PLUS: NISSAN’S ELECTRIC DREAMS THE SOCIAL LOAN RANGER BUSTING ‘CLOUD’ MYTHS
www.bme.eu.com • Q4 2010
CREATIVETHINKING How unleashing the power of design can provide a blueprint for business success
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FROM THE EDITOR 7
Design works As businesses strive to create greater brand connection and awareness, could using design as a business tool be the silver bullet?
asting my eye around the ofﬁce as I put the ﬁnishing touches to this issue of Business Management, I’m confronted by a sea of editors and designers busy beavering away on svelte, aluminium-clad computers. Californiabased Apple has carved out a reputation synonymous with elegant and tactile desktop computers, laptops, MP3 players and, more recently, mobile phones. The distinctive design and build quality of their gorgeous gadgets mean Apple fans, dubbed ‘Applephiles’, think nothing of bedding down for 12 hours with a hot ﬂask outside an Apple store just to be the ﬁrst to get their eager hands on the latest shiny device. For some, though, its all about style over substance; the decision to pay a premium for one of their computers comes purely down to aesthetics as opposed to processor performance or how much RAM sits inside the silver frame. Like them or loathe them, for Apple, design is a fundamental part of who they are. In this issue’s cover story, Stacey Sheppard unlocks her creative side and speaks to design chiefs at Nokia, Virgin Atlantic and Whirlpool to ﬁnd out how they use design as a tool to outsmart their rivals and differentiate themselves as brands. “Virgin Atlantic has innovation as a core brand value and uses design as a key competitive differentiator,” says Joe Ferry, the airline’s Head of Design. The article coincides with London’s Design Festival – a nine-day event in the capital that’s expected to draw a crowd of 300,000. With so much creativity on display, you can be sure the corporate world will be foraging for inspiration and new ideas. Also in this issue, we put electric cars under the spotlight; more speciﬁcally, the soon-to-be released
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Nissan Leaf, described as the world’s ﬁrst massproduced affordable car that’s powered solely by electricity. Despite the misgivings some have over ditching their petrol and diesel vehicles for a car that has to be charged for eight hours every 100 miles, Nissan is predicting buoyant sales. I catch up with Andy Palmer who heads up the Japanese automaker’s electric vehicle (EV) division to press him on the limitations of EVs and whether he agrees with his CEO Carlos Ghosn that all vehicles on our roads will be electric by 2020 On page 70 we have an interview with Giles Andrews, CEO and co-founder of peer-to-peer lending website Zopa. In a fascinating chat, he reveals how the public’s distrust of the banks in the wake of the ﬁnancial crisis is increasingly persuading people to lend to one another through Zopa. The business model is a simple but intriguing concept that has become a British success story, which is now spawning competitor sites abroad. I hope you enjoy this issue of Business Management. Time to get back to ﬁnishing the magazine on my sexy iMac.
“When you ask customers in Europe, the US and Japan, around eight or nine percent are already saying that their next car will be an electric one” – Nissan, pg 34
“People really like working together and have convinced themselves that together they can get themselves a better deal than by dealing with more traditional institutions”– Zopa, pg 70
Julian Rogers Editor
Electric avenue Will its zero emissions and wallet-friendly running costs be enough to tempt motorists to swap tried and trusted petrol power for electric power with the new Nissan Leaf?
Loan ranger Peer-to-peer lending website Zopa brings lenders and borrowers together, bypassing the banks. CEO and co-founder Giles Andrews says the public’s distrust of the greedy banks has been a boon for his business
38 The business of design As businesses across the globe seek new ways of outperforming their rivals in today’s highly competitive marketplace, Stacey Sheppard asks if ‘Design Thinking’ could be the solution they’ve been looking for
126 Inner beauty
For Geoff Skingsley, Executive Vice President of Human Resources at L’Oréal, the joys of working at the company are more than skin deep and investment in staff is a strategic priority… because they’re worth it!
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HEAD TO HEAD 112 ITSM
EXECUTIVE INTERVIEW 54 Bengt Wallentin, eBuilder 75 Andreas Tesch, Atradius 98 Rob Smitten, PFI Knowledge Solutions 102 Michel Kisfaludi, Illuminate Solutions 104 Paul Magee, Phocas Ltd
ASK THE EXPERT 22 Paul Tyrer, Schneider Electric 52 Roy Thompson, AMD 61 Andreas Oswald, LogObject AG 64 Joseph Belsanti, WinMagic Inc. 82 Mike MacDonagh, Sword, a Wolters Kluwer Business 100 Sylvain Pavlowski, TIBCO Spotﬁre
INDUSTRY INSIGHT 68 Stephen Hoare, Kensington 84 John Verver, ACL Services Ltd. 120 Alan Arnold, Vision Solutions
46 Cloud burst Should your business make the migration to cloud computing? BM gazes skywards and takes a closer look
56 Application converged networks
GOLD S P O N S O R
Steve Melahn on why network convergence strategies need to be updated to reflect the crucial importance of today’s virtualised enterprise
59 A perfect match Integrating social media applications with unified communications technology will help this underused corporate communication tool achieve its full potential
GOLD S P O N S O R
62 Feeling anti-social? Find friends fast Darren Gallagher lifts the lid on the impact social enterprise networking can have on your organisation’s CRM strategies
66 Hidden messages Despite the proliferation of social networking in business, email still remains the primary security concern for CISOs, says Michael Osterman
SILVER S P O N S O R
78 Reassessing credit risk management
José Manuel González-Páramo of the European Central Bank explains the challenges of credit risk management and the lessons that can be learned from the fi nancial crisis
86 Comply or die Markus Schultz on the challenges of a tighter post-crisis regulatory regime
90 New horizons Chris Loughlin, Travelzoo’s new CEO, tells Business Management how he led the successful expansion of the company’s operations into Europe
96 Doing business the intelligent way The recent surge in the popularity of business intelligence cannot mask the errors many companies make when using it, says Herman Heyns
106 Tr@ck and ﬁeld We go faster, higher, stronger with Jean-Benoit Gauthier, the man responsible for the complex IT supporting the summer and winter Olympic Games
116 Putting ITSM to work Delving into the world of ITSM and maximising ROI
122 Behind enemy lines A look at the power of ambush marketing
136 Blueprint for success IKEA CIO Paolo Cinelli on developing brand technology
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16 The brief 18 International news 138 Gadgets 139 Books 140 36 Hours in Las Vegas 144 Photo ﬁnish
CIO Europe Summit 2010 19 - 21 October 2010 InterContinental, Vienna The CIO EU Summit is a three-day critical information gathering of the most influential and important executives from across all sectors. The CIO EU Summit is an opportunity to debate, benchmark and learn from other industry leaders.
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The big dipper The recession is ﬁnally over but can we sidestep the dreaded double-dip?
ver since the world economy emerged battered and bruised by the worst recession in living memory, the spectre of slipping back into a second recession has loomed large. As theories about how the recession would pan out were aired, economists and journalists grabbed their pencils and scribbled an inverted, elongated shape to signify a quick rebound while others drew bowl-like shapes signalling a gradual recovery. Some sketched a big ‘W’. The ‘W’, or double-dip, is certainly a possibility, especially when economies remain fragile, taxes are rising, unemployment is worryingly high, and businesses still struggle to get credit. Also, some countries battling to put
a lid on their debts have suffered the ignominy of having their credit ratings downgraded. Eurozone governments like Germany have had to prop up sickly economies such as Greece which is trying to plug a gigantic black hole in its finances after years of reckless spending. But despite these times of financial woe and public spending cuts, the world economy is not heading for a double-dip, according to the Centre for Economics and Business Research (CEBR). To emphasis the CEBR’s confidence that we won’t be enduring another recession, the CEO Douglas McWilliams put his neck on the line with this comment: “I would be prepared to bet one of my better shirts on there being no global double-dip.” For McWilliams, the emerging economies will play a key role
“I would be prepared to bet one of my better shirts on there being no global double-dip” - Douglas McWilliams
in the recovery. “Although their growth will be affected by slower growth in the West, the emerging economies are too resilient for global growth to go negative again in the short term.” The think tank is predicting the global economy to swell by 3.5 percent this year. However, this has been downgraded from 3.7 percent after the CEBR lowered forecasts for the US economy. Forecasts for the next four years were also down, the sharpest being for 2011 which slips to 3.4 percent from the 4.1 percent that was chalked up just three months ago. Across the pond, the National Bureau of Economic Research says the US recession lasted 18 months and was the most prolonged since World War II. Meanwhile, the Organisation for Economic Co-operation and Development (OECD) expects the US economy to grow by 2.6 percent this year. Still in the US, a survey of leading economists by CNNmoney found there was a one-in-four chance of a double dip – up from 15 percent 12 months previously. Some economists, however, put the chance of the US economy slipping back into recession as high as 40 percent. The CEBR says the US economy will rise by 2.5 percent this year and 2.2 percent in 2011. The think tank believes corporate spending in the US will raise the growth rate but this may not happen until 2012. Commodities will come into play in the recovery, the CEBR notes. They warn the failure of the wheat harvest in Eastern Europe due to wildfires and drought means consumers will be faced with rising food costs, which will curtail spending. In a separate development, credit agency Moody’s has said that the UK’s coveted AAA rating is safe following tough austerity measures rolled out by the coalition government. The government has come in for criticism for announcing widespread public cuts so soon after coming to power, but the UK’s leaders say the country needs to reign in spending and slash mounting debts and interest payments on loans. If tough austerity plans were not put into place then the UK could end up in the same boat as Greece, the government claims. The agency said: “Moody’s stable outlook…is largely driven by the government’s commitment to stabilise and eventually reverse the deterioration in its financial strength. The UK economy appears sufficiently flexible and robust to grow moderately, even in the face of austere fiscal consolidation.” Unions in the UK, however, have warned of public sector strikes over the axing of jobs and public services. Across Europe, too, the cuts have been hard to swallow for some, sparking violent protests in Greece and demonstrations just recently in France. The government there plans to raise the retirement age from 60 to 62 by 2018 – an age that on the face of it looks to generous compared to other nations but French workers are vehemently opposed to having to work for an extra two years.
News in pictures
Revellers toast the Oktoberfest at Theresienwiese in Munich, Germany on September 20. This year marks the 200th anniversary of Oktoberfest, the world’s biggest beer festival
An Indian ﬁre-ﬁghter inspects the damage after a footbridge connecting the new road to the Jawaharial Stadium in Delhi, India collapsed, injuring dozens of construction workers. Delhi is staging the Commonwealth Games in October
Staff count cash at the branch of Industrial Commercial Bank of China. China’s currency recently increased to a new record high according to the China Foreign Exchange Trading System
WORLD BUSINESS ROUND UP
Widening web appeal
A Chicago suburb recently welcomed bedbug experts who gathered to discuss the pest problem that has struck the Northeast of America. Pest control workers have declared New York to be the epicentre of the breakout that has affected numerous office buildings, housing projects, apartment blocks, shops and even a theatre. The latest company in New York City that has been forced to close its doors is athletics clothing and shoemaker Nike Inc. The bloodsucking pests have reportedly now moved into Oregon and pest controllers told The Oregonian earlier this month that calls for help in the Portland area had tripled in the past two years. Chicago is expected to have a problem comparable to New York’s within two to three years.
A detailed survey of the UK’s fashion industry was recently launched by UK Culture Minister Ed Vaizey, and Vince Cable, the Business Secretary, at the House of Commons. The Value of Fashion report, commissioned by the British Fashion Council (BFC) and put together by Oxford Economics, concludes that the fashion industry is now worth €24.6 billion a year to the UK economy. Th is figure increases to as much as €43 billion when its wider contribution is taken into account, including tourism and related businesses. The report also found that the fashion business, which is the 15th largest industry in the UK, directly employs 816,000 people, making it the second biggest employer.
Tesco, the world’s third largest supermarket chain, has announced plans to expand its online shopping service into China, the Czech Republic and Poland. The supermarket giant was an early adopter of the online sales model and has been experimenting with home delivery in the UK since the 1970s. It will start trading online in Poland next year followed by Prague and Shanghai and hopes its new venture will be a success. It currently already sells over the internet in Korea and Ireland, its first and third-biggest international markets respectively. Philip Clarke, who will take over as chief executive next year when Sir Terry Leahy retires, said he wanted to expand Tesco’s online offer round the world.
€37.8 million Total invested in a new R&D centre by confectionary giant Nestlé
WORLD BUSINESS ROUND UP 19
Nestlé is to set up a new research and development centre in India, which will be used to facilitate innovation in cereals, beverages and dairy products. The centre, which will be at Manesar in Haryana, India, will be Nestlé’s 30th R&D centre and is scheduled to be operational by July 2012. Klaus Zimmerman, Head of Nestlé R&D Centre Worldwide, told reporters that the company has invested 50 million Swiss Francs (€37.8 million) in the new centre, which will initially accommodate a team of 40 engineers and scientists. At the stone laying ceremony Zimmer said: “The research at this centre will provide exciting opportunities for innovation. It will allow us to offer consumers in India and beyond the choice of tasty, healthy and nutritious products.”
Efforts to diversify operations at Japanese technology group Hitachi have been ramped up as the company revives its plans to shift away from consumer electronics towards large-scale infrastructure such as nuclear power and railways. Following a review of operations in 2009, Hitachi, which has not reported a profit since 2006, is looking to raise US$1 billion in the US by selling shares in its California-based computer hard drive business. The tech company, which once dominated the market, made a net loss of Y107bn (€0.94bn) in the fi nancial year to March, and in response has sought new and more profitable niches in areas such as transportation, energy and information technology.
Willie Walsh, Chief Executive of British Airways, recently announced his interest in reviving talks of a merger with the Australian airline Qantas Airways. In response to this, Alan Joyce, Chief Executive of Qantas told reporters: “Been there, done that,” saying that he is now more interested in exploring organic growth in the Asian market. BA and Qantas held merger talks back in 2008 when Qantas was under the control of Chief Executive Geoff Dixon, who called off talks over a disagreement on the airlines relative valuations. Jetstar, the low-cost subsidiary of Qantas, is allegedly talking to multiple parners in Asia regarding its expansion plans, which also include venturing into South America, according to Joyce.
Facebook and the workplace
Workmates or ‘friends’? One in every three UK employees who are online have been sent a friendship request on Facebook by a colleague, client or boss, according to The Protection Gap survey conducted online and commissioned by Abbey Legal Protection (ALP). When asked which Facebook-related incidents they had experienced, 21 percent of respondents said they had had their photos accessible for colleagues to view and eight percent had had Facebook information and knowledge used in a workplace situation. CEOs emerged as social networking fans, with only 42 percent claiming not to have a Facebook page. One in seven CEOs admitted to having photos uploaded and available for employees to view and a surprising 10 percent have had their Facebook knowledge used in a workplace situation. h Following the announcement of the survey results, ALP urged employers to understand the potential risks for businesses, both in terms of reputation and the efﬁciency related costs, of not having a clear and articulated company social networking policy in place.
36% of UK employees online have been sent ‘friend requests’ by a colleague, boss or client according to new research
Opportunity and risk
58% of UK CEOs online are now on Facebook
Commenting on the ﬁndings of The Protection Gap survey, Richard Candy, Underwriting Director Abbey Legal Protection said:
1 in every 5 workers has photos accessible for colleagues to see on Facebook
“The emergence of any new form of technology or means of communication can be extremely positive and bring welcome new ways of working into the workplace. Unfortunately, this also often translates to an increase in related risks for businesses and individuals. As was the case with the internet, mobile phones and email, social networking sites are no different.
29% of both UK CEOs and senior managers have been asked to ‘friend’ an employee, boss or client on Facebook 1 in 5 18-24 yr old workers have found their Facebook knowledge used in a workplace situation 38% of female workers have been asked to ‘friend’ a colleague, boss or client compared to 34% of male workers 42% of workers in London have been asked to ‘friend’ a colleague, boss or client, compared to 32% in the North of England and 33% in Scotland
“These opportunities and risks vary considerably by organisation type and sector. Whilst Facebook can help to connect people and businesses, the risks range from corporate reputation and those of speciﬁc individuals, through to security breaches and even unlawful discrimination or harassment, to name but a few. “The key to minimising the mineﬁelds for businesses, is to have a clear policy in place that suits your organisation. Ensure employees are aware and familiar with it. Make sure they understand what is deemed to be inappropriate usage, and most importantly, update your policy regularly, as new issues emerge. “If you have evidence to demonstrate that these measures have been taken, you will be in a much more secure position should you ever be at the centre of a social media related legal wrangling.”
Firms fear global squeeze Time to quit?
igures from Cloud Recruitment Company ‘Resource on Demand’ show that more employees in the UK hand in their notice during the third week of September than during any other week of the year. Year-on-year statistics show that 37 percent of resignations occur in that week and 24 percent happen during the fi rst week of February. The timing of both coincides with the four-week mark after the end of traditional holiday seasons. The research shows that while many career changes are triggered following these key holiday periods, it takes candidates on average four weeks to job hunt and attend interviews, then a further four weeks to work their notice. Th is means that the majority of post-summer resignations only start their new roles at the beginning of November. According to Lee Durrant, MD of Resource on Demand, “[The third week of September] sees hundreds of thousands of people handing in their notice across the UK & Ireland. The catalyst is often the summer break, people return from their time away looking to progress or alter their career path. “After mulling it over on a beach, job hunting, applying, interviewing and working their notice, many candidates will naturally opt for this week to hand in their notice and so a ‘merry-go-round’ of the jobs market will begin”.
Fast fact Global IT spend is set to reach €1.2 trillion by the end of the year
Source: International Data Corporation
Global businesses are fearful of their ability to improve proﬁtability over the next 12 months, according to KPMG’s latest Global Business Outlook study. The study, which canvassed the views of 6200 manufacturers and service providers across 17 major economies worldwide, revealed ﬁrms’ fears over their inability to increase the prices they charge, against a backdrop of rising or static input costs. The overwhelming majority (88 percent) of service ﬁrms around the world expect input costs to increase, or at best remain static, over the coming year. The cost outlook is almost as bleak among manufacturers, with 82 percent anticipating a rise or no change in input expenditure, and close to half (45 percent) predict increasing input costs; as do almost a third (30 percent) of ﬁrms in the services sector. Just one ﬁfth (20 percent) of services ﬁrms, and less than a third (32 percent) of manufacturers, expect to be able to command higher prices this time next year for their goods and services. Martin Scott, Partner at KPMG Performance and Technology, commented: “In proﬁtability terms, the majority of ﬁrms will be in no better position next year – indeed, many are predicting margins to contract. “Raw material price hikes, competitive pressures, mounting energy costs and rising inﬂation are all cited as contributing factors to an increasing global cost of production. “Without the ability to pass escalating costs on to customers, ﬁrms will struggle to grow proﬁts over the coming year, raising serious doubts over sustained economic recovery.”
ASK THE EXPERT
Non-stop business Paul Tyrer outlines and emphasises how important an uninterruptible power supply can be to your company’s IT department. The introduction of scalable data centre physical infrastructure is therefore a key enabling technology for reduced total cost of ownership. By taking a building block approach to UPS protection, modular architecture enables additional power modules and battery cabinets to be deployed as a ‘pay-as-you-grow’ solution for growing IT estates. The system can be scaled back too: virtualisation enables organisations to reduce the number of physical servers it requires to run many of the applications required
Paul Tyrer is Vice President, UK, Ireland, Nordics & Baltics, APC by Schneider Electric. He joined APC in 1994 and has held various management roles as his career has developed. In 2002 he became Director of Channels & Partners, EMEA to develop business for InfraStruXure, APC’s solution for on-demand data centres. He has served the company as country VP since its purchase in 2007 by Schneider Electric.
t is difficult to envisage any business that could function effectively without IT in this day and age. In fact, anecdotal evidence suggests that even when businesses are failing or unprofitable, they continue to invest in information technology. In recent years, this increasing dependency has been fuelled by great leaps forward in technology and a buyers’ market. Today, most would agree that the best place to house new generations of compact and powerful IT servers is in dedicated computer rooms and data centres. Irrespective of whether you choose to build your own facilities, outsource your IT infrastructure or elect to have your IT supplied as a service, a key objective will be to ensure continuity of services. Until recently, IT availability has been pursued at almost any cost, with highly resilient infrastructure designs the order of the day to ensure power and cooling for IT, irrespective of the mains power supply condition. But escalating energy costs, coupled with concerns about the environmental impact of increasing numbers of data centres has stimulated action from the EU in the form of the Code of Practice for Data Centre Efficiency. As a result, the consultants responsible for data centre design and build and the manufacturers that supply the plant to power and cool these facilities have started to give primacy to the need to ensure energy efficiency. This has led to a number of changes to the uninterruptible power supply (UPS), the piece of equipment that protects IT equipment against the loss of the mains supply. In the first instance, designers have sought to more closely size the UPS exactly to the load being protected. Oversizing of the UPS not only has consequences for capital costs, but also drives up operating expenses such as energy and service costs.
for day-to-day activities. Scaling down physical infrastructure at the same time affords the opportunity to maximise potential energy savings and, therefore, cost and environmental impact. At the same time, modularity brings benefits by enabling service parts to be kept on site and by reducing the complexity of maintenance. Mean time to repair (MTTR), together with mean time between failure (MTBF) are the measure of availability. By making important components such as power modules user replaceable, time to repair can be decreased, thereby improving the availability of the power protection plant. A major cause of UPS failures is as a result of service visits, and simplifying maintenance routines plays an important part in reducing this hazard. The data centre sector is in the process of adopting the power usage effectiveness (PUE) metric as a gauge of electrical efficiency. The measure is based on the proportion of facility energy that is used to power the IT equipment hosted in the data centre. Ensuring that electrical infrastructure is scaled according to IT requirements is key to achieving lowered PUE; evidence of a well managed data centre. The introduction of UPS which are both high efficiency and which achieve high levels of efficiency at low IT load conditions can be an aid to improving PUE by increasing the amount of energy available for powering IT. High efficiency UPS can also provide some overhead for growth without the user being penalised through heavy operating costs. UPS vendors are taking a technological approach to solving the problems caused by the proliferation of technology. Current generation UPS provide a range of topologies to ensure availability and while the static UPS remains the staple for modern data centre designs, the benefits of modularity, scalability and serviceability are helping ensure the fitness of the facilities that are at the heart of today’s IT services.
acebook has pushed eBay off its second place position in the list of organisations most often attacked by phishers, according to a recently released report from Kaspersky Lab. According to the report, Facebook accounted for 12.81 percent of phishing messages in July, more than three times as much as in the previous month. The e-commerce business PayPal remained in first place after being targeted by over half (53.48 percent) of all phishing attacks. The US and India maintained their leading positions as the most popular sources of spam, distributing 1.5 times as much spam compared to June (17.2 percent and 9 percent respectively). Europe caused the most noticeable change in July’s rating with the UK, Germany and Italy all making it into the Top 10. The total volume of spam originating from their combined territories increased by 50 percentage points compared with the previous month.
One in three European workers are planning to search for a new job by the end of the year Source: AON
Getting smarter every day With competition in the smartphone market continuing to intensify, Nokia has vowed to up the ante in a bid to battle for more customers by unveiling three new smartphones at its World Conference in London this year. As things stand, Nokia currently remains the largest maker of the next generation model of mobile phone, but with stiff competition from Apple, HTC and Blackberry, the Finnish phone giant will need to choose its weapons of choice wisely. According to Comscore, Nokia’s market share has fallen more than 14 percent since July 2009, although it still commands over half the market in many western European countries and sells around 260,000 smartphones every day. Meanwhile, Apple and Android devices have both grown in excess of ﬁve percent in the last 12 months; fortunately for Nokia, they both still equate to less than half of Nokia’s market share. Analysts at CCS Insight said the devices were “critical to Nokia”, but the Symbian software, despite reﬁnements aimed at making it easier for developers to write apps for the phones, was “not positioned to challenge the iPhone”. However, the ﬁrm’s Niklas Savander was adamant in his retort at the conference, saying: “We are not going to apologise for not being Apple, Google or Samsung. It’s about three words: Nokia is back.”
All change at the top European heavyweights Barclays and Nokia get all new chiefs.
merican-born Bob Diamond, the man said to be the world’s highest-paid banker and once described as the “unacceptable face of banking”, has landed the top job at UK bank Barclays, replacing outgoing CEO John Varley. Diamond, who built his reputation from turning the bank’s investment arm, Barclays Capital (BarCap), into an international player will take over next March. Barclays says he will relocate from Manhattan to London. Barclays, the UK’s second-largest bank, is tight-lipped about Diamond’s pay packet as BarCap chief, although it’s thought to be in the region of €70 million a year, mostly through performance bonuses. And you can see why Barclays sees fit to remunerate the 59-year-old so highly: in the fi rst half of 2009 BarCap accounted for 86 percent of underlying pre-tax profits. Diamond is also credited for picking through the bones of what was left of the Lehman Brothers collapse in 2008 and slicing off the juicy parts at a bargain basement price of €1.4 billion. But in April it was the UK politician Peter Mandelson who dubbed Diamond the “unacceptable face of banking” over his salary that was excessive for “deal-making and shuffl ing paper around”. Th ree years ago, Barclays lost out to RBS in its bid to snap up Dutch lender ABN Amro, a purchase that overstretched RBS and forced the bank to go cap-in-hand to the UK government for a bailout when the credit crunch hit. While RBS came close to bankruptcy, Barclay’s lucky escape meant it was able to ride out the fi nancial crisis relatively unscathed. Diamond, who missed out on the top job to Varley in 2003, has been instrumental in the company’s expansion from one the UK’s high-street banking stalwarts into an internationally recognised brand – two-thirds of the company’s operations are now overseas. Shareholders will be anxious to know whether Diamond, now a UK citizen, will switch the company’s focus more towards BarCap, at the expense of its conservative retail operations. After all, it was the so-called ‘casino banking’ that was the catalyst for the credit crunch and fi nancial sector meltdown. European governments want to see the banks like Barclays ditch dicey investments and return to safe, responsible lending. Jerry del Missier and Rich Ricci will succeed Diamond as co-chief executives of BarCap in October.
nce the undisputed king of mobile phones, Nokia has found itself struggling to compete with rivals’ allsinging, all-dancing touchscreen handsets in a rapidly evolving market. Nokia has been accused of being complacent as a clutch of emerging manufacturers like Apple, RIM and HTC, have eroded the Finnish fi rm’s dominant position. Since Apple threw its hat into the ring with its now-ubiquitous iPhone, the US electronics giant, along with RIM, responsible for corporate favourite the Blackberry, have taken 65 percent of the available profit in the sector. Nokia profits have been plummeting since 2007, and in 2009 Nokia recorded a loss in the third quarter – the fi rst time in more than a decade that this had happened. Its share of the smartphone market has slumped to 37.4 percent, compared to 45 percent 12 months ago, says analyst fi rm Gartner. In a bid to reverse the firm’s fortunes, Nokia has appointed a new CEO – the former Microsoft chief Stephen Elop, who ran the division responsible for the omnipresent Microsoft Office. Elop, 46, replaces Olli-Pekka Kallasvuo. Nokia is Finland’s largest company so to plump for a foreigner to take up the reigns is a break from tradition and magnifies the seriousness of the problems being faced. The overriding issue to be addressed by Elop is how to entice people to switch to Nokia handsets, which can only be achieved by producing attractive and feature-laden devices. The much-anticipated N8 is the new flagship device that bosses are pinning their hopes on to win back smartphone market share. The new CEO also needs to prevent existing customers from having their heads turned by snazzy rival phones and jumping ship. Elop was quick to highlight the challenge ahead for him personally: “I have a great deal to learn about Nokia and a great deal to learn about Finland.” And if the task ahead wasn’t stiff enough, Anssi Vanjoki, a 19-year Nokia veteran who heads up the smartphone division, quit on the eve of Nokia World, the manufacturer’s annual trade fair. Media reports suggest Vanjoki, who was dubbed ‘Nokia’s Steve Jobs’, was unhappy at being overlooked when Kallusvo’s successor was chosen. Elop’s appointment is controversial in Finland but if he can restore Nokia’s position in the smartphone market, there will be few who will quibble about a foreigner running the company.
