suits seek to report on. I don't know whether there were
any SMEs there on that day, or here today. I don't know that any
of the ten are really important to SMEs.
So with those things in mind, I'll just take you through these
slides.
 
I
think what gets SMEs attention are the questions - Am I making
any money? - That's Rule No. 101 to 1010 - Is the cashflow flowing?,
how am I coping with this wretched GST?, am I waiting 90 days
for a corporate retailer to pay my invoices? and, are my sales
doing well? I've got to look after my customers - playing golf
with my customers, rather than going to workshops and seminars;
then worry about someone talking about 'costs'. And I mean, an
SME thinks pretty much in this order.
You know, corporate Australia thinks about costs, it is No 1,
saying 'lets shrink', 'let's downsize'. SMEs aren't focused that
way. If they've got the money, they'll spend it and they'll employ
people. Staff are good and an asset - because most of them are
in the family business - they don't have to really worry about
staff in that corporate sense. Then come all the things that we
think they worry about, but they try to ignore because they're
small businesses and erratic people in a corporate sense, and
after that come worries or anything else that comes along.
When they look for leadership they don't see the CEO of Coles-Myer
or the head of BHP, they see Singleton or Newman or Dick Smith.
But if they are going to talk to people and get advice, it's from
their own kind. That's their accountant - who is also usually
an SME, and knows bugger all about corporate culture - or other
advisers they might meet at Rotary - which I think is a very unused
group of people - or some sort of mentor that they may have in
the family. Then there are their investors because they try to
raise money to keep it all going. They are other partners in the
business - they're not real family, but they're family - good
or bad it is unlikely they are a corporate mentors. And only then
they start looking at the real world of 'blue suits', the banker.
Banks are important; banks are bastards but they're important
bastards. Customers come first, then their competition, visionaries,
and their hobbies - hobbies become important - sailing and golf
are much more important than going to seminars, and then everything
else.
Now
for some of the things that we've learnt over the last five years
from Coles, Woolworths, the Department of Defence, a hospital
or a pharmacy wholesaler. There are people there who can tell
you, quite passionately, that a manual purchase order can cost
$50 in a grocery environment, $70 in a pharmacy environment, $120
in a hospital environment and over $1000 in a Federal Government
Department environment. That's just to place a purchase order
for one pencil, or one tank. We know that if we can get everybody
onto e-commerce, we'll get that down to $5, $2 or almost nothing.
But, you know, we're just saying that, and people haven't proved
it - being the corporate people who believe it - and the SME people
say, 'Well, you don't even bloody know'. But the one certain thing
about this is, that if we're going to get this message across,
we have to have a very simple SME message, a very simple song,
two verses, which I'll come to later.
So SMEs don't focus on this. They don't understand it. I have
spent hundreds of man-hours with accountants and SMEs trying to
convince them why they should go online with Coles or Woolworths
or Soul Pattinson or the Department of Defence. And it's in the
second or third hour that the penny drops. Now, who of us here,
highly paid corporate and consultants that we are, is going to
go out and sign up an SME with three hours of corporate wages?
It just isn't going to happen. I mean, there are companies like
Market Boomer who have done it quite successfully, and it can
be done, but it can't be done in the normal multi-national, big
telco marketing model. It just doesn't compute.
So in SME-land, the focus is on cashflow and convenience. Those
are the two main words I want you to take away today, and if we
could promise SMEs that if every invoice would be paid in 28 days,
they would do anything. That's the thing they
want. Nobody is giving it to them, and if they're talking about
it, they don't believe the corporate and they don't believe the
Departments. And so, they sadly do not also see that they're part
of the problem. But they are the problem.
At a hospital in Sydney, the accounts payable section fails to
pay on time 14,000 invoices a month. They can only reconcile about
three thousand of them first time. The rest take up to six re-work
times to reconcile. Most of the problem is a combination of the
hospital's own performances and the suppliers all equally making
human errors. But the suppliers, who are largely SMEs, are their
own worst enemies because they make more mistakes. Mistakes mean
a lot of reconciliation work. But they don't understand that.