Executive Profile Alessandro Profumo’s determination and strength of character helped him rise from lowly branch employee to CEO of UniCredit Group. Now he uses the same qualities to navigate the tricky waters of the international ﬁnancial sector.
lessandro Profumo’s life story is the proverbial fairytale of the kid who starts at the bottom and works his way up to become the boss. Born in Genoa, Italy in 1957, Profumo started his working life at the age of 20 as a clerk in a branch of Banco Lariano, and within 10 years he had progressed to being manager, and then director. Ten years after that, he became CEO of UniCredit Group, a position he continues to hold today. In 2004, he was awarded the Cavaliere al Merito del Lavoro, a type of knighthood awarded to important figures in Italian industry. The award was not given lightly. Not only has Profumo remained in his role for 13 years – an eternity compared with many of his fellow CEOs – but during that time he has transformed what was a regional Italian bank with 700 branches into an international powerhouse with 10,000 branches in 22 countries, and nearly €770 billion in assets. Known for his focus on maximising shareholder value, Profumo also places a high priority on people management, stressing the importance of good managers to improving a company’s performance. He also believes in delegation, having appointed three deputies – in retail; corporate, investment and private banking; and operations – to handle many of the CEO’s traditional responsibilities, leaving him free to concentrate on running the company as a cohesive whole. UniCredit’s transformation was achieved through a series of mergers and acquisitions, a process that Profumo readily admits was not without its challenges. While the M&A process has provided the company with both
expertise and diversity, having operations in so many countries also brings with it differences in language and culture, as well as various ways of interpreting events. Th is can lead to a disconnect between the message the CEO thinks he or she is getting across, and what employees believe they are hearing. Profumo has not been shy about sharing his opinions on the causes of, and fallout from, the international banking crisis, and as President of the European Banking Federation, his opinion carries weight. He has said that the fi nancial sector should have seen the crisis coming, had it not been so intensely focused on microeconomics, rather than the bigger picture. In early September, he wrote a letter to European Central Bank President Jean-Claude Trichet, which was published in Italian newspapers. The letter implied that Basel III banking regulations must be balanced or they might endanger economic growth in Europe. “At this point, a well-balanced calibration of the proposals...will be crucial if we are not to put European jobs and growth at risk,” said an excerpt published in l Sole 24 Ore and Corriere della Sera. It hasn’t always been plain sailing for Profumo in his role as UniCredit CEO either. Earlier this year, he threatened to resign from the bank’s board over his plan to streamline operations in Italy by integrating UniCredit Banca, Banca di Roma, Banco di Sicilia, private banking and corporate banking into the group holding. Analysts estimated the move would save the company more than €770 million, but shareholders rebelled, reportedly because the shareholder foundations holding 12 percent of UniCredit stock feared the move might lead to the abolition of subsidiary boards in regional businesses, over which they currently exert a certain amount of influence. And in late July, Italian politicians expressed concern after Libya’s sovereign wealth fund took a 2.075 percent stake in UniCredit, joining the Central Bank of Libya as a top shareholder. Bank rules bar a shareholder from having a voting stake of more than five percent, but the new investment would give the two Libyan institutions a combined seven percent share. Profumo was forced to reassure investors, telling reporters, “We will ask these investors to show us the legal documentation to be able to evaluate from the legal point of view if they are independent investors or not.”
“Known for his focus on maximising shareholder value, Profumo also places a high priority on people management”
UniCredit has 10,000 branches in 22 countries
Bricks and mortar
After 11 years of dispute between Europe’s biggest toymaker, Lego, and it’s Canadian adversary, Mega Brands, the European Court of Justice has ﬁnally ruled that a three-dimensional image of Lego’s eight-stud brick did not qualify for a trademark because it served a functional purpose. The Danish toymaker had listed its brick as a trademark in the EU in October 1999, but Mega Brands were hot on their heels with the objection that registering the block’s form contravened trademark legislation. The objection was upheld by EU agencies in 2004 and 2006, with the Court of First Instance siding with the Canadian toymaker in 2008. Essentially, the case centred on the argument that shapes used for “a technical result” did not qualify for a trademark. Countering the debate, Lego said it had shown that its brick was distinctive and that differently designed bricks with virtually the same function could be made at no extra cost – ultimately misleading consumers as a result. Peter Kjaer, Head of IP at Lego, said: “Analysis show that 40 to 60 percent of shoppers believe they are buying a Lego product when in fact they are purchasing a different product. Shoppers can see there is a different name on the box but they still believe it is a product line or a company owned by us.”
The real page turner
few years ago, when the music industry was forced to sit up and take notice of the digital wave sweeping through its backyard and demolishing anything that wasn’t secured in its path, both consumers and executives alike realised that times were a changing. So when the eBook unveiled itself to the world of publishing and electronics in 2007, perhaps it was a slight surprise to see that the same people were divided as to the potential of its success. Fast-forward three years and it certainly looks as though lightening can strike twice, with Amazon reporting this summer that for every 100 hardback books it sold, it sold 180 eBooks – and predictions suggest that it is nowhere near its plateau yet. Of course, the publishing industry assumed that it was relatively immune to the digital threat; after all, nothing could replicate the anticipation and excitement of turning a page, could it? Well, for the hundreds of thousands of people who have bought an eBook device since its invasion of the market, it seems as though companies such as Amazon and Sony have done just that. In fact, when Amazon launched its fi rst eBook – the Kindle – back in 2007, it would set you back a heft y €306. Compare that to its recently tweaked newer model with a price tag of €178, and you don’t have to be a pricing expert to know what this means for the publishing world. To add insult to injury, a new website known as 24symbols is trying to do for books what the likes of Pandora and Spotify did for music. The site, funded completely by advertising to ensure its services remain free, allows anyone with an eBook reader to log on and search through an archive of eBooks divided into genres, nationalities and publishing houses. And with 24symbols’ ad-free subscription service, books can even be stored in cache for reading when not hooked up to the net. For the world of publishing, future market share can only be predicted, but perhaps it’s time they re-wrote their own ending.
Working hours increasing after recession trough Figures published by the Working Hours in the Recession audit by the Chartered Institute of Personnel and Development (CIPD) have revealed that demand for labour in the UK has picked up for the ﬁrst time since mid-2009. After the recession ﬁrst bit, the UK job market suffered one million full-time job losses and a shift to more ﬂexible and fewer working hours among a workforce that was eager to do all it could to hold on to employ-
ment. As a result of this shift in working patterns, there was a 10 percent fall in the number of employees working more than 45 hours a week. Full time employment fell by 4.1 percent at a time when part-time employment grew by 4.4 percent as a result of workers agreeing to cut their hours in attempts to stave off redundancies and help see their employers through the recession. Overall, 32.7 million fewer hours were worked each week in
the UK since the start of the recession and the publication of these ﬁgures by the CIPD. By the second quarter of 2010, 440,000 fewer employees worked more than 45 hours a week compared to two years prior, with male employees accounting for the bulk of the recession casualties. The audit report also reveals that, by spring 2010, there were just as many UK employees working between 16 and 30 hours a week as there were working 45 hours or more, suggesting the country has come to fully adopt a ‘mixed-hours’ culture. “A marked shift to shorter working hours has been one of the key characteristics of the recession,” said Chief Economic Advisor at the CIPD, Dr. John Philpott.
Company index Q4 2010 Companies in this issue are indexed to the ﬁrst page of the article in which each is mentioned. 451 Group 46 Abercrombie & Fitch 120 ACL Services Ltd. 84, 85, IBC Adidas 120 Alcatel-Lucent 2, 56, 58 AMD 51, 52, OBC American Express 120 Ansett Air 120 Apple 38 Atos Origin 106 Atradius IFC, 75, 76 Bavaria 120 Betfair 70 BMW 38 Boober 70 BT 106 Casio 38 CFMS 93 Chartered Institute of Marketing 120 CMO Council 120 Coca-Cola 38 Design Council 38 Dyson 38 eBay 70 eBuilder 54, 55 European Central Bank 78 Facebook 59, 66, 70 FIFA 120 Financial Times 70
Fly.com 90 Guerrilla Communications 120 Helix SMS Ltd 112, 113 Hotel Astoria 143 Hotmail 46 Hugo Boss 120 IBM 38 ICSID 38 IKEA 136 Illuminate Solutions 15, 102, 103 Interbrand 38 IOC 106 Kensington 68,69 KPMG 96 LinkedIn 66 LogObject AG 4, 61 L’Oréal 126 Mercedes 32 Method Masters 112, 115 Microsoft 120 Mitsubishi 32 Nokia 38 Nike 38, 120 Nissan 32 Octopus 117 Osterman Research 66 PFI Knowledge Solutions 98, 99 Phocas Ltd 104, 105 Puma 120 Qantas Airlines 120
Reebok 120 Red Dot Design Award 38 Schneider Electric 22, 23, 25, 27 Seymourpowell 38 Siemens 38 Siemens Enterprise 6, 62, 63 Smarva 70 Sony 38, 120 Sword, a Wolters Kluwer Business 8, 82, 83 Tefal 38 Tesla 32 The Access Group 95 TIBCO Spotfi re 10, 100, 101 TOPdesk 119 Travelzoo 90 Twitter 59, 70 Virgin Atlantic 38 Virgin Galactic 38 Visa 120 Vision Solutions 120, 121 Whirlpool 38 WinMagic Inc. 12, 64, 65 Yahoo 46 Yankee Group 59 YES-secure 70 Zopa 70 Zurich 86
THE BIG INTERVIEW
Japanese automaker Nissan is hoping to steal a march on its rivals with the Leaf, the ďŹ rst massproduced, affordable electric car. But will its zero emissions and wallet-friendly running costs be enough to tempt motorists to swap tried and trusted petrol power for electric power? Julian Rogers investigates.
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THE BIG INTERVIEW 33
Nissan’s Andy Palmer proudly shows off the Leaf
co-friendly electric vehicles (EVs) have been trumpeted as the future of motoring and a credible replacement for the internal combustion engine, as well as the ozone layer’s saviour, for decades. The fi rst EV was built way back in 1891 but it is only recently that manufacturers have made the technological breakthroughs to produce practical EVs on a mass scale without exorbitant price tags. And 2011 is shaping up to be the year of the EV as a glut of models hit markets around the world. Customers in the US and Japan will take delivery of Nissan’s effort, the Leaf, in the coming weeks (both countries seeing 25,000 pre-orders combined) and it is due to hit forecourts in the UK, Ireland and Portugal early next year.
Andy Palmer.indd 33
To an untrained eye the Leaf looks like your average five-seat family hatchback, although the lack of an exhaust pipe protruding from the rear end offers observant passers-by a clue as to this car’s green credentials. In the cabin, the clean lines and space age white interior hint at a new era in motoring. Aesthetics aside, there is one crucial difference between the Leaf and the majority of other cars on the road: a plug socket under the Nissan badge replaces the need to ever fi ll up at the pumps. The Leaf’s lithium-ion batteries generate a power output of 90kW while a gentle whirring sound from the electric motor replaces the familiar grunt of a petrol or diesel engine. But the underlying problem Nissan and rival manufacturers have to overcome is that although EVs
THE BIG INTERVIEW
“When you ask customers in Europe, the US and Japan, around eight or nine percent are already saying that their next car will be an electric one” -Andy Palmer
sound all well and good, they are stigmatised by preconceptions of being a bit naff, to be perfectly blunt. Sluggish acceleration and a disappointing top speed accompanies that nagging fear that the battery will suddenly run dry, leaving you stranded on a motorway hard shoulder. Loudmouth motoring pundit Jeremy Clarkson once described electric cars as “a bit like cod liver oil – very good for you but you would rather have a plate of steak and chips”. Nissan, Japan’s third-largest automaker, says these are outdated misconceptions that couldn’t be further from the truth; the Leaf boasts a 160km range off a single eight-hour charge (a fast charge takes less than 30 minutes and replenishes the battery to 80 percent of its capacity), a top speed of 144 km/h and it’s pretty zippy when you pull away at the traffic lights thanks to impressive torque. “It’s our job to change the preconceptions,” says Nissan SVP Andy Palmer, the man charged with the company’s global EV development programme. “I can guarantee that if people drive the Leaf, many of those preconceptions will disappear – the car is capable of over 90 mph so you can defi nitely lose your licence.” Performance and cornering are sharp, he explains. “In terms of being fun to drive, it’s extraordinary – the handling is amazing.” The Leaf ’s nimbleness can partly be attributed to its low centre of gravity and lightness. Indeed, the EVs today are busting myths about performance and winning the praise of car experts, such as seasoned motoring journalist Quentin Wilson, who recently described some of the more sporty EV’s rolling off production lines today as “blindingly good”.
Apart from performance, the Leaf’s pièce de résistance has to be its running costs. The carmaker expects these to be between €1.05 and €1.59 per 100km depending on where in Europe the Leaf is charged. Nissan also says its EV will be on average €615 cheaper annually than a traditional car. If you live in the UK, then the car is exempt from road tax and the congestion charge in the capital, London. Despite running costs looking particularly attractive compared to prices at the pumps, critics point to the fact that you have to remember to plug the car into the mains for eight hours when the battery needs charging. Palmer, however, dismisses this as an inconvenience. “I get frustrated when I have to stop off on my journey to go to a gasoline station, pull up, get my hands dirty and smelly because I’m using a diesel engine, stand out in the cold in the middle of winter and fi ll my car up for five minutes; that’s an inconvenience.” Unsurprisingly, he paints a rosy picture when living with the Leaf: “You never have to go to a fuel station but can simply plug your car into the mains, enjoy your dinner and go to bed. You then wake up in the morning already warmed up because you preset the heater and it’s ready go.” On the face of it, the 100-mile range might seem a tad puny, ruling out a long motorway journey without having to pull off and hunt for a charging point. However, Nissan says UK motorists average just 30 miles a day. “One charge will last for three days so charging at home is pretty okay for the majority,” Palmer states, although he concedes that a change of mentality is required while the driver waits 15 or 20 minutes for the battery to be 80 percent replenished.
What the analysts say about EVs Respected analyst ﬁrm Frost & Sullivan believe EVs are set to shake up the mainstream car market in the wake of rising concerns over greenhouse gases and depleting fossil fuels. In their 2010 report, 360 Degree Perspective of the Global Electric Vehicle Market, Frost & Sullivan lay out their vision for the EV landscape and how the market will be shaped over the coming years. They say advances in battery technology have been an underlying factor in mass-market production of EVs, creating a revolutionary business case for the car industry. “With the advent of lithium-ion battery technology and innovative ﬁnancial models, the automotive industry is all set to witness a revolutionary business case,” the author of the report states. Frost & Sullivan also highlight how car manufacturers are working on business models that will make available the car and energy under one roof, opening up a plethora of opportunities for utilities, suppliers and ﬁnance businesses. They also point to a rising trend towards urbanisation, along with the emergence of mega and smart cities, which will be a boost for EV sales. The report goes on to say that by 2020 the emergence of mega cities in developing economies will drive personal mobility to a new level, adding to the demand for EVs. City layout will play a part, too. “Most ofﬁces are expected to move to the ﬁrst-belt suburbs and city centres will encompass the shopping areas (small-scale deliveries) and living areas for ‘double/single income, no kids’ households,” says the report’s author. “In mega cities, ofﬁces and homes are likely to be adjacent to each other, creating a favourable environment for EV deployment.” It’s not all positive, though, with Frost & Sullivan describing the prices of the initial wave of EVs as being “prohibitive”. To counter this cost challenge, the author notes, federal and local governments have passed a series of legislation, beneﬁts and rebates to help manufacturers sell their vehicles at affordable prices.
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THE BIG INTERVIEW 35
CEO Carlos Ghosn says EVs will account for 10 percent of all cars on the road by 2020
The Leaf boasts a 160km range off a single 8-hour charge
Andy Palmer.indd 35
Decisions, decisions Making the switch to EVs in the fi rst place requires a radical shift in mindset on the consumer’s part. Petrolheads are unlikely to give their gas-guzzlers the elbow, even if they do drink fuel like a 747 jumbo jet, but for those motorists vexed by volatile petrol and diesel prices, as well as the pollutants these fossil fuels kick out, then an EV could be the logical choice. Nissan, clearly at pains to emphasize the car’s ‘greenness’, has produced a viral TV advertisement in which a polar bear makes an arduous trek south from the North Pole across challenging terrain. The animal eventually arrives in suburbia and discovers a motorist alongside his Leaf before giving the startled man a tender bear hug. But let’s be honest here; any EV’s eco credentials are likely to take a back seat to the miniscule running costs – electric-powered vehicles cost one-tenth the price to power compared to their petrol cousins. So while you may well stroke your chin in a moment of contemplative selfcongratulation over your planet-saving auto purchase, the knowledge of never having to visit a fi ling station and part with a wad of cash again is the USP for EVs. These negligible running costs and the car’s ‘greenness’ are certainly expected to appeal to the corporate market, even more so amid these austere and carbon-conscious times as companies get to grips with climate change targets. An added bonus for business is that the Leaf is free of company car tax for five years. Nissan’s sales team guides customers through a ‘decision tree’ based on their driving habits to ascertain
Nissan Leaf: the pros and cons + Running costs are one-tenth the price of petrol-powered vehicles + Makes ﬁlling station forecourts a thing of the past + No greenhouse gases + Exempt from vehicle excise duty in the UK, company car tax for ﬁve years and London’s congestion charge
- Needs to be plugged into the mains and charged for up to eight hours - 100-mile range won’t suit long distance commuters - Charging station infrastructure could be lacking - Not cheap to buy, even after incentives
THE BIG INTERVIEW
The Leaf boats an IT system that, once connected to a global data centre, can provide support, information and entertainment for drivers 24 hours a day. The dash-mounted monitor displays the Leaf’s remaining power or ‘reachable area’ as well as showing nearby charging stations. Owners are able to use their mobile phones to set charging functions and turn on air conditioning prior to journeys, even when the vehicle is powered down. An on-board remote-controlled timer can also be pre-programmed to recharge batteries. It also comes with sat-nav and a parking camera.
whether or not an EV is right for them. By some time between 2015 and 2020, Palmer expects around 10 percent of Nissan’s customers to be suited to the EV range. For the time being, though, the EV market is miniscule – less than 0.1 percent of the 26 million cars on UK roads are powered by electricity. However, a raft of manufacturers are looking to tip the balance of power with their new EV models set to hit car showrooms in the next 12 months or so. Nissan CEO Carlos Ghosn confidently predicts the global EV market will account for 10 percent of all automotive sales by 2020. “When you ask customers in Europe, the US and Japan, around eight or nine percent are already saying that their next car will be an electric one,” Palmer reinforces. He admits that these figures are perhaps slightly skewed by consumers being confused by the difference between EVs and hybrid vehicles and other pure gasoline- and diesel-powered alternatives, but 10 percent won’t be far wide of the mark. “I don’t think 10 percent as a projection is an unrealistic number as there will be a proliferation in EVs; even in 2010 there are already a number of ‘hand-raisers’.” By being the fi rst to launch a mass-production EV, Nissan believes its vehicles can ac-
Andy Palmer.indd 36
count for the lion’s share of that 10 percent. In the US, the world’s biggest car market, analyst fi rm Frost & Sullivan are forecasting that just one to three percent of vehicle sales – 400,000 to 500,000 – will be electric. By 2020 this percentage will rise to five to seven percent and 10 percent by 2025 – clearly indicating an uphill task around the corner for EV manufacturers. At the moment, Nissan’s order book for the Leaf contains the so-called early adopters of new technology keen to get behind the wheel of the fi rst serious EV. But one potential barrier to the car’s widespread appeal is the less than appealing cost. The Leaf, including the battery, will set UK buyers back a cool UK£23,990, even after a UK£5000 government grant has been taken into account. The slightly prohibitive pricing, at a time when household budgets are stretched, may be a shock for some, but you could consider it a bargain compared to Mitsubishi’s soonto-launch dinky electric run-around, the iMiEV, which was a whopping UK£38,000 before incentives. However, Mitsubishi has recently slashed the price by UK£10,000 which, when the electric car grant is included, puts it on a par with the Leaf for price.
THE BIG INTERVIEW 37
Palmer argues that the aforementioned running costs mean his car is still good value, particularly in mature markets like the UK. “Obviously, some people will reject it but in the mature markets people are going to look at the cost of running the car. I remember my dad 20 years ago calculating the miles per gallon of diesel and the distance he drove and discovering that it was cheaper than a gasoline engine car. The cost of electricity is one-tenth the cost of gasoline so your’re going to be running it a hell of a lot cheaper on a day-to-day basis and avoiding the congestion charge if you live in London.” The subsidies in global markets will be vital. “We really do need those government subsidies in the fi rst instance in order to give us the mass [production] in order to help us bring down the cost of the technology,” Palmer explains. As well as purchasing costs, concerns linger over whether there will be an adequate charging infrastructure in place for when the car needs a top up. There may be an abundance of petrol fi lling stations, including the obligatory supermarket offering, but charging stations could end up being few and far between – more than a small inconvenience for those needing to make a long journey. Palmer says most drivers will charge at home but the infrastructure is required to reduce anxiety. He too admits to apprehension: “Yes, we do have a concern that the charging infrastructure won’t be in place and that would reduce the people on the buy list.” He explains that Nissan is only releasing the Leaf in countries committed to rolling out the EV infrastructure, as well offering incentives to buyers. Somewhat surprisingly, it’s Ireland and Portugal rather than the US or Japan that are currently the most “aggressive” in striving to create that infrastructure. “They will make sure there is a robust grid in place by the time we launch the car.”
Lasting legacy Initially, global production will come from Nissan’s Oppama plant in Japan but from 2013 the car will be built in Sunderland, in the North-East of England, safeguarding thousands of jobs in the aftermath of the toughest economic period for decades. Nissan also has another three EVs in development that could follow hot on the wheels of the Leaf. If EVs capture the public’s imagination, then the prospects for the Leaf and Nissan’s subsequent EVs look promising. For Palmer, the emergence of EV is just another step on the technology process ladder. “The automotive industry has made dramatic changes over the years; they tend to be on an evolutionary basis, little steps of improvement, but when you look back over time, the change is dramatic. I think EV is one of those periods in time where you make a dramatic jump forward in the technology that you might call a new dawn.” And although prising motorists, especially in the US, away from their love affair with petroleum vehicles won’t be achieved overnight, Palmer sums up the EV’s benefits neatly: “For me, it’s about the driving being fun, you’re saving money and knowing that you’re doing something for the planet. I would say that’s interesting for consumers.”
Andy Palmer.indd 37
The outside lane: rival EVs City run-around Mitsubishi’s diminutive i-MiEV is clearly aimed at those looking for a nifty urban hatchback for popping to the shops and squeezing into awkward parking spaces. Due to be released in January 2011, the i-MiEV can hit a top speed of 130km/h and like the Nissan Leaf, can be fast charged from zero to 80 percent capacity in 30 minutes. With the UK government grant, this EV will set you back a shade under UK£24,000 and includes a ﬁve-year, 100,000km warranty for the battery and EV components. Best of all, this car will cost just UK£10-worth of electricity to fuel it to run 1600km. Family workhorse German thoroughbred Mercedes has just unveiled its electric car – the A-Class E-CELL – with a 200km range on a single charge and a top speed of 151km/h. The ﬁveseat EV hatchback is based on the regular A-Class with the electric motor mounted where the petrol or diesel engine usually sits. Mercedes claims the car will hit 60km/h from a standing in start in 5.5 seconds thanks to the low-end acceleration. As electric cars go, this is sure to have traditional German build quality combined with reliability. It’s goodlooking too. At this stage, however, the makers are staying tight-lipped about the price. Sporty number Who said electric power means sacriﬁcing driving performance? California-based Tesla’s Roadster 2.5 certainly delivers all the thrills and spills of a traditional petrol-powered sports car, minus the exhaust pipe. Tesla claims the Roadster can reach a mighty impressive 339km range off a single charge and can hit 100km/h in less than four seconds. Tesla’s Christiano Carlutti says it’s a car that can be used on a daily basis but boasts performance that often surprises test-drivers. “Once they drive the car they ﬁnd the experience overwhelming. They get out of the car and say ‘I didn’t think this was possible.’” It also comes with a sporty price tag: UK£87,945.
As businesses across the globe seek new ways of outperforming their rivals in today’s highly competitive marketplace, Stacey Sheppard asks if ‘Design Thinking’ could be the solution they have been looking for.
The business of
Business of design.indd 38
COVER STORY 39
Business of design.indd 39
n the 1950s Thomas J. Watson Jr. of IBM famously said: “Good design is good business.” Coming from the man who was President of a company that is today ranked second in Interbrand’s 2010 league table of the most valuable global brands – pipped to the post only by Coca-Cola – this may just be advice worth taking. And yet many companies seemingly still haven’t taken it on board. Or at the very least they struggle to see the potential benefits that good design can bring to business. But as economies the world over emerge bruised and battered from the worst fi nancial crisis since the Great Depression, business has become acutely aware that the economic downturn has led to great change in our consumer-driven society. For better or worse there has been a revolution in our collective consciousness as consumers everywhere are feeling the pinch and demanding more – more authenticity, more quality, more reliability and more innovation. Quantity is no longer at the top of the consumer agenda and this has led to a profound transformation in our economy. From the industrial revolution we moved into an age of mass manufacturing, shortly followed by a service-based economy. We then progressed into a digital age that saw the development of an information economy and now many are hailing what they call the emergence of the design economy. As markets continue to globalise at an alarming rate, developed nations are fi nding themselves increasingly pitted against countries like China and India. We simply cannot compete on the price and sometimes even the quality of products emerging from these developing countries. Th is has lead to us having to increasingly compete on the grounds of innovation, creativity and imagination. Th is shift has profound implications for every business leader and manager among us. In order to achieve these new standards of innovation, creativity and imagination, business leaders need to look elsewhere for their competitive advantage. As such, businesses are now turning to design as a way of improving their performance, increasing their market share and gaining a competitive edge, which can in turn result in improved turnover and growth.
Designomics A new term that has been doing the rounds lately in the sphere of design is ‘designomics’ – a word that has been created to explain the way in which design has the potential to be a major driver of economic growth. For many observers, a design-based economy now represents the best opportunity for businesses to be able to create growth, value, higher revenues, better profits and more jobs in the coming years. Design is increasingly seen as a way of providing the necessary tools, perspectives and methodologies that we now need in order to generate new economic value. But whilst design can bring benefits to the business success of a company, can it really be held up as a panacea? If you take the case of some of the world’s most successful companies, the leaders in their particular market, you will see the likes of Apple, Nike, Nokia, Siemens, BMW, Dyson
Business of design.indd 40
Casio’s Baby G went from a Seymourpowell design proptype to the most successful girls’ wristwatch ever produced
and Sony, to name but a few. All these companies have one thing in common – their strategic use of design. They are all what can be referred to as design-led companies. Based on this outlook, it would be easy to assume that by following suit and giving a greater importance to the function of design, revenues will increase along with business success. Dr Peter Zec is past president of the International Council of Societies of Industrial Design and founder of the internationally recognised red dot design award. He says: “Companies learn from each other and they observe each other in the market. And when they see that the leaders in the market or that their main competitors do better, then they start to think about why this is. Of course the first question is probably ‘do they have a better price?’, and then the second one is ‘do they have a better technology?’ And if they can see that these companies don’t have a better price, in fact sometimes they are more expensive, and the technology is probably also the same, then it is clear to them that design makes the difference,” explains Zec.
“Companies who want to be successful with design have to understand the meaning and the value of design, and they need to work with design strategically”
COVER STORY 41
Apple sold over 2 million iPads in the ﬁrst 60 days after its launch
Design case study Alessandro Finetto, Director of Global Consumer Design Europe for Whirlpool, on the history of design thinking at the appliance manufacturer
The Dyson Airblade uses 80% less energy than warm air hand driers
The history of Whirlpool in Europe, and in the world, is quite recent, as the decision to become global only came at the beginning of the 90s with the acquisition of the white appliances business from Philips. In order to be a global company it was decided that we needed to have multiple brands in our portfolio that could work locally for different requirements. It was at that time that there was a decision to invest in design in order to create what we call internally a ‘Visual Brand Language’ that can create a consistent style and aesthetics across our brands . Industrial design was then used on a different level in order to put the customer at the centre and to really understand customer needs. After this we started to concentrate on brand evolution over three, four, ﬁve years. So it became very important for the company to have a dialogue with designers about what the scenario would be ﬁve years from now. And this was the start of ‘design thinking’ at Whirlpool. The people that are part of the design team participate in a review with the CEO of the company about what is going to happen in the next ﬁve years. What we have done is to instill an innovation attitude in everybody that works for Whirlpool. We have tools like the Whirlpool Virtual University, so all the employees can follow courses if they want to. Even in the factory you have monthly meetings for educational training of new people, new employees; frequently people of the design team are part of this and they train people in what exploration and research means and how you can do research in your normal every day life by just observing. So we are all on the front line when it comes to transforming ideas to concepts and the concepts to an eventual business case.
However, it is not always easy for businesses to follow the lead of the most successful design-led companies, particularly if they do not understand design in the fi rst place. “Companies who want to be successful with design have to understand the meaning and the value of design, and they need to work with design strategically,” says Zec. “The most important thing for any company is to do their homework in the area of how to install design within the company and they certainly need to have good research and development programmes. Because if they don’t, design cannot help. Design comes on top. But if you already perform well with your technology and if you have your fi nances in order, then design can really make the difference.” However, many companies today have yet to grasp the power of design as a strategic business tool that can be used as a way to increase sales. In fact, in many cases just the opposite is true. Investments in design are all too often misunderstood as expenses and this is what Dr Zec
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has explored in his new book Design Value, A Strategy for Business Success. “When you employ a designer or when you install a design department in a company, you see very clearly what it costs to do that, because you have to pay your bills to the designers or you have to pay the wages of your in-house designers. But on the other side, on the income side, until today nobody had really measured what part of the income relates to the design success,” says Zec.
Design value The fact that design normally shows up as a cost factor in a company’s balance sheet and not under earnings or as part of the proceeds prompted Peter Zec and his co-author Burkhard Jacob to explore ways in which the value of design could in fact be calculated in a way that can be better understood by business people. Whilst the dogma of business economics unfortunately limits the purpose of a company to profit maximisation, the goals and objectives of design go above and beyond this to include improvements in the user experience and increased consumer engagement, connection and interaction. Consolidating these two objectives in order to come up with a business strategy in which design is seen as an investment that helps to maximise profits is particularly tricky. “In general the way we understand design, from the historic background, has always been bent towards aesthetical questions, maybe also towards functionality and usability. But design itself deals with quality terms, and it’s very hard to transform quality into quantity. We also have different kinds of languages; we have the language of designers, and designers don’t like to talk in quantity terms; they are only focusing on the quality of a product. And on the company side, managers and marketing people are used to working with numbers. So it has always been very hard to look at design in a way that satisfies both sides,” explains Zec, who has now come up with an actual mathematical formula, which allows designers to prove the value of their work in purely economic terms, turning costs into investments.
“Until today nobody had really measured what part of the income relates to the design success”
Nike’s Air Force 1 trainers have become one of the most iconic shoe designs in history
Once the value of design investments can be determined it is also important to understand that such investments are different from those that a company would traditionally make in other assets, such as machinery for example. David Godber is Deputy Chief Executive of the UK’s Design Council, a government agency funded by the Department of Business Innovation and Skills. He believes that investment in design can take far longer to generate visible returns. “A design investment is one that actually needs time to grow. You’ve got to plant the seeds of design and actually nurture it over time, so a brand takes time to travel, to become known, to build a customer base and loyalty, and new product takes time to develop and engineer, manufacture and launch and then gain traction in the marketplace. It’s been described on many occasions as a ‘jam tomorrow investment’. It is something you need to find as a founding culture of an organisation,” explains Godber.
Designing demand Companies like Apple, Nike, Dyson, Nokia and BMW are lucky enough to have design in their DNA. Their company culture is founded on design and this has given them distinct advantages in the market over their competitors. They have understood at a very early stage the benefits that working in close collaboration with designers can offer. In this new design economy, personal and customer relations are more important than ever and consequently businesses need to understand the power of design to create emotional connections with consumers, and to understand what it truly is that they want from a product or service. “There’s a whole knowledge that designers possess because what they’re doing is putting the customer at the
Measuring design value The design value is the monetary (present) value determined at a speciﬁc point in time. It is calculated using the design-relevant earnings before interest and tax (EBIT), the design strength, the design continuity and a valuation of the design property of a company. The purpose of its determination lies above all in giving the industry a better understanding of the chances and risks design offers, because to date design has at best appeared as a cost factor in the balance sheet and not as part of the earnings.
The formula: Design value = [ Design revenue x (Design strength + Design continuity) ] + Design assets
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43 COVER CO RS STOR STORY 43
heart of their decision-making processes and they’re developing solutions to meet customers’ needs, not just evolving what already exists, so design is essentially the revolution not just the evolution,” says Godber. Companies wanting to benefit from this knowledge have two choices. They can either enlist the help of external design consultancies or install their own in-house design team. Both options have clear advantages and disadvantages. David Fisher is Director at the global design and innovation company Seymourpowell, which has helped a great number of international brands produce some of the milestone products of the last two decades, including the fi rst cordless kettle for Tefal in 1985, the fi rst truly mobile phone for Nokia in 1987, the Baby G watch for Casio in
1996 and the interior of Virgin Galactic in 2006. Explaining why Seymourpowell attracts such big international brands, Fisher says: “We’re experienced and have a reputation for not only working with global companies, but challenging them and their beliefs, because we understand how they work and the microclimates they inhabit – and they know we know.” However, Zec believes that if the competition is particularly strong it may be necessary for a company to install their own in-house design department. “Companies who want to be successful with design have to understand the meaning, the value of design, and they need to work with design strategically, and this is almost easier if they really invest into their own design department.”
Design case study Marko Ahtisaari, Director of Design Strategy at Nokia, outlines the importance of user experience and how the Finnish company hopes to radically change the smartphone market of the future. The design culture at Nokia deﬁnitely has a respect for people and their daily use of devices. Perhaps Nokia as a brand more than any other company, perhaps even more than any other nongovernmental organisation or nation, has done more to impact social change by making technology accessible to people and I think with that comes a sense of responsibility. The designers are quite wary of the impact that the technology is having, and this means that there is a lot of respect for observation, looking at everyday use. There are several billion people that rely on a basic key map daily to make calls and to text message, and given the way we’ve designed our phones for true mobile use, they can text one handed and nearly blind. And this cultural kind of muscle memory is critical. So incremental innovation is important in situations like this as you must respect usage and not suddenly forget about how people are used to using technology and how it ﬁts into their everyday life. Incremental innovation is important because behaviour changes slowly in that sense. Radical innovation is important when an industry is in its early stages, trying to locate a dominant design, and that I think is the situation with smartphones. And I think in smartphones and these mobile computing devices, we need to make a radical innovation in the ease-of-use and how that operating system is designed. Where the industry is really missing a trick with the move to touch interfaces is that they are immersive. You have to sit there and stare at these things close, use two hands, for the most part, and your head is down. If I’m successful in the coming years, in addition to innovating the smartphone platform, the basic setup of the operating system, I want to allow people to hold their head up again. And I think that’s a worthy, radical innovation to look for.
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Whatever path companies decide to follow, there is no denying that design value can help enhance the innovative strength of a company. “If you think of design as a process and not just as the end result then it’s easy to understand how innovation is just an intrinsic part of it – rather than the other way around,” explains Fisher. “If you look at the origins of the word innovation you will see that it comes from the Latin for new (nova). So when a fi rm is bold enough to be ‘innovative’ they are basically looking for something new – that’s all. “Once they’ve found the idea they usually work it through to its inevitable conclusion in a linear way. But what design is brilliant at is fi nding the ‘new’ during a process that opens up a problem, throws everything up in the air and then dissects it bit by bit to explore the many different opportunities and solutions in a very disciplined and iterative way. Once we have a number of big ideas to
consider, we can create context and then whittle these ideas down based on the criteria of the original business challenge. (Good) designers can handle this organised chaos – big companies have to be more linear.”
Design thinking The way that designers tackle problems has gained traction in business spheres recently and what has become known as ‘design thinking’ is now being heralded by some as a viable alternative to business intelligence (BI). Traditional BI takes an analytical approach and the method of thinking is convergent, which means it focuses on eliminating alternatives so that there is one alternative to focus on. Design thinking, on the other hand, is divergent and encourages as many alternatives as possible, adding ideas rather than discouraging them, until the best possible outcome is reached.
The Upper Class Suite increased Virgin Atlantic’s market share by two percent, worth €59 million annually
Design case study Joe Ferry, Head of Design at Virgin Atlantic, explains the importance of investing in design as a way of remaining competitive and meeting brand expectations, and why senior management buy-in makes all the difference. Virgin Atlantic has innovation as a core brand value and uses design as a key competitive differentiator. How important is it for you, as Head of Design, to have the support of senior management when it comes to innovation? It’s absolutely essential. In fact, I couldn’t do my job if I didn’t have the support from senior management, because you need to have people that understand about design, understand about innovation and are fully supportive of the need to invest in differentiation. So I can spend my time focusing on making sure that the designs and innovations we are producing are the very best and focusing on how I can collaborate with all the other elements around the company so that we’re not only creating something that is aesthetically pleasing, but that we’re also delivering an element that improves customer experience.
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Having the support from senior management helps me make sure that we deliver to the best of our abilities. But I think that it’s a very good relationship because they have seen the power of design and innovation, they’ve seen the return on investments that we’ve made, and they realise that in order for us to be relevant in the context of the aviation industry we need to continually improve and modify our products and service. We use innovation as a tool to do that so that the brand expectation from all of our guests is lived up to. For example, with the Upper Class Suite that we invested in just after 2001, we saw a return on our investment within two years. And that has kept us competitive; it’s meant that our product and service differentiation are above and beyond those of our competitors. We had a bit more pressure on us during 2001 because our competitors had a ﬂat bed and we needed to have a ﬂat bed very quickly. Other airlines were deﬁnitely cutting back on investment and product innovation and some completely stopped altogether and removed their design teams. And that was at a time where we ramped up, because we knew that in order to survive, our product and service differentiation had to be better than our competitors. So we had two options; either the world was going to come to an end and there was no point in investing in design; or the market was going to return, and when it did we would have the better product to our competitors. It’s a very brave decision and that’s where you need senior management to completely support you and have a complete understanding of the power of design and innovation so that they are prepared to make the very big decisions of investing
“The hardest area to illustrate return on investment is brand equity”
COVER STORY 45
The traction that design thinking has gained has led some commentators to propose that CEOs don’t need to simply hire designers, they need to think like them too. Fisher believes that this can only be beneficial. “If CEOs begin thinking like designers then they will be able to build their business practices around design process – which would be amazing. My humble process philosophy is ‘just build it and then try to break it’ – meaning, get to the idea quickly in as real and as tactile a way as possible; so you can understand it and see what’s right or wrong with the idea, then use that fi rst-hand knowledge to make it better. As opposed to processes built around marketing’s selfjustifying need for de-risking ideas with focus groups and quantitative research – which has been known to kill good ideas. Design is about having an idea and going for it with a collective mindset as opposed to sitting back in judgement while others do it.”
Design is, in essence, about risk taking and pushing the boundaries of an organisation. Great design often stems from CEOs who are willing to place bets in design. When Apple launched the iMac, it did so in an already saturated market and still managed to enchant consumers – a bet that clearly paid off. Good design really is good business, but only if it is truly integrated into the company structure, says Fisher. “Design needs oxygen, it needs to breath and find the space to explore and try new things. Don’t restrict it by sitting it between engineering and marketing and then poking it from both sides. And don’t just wait for it (design) to come up with the idea by itself. Engage with it, and take it through the entire business process of developing new products. Let it see as much as possible because it will see things that business-people don’t – and it will listen and observe with an open mind, because design is simply about making things better…for people.
when everything else around the world is contracting and saving money.
for instance, putting a Jacuzzi in a clubhouse and having the largest clubhouse in the world, which adds to the expectations of your brand. The whole communication around the globe of what we’re doing and how we’re re-establishing our brand presence as being an innovator, doing things that other people wouldn’t do and being a consumer champion, has become very important in an age where social networking and global communications are so much more prevalent. And it doesn’t really matter to a certain extent what you say about yourself, because there will be thousands and thousands of people telling each other what they think about you. So honesty and truth in your product and service is going to be even more paramount in the future, and therefore there is no escaping the fact that you need to invest.
How do you go about communicating the value of design across the organisation? How have you overcome the challenge that is presented due to the fact that is it quite difﬁcult to measure how much value design can bring to an organisation? In terms of the bottom line, it does depend upon which project you’re doing; some projects are far more difﬁcult to assess a monetary return on investment. If you make a seat lighter that’s an automatic weight-saving, which equates to fuel saving, which equates to money. So there are ways of illustrating your return on investment. I think the hardest area to illustrate return on investment is brand equity. Even if you are not having a direct return on investment from a management point of view, there are things that you would do,
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It’s pretty hard to escape the buzz being created by cloud computing nowadays. For businesses, the cloud can offer tremendous beneﬁts but also comes with hazardous pitfalls and challenges. So should your business make the migration? Business Management gazes skywards and takes a closer look.
S BUR T T
o the end user and the general public, the cloud is invisible – something that people can visualise but not grasp. However the cloud is nothing new; email providers like Hotmail and Yahoo have held customer accounts in the cloud since the 1990s. Likewise, your YouTube videos of the dog doing back-fl ips in the garden and snaps of your two-week holiday in Greece uploaded to Flickr are stored in the cloud. For CIOs, cloud computing purports to deliver agility and flexibility, while also helping to cut costs and environmental impact. A company with a rigid server may be paying for storage costs that it doesn’t need and, conversely, if they experience a sudden spike in business, their server capacity may be inadequately able to cope with the increase in demand, harming their business growth. On one level, a public cloud virtual server is the ideal solution here – it can be incorporated to respond to a single company’s storage and hosting requirements, either in times of growth or contraction. A private cloud can be used within an organisation’s fi rewall and security infrastructure to help enable the business to better manage its data storage needs, the only difference being that no external sources or data are stored on these particular servers. But understanding what the cloud is and how it could work for your company is a perennially challenging task. There are just so many parameters to work within, so many
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strategies to follow, and so many questions to ask. “I guess many businesses see the cloud as the next great white hope,” says William Fellows, Principal Analyst for The 451 Group. “There is a convergence in the industries of telcos, service providers and IT vendors and integration players who are all competing for this next cycle of spending opportunity, with the majority of them forecasting that servers are going to be increasingly in hosted environments rather than in on-premise deployments. While there is still some way to go before managed hosts are able to reach the gold standard of someone like Amazon, there are plenty of companies out there that are getting close.” With data storage capacity needs growing exponentially at a rate never before seen, companies are falling over themselves to align their business with a suitable cloud strategy. “Companies are now looking at the cloud as something that can manage their increased workloads,” says Fellows. “For most large enterprises, the majority of their IT spend is still going on premise equipment rather than third-party services, and it is probably about 75/25 throughout most industries. If an end user is comfortable putting 25 percent of their data into the public cloud that is fi ne, but that might mean there is still 75 percent worth of data that remains in-house, so the issue of the private cloud becomes more pressing.”
Private cloud Such virtualisation of data is nothing new for most larger corporations, but the benefits that the public cloud bring are starting to be transferred into the private space, such as flexibility and scalability. “Most organisations have virtualised some, or all, of their data, but the prevailing thought process is if they had some of the other features of the public cloud at their disposal they could enjoy greater benefits. So they are doing a couple of things. Firstly, some progressive companies are looking to emulate, replicate or imitate what the public cloud delivers, and they are looking at their IT infrastructure and assessing what the total costs and ROI is for hosting and running their own workloads.” The issue of cost-effectiveness is a hot topic in these times of tight liquidity and negative growth. The private cloud is seen as a potentially cost-efficient implementation that many businesses can no longer afford to ignore. “Is it more cost-effective to host and store data internally than on a public cloud?” asks Fellows. “Th is is something that a lot of companies are looking into, whether these end-users of cloud computing are better off investing in their own ‘best execution venues’; and by that I mean the purchasing of hosting capabilities that are suitable for their business in terms of price, performance and capacity.” Companies unsure of exactly where to start as they take their fi rst tentative steps into the world of cloud computing should, says Fellows, follow a couple of practical steps in order to fi rst assess their requirements. “The fi rst step I would advise is for companies to simply create a service catalogue in order to at least understand what services are available to end users in their organisation.
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Cloud computing: the numbers that count In 1997, NetCentric attempted to patent the term ‘cloud computing’ but abandoned this idea two years later.
The next step is to look at the cost of provisioning and deploying to those end users. Just this very action of fi nding out cost allocation is proving an enormous driver because end users are discovering the range of services that are available to them, and figuring out the specific cost to their business.” Using the public cloud as a means of measuring the potential costs and scalabilities of an organisation’s internal IT is, believes Fellows, a smart move. Public clouds have already begun to replace internal IT infrastructures in many enterprises, so it would be foolish for a company to not at least investigate how cloud-based services could benefit their business.
Hybrid hints A survey of 1800 IT professionals found that only 10 percent plan to use cloud computing for mission-critical IT services. 45 percent of those surveyed say the risks outweigh the beneﬁts. Yankee Group report that 75 percent of enterprises are allocating no more than a third of their 2010 IT budgets to the cloud. IDC forecasts public cloud computing will be a US$33.5 billion industry Source: Basemag
All this points to the adoption of the hybrid cloud, which is a managed cloud computing environment where some services are managed in house, and others services are provided externally. The hybrid cloud, when implemented correctly, enables businesses to enjoy the best of both worlds: the security and control of internal IT mainframes, and the flexible scalability and cost-effectiveness of the public cloud. “Clouds are the ring fence that is under the control of a private cloud owner, but they run at a third party,” says Fellows. “With the hybrid cloud there are any number of combinations that can be applied. There will be vertically integrated Clouds of IT systems in B2B chains where partners and customers will be able to access elements and process their supplies and data on the cloud, but it is going to take longer for the more horizontally federated cloud to come into wider usage because the interoperability of different cloud providers is quite difficult at the moment. It’s not impossible to move workloads between different clouds, but there is a whole bunch of maturing the industry needs to go through before we arrive at that stage.” The ability to easily and safely transfer data across different cloud providers will mark a watershed moment for a number of companies who still harbour reservations about this, and other issues, of cloud computing. Fellows believes we are three years away from achieving complete interoperability; the desire and innovative thought processes are in place already. What is currently lacking is the technology to make it happen.
Trust and security Security concerns abound in the world of cloud computing. Companies fret access to their data, control of their data and loss of their data. But the cloud is as much about security as it is about trust: two concerns that can easily be overcome with time, education and improved technological advances. “We’ve been surveying end users of cloud computing for just over a couple of years now,” reveals Fellows. “We have conducted some quantitative surveys of a broad end user base and undertaken a more qualitative assessment of smaller groups of end users, and what we have found is that there is a pretty consistent level of concern regarding the issue of trust, control and security.
COMPUTING FOCUS 49
“It is important to distinguish between security and trust. IT security – the security of your actual systems – is obviously a concern, but more important are the regulatory and compliance requirements, and basic protection. These issues are quite distinct and separate, but rolled up and bundled together. The major concern for a great number of companies is overall control and trust. And within that there are data management concerns, auditing, interoperability and so on.” Fellows’ research identified a grouping of inhibitors to adoption of the cloud, with control and trust what he referred to as ‘the fi rst set of inhibitors’, and cultural concerns the second set. “Often reluctance to embrace cloud computing has little to do with technology,” says Fellows. “Snagging points revolve around issues of internal resistance to change. Whenever the issue of power, trust and control come up, there are a whole bunch of organisational factors that have to mature or change in order for new practices to be accommodated, new working environments to be embraced and new technologies to be implemented. The cloud brings all three of these inhibitors to change to the very door of the executive decision makers, so this hesitation is often understandable.” Overcoming these hesitations and inhibitors is a challenge that the cloud computing industry must focus on if it is to promote an atmosphere of wider acceptance. Greater adoption of cloud computing will happen regardless though, thinks Fellows, as more and more companies begin to trust their instincts and take advantage of the wealth of services out there. “Wider use of cloud computing is happening kind of by default because there tend to be lots of people in big organisations who are already using cloud computing to some degree, whether they know it or not. So over time what we have found is that cost reduction has become one of the main drivers to adoption of cloud computing; sorting out that bottom line. Cost of ownership is seen as just as important, if not more so, than flexibility and agility. But the two issues are connected, because the ability to move tasks and workloads flexibly both internally and into the cloud is really the thing that has proved to be the key attraction adopter, because efficiency helps lower costs.” Another issue is that the hype around the emergence of cloud computing has highlighted a more far-ranging and longstanding issue felt in many an enterprise IT department: namely that of ownership. Mark Settle, CIO at BMC Soft ware, believes the cloud is providing businesses with a great opportunity to get their stra-
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to agree standard procedures for procuring, accessing and monitoring cloud resources and service levels to ensure each business unit pays for the IT they need and us, says Settle. “Th is is also why those IT departments with welldeveloped business service management (BSM) soft ware deployments that allow them to align IT resource with business demand will already have a head start into the cloud, whether it is public, private or hybrid in its nature.”
tegic approach to IT funding in order. “For all the promise cloud computing offers to reduce capital expenditure and management burden, it also reignites the knotty issues of IT chargebacks – an approach to IT funding that, due to its complexity, was in the past somewhat of a recurring nightmare for CFOs and CIOs.” Settle explains that IT budgets can be assigned by business unit, project or overall annual requirements. But cloud computing, as a centralised IT resource charged on a usage-based billing model, blurs traditional budgetary lines, reviving the concept of the IT function charging its costs back to individual departments. “In the past, chargebacks have been difficult to implement, as calculating the full cost of service delivery is an extremely complex process due to the range of variables associated with it. With cloud computing, organisations can build flexible IT resourcing into their operational expenditure for managing cheaper, sustained and predictable business workloads.” Settle continues: “At the same time, they can access extra resources on-the-fly, when a business unit needs it, to get a new project up and running quickly for example, without having to factor in the extra hardware, power, maintenance and labour costs usually associated with new IT capital expenditure.” It is essential, therefore, that any CIO considering a move to the cloud must work hand-in-hand with the CFO
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“I think what we are seeing is the control of the platform as a collaborative tool to be used inside organisations”
As cloud computing has steadily emerged from the backrooms of IT offices into the consciousness of every committed businessperson around the world, its focus has been mainly on infrastructure service: how it runs and works, security concerns and hosting. Fellows believes that the sector’s evolution will move away from initial questions about understanding and penetration, to more soft ware-type concerns. “The next big step for cloud computing will be concerned with platforms of service, whereby you basically have one type of environment, you show the code and it gets run. “I think what we are seeing is the control of the platform as a collaborative tool to be used inside organisations. So where, for example, Spring Source is a collaboration between VM Ware, Force.com and Google, we are now seeing Microsoft working with Azure. The developed world is divided into three camps, basically. Java, dot-net and open source (Python, Ruby, etc.), and systems staff are looking to create big developer environments and communities and to take advantage of their platforms that support the execution of those code bases. And this again rides on top-off infrastructures of service because you need this kind of flexible infrastructure behind it to create that platform service.” Recognising where the cloud is drift ing to and ensuring your business is best placed to take advantage of the ever-evolving service it offers is another challenge that lies not too far over the horizon. “You can identify the cloud computing model when you see IT organisations afforded the ability to provide some automated governments in a way that they haven’t been able to before,” says Fellows. “It is not so much a case of exerting control, but by offering, for example, the developer a black box that they can develop against without having to be concerned with what happens in getting the tasks done. Th is is manifest in the trend we are seeing for developer and IT operations functions coming together in what we call the ‘devox’.” These changes will inevitably lead to widespread restructuring of IT departments, but are most organisations ready for these various stages of upheaval? “To date it has mostly been champions for the cloud pushing through change by utilising end examples to show their bosses,” says Fellows. “But I think going forward, the greater their peer experiences, the better the collective understanding about the benefit of the cloud. And as more and more competitors adopt and reap the rewards of the cloud, more and more in your organisation will begin asking questions, and will want to enjoy the same benefits too.”