Nobody's telling them that at all. So the hospital just does not
pay them on time. It's all the SME understands - the big bugger
has not paid me - they do not ask 'why'.
So
very quickly, on the left hand side I'm talking about one thousand
corporate entities. Coles is one entity, Department of Defence
is a second entity, and the Victorian Government is a third entity.
So, in Australia, we have about one thousand big buyers being
serviced by about 100 thousand of the one million SMEs. So I'm
only talking 10 percent of SME businesses.
Now on the left hand side, the model is millions of transactions.
Millions of purchase orders, invoices, packing slips, payments
and cheques. They've got huge investments in computers and infrastructure
that only runs as fast as a fax machine. Not at broadband, not
at warp speed. They've got rooms of computers that go as fast
as a bloody fax. I mean, think about it? Every time we key 100
keystrokes - no matter who we are - we make six errors. Millions
of transactions every day, six percent errors, just reticulating
away out there.
Interoperability, that Ashley Cross (General Manager, Electronic
Commerce Diffusion, National Officer for the Information Economy)
mentioned, is enormously important. In a lot of our industry sectors
we are super-efficient at the top, but at the bottom - down to
the mud and the blood and the beer - we are dysfunctional and
completely hopeless when it comes to exchanging transaction data
along the unconnected pipes. You put the pipes together and all
the data just doesn't transmit.
Corporate Australia has concentrated on the IT and the super-highway
- not the 'dirtway'. Corporate Australia is not concentrating
on the guy in the cardigan or the people driving the truck - the
people who in work in the dirtway - the sharp end of the business.
It's the people in the cardigans and the people driving the trucks
who combine SME Australia and corporate Australia. And there's
very few technology innovations or marketing happening to take
e-commerce benefits down to the SMEs, but also to the corporate
dirtway people that physically transposes the SME world to corporate
world. It's just totally dysfunctional again. And there is no
business process-to-business process. Now, the entire Health industry
uses EDI to transmit claims processing for - any operation. So
every hospital, mostly 'EDI' their claim process - private hospitals
to the health insurer. You know what they do? They print it off,
pick up a biro, check it and re-key it. Why? Because it isn't
going down into the workplace, dirtway, business processes. May
as well not do it at all. On the other side, there is the fax
- and you'll hear me say this over and over again - as far as
SMEs are concerned, the fax is good. I don't understand why they
can't
re-key effectively as a business process. They have no quality
over their data. They don't understand the errors they make. They
have no standard paper work formats. They have no automatic information
links at all. They also have no interest in corporate theory.
They have no idea about return on investment and all this big
end of town stuff.
There's no cat leadership. SMEs are cats. You cannot herd cats.
It's just impossible. The only way to herd cats is with a bowl
of cat food. Almost every situation requires different bowls of
cat food. But most of them do not know what they are doing wrong
and what the secret is, we just haven't told the cats what it
is. And you've got no hope of telling these people anything. You
can only show them. They will only react to practical examples
of success that actually answers the biggest question, 'What's
in it for me?'
So
if you look at this slide. I've got there the example of Bad Buggers
Limited to Silly Me Enterprises with the purchase order onto an
invoice. All the things that go wrong every day. You see that
the order number is not right; they've got to deliver this in
the year 2022; they've got 10 of them; but they got the product
number wrong; they got the description / colour wrong; they got
the price and then they extended it wrong. That's the real world
of purchase order/invoices - that's why it takes five times to
reconcile ten thousand invoices, and not once. Corporate retailers
will tell you that to draw a cheque manually costs them $23. An
e-commerce cheque costs them a dollar. One of them does 800,000
cheques a month. So for corporate Australia, that's huge. But
all those little cats supplying the retailer are 12,000 little
cats, and they don't see that value proposition at all - until
they do, we have a problem.
This is actually a quote (on the slide - 'share information')
from one of those two big retailers - I've changed it a little
bit - and it's true. The Internet has changed the way they do
business. That's one of the reasons why corProcure didn't fly.
If you don't understand this - and people like Market Boomer and
others do understand - then you're not going to make this work.
You can't hold things back. You can't be proprietary. You can't
have secrets. And that's a very rare and mature attitude that
is very uncommon in Australia. We are not mature about this at
all. We're not like Americans, we're not like the Brits, and we're
not like the Germans. In fact, we're a
very different country in many ways. We're trying to solve our
problems with big country software and big country solutions and
we can't. We have to have Australian solutions because we're a
very unique market. And the simple thing about it is that unless
we align the data, unless it's reliable, it won't be timely and
it won't be useful. So why do it? It's like the example I gave
of the hospital insurance. They've spent $300 million on EDIs;
there's not one penny benefit, not one penny!
So,
the issue of sharing it with 'them' is 'un-Australian'. We have
this adversarial thing. You know, they say, Why am I going to
tell them that? Why would I share that with them? It's completely
un-Australian mate. Well, as long as we're un-Australian, mate,
we're never going to get anywhere. So that's one of the biggest
issues that - particularly from the point that Ewan makes about
the Taskforce and the leadership from government. It's what this
issue is about. There isn't any 'them', it's 'us'. And people
are smart. We're smart, we're intuitive. We take a fax machine
purchase order and we see that it says, 'May be blue', and we
say, 'Oh he doesn't mean, may be Blue, he actually means Pink',
and re-key it. Or, we see 'Pink', and we key 'Blue'. So we fix
and make mistakes. But PCs are absolutely dumb. If you transmit
'blue' and meant 'pink', the machine doesn't know. It will either
reject it or process the error. That is the most fundamental thing
that corporate Australia doesn't understand is - how to get that
bit right. Because it's boring, tedious, hard work and only done
by the people in the cardigans, so let them worry about it. But
they're not empowered, so it isn't fixed.
I
say to SMEs, 'What's your biggest problem?' They say, 'Oh, 90
days to get paid'. And I say to them, rather cruelly, 'Fax the
invoice'. And they say, 'Oh, goody will that help?' 'Yeah! We'll
fax you back the cheque'. The SME goes, 'Oh, good - then D-Ho
the penny drops! Oh!'. It is an effective way to try and get them
to focus. If they really want their cashflow, they have to do
something else which is, replace the fax machine. But that's what
they love to use. I mean, they also have a global B2B
standard tool. Well there are also e-business global standards,
but it's very hard to get them down to SME-land when and where
the fax is so ubiquitous and so easy to use. I mean anybody can
use a fax, even the CEO. The next point actually comes from Jack
Welsh, who is a CEO, from GE - I've changed it a bit also: There
is no new economy. There's no old economy. You sell it for a dollar
when it cost you 80 cents that's good economy. You sell it for
70 cents when it cost you 80 cents, that's bad economy. We're
just doing economy faster.
That's another message we're not getting across to SMEs. We're
not trying to get them to change their business, we're just trying
to get them to do things quicker and better, and it's a message
that's not getting through. Because SMEs use simple processes
of business-of-business. They're not interested in fat five theories
and what's going to do well for a corporate or a government balance
sheet, or their big end efficiency. They're only interested in
what's in it for me. And we can't sort of haphazardly drive this
by the corporate use of technology. We've got to drive it by things
that are important to SMEs.
So
who are important to SMEs? Well on the left-hand side, as I mentioned
before, are the accountants. I think the accounting profession
has an enormous role to play in this because they really are the
major mentors of SMEs. The bank, cashflow, the Tax Office, are
very, very important to them. Customers, growing their business,
competition, red tape, regulation, the ACCC, and all those sorts
of things. They're very interested in success stories that work.
That is the point that Ashley made -show them, tell them practically
that this is a better way, they'll listen; ask them to read about
it, or go to a meeting, they won't. They like things that are
convenient. They're lazy - we're all lazy - because they're cats.
They like to get out of bed in the morning and go to work, which
a lot of corporate people don't like. They do. They have self-satisfaction.
They like what they do. And so, we the corporate are saying, 'You
shouldn't like it'. Being a SME sucks. You should change and be
like us'. And the SME goes, 'Drop dead!'.