ASK THE EXPERT
Doing business at the speed of sight Roy Thompson explains how the united power of the CPU and the GPU can garner greater beneﬁts for businesses helping them maintain that important competitive edge.
s far back as 4000 years ago when an early Emperor of the Xia Dynasty in China was fi rst credited with saying “a picture speaks a thousand words,” human beings have known the power of the visual arts. In fact, recent studies have shown that more than 80 percent of human comprehension is gained visually. Moreover, proving the early Xia emperor was right, the use of visual aids with oral presentations is understood to improve content retention levels by as much as six-anda-half times more than using words alone . As such, business has moved on from the basic PowerPoint presentation illustrations, jpeg and mpeg fi les, accompanied by basic presentation notes. The expectations of the end users of such applications have become so driven by the quality of the visual experience across multiple screens, interaction and capability, that organisations must increasingly ensure PC systems can accommodate growing visualisation requirements, and not just speeds and feeds or data-crunching abilities. Nowadays, graphics technology is evolving to meet bourgeoning requirements to create visually stunning computing experiences in a growing number of diverse business sectors and end-user groups. Whether it’s the rise of picture messaging or embedding richer multimedia assets in a webpage or presentation, the demand for more powerful PC graphics capabilities is unlikely to abate. Take, for example, the impact of the use of multiple monitors. Research has found that the increased viewing area provided by multiple monitors can help improve worker productivity by as much as 40 percent; simply not having to resize windows and spending less time managing the viewing space enables workers to concentrate better on the work at hand. Global research targeting SMBs, as well as enterprises, found 63 percent thought that today’s applications demanded the latest graphics performance. Meanwhile, 64 percent felt greater graphics capabilities were becoming necessary for optimal operating system (OS) performance, and 72 percent believed graphic capabilities on laptop or notebook PCs was a requirement that was increasing in importance. The challenge for many SMBs, which typically revolve around a two to three year refresh cycle of technol-
ASK THE EXPERT 53
ogy, is ensuring that their technology stands this test of time, and that when making their purchasing decision they are confident that regardless of industry changes and increasing reliance on graphical data, they still have the power in their machines to keep up – even towards the end of their lifecycle. The particular emphasis on more powerful graphics capacity, especially within notebooks, is not surprising when considered in the context of users who want to be able to access business applications quickly and securely when out and about, without compromising on a comparable desktop PC experience. At the same time, they also want to be able to use the full set of consumer scenarios that now come standard with the latest OSs, such as Microsoft Windows 7, for example. Innovative companies that recognise the importance of meeting this demand have, as a result, started using balanced PC technology to generate, manipulate and view rich visual presentations that include video and 3D graphics as part of a strategy to create attention-grabbing, winning sales and marketing ideas. They realise that having smooth, uninterrupted creation and viewing of video or visually rich
“Research has found that the increased viewing area provided by multiple monitors can help improve worker productivity by as much as 40 percent” presentations containing embedded video or 3D graphics often requires a balancing of the PC’s central processing unit (CPU) with the graphics processing unit (GPU). In an effort to maximise this balance, AMD has been preparing to place both the CPU and GPU on one single, cost-effective chipset. Th is will help enable the addition of new power gating and dynamic power optimisation capabilities, and should allow for a massive boost in dynamic compute power to seamlessly handle more complex processing tasks, regardless of whether it’s data or graphics driven. Th is development should also lead to advancements in virtualisation, thereby helping organisations maximise the return on their investments in legacy applications running on newer OSs. In turn, this can also help capitalise on an extended lifecycle for new systems by enabling backwards system compatibility and making sure compute requirement can respond to, and keep pace with, changing user and system needs. Taking the best of the CPU and GPU, processor manufacturers like AMD have been working through industry standard partnerships to facilitate secure computing without proprietary lock-in, and are enabling the visual performance necessary for today’s internet-focused and graphics-intensive business applications. For example, such innovation can increase the speeds at which users can transcode high quality video-based content, such as train-
ing and product demonstrations to portable formats. And the ability to unify display drivers can boost manageability by simplifying future system upgrades. But harnessing the united power of the CPU and the GPU can garner greater benefits for businesses than just technical manageability and support. The approach can also meet the needs of business users by offering mobile computing capabilities an enhanced visual experience, reliability, manageability and security characteristics, all of which are designed to help a business maintain a competitive edge in this tough economic environment. Combined CPU/GPU chipset developments have also enabled long battery life by allowing for automatic adjusting of processor performance based on application and user needs. For example, in the AMD stable certain technologies have enabled our ultrathin notebooks to realise battery life of up to eight hours, and up to seven hours in our mainstream, Quad-Core notebooks. They also offer support for robust and secure central access to initiate system maintenance and administration, even when powered off, for out-of-band management. AMD also had the mobile worker in mind when it created technologies that allow visually rich applications such as web meeting or video conferencing soft ware to run smoothly and look great, all while running ‘face-to-face’ virtual meetings, collaborations and customer interactions. Having this kind of ability can be a key tool in an organisation’s arsenal for maintaining service levels while also simultaneously helping reduce travel costs and benefiting carbon-conscious corporate social responsibility (CSR) strategies. However, while technology is central to helping businesses achieve many of their goals, technology is not a core function of most of what small businesses offer. As a result, SMBs may fi nd purchasing decisions difficult to make. According to IDC, the number one source of advice for SMB IT awareness and information gathering is word of mouth, and many SMBs buy in a similar method to consumers; that is, thinking about usage rather than thinking about pure “speeds and feeds.” Th is is why it’s important that the technology industry begins to adapt its marketing to this type of purchasing; for example, small business owners may understand the advantages of video-conferencing, but may not understand the technology that can help them achieve it. Communicating the advantages of specific types of technology, such as a combination of synchronicity offered by upcoming APUs, to small businesses can help them to visualise the benefits to their business. The IDC research cited above also found that many SMBs use their notebooks for both business and personal use, including watching DVDs while on fl ights, storing family photos or playing games. Th is means that being able to offer a product that can speak to both business and personal needs can be a great advantage. To do this, notebooks should take advantage of advanced technology such as support for Microsoft’s DirectX11, which can greatly improve the consumer’s overall visual experience.
Roy Thompson is Vice President Sales Multi-National Corporations (MNCs) at AMD EMEA. Reporting to the regional Corporate Vice President and General Manager, Alberto Bozzo, he is responsible for leading the company’s MNC sales organisation in Europe, the Middle East and Africa, which manages AMD’s European customer relationships with HP, Dell, Toshiba, Asus, Acer, Sony and Lenovo.
Head in the clouds eBuilder’s CEO, Bengt Wallentin, explains how cloud processes for your value network can give you a competitive edge in a hyper-connected, complex business environment.
How do you achieve optimum control and efﬁciency in a value network made up of your partners and their relevant systems? How can you integrate thoroughly and still retain the ﬂexibility needed to deal with a constantly changing business environment? Bengt Wallentin. Today’s business environment is increasingly complex, changeable and competitive. If your business is highly interconnected and multi-enterprise; if you collaborate with numerous business partners (your value network) for a significant share of your added value; you know the critical importance of operational, tactical and strategic management of the business processes in this value network. eBuilder’s Cloud Processes integrate and automate the business processes of the entire value network – all the collaborating parties and their relevant systems. This gives you end-to-end control driven by the business logic and rules configured in the cloud process. It gives you end-toend visibility of the entire value network based on real-time information and access to all key master information, whether it resides inside or outside your own organisation. Traditional methods and tools originating from ERP and best of breed initiatives are no longer sufficient to manage the widely-distributed, business-critical resources in the value network because they give poor transparency, weak synchronisation and rising costs. Today, the internet, business process management (BPM) and integration technology, together with our cloud computing paradigm, constitute a completely new option that enables companies to take control of, and manage, their value networks. The core enabler is eBuilder’s Cloud Processes, which establish the collaborative format that defi nes how the par-
ticipants in the value network will produce added value for their customers and how the added value will be measured, reported and reimbursed. These cloud processes are connected end-to-end, and they automate and optimise execution of business processes thousands of times faster than human staff, at a fraction of the cost. So the bulk of administrative tasks and critical business logic are handled automatically in seconds, with better quality and consistency. These cloud processes enable you to manage businesscritical information that lies outside your organisation, often information about assets you own but that others control in the value network. Background information (charts of accounts, personal profi les, agreements, service level agreements, etc.) that were scattered throughout your own and other organisations are now centrally managed and controlled. What are the concrete advantages of end-to-end integration and automation in the cloud? BW. Connecting the value network using eBuilder Cloud Processes leads to dramatic improvements in business performance (where often more than 50 percent of administrative costs can be eliminated), significantly increased quality and customer satisfaction, measurably reduced lead times. In general it lowers costs by three to 15 percent. Managing complexity is no longer a problem – every step of millions of business transactions can be monitored in real time. The smartest business rules are applied to the specific situation. Easily configurable business logic and central management of business-critical information give you the agility to quickly and effectively react to changes in your business environment.
eBuilder CEO Bengt Wallentin has over 30 years of experience in the international technology and services businesses. Prior to founding eBuilder he served as President and CEO for 18 years at Frontec, with over 1200 employees. Wallentin has a Master’s degree in electronic engineering and a Bachelor’s degree in Business administration.
NEXT BIG THING
Application converged networks Steve Melahn on why network convergence strategies need to be updated to reﬂect the crucial importance of today’s virtualised enterprise.
etwork convergence has always held out the promise of increased agility, as well as lower expenses and greater operating efficiency, through using a single infrastructure for voice and data. But in the time it has taken for voice-data convergence to become mainstream, enterprise environments have changed dramatically. Complexity has increased. New voice, data and video applications are proliferating, and new capabilities are required to address the explosive growth of mobile devices. Virtualised applications are also on the increase, and the next wave of network unification is enabling a single data-storage network in the data centre. As a result of these trends, network-delivered applications are giving organisations more productive ways to achieve their business objectives. Because these applications play a strategic role in day-to-day business operations, it’s crucial for them to be available at all times. However, most convergence strategies have not kept pace with cur-
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rent trends. Their primary focus has been on cost efficiency, without fully addressing the necessity of increased reliability, performance and security for enterprise applications as they migrate to a single infrastructure. Application converged networks go beyond this traditional mindset by adding the user’s quality of experience to the equation. In addition to streamlining today’s complex operations, application converged networks optimise performance for each application by dynamically adapting to its unique requirements. Th is new approach recognises that the cost savings generated by a unified infrastructure can quickly be outweighed by the negative business impact of garbled calls, jittery video transmissions, network downtime or a security breach. To deliver consistent high performance as well as economic advantages, application converged networks must intelligently and automatically deliver adaptability, resiliency, simplicity and security.
NEXT BIG THING 57
Application adaptability Voice, video, data and virtualised applications all put different demands on the network infrastructure. Consequently, effective policy evaluation and management are crucial for maintaining the best quality of experience for users, regardless of the application. These policy capabilities allow application converged networks to instantaneously recognise each type of application and meet its particular performance requirements. As a result, voice and real-time video communication applications automatically benefit from the latency, bandwidth and QoS levels needed for high-quality voice and picture transmissions, pro-actively preventing distortions that can disrupt business calls and videoconferences. To provide a satisfying user experience anywhere and on any device, the network must also react automatically to a user’s location and network entry point — and to any changes in a virtual application’s location within the data centre. Recognition must be immediate, along with correct application of the required security profile and quality of experience parameters within this context. Again, these automated responses enable a high-quality user experience, while optimising the use of network resources for simplified operations.
Resiliency To meet today’s increased performance standards, applications must be available consistently, on demand, with few, if any service interruptions. This level of reliability in an application converged network requires a resilient infrastructure with rapid recovery capabilities, constructed with high-availability network devices and architected for highly available operation. If a failure occurs in a switch component, in most cases the switch can continue to operate. If a failure causes a switch to become inoperable or a link to become unavailable, the network must automatically reconfigure itself so rapidly that the recovery is transparent. That is, there’s no discernible downtime, and any application being used is undisturbed. For example, when the Tolly Group tested the Alcatel-Lucent OmniSwitch LAN series of switches, recovery from link failures was complete in under 50ms. With this rapid recovery time, the link failures had no audible impact on IP voice calls and just a momentary pause in videoconferencing sessions that were in progress. None of the voice or video sessions were interrupted.
Simplicity As application converged networks focus on quality of experience, they must still meet the traditional goal of convergence: cost-effective simplicity. To advance this objective, Alcatel-Lucent is enabling a simplified network architecture where no aggregation/distribution layer is required, which provides significant reductions in complexity and cost while improving performance. The Alcatel-Lucent OmniSwitch 10K Modular LAN Chassis, the newest addition to our OmniSwitch portfolio, makes this possible by offering market-leading wire-rate and
non-blocking capacity with a pay-as-you-grow approach. The switch will support virtual chassis technology for reduced switch management costs and increased switch redundancy. In addition, the OmniSwitch 10K includes multi-chassis link aggregation, a link virtualisation technology that removes spanning tree limitations, optimises link use and increases node redundancy. Multi-chassis link aggregation is a subset of Alcatel-Lucent’s Virtual Chassis technology, which has been field proven since 2001. The OmniSwitch 10K will also support emerging standards for loss-less Ethernet to enable the delivery of performancesensitive applications, such as voice, video and storage, on a single, converged all-Ethernet/IP network. Application converged network operations must be streamlined, too, and higher levels of automation can play a key role. For example, self-provisioning capabilities will allow access layer switches, virtual machines and end-user devices, such as VoIP phones, to simply be plugged into the network — then configuration of the device proceeds automatically. These capabilities allow network growth and reconfiguration to be achieved in minutes rather than months, with significant savings in operational and maintenance costs. Application converged networks can also enable reductions in ongoing power requirements and costs, helping to support green initiatives. Their streamlined architecture, with fewer layers and devices, minimises energy consumption. In addition, use of higher capacity switches, such as the OmniSwitch10K with class-leading low power consumption capabilities, allows higher volumes of traffic to be handled within a smaller footprint.
Security When all types of applications are converged on a single network, tight network security policy and implementation is imperative to make sure that the enterprise remains open for business. Therefore, the transformation to a converged network must also include delivery on the promise of a comprehensive network access control (NAC) solution. This requires that the crucial elements for NAC become embedded within the network, as they are in Alcatel-Lucent’s OmniSwitch portfolio. With these embedded capabilities, the network can authenticate endpoints, users and applications, enforce a proper host integrity check on endpoints and enforce post-admission access controls. The network can also monitor the run-time behaviour of endpoints, placing the endpoint in quarantine upon detection of any suspicious activity. These network-based capabilities reduce the risk of fraud, malware attack or breach of information security without the complexity of today’s ‘add-on’ security solutions. Because an application converged network adapts dynamically to optimise application performance, enterprises can deliver a high-quality user experience while benefiting from a simplified, resilient and secure network that streamlines operations. As a result, companies can overcome today’s demand for quality bandwidth and experience a significant reduction in network complexity. n
Steve Melahn is a Director of Product Line Management in the Enterprise Solutions Group of Alcatel-Lucent. He has over 26 years of experience in high tech industries including telecommunications, semiconductor, and aerospace. Prior to joining Alcatel-Lucent in 2007, Melahn held management positions at Marvell Semiconductor and Xylan Corporation.
UNIFIED COMMUNICATIONS 59
A perfect match Will integrating social media applications with uniﬁed communications technology help this underused corporate communication tool achieve its full potential?
nified Communications (UC) have been around for some time now and although many businesses have been deploying the technology for well over a decade, many observers feel that we are only just scratching the surface of UC capabilities. The idea behind UC has always been to simplify and seamlessly integrate all forms of real-time communications – from instant messaging (chat), presence information, and telephony (including IP telephony), to video conferencing, call control and speech recognition – with non-real-time communications – voicemail, email, sms, and fax – in order to optimise business processes and reduce response time, manage flows, and eliminate device and media dependencies. Whilst there has been success in the domain of UC, it is generally understood that most businesses are not yet capitalising on the sophistication that the technology can offer. There has always been a clear vision of what UC was designed to do: fi rstly, an increase in individual productivity should lead to an increase in workgroup productivity; secondly communications-enabled workgroup processes will evolve and ultimately, the enterprise should be transformed. However, whilst the potential collaboration benefits are clear, UC has long been over-hyped and underutilised, so this vision has not yet come to fruition. And since social media made an appearance on the information superhighway, UC has become slightly over-
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shadowed. Social media is seemingly able to meet the objectives that UC set out to achieve – enabling new ways to collaborate, improving products and services, increasing sales, crowdsourcing product development, and virtualising and globalising business – in a way that people can actually identify with. Many companies, however, are still unsure of how to best utilise social media in order to benefit their business. For a number of enterprises, social media is still seen as purely another marketing medium for generating leads, which is where the mistake occurs. Only once companies realise that social media can be employed as a very effective conduit for customer communications, will they be able to see the true benefits of integrating social media with unified communications. These benefits are clearly outlined in a recent Yankee Group whitepaper, which explores how social media, combined with customer service and other revenue-generating initiatives, helps make the relationship between a company and its customers more effective for both. The report highlights the fact that the recent evolution of communication channels means that businesses must understand that social media is no longer just about chats, tweets and Facebook pages; it’s about the blending of immediate information anytime from a trusted community. The behaviour of new, socially connected consumers is changing the face of business interactions on an
“Only once companies realise that social media can be employed as a very effective conduit for customer communications, will they be able to see the true benefits of integrating social media with unified communications”
unprecedented scale. Social media is not only changing how consumers participate in the conversation, but also how businesses must respond. And whilst some are quite forward-thinking and innovative with regards to their social media policy and participation – both in terms of employee usage and the company’s own social media focused business strategy – there are others who struggle to formulate a plan and are blindly participating with no formal processes, controls or engagement strategy. Yankee Group’s report highlights the fact that consumers are moving from passive consumption to active participation and therefore expect businesses to be engaged. The survey that was conducted as part of Yankee Group’s research revealed that 81 percent of respondents said it is important for companies to review social media sites to see what people are saying about them. Also, considering that 40 percent of respondents participate in blogs and/or social networking for both work and personal use, companies must take social media seriously. And some are taking it seriously. Some are starting to use it as a form of enhanced customer support in near real-time, and others are looking at the marketing side of things in order to reach customers, stimulate debate and build relationships. So this brings us back to the question of why social media has slightly eclipsed UC in the business arena. The majority of UC applications deployed today revolve around improving communications and collaboration with individuals from the same organisation, whilst consumer-focused social media is what workers turn to in order to communicate and collaborate with those outside of the organisation.
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Integrating unified communications and social media can: • Create a 360-degree view of the customer that includes information never previously available. • Deepen customer relationships by communicating with a customer in the method he or she prefers. • Increase ﬁrst contact resolution by putting customers in contact with the right individuals immediately. • Enable better corporate collaboration by providing a broad set of tools to reach both internal co-workers and a user-deﬁned external network of individuals. • Streamline business processes by automating many of the day-to-day tasks that normally involve human interaction. • Provide better access to expertise, both within and outside of an organisation, by enabling faster access via a company’s knowledge base. Source: Yankee Group, 2010
“UC has a tremendous amount of potential to change the way we work and collaborate. To unlock the full potential, however, UC solutions need to be integrated with social media,” according to the report. By doing this, businesses will be able to cut costs, improve collaboration and increase productivity.
ASK THE EXPERT 61
Work orders mastered dynamically and in sync Andreas Oswald outlines the key areas that need to be improved in order to achieve true service management excellence.
re your work orders mastered dynamically and in sync with your business interactions with customers, partners and suppliers? Do you obtain the best results for your service level agreements (SLA) and costs? If not, you may have three or more improvement zones to improve, which will accelerate you to the next level of service management excellence. In the modern world of service management, one still fi nds paper-based business processes especially in work force management. Th is is the case, even though one comes across an unlimited amount of applications, which promise to do the job of getting rid of paper and eliminating redundant processes. You just might get lost in your ambition to improve and might waste a lot of time until fi nding a reliable solution of paperless scheduling and controlling of work orders in sync with your organisation, allowing you to adapt dynamically to change in almost real time. Let us assume you have actually identified three or more problem zones. What could be the three most important ones? Your first problem zone might be to know and understand all the costs of your work force management department. Th is would of course include the costs of your own department and also outsourced service partner processes. Your second problem zone might be to measure work force management performance, allowing you to take corrective measures as required when service level agreements (SLA) fail. Being able to identify the cause and putting your fi nger on it is key to resolving the problem. By the way, just because you don’t see the problem, doesn’t mean it isn’t there. Measurement means creating a set of service KPIs (key performance indicators), which allow assessment against a referential baseline. Your third problem zone could be “missing state-ofthe-art” work force management, enabling adaptability to service change management as required, exemplifying a trustworthy image with usage of modern tools (integrated mobile online device) and face the customer agility with reliability (deliver the promised SLA). Customer service as the major objective for every organisation requires the best possible allocation of capacity to keep the costs in line. Decisions about priority in service must be based on individual customer situations. At the same time, work force capacities must be used at the best level to ensure efficiency. Th is requires decisions, which cannot be made by batch-based and semi-manual dispatching. A decision on distributing the service capacity must be made in time, just prior to the next availability of the service personnel. Your service system should have
a dynamic approach that automatically takes care of any changing situation in real time. Th is will allow you to improve your customer satisfaction and reduce costs dramatically at the same time. What kind of business process change and technology will bring your service management to the next level of performance satisfaction? Consider the ability of allocation match, based on a unique real time adaptive logistics engine. Instead of static queerying of options, your object model based solution should compare every possible solution on the fly. Based on the parameters you use, your system should compare options on predefi ned weighed factors. Depending on the actual situation, you can, for example, weigh quality of service (usually speed of service) against cost (usually availability of work force). The last challenge is to connect your service personnel to the system online. One might perceive service management as the last area of differentiation against the competition. Inevitably this will happen as your in-house products and services turn more and more into replaceable commodities. The only question left to answer is: “ Is your service management performing?”
Andreas Oswald is Vice President of LogObject AG, a leading provider of service management solutions that transform vital business service processes into an end-to-end dynamic and real time resource management system.
Feeling anti-social? Find friends fast Darren Gallagher lifts the lid on the impact social enterprise networking can have on your organisation’s CRM strategies.
D Darren Gallagher is a Director within the Chief Technology Ofﬁce at Siemens Enterprise. He has been involved in the design and implementation of several europe-wide VoIP and UC solutions and has held responsibility for technical relationships with system integrators including IBM, Accenture, Cap Gemini, and Atos Origin. Gallagher is an active member of IEEE, UCIF and the SIP Forum.
espite promising signs beginning to appear in some sectors of our global economy, it’s likely that for many organisations – cost control and better leveraging of human capital will continue to be critical for a considerable period of time. Less budgetary resource often creates greater innovation during times of competitive peer pressure since we all need to remain nimble, agile and responsive despite austerity measures. One of the ways that organisations can differentiate themselves is through offering class-leading customer service. Business value can be clearly measured on the bottom line since the costs associated with customer acquisition and retention are driven down. But how do we begin to increase customer satisfaction and drive business value from these technologies?
Social search’s impact on CRM Many organisations are looking to increase first contact resolution rates through better leverage of the tacit knowledge within their workforce, regardless of whether they are full-time CRM agents in the contact centre or back-office workers in their homes or satellite offices. Social enterprise networking and unified communications (UC) can enable you to locate and contact the best resource to expedite the customer interaction to conclusion, either through the use of employee profi le pages or automated expertise harvesting. Be mindful that if your workforce are using externally hosted services, it may be difficult to securely connect, harvest and index the knowledge and innovation shared on such systems with your own Intranet search engines and therefore could effectively be lost to the organisation. It may be better to provide a platform internally where integration options are more controlled and intellectual property is protected, preserved and searchable. Personal profi le pages are an employee’s mechanism for providing the corporate social network or directory with a freeform text description of their role, duties, skills, expertise and experience within the enterprise. However, there can be several drawbacks to the employee profi le approach: • Employees only enter what they believe to be pertinent to their current company and job role. • Profi les tend to not capture the employees’ full skill and experience profi le. • Profi les are very often not kept up-to-date.
• Employees rarely enter skills or interests in external subject matter. • Employees do not disclose all expertise to ‘avoid contact’ which may seem to make them less productive in their current position.
Expertise harvesting Information automatically harvested from email, wikis, blogs, micro blogs and forums provide a far more holistic solution to expertise transparency in the tacit knowledge world. It also provides greater insight in what the employees may be involved in outside of the work environment as well as within it, and many deliver powerful analytics back to the employees. They can see where they spend more of their time, who they communicate with the most, and what was discussed, enabling them to quickly identify further people who share the same interests and build better and more effective virtual teams.
“Information automatically harvested from email, wikis, blogs, micro blogs and forums provide a far more holistic solution to expertise transparency in the tacit knowledge world” Th is data can then be auto embedded and updated within profi le pages (as tag clouds etc) as well as searched from the CRM solution and corporate intranet portal. What does this mean? Put simply, agents can fi nd and collaborate with the right person fi rst time that are most relevant to solving a customer problem, which decreases call time and improves customer relations. I think we are still some way from seeing totally automated skills-based routing of the back office but companies can now better understand the knowledge held within their human capital regardless of job title, department or geographical location – and be able to match their customers’ inquiries more quickly to the right expertise. Therefore, it’s important when choosing a vendor to question how they are planning to leverage the expertise within your organisation and whether they are easily able to integrate and embed such functionality within social, UC and CRM applications.
ASK THE EXPERT
Asking all the right questions to protect yourself What questions does an organisation ask when a laptop is lost or stolen? More than you want to answer, so backup and encrypt. By Joseph Belsanti
eing told that one of your employees just lost their laptop can instantaneously wake you up to the reality that your data is not safe, and you just may have been compromised. Thoughts revolve around the data that resided on that drive, did a current backup exist, or is there any backup at all. Next, concerns arise relating to what might happen if there is unauthorised access to the data and if it were to be used for wrongful purposes. The immediate questions asked are: Whose laptop has gone missing? And what data did they possess? Secondly, questions surrounding the restoration of the data through a backup are discussed in order to get the employee’s productivity back up to a desired level. Now the adventure begins. Was the laptop encrypted? Does disclosure of the loss of data need to occur and what would the repercussions be to the enterprise? Upon the loss of a notebook, a typical organisation asks the following questions. How did the notebook go missing, and is there anything we can do to stop it from happening again? Joseph Belsanti. Organisations now start to analyse their security practices and processes. They try to determine if they need to buy any soft ware or hardware to protect their data – such as encryption, and they look at reviewing their existing security measures. If the organisation subscribes to ISO 27000 standards, they now turn to ISO 27001, which formally defines the mandatory requirements for the overall management and control framework regarding an organisation’s security risks. They will also review their ISO 27002 standards, in relation to ISO 27001, to establish a code of practice and guidelines in protecting sensitive data within their enterprise. Was the notebook encrypted? JB. Given the amount of attention that privacy and security regulations around the world have brought to data breaches, the above question is probably one of the fi rst questions to be asked. The reason for this question begins with the
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exemption clauses under most data breach notification conditions existing within privacy and security regulations. In most cases if you encrypt the media upon which the data resides in adherence to exemption clauses, then you will not be required to disclose a potentially embarrassing data loss. Is there any way to ﬁnd out where that laptop is now? JB. In some cases, organisations want to know if they can track the location of the missing laptop in question. They do so, not necessarily to recover the laptop, but to determine if there are any other measures that they need to take into consideration to further protect themselves. For example, did the recently fired employee take a laptop home and is holding it ransom for severance? Did the contract worker that was in last month take a notebook? Did an employee steal it? Each one of these above conditions may provoke a different set of responses and measures that an organisation may want to execute in order to protect itself legally should any data become exposed. What else can be done to the laptop now that it is not in our possession?
JB. Intel’s Anti Theft Technology now enables some encryption ISV vendors to issue a poison pill to a laptop that has been identified as lost or stolen. Th is poison pill can be issued to a laptop whether or not it is connected to the internet/ LAN and performs two primary functions. It disables the platform and performs an encryption data disable. The first function was intended as a theft deterrent mechanism. The second function further protects the sensitive data on the laptop. In this case, access to an encrypted laptop would be denied even if the individual were in possession of the correct credentials – password, smartcard, USB token, etc. With new security technologies including Intel’s Anti-Theft Technology and self encrypting drives (SEDs), the ubiquitous protection of data through encryption will only be a matter of time before the encryption of data is a normal practice, just like backing up data.
Joseph Belsanti is the Vice President of Marketing at WinMagic Inc., a leading global provider of full-disk encryption solutions protecting data on laptops, USB thumb drives, and CD/DVDs. In addition to data security solutions, he has been marketing and selling in the ﬁelds of IP Address Management (IPAM), and E-services (CRM, E-procurement, Web Services and E-business).
MESSAGES Despite the proliferation of social networking in business, email still remains the primary security concern for CISOs, says Michael Osterman.
witter is growing by leaps and bounds among business users. Tens of millions of business users communicate on Facebook. LinkedIn users number in the multiple millions. Instant messaging clients – both consumer and enterprise-grade – are used widely. Text messaging/SMS has become the default mode for personal communications for many younger workers. That said, email continues to be the dominant communications and fi le transport mechanism used in business today. The results of a recent Osterman Research study confi rm this reality. For example, email users spend an average of 152 minutes on a typical day working in their email client, or 28 percent of their nine-hour, nine-minute workday. Compare this with their use of the web at 138 minutes per day (23 percent), attending in-person meetings (13 percent) and talking on the phone (12 percent). Further, email users spend only 13 percent of their time on a typical day not working on a computing platform of some kind, whether it’s a desktop computer, laptop computer or smartphone. Slightly more than one-half of email users report that more than a quarter of the information they need to do their work can be found somewhere in their email system.
Spam under attack It is important to note that the situation on the spam front is getting better in several ways. The takedown of
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McColo – a San Jose-based web hosting service provider – in November 2008 significantly reduced spam, albeit temporarily. Better spam-fi ltering tools are fi nding wider use. Reputation analysis systems are blocking spam more effectively than traditional capabilities have in the past. On the downside, however, a large number of organisations report to us that spam is getting worse, both in volume and sophistication. Spammers continue to get cleverer in the ways that they deliver their content. A difficult economy is driving spammers to develop newer, better and more ingenious ways of getting their content through spam fi lters. Timely subject lines focused on natural disasters or pandemics or fi nancial problems continue to attract many. Further, malware continues to be delivered via email, although much of the focus for malware developers has shifted to the web, as discussed below.
“Spammers continue to get cleverer in the ways that they deliver their content”
Integrated threats Email threats are by no means a security problem unto themselves. We are seeing substantial growth in blended threats that use email as an invitation to webbased content. For example, many spam messages contain a link (sometimes a shortened URL) to one of the millions of unique URLs on hundreds of thousands of websites that automatically install malware on visitors’ machines. Spam oft en is used to drive traffic to these sites simply for the purpose of installing malware for later use,
SECURITY ANALYSIS 67
such as building botnets that can deliver more spam, or phishing attempts. Outbound email also represents a security threat. Sending an email without encryption is akin to writing and mailing a postcard with the content exposed to everyone handling the card during its journey to the recipient. Hackers and others with malicious intent can intercept email messages and read them simply by placing packet sniffers on the network. In spite of the risk, the vast majority of email messages are sent in clear text without any sort of encryption applied to protect the content of the message itself or the attachments they include. Th is, despite the fact that a large proportion of email messages contain some sort of sensitive, confidential or regulated content that should be protected from access by unauthorised parties. As businesses use email as a standard form of communication, clear text email messages can often contain information that they would not like to become public or fall into the wrong hands. But all too often this is exactly what happens. It is easy to rely on the auto-fi ll feature of many email clients that completes a recipient’s name when the sender types the fi rst few letters, but this could result in the email being sent to the wrong person. Also, it is easy to email attachments and other fi les that contain sensitive information to the wrong individual, or for other users to mistakenly forward such attachments to unauthorised recipients. Further, an email can be forwarded that might contain sensitive information far down in a discussion thread, oft en unbeknownst to the sender, who might not have read the entire message. The key then is to protect this information using some sort of data leakage protection, encryption or content fi ltering technology that will monitor outbound communications and maintain the security of sensitive information.
The future What are the best practices that organisations should follow to maintain robust email security, as well as the security of their data and networks in general? There are a few key guidelines to consider. It is vital to maintain very robust security defenses to protect against inbound threats sent via email. Th is includes not only appropriate defences against the rising volumes of spam, but also capabilities that are updated continually to protect against malicious payloads in email, phishing attempts and the like. Defences should be integrated so that web threats can be managed as part of the entire security infrastructure. For example, a spam message that contains a link to a malicious website – one that might download a keystroke logger, for example – should be quarantined because of the nature of the website to which the spam message points. An important consideration in any security infrastructure is protection against the growing number of threats that can be delivered through web 2.0 applications. For example, tools like Twitter and Facebook are
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Email of the species Despite competition from other quarters, email remains the biggest part of the working day Working in email: 28% All other activities: 17%
Travelling to/from appointments, other ofﬁces in the company, etc.: 5%
Talking on the phone: 13%
Using the web: 23%
Attending in-person meetings: 15%
fi nding use in a growing number of organisations. While many organisations simply block (or try to block) these tools, they do offer business value and should fi nd use where appropriate. Part of any organisation’s security infrastructure must be to manage use of web 2.0 applications in a way that is consistent with corporate policies, regulatory requirements and other obligations. Outbound content must be managed as vigorously as inbound content. Th is will allow emails and other information transmitted beyond the fi rewall to be sent securely and in a way that will minimise the risk inherent in sending sensitive content to those on the outside. Many organisations overlook mobile devices as an ingress point for malware. For example, few users have any sort of antimalware soft ware installed on their smartphones. However, given that many users employ smartphones as their primary or secondary email client and surf the web from these devices, they can represent an entry point for malware. As a result, smartphones must be part of the overall security plan for protecting against malicious content. Michael Osterman is President and founder of Osterman Research.
Laptop lockdown More than half of network breaches result from a stolen laptop. Kensington’s Stephen Hoare discusses how simplifying the role of the employee increases employee compliance, increases protection levels and delivers compelling ROI. and ROI. As the world’s leading physical laptop security brand we’ve looked at how we can support our customers so they enjoy high compliance levels and ROI when they invest in our products. A laptop lock that is simple to use is far more likely to be used than one that is complicated. At Kensington, we have taken our ‘smart made simple’ brand promise to a whole new level by simplifying the fivestep process required to use existing laptop locks into one easy step, without compromising strength or protection. The benefit for organisations that specify laptop locks in their security policies is that the lock is simple for employees to use, removing any acceptable excuse from any employee who ignores a policy that expects laptop lock usage.
E As Kensington’s Security Business Development Director, Stephen Hoare has a deep understanding of the challenges that face organisations. He positions Kensington as a partner rather than a supplier, offering value added services that help businesses with bespoke physical protection solutions, deployment and compliance measures unique to their requirements.
ven the most comprehensive polices or most rigorous training programme won’t automatically ensure employee compliance. Th is is especially true if employees are asked to change their behaviour or do something that they don’t understand. When it comes to employee compliance, keeping it simple and logical is more than just common sense. Where behavioural change is required, especially when it comes to matters of security and reputation protection, organisations that provide explanation as to why the policy is in place, provide training and regularly remind employees of their responsibilities will be most rewarded. If an employee understands that the behaviour required of them is deemed necessary to protect their employers’ bottom line and ultimately their own job security they are likely to comply. Organisations should ensure that the role of the employee is simplified. Th is is risk minimisation. It’s likely that you have an ID badge that is programmed with your access permissions. Th is is far simpler than handing each employee multiple keys.
Safer investment decisions Products and systems that offer the levels of protection demanded by you and your customers and are also easy to use are safer investments than alternatives that may offer a short term saving but result in poor levels of compliance
The right policy and approach to enforcement is as important as the right product solution. Th is is important because you should expect full compliance without disrupting your employees’ existing daily routines and productivity levels. The right policy will foster a culture where responsible behaviour is expected and where peers feel empowered to encourage others to comply with their organisation’s policies. The acid test of a policy is its effectiveness. Is it complied with? I use this logic relative to laptop security. It’s simpler to protect your organisation against the effects of laptop loss such as fi nes, lost productivity, disruption and reputation if you don’t lose them in the first place. The most effective fi rst line of defence against laptop loss is a laptop lock. The most effective laptop lock is one that is actually locked to a laptop. Our common sense approach to security policies is supported by research analysts IDC. We’ve worked with them to provide a ‘cut and paste’ policy that can be easily adopted by organisations from any sector. The policy presents a common sense approach to laptop security in and out of the office which also provides a framework for your organisation to educate and remind employees of the importance of complying with policy. Employees don’t need to concern themselves with installing the latest anti viruses soft ware, IT departments do this for them. Issuing locks that are simpler to use and deploy is one less thing for your IT personnel to worry about. Issue the new ClickSafe locks and they may even sleep better. Download Kensington’s policy and learn more about their new ClickSafe locks at www.simplersafersmarter.com
Peer-to-peer lending website Zopa provides a platform to bring lenders and borrowers together, bypassing the banks. Five years after its emergence, CEO and co-founder Giles Andrews says the public’s distrust of the greedy banks has been a boon for his business. By Julian Rogers
hen I was a kid I loved the board game Monopoly. Unfortunately I was always bereft of that ruthless property developer streak required to win. I would invariably end up lumbered with a couple of train stations, the deeds to the water works and a few cheap houses dotted around Old Kent Road and Bow Street. After a couple of involuntary nights spent in swanky hotels on Bond Street and Park Lane I was usually re-mortgaged up to my neck and limping around the board praying for the dice gods to prevent my battleship counter from landing me in yet more financial misery. Even being sent to jail looked inviting at this stage of proceedings; you can’t get issued with inexplicable income tax bills or mysterious parking fines when you’re banged up, right? Suddenly, a devious grim would creep across my brother’s face before he threw me a fi nancial lifeline: a UK£2000 loan with an exorbitant interest rate of 50 percent – sometimes higher – to be repaid within the next two laps of the board. Drowning in a sea of debt and ignoring the small print, I would reluctantly accept his offer just to get my desperate mitts on four red £500 notes. But this futile bid to keep my head above water and stay in the game meant I was always headed for one place: bankruptcy.
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Sidestepping the b banker and obtaining a loan from a fellow player is pretty much how Zopa works, san sans the crippling interest rates. Zopa, an acronym of Zone of Possible Agreement, is a so-called social lending site that acts as a middleman between individuals looking to lend money and those seeking a loan, 24 hours a day. The business was co-founded by Giles Andrews, who led four fund raisings for US$35 million from US and European investors before Zopa burst on to the world wide web in 2005. The business model was based loosely on online auction side eBay and internet betting exchange Betfair, the underlying factor being that these sites also take a commission for bringing two people together in a transaction over the net. Zopa, which went live in 2005, says social lending is a “smarter, fairer and more human way” of lending. An average of UK£4 million in loans is agreed every month. “People really like working together and have convinced themselves that together they can get themselves a better deal than by dealing with more traditional institutions,” Andrews explains. It’s a business model that is outshining the banks, according to Andrews. “Our loan book has performed better than any of the UK banks consistently from the day we’d launched till now – we’ve got default rates they would only dream about.” Borrowers typically borrow around UK£5,000 (the minimum permitted is UK£1000 and the maximum UK£15,000), which is usually put towards a new car or making home improvements, says Zopa. On the other side of the fence, lenders achieve an average return of 8.2 percent. The average lent is UK£2000 but this doesn’t paint a true picture according to Andrews. “It’s misleading because we have people lending as little as UK£10 and we have people lending many hundreds of thousands of pounds.” Zopa charges a one percent service fee to lenders while borrowers pay UK£124.50 on a loan. So what’s to stop an unscrupulous borrower from running off with my cash, I hear you cry? Well, if you lend UK£500 or more then your money is spread across at least 50 borrowers and the average default rate is 0.7 percent. “I probably wouldn’t choose to lend 10 grand to a complete stranger in the pub on the basis of his credit file,” says Andrews, “but I might happily lend 10 quid to 1000 people who share the same credit profi le.” Checks are made to vet potential borrowers and those accepted are put into categories according to their ability to pay – A* (super clean borrowers) down to much riskier borrowers in band C. There is also a Y group made up of young borrowers. Lenders then make offers, such as wishing to lend x amount of cash to an A-rated borrower for x
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period and with x amount of interest. The A-rated borrowers then choose whether or not to accept the lenders’ money. If a borrower does default, they are chased for the debt through proper legal channels. The riskier groups pay higher interest rates to the lenders but the default rate will be higher. It’s a case of balancing risk versus reward when loaning out your hard-earned cash.
Crunch time In the last two or three years, Zopa’s growth in popularity has reflected the groundswell of distrust of the banks among the public. The credit crisis was sparked by reckless practices by the loosely regulated banks, which snowballed into the worst recession since the Great Depression. Such is the distrust of the banks’ nowadays that owning up to plying your trade as wheeler-dealer hotshot in the City carries about the same stigma as admitting to being a war criminal. Zopa benefited from the banks fall from grace, Andrews reveals. “We were three and a bit years old when the credit crisis hit and had been working really hard at building up trust in the business. Consumers didn’t feel they were getting a good deal out of banks – there wasn’t the same degree of banker bashing as there is today, but there certainly was an appetite to look at alternatives.” Andrews says Zopa’s loan book has been properly managed. “We could say we had managed credit properly while all these banks were losing a fortune making stupid lending decisions.” Unlike some of the banks, Zopa took a cautious approach to acquiring borrowers rather than rushing in gung-ho and accepting those with even the most patchy credit histories. “We could have taken much more risk. We could have lent more unwisely and we could have grown our business faster by accepting more of our applicants. We could have pitched the business at more risky consumer groups where the rates of return might have looked more exciting, so that subprime lenders made returns in the high teens compared to prime lenders making returns of eight or nine percent. But had we done any of those things then we wouldn’t necessarily have been able to get the money back to our lenders and I suspect we wouldn’t be here.”
While the banks get involved in everything from mortgages to betting on the price of aluminium, Zopa’s business model is focused on unadulterated lending. Andrews says both parties on either side of the deal like the simplicity of it all. Alongside the knowledge that their money is helping real people, lenders particularly appreciate the returns available from Zopa, far outstripping current savings rates. UK savers have had a bum deal since rates were slashed by the Bank of England from five percent to a pitiful 0.5 percent in order to kick-start the fragile economy. Zopa’s eye-catching returns have tempted plenty out-ofpocket savers to become anonymous lenders through Zopa. “Savers in the UK are being hit where it hurts very hard,” says Andrews. “People who depend on savings for an income, like retirees, are in real trouble and desperately looking for alternatives to get a better return.” Likewise, the banks have been reluctant to lend to customers, so have hiked up their interest rates. It’s been a win-win situation for Zopa. Back in 2005, Zopa’s founders made a conscious decision not to throw money at aggressive marketing campaigns, choosing instead to let the company grow through word of mouth, and its uniqueness generate its own publicity. The day of Zopa’s launch saw the site reported in London’s respected Financlal Times newspaper and The Economist as well as a clutch of other print and web publications. The media’s inquisitiveness about the business still exists today, which is reflected by a media section on the Zopa website stuffed with press cuttings and TV and radio clips. As of August of this year alone, Zopa has been covered by 45 media outlets. “We’re terribly lucky that the story remains interesting,“ the boss notes. After the launch, Zopa created a stir, particularly among techies and IT professionals who were au fait with groundbreaking internet start-ups. “Our early adopters were heavily dominated by IT professionals and a few people who worked in the City. With any new products like this, the IT boys like to have a look around and talk to each other, because they are interested in technology.” Nowadays, Zopa’s customers come from all walks of life, although the majority tend to be men, especially the lenders, who are often middle-aged or retired men with disposable incomes. “It’s probably fair to say that our very big lenders are typically older and either in or approaching retirement,” Andrews reveals. “However, we’ve also got lots of young people lending very small amounts of money, presumably because they think it’s interesting.” Zopa also strives to generate an online community so that users get to interact with one another and discuss the business of lending and borrowing. Its online forum, for instance, is especially handy for those getting to grips with the ins and outs of the site. “We’re very lucky that we’ve got a group of users who are prepared to give up their time and knowledge to help educate new
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people.” There is also a healthy following on the company’s blog, Facebook and Twitter – the latter being a convenient platform to answering users’ queries. “We find that if customers tweet us with a question it tends to get answered very quickly indeed compared to email. So it’s just a very efficient way of dealing with people. The customers like it and the people here like it.”
Market forces Zopa’s success in the UK led to Andrews and his team eyeing up the almost endless opportunities that lay overseas. However, it wasn’t as simple as just setting up shop in a foreign country and then counting the cash as the punters came flooding to the site. Markets like the US offer “huge potential” according to Andrews, but regulations vary greatly across the world and ultimately proved to be a thorn in the company’s side. “The regulatory challenges are enormous in every country – it’s not like eBay, which is easy to roll out from one country to another.” Zopa launched in the US in 2008 but regulatory pressures meant the business was different to its UK counterpart. “We ended up launching a business in conjunction with credit unions, which are a rather bigger group in the United States than they are here. It wasn’t as strong a peerto-peer business model as it is here, and we also launched in 2008 right in the face of global Armageddon.” After a year, the decision was taken to withdraw from the US. Efforts to break into Japan ran into difficulties and in Italy Zopa was forced to operate through a franchise. “It’s absolutely not trivial to launch in different countries and indeed in some countries it’s not even possible.” Andrews describes the company’s retreat from the US, the biggest market in the world, as “painful” but is focused on the UK for the time being. “We’ll confine our ambitions to the UK for a year or two and see how we get on, because the UK is a big enough place for us to build a substantial and exciting business and then maybe think again internationally.” With Zopa garnering increasing attention and other peer-to-peer lenders such as YES-secure in the UK, Smarva in Germany and Boober in Holland, does Andrews believe traditional bricks-and-mortar banks and other financial institutions should be quaking in their suits? “I think we definitely represent an enormous threat to them in this segment of the business because we do it more efficiently,” he states confidently. “So yes, they should definitely be worried, but if we and other person-to-person lenders were to take half of the banks’ personal loan business away from them in the next five years, then that represents an enormous opportunity for us but it’s not a terrifying loss for the banks because they do so much else. So we could take a very a profitable niche away from them, and it might impact share price a bit but it’s not going to kill them.”
“The riskier groups pay higher interest rates to the lenders but the default rate will be higher”
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EXECUTIVE INTERVIEW 75
Weighing up the risks Business Management catches up with Andreas Tesch to discuss the pertinent issues surrounding credit management in the wake of the economic crisis.
Andreas Tesch, the Director for Global, Oceania and New Markets at Atradius, is a leading global authority on trade credit insurance. He joined Atradius in 2001 in Corporate Development, subsequently becoming Director of Risk Services for Central and Eastern Europe (2004-2006). In 2007, he was promoted to his present role overseeing a team of 200 in 30 countries.
In light of the recent ﬁnancial crisis, in what ways have credit management solutions had to evolve in order to protect businesses of all sizes against the commercial and political risks inherent in domestic and global trade? Andreas Tesch. The speed with which the fi nancial crisis hit markets across the world meant that credit management solutions needed to move equally quickly. Decisions about buyer default risks needed to be fast and decisive. At the same time bank fi nancing was in minimal supply for even profitable companies looking for additional support from their trade creditors. P&L information alone was not sufficient. Every bit of information became important as the dangers of payment default were now coming from all sides: trade sector, available funding, customer base (depending on one customer that was in trouble, etc.). As a result, forward-looking rating tools, particularly those that take the fi nancing element into account, have become more important, since simply looking at past performance did not guarantee future success. What opportunities are to be found in emerging markets, particularly in Central and Eastern Europe, Asia and the Americas with regards to credit insurance and credit management services? And what are the main challenges in these regions? AT. These emerging markets have relatively low penetration rates and therefore represent attractive opportunities in respect to potential for new customers and with them new premium income. Once a local office is opened and a better understanding of the local risks can be realised, this will also reduce the risk of payment default as risk assessment will be improved. Th is will lead to higher credit limit acceptance rates. For Atradius, it would also translate into an improved ability to service our customers on a truly global basis as they (our customers) expand their business into these markets. Entering new markets also brings certain challenges, including unfamiliarity with credit management services, less developed legal systems, poor information infrastructures, entrance barriers like licensing and capital requirements, and local business practices that are unfamiliar and may even seem corrupt but which are customary and standard business practices in the local market. Despite these challenges, if pursued cautiously, new markets can become important contributors to the premium and profit growth.
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As business markets become increasingly globalised and international trade becomes ever more essential to effective business growth, what are the main credit risk challenges for global businesses and how should they be looking to overcome these challenges? AT. Just as the three most important considerations in real estate are location, location, location, for credit management those three considerations are information, information and information. You need to have as much information as possible to accurately assess the risks you will be facing. Th is includes developing a thorough understanding of local business cultures and habits. You can’t think like a Western European or American business. You have to think like the local businesses to really be successful. Finally, you can’t just think about the sale. You also have to consider getting paid. If payments are not made, you need to know in advance how you will recover them.
“Free flowing financing is not a given in today’s markets and may not be for some time. Taking care of the balance sheet and the cash flow statement are therefore essential to driving the business forward”
Now that we are in a period of recovery, how will those businesses that survived into 2010 have to adapt their business policies in order to make the shift from merely ‘surviving’ to ‘thriving’? AT. Right now, sound fi nancing has become a key element to business success. Free flowing fi nancing is not a given in today’s markets and may not be for some time. Taking care of the balance sheet and the cash flow statement are therefore essential to driving the business forward. Th is includes producing in a cost effective way. On the customer-facing front, however, there remains no substitute for knowing your customers. If you know your markets and the companies you want to reach, you can bring the cost effective market approach by bringing the right products and services to the right potential customers through effective marketing channels and techniques. ■
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CREDIT RISK MANAGEMENT 79
José Manuel González-Páramo, Member of the Executive Board of the European Central Bank (ECB), explains the challenges of credit risk management and the lessons that can be learned from the ﬁnancial crisis.
he ECB places great importance in the development of sound and effective risk management practices in the fi nancial industry. However, both central banks and private fi nancial institutions continue to face great challenges collectively in managing risk. These challenges seem to persist, although they have been changing face. The high levels of uncertainty manifested in unprecedented levels of asset volatility in the years 2007-2009 emanated originally from liquidity shortages in the offbalance sheet management of highly complex assets. In late 2009 and 2010 we have seen, again, high levels of volatility, this time associated with concerns about the large fiscal imbalances in some EU Member States. In both phases of the crisis, financial markets have reacted to the increasing fear that some market participants may fail to honour their obligations; they have experienced an increase in credit risk. Under the general concept of credit risk I would include both the risk of default of issuers of securities held in portfolios as well the counterparty risk faced in over-the-counter transactions. Today I would like to share with you some thoughts on the management of such risks in general and in central banks in particular.
Management of credit risk It is widely accepted (but not appropriately emphasised) that one of the causes of the deep fi nancial crisis witnessed since mid 2007 has been the deviation from well established principles in the management of risk (in particular credit risk) by fi nancial institutions. Common sense risk management practices such as “know your counterparties”, “invest only in products you understand”, “do not outsource credit risk management by relying exclusively on external credit assessments”, “do not rely exclusively on quantitative models, however sophisticated” had been abandoned. It is interesting to recall at this stage the work of the original Counterparty Risk Management Policy Group co-chaired by E. Gerald Corrigan and Stephen G. Th ieke which already in 1999 stressed that “better knowledge of one’s counterparty represents the foundation upon which the other pillars of risk management rest”. Re-establishing these principles in risk management practice is essential for the resilience of the fi nancial system. I would like to highlight in particular the trend witnessed in recent years for many market participants to exclusively rely on external assessments for the management of their credit risk. These assessments have been often provided by only a small number of specialised institutions (rating agencies). The critique on the role of rating agencies has become a recurring theme in all analysis of the current crisis. In addition to potential confl icts of interest embedded in their business models, rating agencies have faced questions on their methodology, in particular in the area of structured fi nance and the lack of transparency in their activities.
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“The ex-post assessment of the performance of their ratings in the last two years has raised serious concerns”
The ex-post assessment of the performance of their ratings in the last two years has raised serious concerns. At the same time the use of credit rating in legislation, regulations, and other supervisory policies is so widespread that I would agree with the Financial Stability Forum which has questioned whether it is not these policies that unintentionally give credit ratings an official seal of approval and discourage investors from performing their own due diligence. Th is should certainly be one of the main concerns of regulatory authorities in the immediate future.
How central banks address credit risk Central banks are unique as market participants because they do not face liquidity risk in their own currency. However, they are not immune to credit risk. Losses occurred because of a default of one of their counterparties or an issuer of a security they hold in their portfolio can deplete their fi nancial buffers. Although their fi nancial survival does not depend in any vital way on such buffers, their perceived lack of fi nancial resources could irrevocably damage their credibility in the market and thus their ability to implement monetary policy and safeguard fi nancial stability. Furthermore, if a recapitalisation of the central bank by the government becomes ultimately necessary, it could jeopardise the independence of the monetary authority. In general central bank risk management is considered conservative, so that overall it could be perceived that the development of an elaborate risk management framework is not really necessary. However, the central bank becomes an above average risk taker in a crisis situation – fi rst of all by showing inertia in its risk management framework. There is thus some fundamental transformation taking place in the risk tolerance of the central bank as it continues operating in a fi nancial crisis when other market participants have long adopted a very conservative approach.
CREDIT RISK MANAGEMENT
At a time when all risk measures (probabilities of default of collateral issuers and counterparties, correlations, expected loss, VaR-measures) have gone up dramatically and financial institutions are cutting credit lines and are increasing margin requirements in the interbank market, the central bank becomes the lender of last resort. In such a situation, its risk taking increases considerably. Th is suggests that the management of the central bank’s risk exposures is even more important in a crisis and requires, at least then, a very carefully designed risk management framework.