So SMEs don't like corporate issues like that. Largesse attitudes
and cost cutting cultures while being told by these corporate
people wagging fingers at them that the SME is 'wrong'! They just
ignore it. They just switch off. And, you know, if you want to
get an SME really annoyed, talk about 'paradigm shifts' eight
times in two minutes. I mean, they just walk out the door - mentally
and physically. They'll go to conferences if it's about making
money, getting rich, or about their golfing or boats. They don't
also like being told by people like me that they're cats.
So,
a summary of all of this. Is the CEO important? 'Absolutely',
from both corporate Australia and the SME owner of the business.
Are the people that run the corporate IT, or the son or the daughter
or the mother that runs the computer important? Certainly. Is
the COO in corporate Australia or the people who drive the trucks
or mix the paint or does whatever dirtway function, important?
Sure. But it's the accountant that is really important because
if the accountant can say, 'Accounts Payable is operating perfectly'
and 'Accounts Receivable is operating perfectly', it means that
there are no errors and I can pay/receive all my bills. So the
accountant is the coming new age hero and the beneficiary of this
change. It's all about money. It's not about paradigm shifts,
it's about, 'Show me the money. Fix the money problems and I'm
yours'.
And so, there was a report on this by Monash University, which
I'll come back to. And I don't mean this to make you laugh. I
mean this seriously. I've met hundreds of politicians. I've met
only one that understands this; one, sadly to say. And it's an
issue that they're not alone in, of course, because most corporate
executives don't understand it either. But politicians have got
a lot to learn and they should learn pretty quickly. So they just
don't only read reports. I mean, do you remember the beginning
fax machine? In 1978 faxes were kind of a mystery and by 1985
everybody had one. Well that's what we're waiting to happen with
business-to-business PCs, SME e-commerce, and it's not. Why isn't
it happening? Because we haven't put the right cat food in the
right cat food bowls, and the cats just haven't taken it up in
herds.
The big end of town, whether a Department or a big retailer, or
whoever, they can lead by opening up e-trading by sharing the
food. By sharing the benefits. Most of the stories you hear from
the big software companies, the big telcos, is all about the benefit
to the corporate. There's nothing in it for the cat. And until
there is, nothing is going to change. We've only got one thousand
corporates, but we've got 100, 200 thousand, 300 thousand cats.
And
this last slide, I think, is really powerful. You know, Mark Twain,
200 years ago said, 'I'm all for progress as long as I don't have
to do any change'. And that's pretty true. And so we need to sing
this song.
Report by Monash University's Centre for Electronic Commerce
In 1996, Monash University wrote a Report, Advice on Electronic
Commerce Programs for Small to Medium Sized Enterprises, that
was paid for by the Department of Industry, Science and Tourism
and it involved the CSIRO. I was fortunate
enough to be part of it, that's why I got onto this PeCC thing
over five years ago.
I
read this report on the plane this morning. And it is really scary,
even though I know it almost back to front, how close this was
all those years ago when we didn't even know that it was going
to be called business-to-business. We didn't know any of the things
we know now. In summary, this Report makes nine recommendations,
and I think they are still all relevant today.
Accountants be used as a vehicle for EC education and implementation
programs for SMEs
I'll go backwards. Recommendation No 9 is that we've got to use
the accountants to make change happen. I think that's been proved
over the last five years. They're not engaged for this - the local
front street, shop accountants, the SME accountant. Nor are the
corporate advisers in the game - they're not engaged in this either.
Program for EC Awards be established in conjunction with industry
sponsors
Recommendation No 8 was to have e-commerce achievement awards,
along the lines of what Ashley was talking about, to raise the
profile, have awards, set standards, make Aussie heroes and all
that sort of thing.
Negotiate a relationship of significant domestic and (export)
international proportions with Rotary International in conjunction
with industry partners
It makes a recommendation (No 7) that we should use Rotary and
other service clubs to reach SMEs.