Credit assessment in the Eurosystem The experience of the fi nancial crisis has led the Eurosystem to solidify the already elaborate credit risk assessment framework it uses in its credit operations. Let me now give you some more information on the way the Eurosystem handles credit risk assessment in the context of its own credit operations. Article 18.1 of the Statute of the ESCB requires that all credit operations conducted by the ECB and the National Central Banks (NCBs) should be based on adequate collateral. In particular all such collateral must meet high credit standards. The Eurosystem has defi ned an elaborate framework of credit assessment (the European Credit Assessment Framework – ECAF) to ensure that such standards are met. In the assessment of the credit standard of eligible assets, the Eurosystem takes into account credit assessment information from credit assessment systems belonging to different sources. Some of them are private, namely external credit assessment institutions (ECAIs),
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counterparties’ internal ratings based (IRB) systems and third-party providers’ rating tools (RTs). Others are public, namely the national central banks’ in-house credit assessment systems (ICASs), Additionally, in the assessment of the credit standard, the Eurosystem takes into account institutional criteria and features guaranteeing similar protection for the instrument holder, such as guarantees. The performance of all credit assessment systems that are accepted by the Eurosystem is closely monitored. On an annual basis, the observed default rate for the set of all eligible debtors assessed by a particular system is compared to the credit quality threshold set by the Eurosystem. Th is way, the results from credit assessments are comparable across systems and sources. With regard to the ECAI source, the Eurosystem does not automatically follow the assessments provided by a rating agency. First, any such assessment must be based on a public rating. Even then, the Eurosystem reserves the right to request any clarification that it considers necessary. In particular when it comes to assetbacked securities, a number of transparency requirements are imposed. Ratings must be explained in a publicly available credit rating report, namely a detailed pre-sale or new issue report, including, inter alia, a comprehensive analysis of structural and legal aspects, a detailed collateral pool assessment, an analysis of the transaction participants, as well as an analysis of any other relevant particularities of a transaction. Moreover ECAIs must publish regular surveillance reports for asset-backed securities containing an update of the key transaction data (e.g. composition of the collateral pool, transaction participants, capital structure), as well as performance data. The need for better understanding of the underlying assets in securitised transactions was emphasised by the ECB when it launched a public consultation on loan-byloan information requirements for asset-backed securities (ABSs) in the Eurosystem collateral framework. With this initiative, the ECB strives to promote an improvement of disclosure standards in securitisation markets from current levels. Such higher standards would contribute to avoiding the inadequate assessment of risks in the underlying asset pools of ABSs by investors and the exclusive dependence on third-party assessments that was at the core of the current crisis. Finally, I would like to emphasise one important element of our framework. Despite the fact that the Eurosys-
CREDIT RISK MANAGEMENT 81
tem uses ECAI ratings as one of its credit assessments, it still reserves the right to determine whether an asset fulfi ls the requirement for high credit standards on the basis of any information it may consider relevant from a risk management perspective. Therefore it should not come as a surprise that on May 3, 2010 the ECB decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for the purposes of the Eurosystem’s credit operations in the case of marketable debt instruments issued or guaranteed by the Greek government. Th is suspension was based on the positive assessment on the side of the Governing Council of the ECB, in liaison with the European Commission and the International Monetary Fund of the Greek government’s economic and fi nancial adjustment programme. The measure acknowledged the strong commitment of the Greek government to fully implement the programme and was an example of the ability and will of the ECB to make an independent credit assessment.
The connection between credit and liquidity risk While I have emphasised so far credit risk management, I would also like to touch upon the more elusive concept of liquidity risk. The current fi nancial crisis has been triggered by the inability of some fi nancial institutions to fund some complex assets. It has been traditionally thought that while such a situation may put the institution at strain, it should be clearly distinguished from that of an insolvency. However, the experience of the last three years has showed that the distinction is far from simple. A prolonged period of liquidity difficulties may easily leave no other choice to the institution than an emergency sale of assets at significant losses and a subsequent depletion of its capital position. Therefore a liquidity problem, if it cannot be properly addressed – possibly by the intervention of the central bank – can easily lead to insolvency. In recognising the importance of liquidity risk and the systemic implications of a liquidity crisis, the Basel Committee issued a consultative document on an international framework for liquidity risk management, standards and monitoring in December 2010. The document put forward two liquidity risk standards and a set of tools for ongoing monitoring of liquidity risk exposures and information exchange among supervisors. The two standards, namely (i) a global minimum ‘liquidity coverage ratio’, which aims at capturing liquidity risk in the short term by ensuring that banks hold sufficient high quality liquid assets to withstand an acute stress lasting one month; and (ii) the longer term ‘net stable funding ratio’, which aims at incentivising banks to fund themselves using more stable sources on a structural basis by establishing a minimum acceptable amount of stable funding based on the liquidity characteristics of the fi nancial institution’s assets and activities over a one year time horizon. A discussion has been triggered and various concerns were voiced on the calibration of the standards, which in the view of some could generate significant negative reper-
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cussions for the real economy, for certain markets (such as the money market and interbank market) and for the business models of some banks. Central in this discussion is the question on the set of assets considered eligible for the short-term liquidity standard. It has been claimed that the proposal is not in line with the severe stress scenario that is assumed and that it could lead to concentration risk as well as higher cost for the assets that are not included. Furthermore, the design of the longer-term standard was questioned, as it was argued that a higher level of mismatch between assets and liabilities is necessary for banks to fulfi l their intermediation role in the economy. The ECB has a particular interest in the Basel Committee proposal on liquidity risk as it relates to the implementation of monetary policy, has an impact on the money market, as well as possible consequences on the fi nancial integration in the Euro area. Clearly the proposed liquidity standards address the major shortcomings identified by the financial crisis in the area of liquidity risk by requiring banks to increase their holdings of liquid assets and to reduce their reliance on short-term volatile funding sources. Furthermore, enhancing the liquidity risk management of banks could have a positive impact on market confidence, reducing thus the volatility in money and capital markets. Still, the calibration of the proposed liquidity standards needs to be revisited to take into account the comments received during the public consultation and their impact on the banking sector, financial markets and the overall economy. Finally, the establishment of an appropriate phase-in period that will allow banks to adjust their balance sheets without an undue impact on their operations or an increase in their reliance on central bank funding is warranted. Unfortunately, it appears that periods of “irrational exuberance” can lead us to forget well-established practices on how to prudently manage risks. Financial crises like the current one remind us of their importance. Also, central banks have learned valuable lessons in their own risk management and have made steps towards solidifying their defences, while remaining faithful to their objectives of ensuring price stability while also safeguarding financial stability.
“The experience of the financial crisis has led the Eurosystem to solidify the already elaborate credit risk assessment framework it uses in its credit operations”
ASK THE EXPERT
Risk management: answering the ‘So what?’ question Mike MacDonagh, Sword’s ERM Product Manager, suggests the questions that business managers should ask with regards to risk management – and where to ﬁnd the answers.
ntuitively, business managers know that risk management is about stopping bad things from happening to their organisations, and lessening the impact when they cannot be prevented. But when it comes to investing their companies’ hard-earned revenue in this area, they have a right to ask for more information, as it is vital that any work performed prevents the right bad things from happening. When a risk manager has to highlight a particular risk facing the business, he or she must answer the question: “So what?” This question has both qualitative and quantitative answers. From a qualitative perspective, managers need to know that the risk involves something they truly care about. From a quantitative perspective, they need to know exactly how important the risk is, and how it compares to other potential threats.
A qualitative view To understand their importance, potential risks can be linked to a number of contextual, transactional and internal variables within the organisation. The contextual environment for a business is largely outside its control and includes factors such as geo-political trends, market prices and changes in technology. Contextual variables are often connected, and many businesses now use ‘scenario analysis’ to identify the combinations that could have a truly devastating impact. By comparison, an organisation’s transactional environment is made up of the key stakeholders within and around the business. When it comes to identifying the company’s core objectives, business managers will often base them around the needs of these stakeholders. As a result, examining the variables in this area can often provide a useful tool for helping the business understand the relative importance of various risks by asking: “If this risk is not pre-
vented, will it have a negative effect on a specific company objective?” The internal environment is limited to the organisation itself, and is concerned with company processes and policies. One method used for evaluating these internal business processes is maturity analysis, using standard models such as CMMI. With this approach, process maturity can be considered a proxy for risk, since the level of maturity required for a given type of process is likely to reflect the relative importance of that process in terms of the business objectives that it supports.
A quantitative view: how much does this risk matter? Whilst this qualitative element will help managers to determine whether or not they care about a particular risk, the quantitative element will tell them how much they care. It is worth re-examining the key environmental variables in order to determine which measures are the most useful. As discussed above, risks engendered by contextual variables tend to be large and complex and have the potential to threaten the very existence of the business. In this case, small changes in risk impact are meaningless, and so management tend to focus on measures of the probability of these events and, in particular, on indicators that reflect this probability. Risks linked to transactional variables can be linked to objectives that should have quantitative
measures and boundaries. These can be assessed in terms of their direct effect on these measures and boundaries. The measures may be absolute, or may relate to the probability of achieving the objective. In both cases the figure is likely to be calculated through a risk assessment process, including the mitigating effect of controls. For risks related to internal variables, there really isn’t any further quantitative measure over and above the assessments of maturity against target levels.
Setting a common framework The final piece of the puzzle for risk management is putting all this information together so that business managers don’t have to come and ask the ‘So what?’ question every time a new risk is identified. To achieve this objective, risk managers can create ‘scorecards’ based on risk indicators, to link together the qualitative and quantitative measures, capture appropriate measures of risk appetite for each and present them against a common framework. By putting all of this together, not only will a business know that it is managing its risks effectively, but it will also know that it is managing the right ones.
Mike MacDonagh is ERM Product Manager with Sword, part of ARC Logics, a Wolters Kluwer company. MacDonagh has more than 25 years of experience helping ﬁnancial institutions across the globe manage enterprise and operational risk more efﬁciently while effectively addressing banking industry regulations, guidelines and standards.
Auditing for the 21st century John Verver takes a close look at the rise of the risk-intelligent audit leader.
he recent fi nancial crisis and our industry responses have produced a surprising misconception – that risk is the opposite of reward. It is not – loss is the opposite of reward. Risk represents the possibility that a loss or reward will occur. For too long, audit leaders have been relegated to the tactical execution of the annual audit plan; however, they are well-suited to provide risk insight given their unique visibility across the organisation’s activities. For audit executives, this point marks a critical distinction from the traditional audit role. Business success will be determined by risk intelligence at the strategic level rather than risk aversion on a tactical level. So too, internal audit’s ultimate value will be determined by strategic contributions to the business rather than tactical accomplishments alone. Amid the
“Internal audit’s ultimate value will be determined by strategic contributions to the business” economic uncertainties facing fi nancial institutions and the mounting pressures bearing down on internal audit functions, this much is certain: audit executives have a unique opportunity to assume and/or solidify their role as a strategic business partner to the CEO and CFO. Those who leverage this opportunity through strategic risk management endeavours, continuous auditing activities, board committee relationships and other strategic priorities can help lead their companies to greater success while enjoying more rewarding career opportunities. Given the regulatory and economic conditions, particularly for fi nancial institutions, as well as the recent post SarbanesOxley focus on internal controls management, all internal auditors will need to do more work with fewer resources. And on top of this, they must conduct their activities in increasingly complex data environments and work with operational partners whose demands for real-time audit and risk information are swift ly growing.
A critical juncture Speaking to CEOs and CFOs about their top needs is a sure way to assess the current state of internal audit; the
challenges that keep C-suite executives awake at night help explain why audit executives face a critical juncture. CEOs and CFOs say that they want their internal audit leaders to cut costs, reduce headcount, teach the business how to take ownership of internal controls monitoring, reduce compliance costs, ‘find money – fast’, enable real-time auditing and risk management, redeploy current internal audit staff and, above all, add value. These demanding and, in some cases, seemingly contradictory requests should sound familiar to anyone who has served as a senior internal audit executive in recent years.
Efﬁciency demands confront everyone The vast majority of CAEs and audit executives face a similar set of challenges that require them to ply their craft with greater efficiency and effectiveness. Addressing these widespread challenges as the IIA President and CEO Richard Chambers laid out in a keynote address, requires numerous steps, including the following: aligning internal audit coverage to meet new expectations; realigning skills to address new requirements; coping with diminished resources; demonstrating value and adding to the bottom line; maintaining stature with the audit committee; and perhaps the most important: leveraging technology to achieve greater efficiencies. Why is the fi nal priority so important? Because technology can help internal audit functions achieve each of the other priorities. “When internal audit uses analytics and automation, it demonstrates its value as a highly effective and efficient contributor to the company’s overall risk management programme and its bottom line,” notes Peter Millar, Director of Technology Application, ACL Services Ltd. and member of The Institute of Internal Auditors advanced technology committee. For example, BNP Paribas uses ACL technology to interrogate large data fi les and assess the rating model of corporate customers. In doing so, they verify the relevancy of each of these models. Previously a two-day task, using technology these results are now generated in a matter of hours. Furthermore, the solution automatically creates an audit trail for the user, mitigating the risk of non-compliance. BNP Paribas can see fi nancial transitions across the business and highlight potential control point failures to generate a more accurate picture of corporate risk. Whether or not the current risks confronting CAEs today turn out to be rewards or losses tomorrow depends, largely, on how effective – and sustainable – their responses are today.
John Verver is the VP of Services and Product Strategy at ACL Services Ltd. Verver has been involved in audit technology for over 30 years and is an acknowledged thought leader on data analytics, continuous auditing and continuous monitoring. He is a frequent speaker at global conferences and was a key contributor to The IIA’s Global Technology Audit Guide: Continuous Auditing. Prior to ACL, he spent 15 years with Deloitte.
BM speaks with Markus Schulz, Chief Compliance Ofﬁcer at a major global insurance company, about his personal views on the challenges of a tighter, post-crisis regulatory regime. Some ﬁnancial organisations are reporting a huge increase in compliance workload as a result of growing regulatory requirements. Is that something you’re seeing and if so, how are you coping with it? Markus Schulz. There are indeed a number, one could even say a large number, of new and revised regulations on the horizon and perhaps even more ideas and concepts where it is unclear at the moment if they will make it into regulation. However, there is one aspect that I think is important to realise for many of the regulations, to see where there are potential differences between the various sectors, such as insurance is not the same as banking. Therefore, it is important that the public and the private sector work closely together to establish where these potential differences are and what they mean for new regulations. It’s maybe more than ever a case of not one-size-fits-all and that’s something I see many corporations engaging in right now. One example of this is Solvency II, which is one of the aspects where it seems to be critical to differentiate amongst the various industries and business lines and sometimes maybe even within those business lines. I believe that all industries are keen to have the right solvency levels, but right needs to be defined well and also in relation to the market standards of an industry where historically some have held higher solvency levels than others. It won’t be beneficial for the markets and the consumers if unrealistic solvency requirements are established that cannot be met. But this is also an opportunity to create a level playing field by introducing the right requirements. I don’t believe that anyone is completely relaxed about the new wave of regulations and this may vary institution by institution, but there only a few things that some large companies in the financial services industry may have not started working on already in advance of it becoming a new regulation, which is the last step in a long process. One aspect that is behind many of the new regulations is the concept of treating customers fairly. While every company has a kind of customer centric approach it is more of a focus than ever. In the UK for example we have the retail distribution review and in other countries there are similar developments requiring distributors to change their models and for producers to see how to best serve this new market set-up. After the Lehman’s story we have seen an even bigger regulatory focus on marketing material disclosure, ease of language, ease of marketing material and meeting customer needs, which is not new to the industry, but has requested a lot from compliance functions and the business to ensure there is no ambiguity towards the customer and that customers have a fair chance to understand what they are buying. This is also the objective of the Packed Retail Investment Products (PRIP) review work on EU level at the moment. Is tackling these challenges more a case of optimising processes rather than simply hiring more compliance ofﬁcers? MS. This varies by company and when talking to my colleagues, some have staffed up and others have rearranged matters and reprioritised. What I noticed is that there seems to be a noticeable increase on the solvency teams where some additional manpower is often necessary to meet short time lines. Some companies don’t seem to have made any major changes, which could be an indication that they started a little earlier with some of this, giving them a longer period to meet the objectives.
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One of the big buzz phrases we often hear from regulators is that they want to see compliance ‘in the DNA of the organisation’. What does this mean to you? MS. I use that expression for years and truly believe in it. Compliance cannot be an activity that’s pushed on to the business from the outside. Compliance must be embedded in the business, ideally to a point that employees never even think about it, it simply happens. You want to have people doing the right thing automatically and not because someone stands behind them telling them what to do and how to do it. To get there, this of course takes time, focus, efforts and the right approach. Have the events of the last few years had an impact on these kinds of efforts? MS. Absolutely! On one hand we have more regulations, or perhaps it is better to say more visible regulations, and public talk about them that reaches many more people then before, so regulatory compliance means something different to many people as opposed to a few years ago. At the same time the economic downturn has resulted in some companies reducing staff, which can put the remaining teams under pressure to do the same with less. So while we have a better understanding and appreciation of regulatory compliance in a broader community of people, there is the increased risk through additional pressures. Th is is not necessarily always balancing itself out There is always the risk that people may take shortcuts and this potentially is more so the case in a downturn then normally, but that requires more monitoring and oversight than you had to do before and establish additional Key Risk Indicators and controls creating a sound early warning system. The other side of compliance is demonstrating to the regulators that you’re working towards these goals. What do you have to do to satisfy these requirements? MS. I guess it comes down to having a solid compliance approach, a solid compliance programme and of course having the right monitoring, oversight and quality assurance on your programme. Quite often I’ve seen companies that establish a new compliance programme by sending out a policy and then basically that’s it. But that’s not it. You cannot just send out the policy saying, “We have a new compliance programme on this topic.” There’s much more required to it, even down to sample testing. So you have to have the first line, the business, really embedded in the compliance thinking and for them to adopt it into their DNA. Compliance needs to help translate what it actually means in day-to-day life and assist in adjusting the processes. Then you need to test it regularly and monitor, maintaining oversight from a compliance perspective. You also have to audit regularly to test that the first line and the second line is really doing what they’re saying they’re doing. If you can demonstrate that, and you have that approach and process in place as a standard in your firm, then this is something you can use to demonstrate your compliance to regulators.
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From the outside that sounds like quite a lot of work. Does it take a lot of time and effort to get all those things running in the way that’s going to satisfy regulators? MS. It is a lot of time and effort, particularly if you do it as an ad hoc one off task. However, if you embed it as a regular task and a regular activity right from the outset it is much more simple to keep an eye on. I’ll give you an example: if you implement a new compliance process with the business and establish from the outset the right key risk indicators, with maybe a dashboard or a report that you create on a regular basis – hopefully automated where you can – thereafter you can monitor these reports and go back to the business if you see certain indicators pointing in a direction. That’s what’s also called ‘desk monitoring’. You don’t have to go anywhere, rather you can just look at the material on your desk. Although it shall be noted that this is only one element to provide assurance. Does this kind of work ever hamper agility in business? Does it get in the way of core activities? MS. There can be these complaints from the business and I am sure some compliance officers hear that more than once. If you’re not doing it right, you will be seen by management as an impediment to the business and that you’re slowing things down. Of course there is that risk, but on the other hand we have seen how expensive it can become if you don’t get compliance right the fi rst time. I’d rather have it right first time and right by design rather than spending time on rectifying situations. People understand that and see the value of it now, but you have to constantly work on it, particularly when you hire new people, as they won’t be familiar with your company’s way of doing things. Do you think that businesses are really seeing the need for increasingly stringent compliance and risk controls, compared to the more relaxed rules that were around previously? MS. There sometimes is the belief that some of it is over reaction. In those cases you will need to work with them to make them understand why and what the consequences can be if a company gets it wrong. Easier said than done and sometimes it poses a real challenge, but not an insurmountable one. But ultimately they are as sceptical as they have ever been. So you still need to invest the same amount of time and effort to allow people to see that this is the right thing to do. However, once they’re convinced they just get on and do it. Is there any way that you can spin these activities into something that genuinely beneﬁt the business or are they always going to be a necessary evil related to regulation? MS. Of course any compliance function likes to say that they bring an added value. There are good examples out
there where compliance has helped to prevent business losses or has helped the business to differentiate itself in the market. It is not always easy to fi nd those cases within the organisation, but they are excellent messaging tools when being used as examples. At the same time, however, a compliance officer needs to be aware of all the alleged cases where there are complaints about how compliance has actually caused the organisation to lose business. It’s worth having a look at some, as it’s rare that compliance was the reason for losing the business, but it is an often used argument to hide behind. In the end I fi rmly believe that a robust compliance framework should allow the business to be more agile and enable them to turn new and non-standard situations into opportunities, when they can rely on the right compliance framework supporting them. There is a lot of talk of the need for greater transparency in the way ﬁnancial institutions manage processes relating to risk and compliance. Is this an issue that you are looking at? MS. My background is in banking and there they’ve been dealing with various regulatory requests related to transparency, such as cross-border payments, for some time. Today the transparency focus may have shifted, but it is as prominent or even more so, for example, when it comes to commissions. The other dimension is transparency in regards to taxes and untaxed funds. We all have been able to read the press coverage on this in recent months and this will be a topic on the agenda for the foreseeable future. Companies addressing the challenges stemming from this differently and there is not an industry-wide approach to it. Some may opt to have a rigorous approach and exclude entire lines of business to be on the safe side and others may opt to look at individual cases. And of course any hybrid in between. Th is very much depends on the control framework of each institution and their ability to differentiate by product or even customer Insurance is a long tail business. It’s not something that you do five years and you’re out. Therefore you really need to think about your reputation in the long-term. You’ve said that you see some ﬁrms ahead of the curve with regulation and compliance and that you’d been working before the rules came down. So where do you see the priorities going forward over the next 18 to 24 months? MS. Solvency II must be number one priority for everybody. Of course another big topic is anti-bribery and anticorruption and data privacy. Tax related regulations will battle for number one priority in the coming months with all the other regulations in the pipeline. These are things we’re working on and they’re not new. We’ve been working on them for a while, but I certainly think they will be a dominant point on the agenda for the next few weeks, months or maybe even years.
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Moving together? Schulz responds to the news that the G20 plans to allow different territories to implement regulations at different times, according to individual economic needs.
I think this can have a signiﬁcant impact. I believe it has to be a level playing ﬁeld otherwise we will see market distortion and regulatory arbitrage. Let’s say one country moves forward in isolation with a signiﬁcant new regulation that will require ﬁrms to change their way of doing business and every change will cost money in the complex and interconnected world we operate in. Should other jurisdictions not do something similar, then there is the risk that some activities may be shifted to other territories where it may not be required to change processes and operations. This cannot be in the interest of the G20. Many ﬁnancial services and products can be operated out of many different territories and have an immediate global reach. Maybe the ﬁnancial services industry is the most globalised one, as it will often only require shifting processes to operate in another territory and not factories and machines. Therefore these changes can take place rapidly and frequently if required. So the more consensus there is on the major items, the better it will be for the consumer and the markets as a whole. We have seen what can happen when regulatory arbitrage is exploited in the past and in the end the consumer may be affected. One topic that has received signiﬁcant press coverage is the introduction of executive compensation caps. At the moment that some countries establish it and others don’t, we may see head ofﬁces moving over time and executives sitting in other locations and on contracts of other jurisdictions. Most executives spend much of their time on the road anyhow, so where they start from may not make a difference to some. Clear market rules, global alignment and a consistent framework will allow for more business opportunities, faster developments, cheaper operations and an overall beneﬁt to consumers and companies operating in a healthy sustainable environment.
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BUSINESS DEVELOPMENT 91
Chris Loughlin, Travelzoo’s new CEO, tells Business Management how he led the successful expansion of the company’s operations into Europe, the main challenges that he faced in adapting the business model accordingly and his growth strategy for the future.
n July 2010, Chris Loughlin took the helm as CEO of Travelzoo, a publicly listed global internet media company that publishes travel deals. Formally Executive Vice President, Europe and Vice President of Business Development, Loughlin certainly knows the company well having worked his way up the ranks since he joined in 2001, when Travelzoo bought the internet company Weekends.com that Loughlin had founded in 1998. The time that Loughlin has spent within the business has given him the necessary experience to head up the company. “The data from most research shows that being an insider, somebody who grew up inside the business, knows the culture and understands how things are, is a huge advantage to an incoming CEO,” says Loughlin, obviously confident that he will be able to take the company forward. “I think I have demonstrated in the last five years that I can grow an organisation into a serious business,” he says referring to his previous role as Executive Vice President, Europe in which he led the development of Travelzoo’s business in the UK and its expansion into three other European countries. “I have 90 people here in Europe now. I’ve recruited every single one of those people. I’ve built up four countries and we are seeing overall growth rates of 100 percent,” recounts Loughlin proudly. And this is indeed a laudable achievement. Originally, Travelzoo was a company whose main operations were limited to the US, where Loughlin was in charge of business development and successfully managed the opening and expansion of Travelzoo’s office in Chicago. When the London office was opened in April 2005, it was no surprise that Loughlin was drafted in as Senior Vice President and General Manager, Travelzoo UK. By January 2006, Travel-
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zoo’s international expansion plan was well underway with the opening of an office in Munich, Germany, followed shortly after by the opening of a Barcelona office in July 2006 and a Paris office in March 2007. Since Travelzoo started its ambitious European expansion plans in 2005, Loughlin has taken the company through a period of exceptional growth, with rates for 2009 averaging around 90 percent. However, this growth does not mean that the European expansion was plain sailing. Loughlin himself admits that there were a number of challenges that he had to deal with when bringing the business to Europe. The first challenge was deciding on a corporate structure for the European business. “We had a US business,” says Loughlin, “but it was purely in the US, operating in one market. When we approached Europe of course we had all the normal challenges. For example, do we establish it in the UK, in Ireland or in Switzerland? What sort of corporate structure should be had within Europe, so if we opt for the UK, do we establish a UK Limited company? In Germany, should we establish a branch or a GmbH? These questions were are lot more challenging in Europe than in the US.” But this was not the only challenge that Loughlin had to overcome. Expanding into Europe also involved certain complications due to the fact that each European country operates a distinct system of labour legislation. “Although we are a common union, there are very different employment laws in each of the markets. There are different privacy laws, different fi nancial reporting laws etc. So we had to look at each market and at the requirements of that market,” says Loughlin explaining that the standard notice period in the US is two weeks whereas somewhere like Germany has a standard notice period that extends from four weeks up to seven months depending on length of service. “You really have to plan those things in and you can’t come over with an American attitude and say okay, well, I’ll just assemble a team within two weeks and get going. You really need to think a year ahead.” Operating in a European market also requires a different approach to marketing in each country. Again, it is not possible in such a diverse continent to make sweeping assumptions that the citizens of all European countries have the same travel and holiday preferences. “The product offering that we have technically is the same, but the content within those products is a little bit different. Germans, for example, are very prone to taking a package holiday so they expect to have everything included. Whereas the British in particular are more likely to hop on an EasyJet and have a hotel booked separately and they don’t necessarily expect the evening meals to be included. So, there was a bit of experimentation around how the different markets would respond to different products,” explains Loughlin.
Deciding on corporate structures, setting up teams to run the European offices and working out how to best market the products was followed by a host of technical challenges specifically regarding the speed and the functionality of the site. “When we first put the site into beta in the UK, the response time was slower than we would have liked. It was probably close to 10 seconds off the homepage. We’ve now got it down closer to two seconds off the homepage,” explains Loughlin. He says that the company had been trying to implement a lot of analytics concerning what was happening on the home page and how users were interacting with it, but admits that in fact they were probably over-thinking it somewhat. “I think we had a very intelligent approach but we maybe overcooked it a little with brainpower. So we dumbed it down, simplified it, and decided to focus on getting the speed, the prices and the availability right. If we can get those three things right, we can win and people will use it. And we’re seeing that now.” Loughlin goes on to explain how they go about measuring the success of the company, which comes down to monitoring the numbers of people who fi nd the company every day by typing the brand name into Google – something that shows that consumers have a strong affi nity with the brand. The fact that Travelzoo now has over 21 million subscribers worldwide, making it the largest publisher of travel deals on the internet is testament to the company’s undeniable success. However, Travelzoo won’t be stopping there, and Loughlin explains that the internet business has a very clear strategy for growth and a well defi ned vision for the future. “The long-term vision for Travelzoo is to be the world’s most trusted publisher of travel and entertainment deals. And however that manifests itself, whether it’s through deals publishing, through the travelzine model, or through search, we want to insure that whatever we publish is real, it’s honest, and it’s the best. And if we can do that, we believe that we can attract a very strong following. We already have over 20 million subscribers around the world and we’ve achieved that in the last 10 years. We’ve accelerated in the last fi ve years versus the fi rst five years in terms of the audience that we’ve attracted. So, there’s no reason why we can’t have 40 million subscribers in the next 10 years,” says Loughlin optimistically. But doubling subscription figures will not be easy, although Loughlin has a pretty clear idea of how Travelzoo must proceed in order to expand its audience and it all comes down to quality. “In order to attract many subscribers you really have to produce quality news and in our business that’s travel deals and entertainment deals. So, we have formally trained journalists here, people from The Guardian, from the BBC, from the ZDF in Germany, and from FVW, which is a travel-trade magazine in Germany. These are formally trained journalists who really focus on producing outstanding content.” Unlike many other comparison sites, Travelzoo also puts enormous emphasis on ensuring the legitimacy of
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ly.com was launched by Travelzoo in February 2009 in the US, and the UK site was launched in August 2009. Fly.com is a “ﬂight search engine” that makes looking for airfares both quick and easy, as the site searches hundreds of airline and major travel sites for real-time fares, and then presents the results in a simple, clean and easy-to-understand format. Chris Loughlin explains the appeal that Fly.com will have for business travellers: “Fly.com was unintentionally built for business. If I’m a medium to small size business I want value. I expect that for medium to small size businesses, travel is probably the third largest expense item in the P and L after salaries and ofﬁce space and all business owners and business managers want to optimise their travel expense,” says Loughlin, explaining that the site enables users to compare the price of ﬂying business class with different airlines. It was only when speaking to the Chairman of VisitBritain that Loughlin realised the extent of the competitive advantage that Fly.com could provide through its incorporation of business class comparisons. “I actually sat down with the chairman of VisitBritian. Christopher Rodrigues and he said, ‘oh my God this is a game changer. You know, who is really going like this site? It’s the retired businessperson.’” He continued to explain his thinking to Loughlin saying that when business travellers spend 20 years ﬂying business class, they get used to a certain standard, but they don’t necessarily want to pay the prices for business class. Fly.com allows them to seek alternative routes or airlines that may be less pricey. One of the other differences between Fly.com and competing ﬂight comparison engines is the fact that Fly.com looks up the prices of ﬂights with the airlines and then double checks on the Global Distribution System to ensure that the ﬂights really are available at those prices. “What you’ll see when you use a lot of these websites is that they will only do the ﬁrst step. So, you get the results and what you have to do is click to see if it’s still available. And they’ll even show you on the screen that this was found nine hours ago because they basically cache the old data from previous searches,” explains Loughlin. For Fly.com however, the live look-up is done immediately. This makes it more expensive but it improves the quality of the results, something that Loughlin believes people will come to notice and appreciate over time.
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every deal that it publishes. Whilst many other sites post up offers that look appealing at fi rst sight but on closer inspection have hidden costs or certain catches that are not immediately evident, Travelzoo has an extremely rigorous procedure designed to test the authenticity of the deals. “We go through what we call the test booking process. Very early in 2006 we established a test-booking centre in Munich, and there we have a team of people who mostly come from the university there. They speak all four languages across Europe. And they constantly test all of the deals that we publish to make sure that you can really book them as a consumer. And you’d be really shocked to see how many deals we fi nd that look great but when you look into it they’re actually not available, or there are additional taxes or fees,” explains Loughlin. By pursuing this honest and authentic approach, he hopes to build trust amongst the consumers that use the site and thereby grow subscriber numbers. And this is the key to increasing income, he says. “Growing the audience is the ticket to getting advertisers to spend more. And of course, the larger you are, the more advertisers you attract. But you can only do that by producing quality content. And then of course you have to feed that growth with a kickstart in marketing.” Which is exactly what Travelzoo has been doing. Last year, the company was ranked amongst the top three for internet advertising, has consistently been in the top 10 for display advertising in the UK and has been pursuing an aggressive advertising campaign in both France and Spain. But the key appears to be ensuring that the brand is present across a variety of advertising mediums.
“Growing the audience is the ticket to getting advertisers to spend more. And of course, the larger you are, the more advertisers you attract” “We’ve really spent quite a lot in online advertising display, we participate in search, we work with the likes of launch groups and we’re also interested in traditional media. It really isn’t one size fits all. You could work on TV, you could work on Facebook, you could work on Google, you could run display advertising, you could do PR or you could do other forms of social media. Everything can have a positive impact,” explains Loughlin, pointing out that the most important thing is how you service the customers once you have their attention. For Travelzoo, ensuring top customer service comes down to three main things: speed, price and honest availability. “If you can get those three things right on the internet, you’ve probably got a pretty good business,” says Loughlin. “Our motto as a company – and we see it every day when we log in – is to be the most-trusted publisher of travel and entertainment deals on the internet. And that’s all we want to be. There’s a difference between trying to capitalise on a market opportunity and make a quick buck and having a vision and sticking with that vision through the good times and the bad times to deliver something that is of value to that market. Those are the companies that ultimately succeed in the long run.”
Travelzoo’s 2010 achievements September 1, 2010 Travelzoo surpasses the 500,000 subscriber milestone in Spain
August 27, 2010 Travelzoo exceeds one million subscribers in Germany
August 12, 2010 Travelzoo tops two million UK subscribers
April 22, 2010 Travelzoo surpasses 20 million subscribers worldwide
January 11, 2010 Travelzoo races into 2010 with 3.6 million subscribers in Europe
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Utilising business intelligence to achieve better business performance is nothing new, but are organisations getting the basics wrong? KPMG’s Herman Heyns explains how organisations should be using BI more intelligently.
usiness intelligence may sound complicated, but in actual fact it’s a lot simpler than one would believe. In essence, it provides intelligent solutions and strategies for business that are implemented via a series of tools, systems, processes and planning. Adopting a strategy that works can be tricky; there are so many variables, techniques and approaches that can be employed to help your business better understand its productivity, efficiency and data. But the end-goal is always the same – to add to the bottom line and grow your business. Th is is always the danger with broad and sweeping industries such as business intelligence. Whilst it sounds a captivating proposal, there are dangers in trying to tackle something so potentially sensitive without a clear strategy in mind. As the fi nancial constraints of the recession leave ever-diminishing room for error, more and more companies are looking to business intelligence to help identify areas of weakness or inefficiency within, so it is little wonder that interest in this sector is currently greater than it has been for many years. “The big organisations spend upwards of €40 billion a year on business intelligence,” says Herman Heyns, Partner of Business Intelligence at KPMG. “In terms of their total expenditure, it is quite a significant chunk of money of these organisations’ overall spend, but the majority of executives feel that they are not getting massive value or competitive advantage over the intelligence they already have about their business. Conversely, there are a small percentage of companies that actually use business intelligence smartly, gaining a competitive advantage. The companies that do this well tend to do some really basic things that are executed well. Th is is the context – what do they do differently that proves so successful that other businesses fail to grasp?” Retrieving something quantifiable, usable and tangible from the masses of data and information a company works with on a daily basis is the Holy Grail for most businesses, and the driver behind the use of business intelligence techniques and processes. However, obtaining satisfactory results has often proved elusive for even the most sophisticated of enterprises. “What our research has found is that the real leaders in this space understand the value of information in terms of making better decisions that drive value for the organisa-
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tion,” explains Heyns. “On the other hand, the losers in this field spend vast amounts on solutions, often technology solutions, without actually knowing where they want to go with this. So what we see are vast sums spent on producing more reports, putting in new data warehouses, putting in new analytical tools etc., and you can fast-forward five or seven years and you can bet that they have no better insight into the decisions they need to make. “So the challenge for many companies is breaking that habit of applying the same recipe over and again and expecting different results. Companies with a vague idea of what they need to achieve from a business perspective spend time and money in all the wrong places.”
Although ﬁrst devised as long ago as 1958, it was not until the late 1990s that the term ‘business intelligence’ was widely used
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Spending large sums of money on business intelligence is no guarantee for success, and is often seen as one of its main inhibitors – if higher spend does not yield better results, then what is the point of business intelligence? “There are two things that really limit the success of some companies’ business intelligence strategies,” says Heyns. “The fi rst one is not being clear about what information you need in order to make the business successful. So many organisations that try to get better business information say ‘what can we get easily? Well that’s what we’ll invest in,’ rather than identifying what is most valuable to their business. Most companies would love to get into the minds of their customers to really understand what services would make them even more valuable, but actually most business intelligence projects try to tackle things like how much of a particular stock they have, which is a completely different theme and not actually that valuable.” Certain organisational structures, according to Heyns, are not aligned in a way that is conducive to getting the information they seek. “A typical organisation will have a CEO, CFO and COO, plus an operations director and marketing director. They all have specific roles, but the information that is valuable to them actually cuts across all silos and sectors, and so the governing structure in organisations such as these doesn’t allow people to execute decisions in that lateral way. The problem is that somebody in an organisation is going to take the responsibility for executing a business intelligence project and it is going to sit within one of those silos, and that person is not going to challenge the silo that they are sitting in.” Rational organisational heads would obviously be able to identify if and when these structural inhibitors were affecting the company’s ability to glean better results from its business intelligence approach, but often the value in the information they require is not so clear-cut. “If the value in the information is clear enough, then it’s at least a rational decision that the organisation can take to say that it is worth changing structures to deliver results,” says Heyns. “But most organisations don’t take this step because they don’t understand the value that they are leaving on the table. And for that reason, they are often not even willing to contemplate changing the organisational structure.”
Understanding information Failure to grasp the value of the information at a business’ disposal is more commonplace than one might think. It is often not an easy task to identify where a company can streamline, cut costs, invest or provide better service: institutionalised business methods, rigid structures and general misunderstanding of where to look combine to produce inefficiencies in a number of companies. Companies that are looking to implement better business intelligence have, therefore, to understand the value of better decision-making and understanding of the information at their disposal. When they are able to do this, then business intelligence will show its true worth. “If a company can grasp the fundamentals of its business,” says Heyns, “then it can begin working out how its structure might be inhibiting its delivery targets. Th is is simple stuff – having something more than a vague idea of what they want can make all the difference. At senior level in many organisations I speak to, most guys get it. But if you talk at a mid-management level, you fi nd that many managers don’t realise the context in which they are trying to solve the problem is, in fact, already part of the problem. The fact that they are sitting in an organisation such as fi nance or marketing or production is the reason why they cannot see the real problem.”
“What our research has found is that the real leaders in this space understand the value of information in terms of making better decisions that drive value for the organisation” Some companies are better than others at seeking to understand what their customers value and then actually producing products that possess the key attributes identified in their business intelligence feedback. Positive outcomes such as this confirm to business leaders the value in business intelligence, and it has become increasingly clear that information is now one of the most important assets for any organisation, if not the most. “I think there is a change happening where people are starting to realise that technology has not delivered on its own,” says Heyns. “It is a management issue that dictates how information is stored and analysed, and some businesses are so fragmented that they are unable to provide a singular view of their products or their customers. Companies have become unable to predictably get an insight around the core elements of their business because their information is stored in disparate silos scattered all across the organisation. “And this is where the real issue is for many organisations – they cannot get insight into the stuff that they should, ideally, have complete control over.”
Business ﬁrst Rob Smitten explains how his team has just secured Knowledge Hub, a high proﬁle project, which will deliver a “revolutionary new platform for communication” across local government in the UK and how their ‘business-ﬁrst’ approach helped them win the contract. eration. A highly configured proprietary solution would be expensive to maintain, especially when the soft ware was upgraded. In contrast, we were able to configure Intelligus, our open source collaborative platform, to exactly meet the needs of the LGA. In short, we provided an industrial strength collaborative environment that meets their needs at a fraction of the cost of a proprietary solution.
You joined PFIKS in September last year; what attracted you to the company? Rob Smitten. I have been aware of PFI Knowledge Solutions for several years, through my contacts in the industry and mutual customers. Their professionalism and the way they did business always commanded respect. But what really set them apart was their approach and analysis. My previous company was very ‘technology-led’, which did not always deliver the best business solution. In contrast, PFI Knowledge Solutions take a ‘business-first’ approach, which is refreshing. It means that our emphasis is spent addressing the opportunities and problems faced by organisations. They are then tackled from the right perspective, ultimately resulting in better solutions, measurable results and much happier clients. It is a far more rewarding professional environment to operate in for both the client and personally. What impact does this business-ﬁrst approach have on the way you do business? RS. Critically we are engaged at board level, which means analysing clients’ strategy and evaluating how well their business processes support that strategy. It earns a place at the top table. In many projects we subcontract to major consultancies and service providers and are brought in as subject matter experts around business
productivity. But it isn’t just the projects that are rewarding. PFI Knowledge Solutions’ technical staff understand the importance of keeping the business objectives as the core of all programming or development work. They regularly challenge and test assumptions, which is vitally important. This interaction between business and technical members of the team enables us to deliver the best possible solutions. Taking a business-first approach has led us to re-evaluate the use of proprietary systems. Very often ‘industry-standard’ solutions are not appropriate for clients’ particular requirements. We increasingly turn to open source solutions. They often provide a better ‘fit’ to the business and are more flexible in their deployment options. You recently won the Knowledge Hub project with an open source product; can you tell us a little more? RS. With over 10 years of experience in collaborative soft ware, PFI Knowledge Solutions had a significant advantage over other vendors. We won this contract with Liberata to work with them to deliver a Knowledge Hub for the Local Government Association. LGA recognised that no proprietary solution would deliver what they needed straight out of the box. But there were other factors that had to be brought into consid-
But open source solutions are the exception rather than the rule. Could they ever be relied upon in a corporate environment? RS. Actually, open source in a commercial environment is being increasingly adopted by major commercial organisations. The UK Government has also stated that open source solutions should be considered first as preferred platforms for the public sector. Therefore we are finding that increasing numbers of clients are actively considering open source solutions. This is particularly true for multi-disciplinary consortia. It can sometimes be difficult to get different organisations to agree upon one solution. The open source platform is inherently apolitical and with the right support it is just as reliable as a proprietary product. So would you say that your business productivity team are exclusively open source experts? RS. I reiterate what I said at the start of the interview: we take a ‘business first’ approach. We focus on improving business performance, providing greater clarity and control for management. We do what is right for the business rather than try to fit one solution into the business.
Rob Smitten leads Business Productivity Solutions at PFI Knowledge Solutions, a consultancy specialising in business transformation.
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Adding Analytical horsepower to BI infrastructure Sylvain Pavlowski explains the need for structured query reports to manage transaction-based infrastructure.
ost companies have implemented a Business Intelligence technology in order to provide their users with indicators to measure the health of the business. The deployment of ‘BI 1.0’ infrastructures entailed the creation of centralised data warehouses to allow information collected from various business applications to be organised and aggregated. The differences and complexity of the underlying infrastructure involved in achieving this makes it necessary to create a semantic application layer. The purpose of this layer is to break down the complex structure of the data warehouse to make data available to users in a simplified format. Th is vision of ‘everything centralised’ is realised through application convergence or the deployment of SOA architectures in order to consolidate all enterprise data in a single enterprise-wide data warehouse. Information about a customer, for example, is compiled from several applications to supply the data warehouse via programmable interfaces (ETL). BI tools then extract the data via SQL queries in order to format it into static reports. The reports are then sent to users in ‘push mode’.
without the need for predefi ned dimensions by leveraging “free dimensional” analysis. In addition to the static reporting application, users can look for the data they need, at any time, and import it to their client workstation (In-Memory). Th is vector database technology offers users a ‘pull solution’ in the decision-making process without the need for predefi ned dimensions. By having the capability to include any other data source on the fly, users go from more reporting to predictive analytics.
Winning strategy As businesses are forced to shorten their decisionmaking processes, it is critical to re-think infrastructures in order to give users the flexibility and tools needed for greater adaptability and faster analysis. Business users already have incredible processing power right on their desktops. Since that entire horsepower is available, it should be put to work. The use of ‘inmemory’ databases gives users the flexibility to manage data locally without affecting the enterprise data warehouse’s response time.
Sylvain Pavlowski is an IT veteran with over twenty years of industry experience vital to his role of VP EMEA Sales at TIBCO Spotﬁre, a position he has held since 2007. Prior to this, he was VP EMEA at UNICA where he was responsible for building and launching new territories and building the partner network across EMEA. Previously Sylvain had held the position of CEO of Digital Peach and managed EMEA subsidiaries for successful IT companies.
A structural limitation The B.I ‘1.0’ infrastructure has structural limitations. The centralisation of data into DW does not offer the flexibility that business requires today. Business users cannot easily access information in a format that is simple enough to support the creation or modification of existing reports. Business users are dependent on the IT department for any new reports, unable to add their own data to the analysis. In this type of arrangement, the user does not have the freedom to perform predictive analytics.
Informed decision making With the advent of ‘enterprise analytics’ solutions, all those involved in the decision-making process are able to work together. Returning centralised data control to the IT department is crucial to promoting and ensuring the quality of decision-making processes as well as data consistency. Users of solutions from vendors such as TIBCO Spotfi re can extract data via a user-friendly interface accessible to everyone. The creation of aggregates calculated on the fly makes it possible to eliminate the semantic data abstraction layer in favour of business data views. These views allow users to extract any data from the data warehouse
“This vision of ‘everything centralised’ is realised through application convergence or the deployment of SOA architectures in order to consolidate all enterprise data in a single enterprise-wide data warehouse”
Today, new predictive analytics and data exploration tools like TIBCO Spotfi re are the only alternative that enables IT departments to re-take control of enterprise-wide data while giving users the flexibility they demand. Allowing both worlds – traditional reporting applications and predictive analytics and intelligent data exploration tools – to coexist is without a doubt the best solution to address these issues today. When the people with fi rsthand knowledge of the data are the ones performing the analysis, it leads to better outcomes. TIBCO Spotfi re provides many companies their twosecond advantage needed to be, and stay, ahead of their competition.
Putting data to work The purpose of agile data warehousing is to provide unfettered access to company data, says Michel Kisfaludi.
Michel Kisfaludi is a former international telecom and banking executive. Over the last 10 years, he has run the US$500 million retail banking division of Deutsche Bank in Spain after managing its marketing department. Previously, he ran business development projects for Dassault and France Telecom in China and Mexico.
In what ways do the latest generation of enterprise data warehouses, data marts and analytics applications better respond to the business intelligence needs of users? Michel Kisfaludi. Most data warehouses and data marts are better today only because computer hardware is bigger, faster and cheaper. The potential benefits to the business user are slight in the sense that more data can be used to develop business information, and more people can query and analyse the data faster. However, in order to keep up with and adapt to ever changing business requirements, data warehouses and data marts are now being built using technology that not only stores all of a company’s data on less disk space, but allows faster data access, better data flexibility, and user-driven ad hoc analysis. How important is it that data warehouse appliances allow for complete ad hoc analysis and data analytics ﬂexibility? MK. Th is is of paramount importance. Complete ad hoc analysis is the ultimate frontier from a technological perspective but we should remind ourselves that it is a very basic expectation of the business user. Wouldn’t it be strange if a car buyer was told he could only drive his car on certain streets and roads at certain times of the day? Business success is measured by a company’s ability to outsmart and better execute than its peers. Only with complete ad hoc analysis and flexible data analytics can a company challenge its own assumptions and move beyond the obvious to fi nd new value for its business. What are the main advantages of value-based storage as opposed to record or column-oriented data storage structures? MK. The number one advantage to value-based storage (VBS) is the 100 percent indexing of incoming data values, allowing each value to be stored just once, and the correlation of every unique value. It is on this cornerstone that the main advantages over record or column-oriented data storage structures are built upon: the ability to load all of a company’s data assets into a data warehouse and being able to ask any and all business questions, and better leveraging those answers into information and business insights; the elimination of planning and structure design; and the fact that data warehouse schema is data-generated during the loading process, which drastically shortens an otherwise very long and costly development process. In fact, data
can be loaded and ready for ad hoc querying and analysis in days or weeks rather than many months. Every query, regardless of the combination of fields used, is processed as quickly as an optimised index can locate the information, usually in less than one second. In addition to simple yet powerful ad hoc querying, advanced analytics, such as Google-type data searches and dynamic segmentation querying, are put at the user’s fi ngertips. How does agile data warehousing allow businesses to make better decisions faster, keep abreast of the latest trends, anticipate customer needs and better manage operations? MK. The purpose of agile data warehousing is to provide unfettered access to company data. To accomplish this, a system must be provided that supports all company data assets, is able to incorporate new data sources as they come online, and adapts to changing business requirements and trends. Once a user can gain access to this singular data source free of limiting data architectures, true agility will be achieved. Simply put, companies should fi rst solve the data container problem with appropriate technologies, then support it witha simple, flexible, yet powerful set of interfaces. How do you see data warehousing platforms developing in the future? Are there any game-changing developments or technologies on the horizon that you are particularly excited about? MK. One of the most exciting developing technologies that will influence and enhance data warehousing is multi-core chips. Once on the market, they will put massive computing power into a single machine, which will be a performance boon for the data warehouses built on technologies that can leverage that additional power without suffering from the restrictions of a single machine’s I/O capacity. In the near future, data warehouses will be expected to contain all of a company’s data rather than data subsets that can only answer specific questions. The increased data accessibility and usability will become a commodity rather than a luxury. The emphasis will then be on improved flexibility and agility, and greater ad hoc analysis and data analytics. As these developments take root, metadata will become the key component of the data warehouse and drive developments in technologies to provide metadata that is more scalable, better adaptable to change, and is easy and quick to develop or better still, generated.
Getting the best from business intelligence To gain maximum beneﬁt from your BI system, it should be simple enough for any non-IT executive to use from day one, says Paul Magee.
What exactly is business intelligence? Paul Magee. Business intelligence (BI) should provide transparency of, and accessibility to, company data across myriad digital data sources to business users, regardless of their seniority or level of IT expertise. Traditionally BI has been complex, designed for large organisations with substantial IT resources. However, we are now seeing a shift in demand towards BI systems that are easier to use and more cost-effective. BI helps companies make sense of what is performing and what isn’t – visibility that is particularly important during a downturn. A recession brings increased scrutiny at all levels, so more companies are using BI analytics to closely monitor performance. The value proposition BI offers now extends beyond large companies into smaller and middlemarket organisations, and it’s a question now of how quickly BI vendors can catch up and meet this new market demand. Analysts have highlighted BI as a fast-growing technology sector. Do you think this growth in adoption will continue? PM. Over the past few years the BI market has seen unprecedented growth, with Gartner’s CIO surveys ranking BI as a number one priority four years in a row. As expected, the recession has impacted adoption slightly; however, a recent report by IDC predicts steady continuing growth through 2014, by which time the market will be worth US$11.3 billion.
I think this growth will be largely fuelled by product developments utilising Software as a Service (SaaS) and mobile technology. At Phocas we have seen significant demand already for our browser-based BI tool Phocas Xpress, launched earlier this year. It enables users to analyse their data from anywhere in the world with an internet connection, and in today’s 24/7 business environment, BI any place, anytime is an attractive proposition. One issue is that most first generation BI systems are complex programmes, heavily reliant upon IT staff to operate them. Because business users can’t use these systems themselves, many older BI investments simply become shelfware. My view is that BI should be a simple, easy-to-use technology that provides business executives direct access to their data. This makes it more attractive to smaller companies too, as there isn’t the requirement for dedicated IT staff. What do CXOs need to know when considering BI adoption? PM. BI is designed to make your data work harder for you. The fi rst step to achieving this is to work out what questions you want to ask of it; however; this is not necessarily straightforward. Until you start drilling down and exploring the data, the questions you should be asking are not always obvious. If your BI tool only provides the answers to the questions posed by each query, it can take a long time before you start understanding where the performance issues and opportunities are. However, some modern BI systems let users run ad-hoc queries and play with their data at their own pace, helping them identify the questions they need to be asking and helping them spot opportunities on the fly. BI should also be simple enough for any non-IT executive to use from day one. To overcome the mental barrier to technology that some non-technical staff have, you should clearly demonstrate how BI quickly turns a set of daunting numerical values into sales opportunities, customer satisfaction rates and stock levels. BI has typically been positioned as a sales tool. Does it offer value elsewhere in the organisation? PM. I think companies that restrict BI access to senior sales and management are usually missing a trick. Sales tends to be the first department to start using BI, but it quickly catches on elsewhere in procurement, logistics, customer services – growth you should plan for from day one. BI that is offered on a subscription basis allows scalability based on business need, and in a short space of time you should see the tool become a core business asset. Or, as one of our customers recently put it to me, “the indispensible heartbeat of the organisation.”
Paul Magee is Managing Director of Phocas Ltd in the UK and Phocas Group. With an honours degree in Industrial Economics and Accountancy from Nottingham University, Magee joined Burroughs Computers in 1980, initially in the UK and later in New Zealand. In 1988, he joined CSB Ltd and headed the takeover of Steeple Computers Ltd. In 1994, he led the MBO of CSB Steeple from the CSB Group. In 1999 CSB Steeple created the independent company of Phocas Ltd.