Focus on the Internet for Consumer EC for SMEs as a major EC technology
program for Government EC
It makes the recommendation (No 6) - but it didn't know what it
was saying then -about business-to-consumer. It didn't know it
was going to be called business-to-consumer.
Determine a recommended software/hardware package configuration
that can be accredited as being suitable for implementation of
global Email using the Internet and which provides access to the
WWW and is suitable for EC with Government for SMEs
It talked about pre-packing software and standards (No 5), and
of course, we now know a lot more about that today. Mandatory.
We just can't do this without standards, but we still haven't
got the pre-packaged software because it's all designed for the
US market. An SME in the U.S. is a huge company by Australian
standards. So buying a US-type solution is beyond most companies
here. They think $300 is expensive; paying $3000 is ridiculous,
let alone paying $38,000.
Put Australia on the map as a leader in global EC by initiating
a worldwide competition for an EC logo that could be used to identify
EC technologies that meet global specifications and identify accredited
providers of EC advice and services
This is something that I think is very important. Recommendation
No 4 talks about an e-c logo, a bit like the Woolmark, so that
SMEs could put proudly on their letterheads and whatever that
they are e-enabled. That they've met these online change management
things, won and they are now functioning as an e-enabled trading
partner. To make it kind of a 'be-in the-club' marketing issue.
I think that was very important then, when the report was written,
and that it came out of workshop discussions that we had with
about, from memory, 602 SMEs we spoke to face-to-face. This is
where these thing observations came from.
Feasibility of establishment of Electronic Commerce Resource Centres
in Australia be explored
Resource centres (No 3) for where the SME could go - some of the
things that Ashley Cross touched on - and see the working demonstrations.
And we've had a bit of this here in Melbourne with the DoD. There
was a very good Telstra funded resource centre just around the
corner here a few years ago. I don't know what happened to it.
David Thornton's AEBN is also a very good resource centre.
Government adopt a leadership role in the education process
Recommendation (No 2) was they wanted their industry trading partners
to trade with them on their terms. That still hasn't happened.
Up until very recently, major retailers and government departments
were telling SMEs, 'You have to trade with us on EDI'. Never worked.
Didn't work. Isn't working. Will l never work? The government
down here has just let a five-vendor panel for business-to-business
procurement. I don't mind telling you publicly, and I'll defend
it, it will never work. It just won't work. And they're spending
millions of dollars on it.
An Electronic Commerce Conversion Board be established
And the No 1 recommendation was to have an Electronic Commerce
Conversation Board. At the time, the writers of this report looked
back at the Decimal Currency Conversion Board and looked back
at the Metric Currency Conversion Board where we made huge process
and practice changes to and for all Australians. The authors realised,
at the time of writing this report that that's what we needed
as a nation. We needed a big, all-in issue of resources with a
Chairman and things. Had we known at the time, we would have said,
'We need a Y2K Taskforce'. Same issue, except where Y2K turned
out to be a great waste of money, this would be an enormous investment
for the economy. I want to close with a couple of things.
Conclusion
First of all, this consumable part of the economy is about $250
billion of our GDP. That's furniture, apparel, clothes, beverages,
pharmacy, health, pens, and paper. The average payment from big
Australia to little Australia in that $250 billion of GDP, is
68 days. It goes from 90 to 120 days delay in some cases; very
rarely goes below 40 days outstanding as accounts receivable.
So this salt-of-the-earth, mass SME market is being paid 68 days
from invoice. If you could pay them 28 days, the national economy
would be moving cash 40 days earlier. Let's say it's only $100
billion, 40 days earlier. I ask you, 'How many jobs is that going
to create?' because corporate Australia is not hiring, but SMEs,
if they were paid $100 billion quicker, they would be hiring big
time.
And the last thing is that this song - I talked about two things
- Ashley Cross also talked about a fax sheet and interoperability
- I really think that everybody, including NOIE, has to sing one
song, two verses for the SME - 'this is more convenient' and 'you'll
get paid faster'.
Thank you.
Pat Gallagher
Casprel Pty Ltd
casprel@attglobal.net
0418 976 06
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PATRICK
GALLAGHER