The meticulous planning that goes into staging an Olympic Games is pretty mind-boggling, including a mammoth IT infrastructure supporting the sporting spectacle. Business Management catches up with Jean-Benoit Gauthier, CIO of the International Olympic Committee (IOC), to hear about how he organises an event dubbed ‘the greatest show on Earth’.
hen the Olympic flame is lit in the main arena, signalling the start of a summer or winter Olympic Games, all thoughts turn to the athletes demonstrating their sporting prowess over two weeks of competition. But, of course, an Olympic Games doesn’t just magically happen; it takes years of planning with thousands of professionals working behind the scenes to ensure the event runs without a hitch. Gauthier is Director of IT for both the summer and winter games, so whether it’s a sprawling Olympic site across Beijing or the awkward, icy environment of Vancouver, he and his team have to be ready on time. There is no leeway and no margin for error. For the IOC, based in Lausanne, Switzerland, London 2012 is turning into the home straight. Less than 24 months away, the rigorous testing is not far off for Gauthier and the IOC’s technology partner, Atos Origin. Atos Origin has been the main IT services partner of the Games since 2002 and has been involved with the Olympics for 20 years. The current contract is reported to be the largest sporting IT deal and has recently been extended to cover the 2014 Sochi Olympic Winter Games in Russia and the Rio de Janeiro Olympic Summer Games in Brazil in 2016. The IT vendor is working on an accreditation system for 250,000 athletes, officials, back-room staff and the media, as well as computerised staff rotas and delivering results to the world in less than a second. Other suppliers include telecoms fi rm BT who is constructing a telecoms network for the site that is capable of carrying six gigabits of data every second. For Gauthier, who has occupied this key role for more than five years, the crucial part of the jigsaw will be the IT operations unit – the nerve centre of the Games, housing some 900 servers. Every Olympic Games becomes more dependent on technology to function and London looks set to be no different. To borrow the motto of the Games, Gauthier is striving to go faster, higher, stronger in the IOC’s bid to make 2012 a feast of sport to remember.
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You were quoted as saying last year that you can delay a rocket launch but you can’t delay the Olympic Games because IT is not working. How do you handle the time pressures? Jean-Benoit Gauthier. It’s a good question. Technology has to deliver what the users need and this means that technology is an enabler. It means we have to be ready on time, because the functions have to be able to use the really advanced technology to support our activities. A key element here is that down the years we have developed a good way of transferring technology knowledge in order for people to really know their job well. Also, we have some long-term partners who are able to develop applications and support each function [of the IOC]. It is a dual process; you teach users and you develop without reinventing the wheel applications that can be transferred from Games to Games. Without partners, we are unable to develop long-term plans because these people are excellent at developing the transfer of knowledge and bringing expertise. Key for us is the need to test, test and test. During the last year or so before an Olympics, we have to test the performance of the applications. It’s technical, not just functional testing. We also need to test the people because at the Games we rely on a lot of people. They also have to be at different venues so we have to solve these problems and these people need to be properly trained so they can react if anything happens during the Games. It doesn’t mean that everything is perfect, but we have systems in place so that we can go to plan B, plan C or whatever is needed. To sum up, the key areas for me are the transfer of knowledge, our long-term technology partners and the testing period. They are all key to having a successful Games that are on time. Can you give us an idea about how much technology, IT and people are involved behind the scenes at Beijing, for instance? JBG. The IT budget here is not like what you would fi nd in a regular company where very often people are focused on fi nancial systems or human resources systems. Here, we are speaking about Games time applications because we need to enable tickets to be purchased, accommodate people, run results and disseminate information worldwide through the internet. We also have to install technological equipment in an area that you would not encounter in a regular company. If you go to a temporary venue then you need to cable it – you need to put all the right elements in place to support your servers and computers. It’s quite a complex element because we had around 10,000 desktop and laptop computers in Beijing. For Beijing, we had about 8800 people working in the technology area and another 600 people who belonged to the organising committee. To be honest, this really is a huge number because in past Games we had less people. We had between 2500 and 3000 volunteers and also the contractors who brought their own staff of 5600 people to Beijing from all over the world. Also, China Telecom and China Netcom brought a lot of local people, which was
fantastic. So it was a mix of local and international experts who have the experience from previous Games. Did Beijing throw up any unique challenges? JBG. One challenge was adapting to the local culture. What was great about China is that you knew the Games would be different than Athens, while London will be different than Beijing. We always need to adapt because when you start working with an organising committee you never know how the Games will turn out. The fi rst thing to do is learn the culture and how they behave and together we can build the Games. Th is was a very big event so we had to think of how the Games would impact on 1.4 billion people so it meant the pressure was higher but it was a good learning exercise.
Number of desktop and laptop computers at the Beijing Olympic Games
The IOC has a partnership with technology specialists Atos Origin – the world’s largest IT sports contract. What role do they play in staging an Olympic Games and how has their expertise proved invaluable in the past? JBG. We have a contract that covers three areas: application development, systems integration and information security. Application development covers all the key applications we need for the Games. For instance, if you go to an Olympic Games then you need IOC accreditation and our long-term partner is able to implement and transfer this application from Games to Games. The second element is systems integration and operations, which means they are able to bring past expertise, procedures and experience to the next Games. It covers how they work with global or local partners because you will always need a telecom infrastructure to be integrated. You need to work with hardware and mobile providers and everything needs
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London 2012 countdown
FEBRUARY 2011 The equipment deployment centre opens. Thousands of computers, servers and network and security devices are conﬁgured and distributed to over 90 venues
JUNE 2011 IT systems and infrastructure are rolled out to all venues
OCTOBER 2010 The ﬁrst phase of 200,000 hours of integration testing begins JULY 2010 Launch of volunteer portal, providing information on 70,000 helpers needed to stage the Games
FEBRUARY 2012 The technology operations centre opens. The accreditation system is launched, enabling online registrations
DECEMBER 2009 Design of the technology infrastructure and systems complete
OCTOBER 2008 1000 days to the opening ceremony of the Olympic Games
AUGUST 2012 The opening ceremony of the Olympic Games MAY 2012 A week-long technical rehearsal is staged
JULY 2012 Results systems operation. Source: Atos Origin
to fit together, which is the responsibility of Atos Origin. Also, with a lot of venues that are not centrally located at a Games you need a technology operations centre that supports each of the venues. Th is is supplied by Atos Origin. When it comes to information security, we hear a lot about hacking and intrusion. So, it’s very important that we have some clear focus on this and Atos Origin has developed a key expertise in this field and a very good approach for the Olympic Games. They start implementing it early on and are very good at supporting the organising committee. It’s around 23 months until the London 2012 Olympic Games. How are things progressing in terms of the IT infrastructure and outside suppliers? Am I right in saying that everything has to be ﬁnished 12 months before the Games begin for rigorous testing? JBG. Yes we will certainly try to get everything fi nished [with a year to spare]. The fi rst element we need for the Games is to build and secure venues. The development of the Olympic Park in London is a very big work in progress with 10,000 people working on it and more than 60 percent of it is complete. You can never say you are comfortable but the progress is positive. They will certainly be on time, maybe even earlier than expected. Th is is good from a tech-
nology point of view because we don’t have to come in at the last minute and rush to install everything. We will have our fi rst event this year for the organising committee – a sailing regatta in Weymouth, which will be an opportunity to test things. The idea is to train people, maybe not the applications because these won’t be ready yet. Although we may have bugs in the applications, it’s all about training people and a milestone on the way to the Games. As I said, a key element for London is making sure the venues are ready on time. The second is that we need to have a balanced budget – things are very good at the moment but there is still a very long way to go. The third is about how to reach this new generation of people. We use TV a lot to reach the global audience and this is a key part of the Games. London has launched an interactive way of connecting with the general public, through the internet and mobile phones but we know we have a long way to go on this. The signs are positive, though. How do challenges differ between summer and winter Olympic Games? JBG. For me, the biggest challenge for the summer Games is the site. We sometimes need to build a big arena on a big area and you have a lot of activities everywhere. The size is one of
“The winter Games can sometimes be a bit more difficult.Due to it being winter, everything has to be ready far in advance; you cannot dig the ground when it is icy”
the biggest challenges for the preparation of the Games. It means that you have to think more about infrastructure, how you build it and how you connect all the venues with a high bandwidth. We also have the issue of peak mobile usage and making sure we can support it. When you have 90,000 people at an opening ceremony sending picture MMSs or SMSs to tell friends and family where they are, you really need a big infrastructure and a reliable partner to help you do it. Th is is always a big challenge. The winter Games can sometimes be a bit more difficult. The size of the event may be smaller but it can be more difficult technically. Due to it being winter, everything has to be ready far in advance; you cannot dig the ground when it is icy. Also, when you are up a mountain, mobility is always difficult and coverage is difficult to reach. Both summer and winter have their own challenges but its different every time. London 2012 will be the most hi-tech Games ever. How do you strike the balance between providing the athletes, ofﬁcials and spectators with the best information and data and taking risks or pushing the boundaries with new technologies? JBG. The success of the Games won’t be down to technology – it will because of the athletes. I spoke about the accreditation system but I don’t think it has to be fancy, it just has to work. When you have 200,000 people to accredit it is important there are no queues, people will get access to where they want to go, it will be a transparent process, fully controlled and the background checks by the authorities will be done properly. So do we need advanced technology for that? I think we need the most reliable technology. We have to look at what is relevant. Technology is advancing so it means we cannot develop technology for the organising committee that is four years old. Everything has to change. We also have to reach people where they are, the way they want. Technology
can support this and it can support what people think of London. The key is to ensure the Games in London will be different than the Games in Beijing and technology has to allow it. It’s not just a cut and paste of Beijing. We need to do it properly and be sure we can support the development of the organising committee. Rio de Janeiro has been selected as the host city for the 2016 Olympic Games. Have you begun preparing for these Games already and do you foresee any unique issues or challenges that will have to be overcome? JBG. The two main discussions we have had with Rio is about construction, like roads, and the marketing side because they need to start activating it. On the technology side, we start to work with the organising committee five to six years before the Games so this year we will go to Rio to discuss technology. For me, the key element is the selection of a telecoms partner and they need to structure a technology department within the organising committee. One challenge will be how they really leverage the organisation of big events. They have already organised the Pan Am Games and they are working hard on the soccer World Cup in 2014. They need to leverage this knowledge because it will be a big step for them compared to what they have already dome. We are ready to support them with that. What do you enjoy most about being Director of Technology at the IOC? JBG. You have to stay humble. When we speak about the Rio Games, no one knows for sure how they will turn out. I have worked on a couple of Games so its about bringing experiences to the next one. If we can work together, understand each other, share our culture, share our knowledge, then we can really develop the right level of technology to support the operation, to support the function and to stage a wonderful Games for the athletes in Rio.
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HEAD TO HEAD
Delivering IT efﬁciencies Two industry experts discuss the tangible beneﬁts of effective ITSM.
How can ITSM be leveraged to gain a competitive advantage and improve customer services? Helen Morris. All businesses are required to deliver more for less, whilst maintaining or improving the customer experience. Often it is how, rather than what, we deliver that sets us apart from our competitors. Effective managers recognise that this has to be considered throughout the product lifecycle. What to make? What is the size of the market? Can we deliver the right quantity, cost and quality? Can the stock get to the stores in time and meet customer demand? How can we streamline our delivery, reduce our costs and continue to innovate? ITSM addresses the same issues for IT. The ITIL service lifecycle ensures IT strategy considers which services to offer, design confirms the IT service will work efficiently, effectively and reliably, Transition makes sure the IT infrastructure will cope with the demand. Operation and improvement deliver IT service consistently, fi nding efficiencies, driving down costs and exploiting technical innovations to meet customer needs. Paul Fairbrother. I think competitive advantage is gained in any sector by being better, faster and cheaper than your competition, and it’s better, faster and cheaper that ITSM allows you to be. Your services become better by creating them to match your customer’s requirements, and they stay better through improved availability and service support that complies with agreed service level agreements. Faster stems from a greater throughput of work in the service
“Competitive advantage is gained in any sector by being better, faster and cheaper than your competition” Paul Fairbrother support area, and also an optimised change management process. And fi nally, cheaper can be achieved in several ways, but ultimately by reducing the amount of incidents in total, reducing the amount of incidents that go beyond the first line of support and maximising the number of incidents resolved by each service desk member is a good way to start.
These are lean times for organisations. In what ways can ITSM be used to drive costs savings and improve efﬁciencies? PF. Cost savings and efficiencies can be bought about by both reducing the amount of incoming work, and then performing the remaining work in a more cost-effective fashion. Effective problem management inevitably leads to reduced repeat incidents which, when combined with the efficiencies bought by effective incident, change and knowledge management, can lead to much higher output per service desk analyst, requiring potentially fewer service desk staff moving forward. By becoming more metric-centric, organisations can maximise the proportion of work done by level 1 support staff, freeing the time of the more expensive level 2 and 3 analysts who can then concentrate on developing a competitive advantage to the organisation in terms of innovation and system improvement, which is a good thing both in times of austerity and prosperity.
Helen Morris, co-founder of Helix SMS Ltd, specialises in ITSM and best practice implementation in global organisations. Helen is a skilled and highly qualiﬁed consultant working in private and public sectors. With over 25 years of IT experience, she has valuable perception and insight into the issues facing businesses today.
HEAD TO HEAD
Paul Fairbrother is the Managing Director and principal consultant at Method Masters, an International ITIL consultancy and recruitment company. With over 15 years in IT, Fairbrother is experienced and qualiﬁed to the highest levels in ITIL.
HM. A principle of all ITSM frameworks is to deliver efficiencies throughout IT. The impact of poorly implemented changes makes this area an obvious target for cost savings. Controlled change management means less re-work and less interruption to the business, with the consequent cost benefits of a right fi rst time approach. Processes have to work but not get in the way of efficient delivery. Good incident management will use experts when they are needed, driving down the cost of providing rapid fi rst-time fi x support. Problem management provides an understanding of the ‘pain factor’ of repeating or high impact outages; focussing efforts on providing a durable fi x will deliver cost savings. Efficient management of IT assets minimises expenditure on costly licences, optimises control of spares and ensures effective re-use, reducing total cost of ownership over the infrastructure lifecycle. Standardisation of desktop build reduces support costs. If the process does not deliver efficiencies, then there is a fault with the process. What are the common mistakes organisations make or pitfalls they fail to avoid with ITSM efforts? HM. Common pitfalls we observe are a belief that the solution lies in tools and technology or slavishly following a framework or process without relating it to the actual requirements in the organisation. The primary mistake is the belief that implementing ITSM processes is an end itself, instead of the start of the next stage. A good question to ask is not just ‘where do we want to be as a result of this consultancy and project’ but also to consider ‘where do we want to be in two years’. Th is is not an argument against using consultants. Clients benefit from support, encouragement, knowledge transfer and development of skills. Consultants are valuable, but there is a danger that once they leave, the improvement stops. Real cultural change is delivered by ensuring staff work with and learn from the experts rather than just watching them. It is important to remember that changing a culture takes time. If the hearts and minds of the staff are not fundamentally changed, then the initiative will have been largely a waste of time, money and effort, lost in the rush to achieve the ‘tick in the box’, and immediate benefits. An initiative that neglects to empower staff to ‘own’ and develop the improvements is a failure. PF. I think a common pitfall is to address the areas of highest impact in an organisation, but without completing the ITSM rollout or adopting a service philosophy. ITIL can offer quick wins in terms of delivering much safer changes, reducing the amount of repeat incidents and having fast, repeatable processes for closing incoming incidents, but IT service management is much more than that. Without a service culture promoted from senior directors, and adopted whole heartedly by IT workers, frameworks such as ITIL offer little more than bureaucratic process and rules to follow. The benefits of ITSM are to be found in the adoption of the service culture, the improved communication channels between all parties, and a sense of shared
purpose. ITSM, with its associated frameworks, allows that shared purpose to take shape through a number of tried and tested common processes and functions. With no senior endorsement and encouragement to the masses, there can be no service culture, and ultimately a failed ITSM project. Just a few documented processes will remain. Please tell us how your products and services have beneﬁted your clients. Do you have any recent examples? PF. As an ITIL consultant I have implemented ITIL into sites that had no prior knowledge or experience of IT service Management or ITIL. In this work I have been able to target areas of high and immediate value and demonstrate return on investment. My consultancy has led to the set up of service desk functions that have been located in different areas of the world. In all cases I work with the incumbent staff to discover what they do and why, and then help them to organise what they do into simple effective processes. By leaving behind a continual service improve-
“If the process does not deliver efficiencies, then there is a fault with the process”
ment programme, and service culture, I am confident that changes I helped to implement will continue to mature and improve over time. Having hired ITIL-qualified personnel for permanent roles internationally over the years I have found this area to be quite frustrating, time consuming and difficult, so I developed Method Masters to provide a one stop shop for organisations requiring ITIL resource of any type, in any part of the world. We currently have ITIL resources based in the Americas, Europe, the Middle East and Asia. HM. As consultants it is our aim to assist our clients in developing their skills, so that they can take their own ‘fi rst steps’. The focus is always on ensuring the client has the tools and capabilities to continue once you have delivered – achieving, maintaining and expanding on their long-term goals. One of the key benefits for both local and central government clients was in adopting their own best practice ethos under our improvement initiative. Th is resulted in recognition that they were part of the larger whole, working as a team, delivering to the public. A global service organisation with a UK head office developed their staff so well during our programme of improvement that they became recognised as a global centre of excellence during 2010. ■
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PUTTING ITSM TO WORK Business Management dives into the world of IT Service Management (ITSM) learn how to maximise ROI.
hese lean times have increased the spotlight on how efficiently the IT department operates and reacts to fresh challenges. Likewise, organisations are looking leverage the most from ITSM efforts in order to gain maximum return on investment (ROI). Selecting the right ITSM solution should be a careful considered decision; advice that is especially pertinent when you consider a recent survey that discovered a general dissatisfaction with todayâ€™s ITSM solutions. The questionnaire, which was completed by 340 ITSM executives and experts, aimed to decipher the total cost of ownership (TCO) and overall satisfaction with ITSM solutions. The fi ndings showed that one-fi ft h of respondents said they cannot afford to change solutions now while another 16 percent reported being tied to their current solution. More than a quarter complained about an additional cost when asking their vendor to do anything. The survey, carried out by EasyVista, also found that 37 percent have faced unexpected costs above the original purchase price, adding up to 25 percent of the TCO. On top of this, almost half of respondents said their primary longer-term cost is incurred by daily code tweak-
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ing above existing maintenance and integration projects. Forty-three percent of these respondents didn’t know how much unexpected costs the additional coding added, however 13 percent estimate that it added at least 50 percent to the initial ITSM solution purchase cost. And one-fi ft h (20 percent) of respondents are actively looking to replace their service desk solution. “In today’s environment, IT Managers are under increasing pressure to demonstrate ROI, so it’s critical that they understand what they are getting from the start, and what they will be charged as an additional cost,” said Gregory Lefort, VP Marketing and Business Development at EasyVista Inc. “Organisations are being held hostage by their past buying decisions and face many challenges when trying to customise hard-coded, traditional legacy solutions to meet their dynamic business process needs. Th is study highlights the importance of understanding total cost of ownership and how it should be viewed on a long-term, rather than short-term basis.” The survey also showed that the two major ongoing problems for service desk solution users’ are around reporting (46 percent) and customizing the system (48 percent). More than half (57 percent) think that it is either very important or an absolute necessity to have a codeless, customizable service desk, while only 7 percent think that it is not important at all. One expert on the matter is Keith Aldis, the outgoing CEO of the IT Service Management Forum (itSMF). Here are his thoughts: Some have claimed that ITSM is as much a cultural change as it is a technological one. To what extent do you agree with this assessment, and why? Keith Aldis. ITSM is not so much a cultural change within organisations, as a necessary business need. Technology has driven to the fore the need to have good written processes and systems which has brought about ITSM in the form or the IT Infrastructure Library. Technology is forever evolving and so must service, but ultimately the service must lead, otherwise, why have new technology? Good service management is going on in many organisations and has done so for a very long time and the difference here is that traditionally, IT departments have worked largely in isolation from the business, whereas it is now recognised as part of the business. And in some cases, IT is the business. As such, the values of good service need to be inculcated into everything an IT person does. No longer can there be “heroes”, no longer can the IT department hold sway over the business and so inevitably there will be some cultural issues. The bottom line, however, is, if you can’t change the people, you change the people. If they don’t want to accept change, then change them to people who do. ITSM tools and strategies have been around for quite some time, yet they seem to have attracted unprecedented attention in ﬁnancial services circles recently. What would you say are the drivers behind the recent rise of IT service management?
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KA. It’s a simple case of more being done electronically and more is at risk. IT is the business, not simply part of the business working in isolation. We all have to have some knowledge of what our IT is doing in order to help the business improve. IT Service management is a recognised part of how to support organisations in delivering their business and is as important as people management, facilities management, product management or financial and strategic management. In what particular ways is ITSM having an impact on the ﬁnancial services industry? KA. It’s enabling fi nancial organisations to design and manage secure systems of work. We are told that by having properly structured and managed systems, that organisations are able to process a greater number of transactions to a higher level with shorter periods of maintenance and fewer failures. Additionally, the cost of implementation becomes more tangible and controlled, rather than the traditional case where it was seen as a cost to the business. Now organisations can start to see a return on their investments. Can ITSM accommodate different challenges a particular company may face? KA. Good ITSM will make provision for all sorts of inevitabilities when using IT, for example Disaster Recovery, Change Management and Control, Security, Configuration Management, Deployment, Use and Delivery. Organisations need to understand that each element of ITSM needs to be managed in line with the business and this includes developing a strategy for doing IT, designing it, operating it, testing it, rolling it out and upgrading it to make sure it meets the business needs. Every company will be using elements of IT but may not be managing it successfully within a strategic framework. The IT Infrastructure Library (ITIL) supports this and is freely available.
About the itSMF The IT Service Management Forum (itSMF) is the independent and internationally recognised forum for IT Service Management professionals. As a notfor-proﬁt organisation, it provides a forum to exchange views, share experiences and participate in continuous development and promotion of best practice and standards. The itSMF aspires to remain ‘the premier community for leadership in IT Service Management’. It also provides an accessible network of industry experts, information sources and events to assist staff address IT service management issues as well as helping to achieve the delivery of high quality, consistent IT service internally and externally through the adoption of ‘best practice’.
Backup plan Alan Arnold explains how today’s globalised business environment highlights the need for advanced data recovery and continuous data protection.
F Alan Arnold is the EVP and CTO for Vision Solutions and is responsible for the global technology and services strategy for the business.
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or the most part, traditional tape-based backup and recovery techniques accomplish their rudimentary goals. Nonetheless, they suffer a number of drawbacks. The backup process itself is at the heart of one of the problems. Applications typically must be stopped or curtailed, possibly for hours, while data is backed up. At one time, this could be done on weekends or evenings without affecting business activity. However, for many companies, globalised operations, competitive demands to keep factories running longer and web-based sales and service have eliminated these backup windows. The issue of disappearing backup windows pales in comparison with the problems that can occur when recovering a system from tape. The tapes have to be retrieved, the data must be loaded and then the system must be reconfigured. Even using modern high-speed tape drives, recovering an entire data centre can take hours or even days. That is far too long for many organisations that are dependent on their information systems. Lack of recovery completeness is another problem. Backup tapes are typically created at night and then shipped off-site where they are safe from a disaster that strikes the data centre. Updates applied during the next day will not have been written to any backup tape and, therefore, may be lost should a disaster occur. High availability (HA) technologies, which maintain online replicas of production servers, eliminate the drawbacks of tape-based backups. And if the replica is far enough from the primary server, a disaster is unlikely to affect both locations. If the primary system becomes unavailable or needs to be taken offline for maintenance, users can be switched to the backup. Because tape-based backups are produced at night, the tape cannot be used to recover data that was added or changed the next day. Standard HA soft ware can’t help in this situation either. The soft ware dutifully replicates all updates and deletions, even if they were accidental or malicious. Thus, data will be corrupted equally on both the primary and backup servers. Fortunately, one class of soft ware that is now available can solve this thorny data recovery problem. Continuous data protection, or CDP, is a flexible disk-based technology that enables organisations to quickly and easily recover data as it existed at any point in time. This earlier version of the data can then be restored to the production environment.
There are two types of CDP: true CDP and nearCDP. True CDP captures every data write performed on a primary system, immediately transfers those writes to a secondary disk and stores each of them separately rather than applying them to copies of the production fi les. Consequently, true CDP allows you to “undo” updates and deletions by recovering data to any point in time. In contrast, near-CDP copies data at particular points in time, typically when a fi le is saved or closed. The copy frequency varies depending on how the CDP soft ware defi nes these recovery points and on the nature of the applications updating the data. The copy intervals may be a matter of minutes or seconds, but they might also be as long as several hours. In some circumstances, this may reduce the volume of sustained network traffic somewhat when compared to true CDP, but it may not provide adequate data protection for organisations that must comply with strict regulations or governance requirements. Continuous data protection from Vision Solutions provides true CDP for nearly instantaneous recovery of applications and data at the push of a button. When data is accidentally or maliciously corrupted or deleted, CDP can reverse the damage and allow operations to continue normally. Th is added level of cost-effective data protection makes CDP an important contributor to any business continuity and disaster recovery strategy.
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enemy lines Why shell out millions sponsoring a high-proﬁle event when you can just ambush it, usurping your competitors and whipping up a media storm in the process. Julian Rogers examines why this brazen form of guerrilla marketing is a weapon that should be in every CMO’s armoury.
t began as a run-of-the-mill World Cup Group E encounter between eventual fi nalists Holland and Denmark at Johannesburg’s Soccer City stadium this summer. Less than 24 hours later, the hot talking point wasn’t Holland’s distinctly uneventful two-nil victory but rather the hoo-ha surrounding a marketing ambush executed by Dutch brewer Bavaria. Soon after kick-off camera lenses fell on 36 young nubile ladies in the crowd sporting skimpy orange mini-dresses associated with family-owned Bavaria. They were on their feet chanting and clapping while garnering the attention of male Dutch supporters around them and millions watching on TV. It didn’t take long for football’s governing body, FIFA, to cotton on that this was a marketing ploy. Security swooped and ejected the alleged models masquerading as fans, even making arrests and confiscating passports. The official sponsor of the month-long tournament was Budweiser – the US beer giant paying an undisclosed few million euros for the privilege.
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But much to the chagrin of the so-called ‘King of Beers’, a plucky European rival had suddenly stolen the limelight for a small fraction of its spend. Soon web and social networking sites were awash with chatter surrounding the stunt and it became the ‘did you see that?’ conversation over the office water cooler. “For a very reasonable investment, Bavaria was the most talked about brewer at the World Cup,” says Herbert Krabel, CEO of Guerrilla Communications. The story gained more mileage after it emerged that a TV football pundit’s allocation of tickets had ended up in the hands of Bavaria’s female fans. He was immediately sacked by the UK’s ITV. But the question is this: did FIFA’s heavy-handedness merely create more publicity for Bavaria? After all, this is a company that has form for this kind of marketing ploy, after having sent supporters wearing orange in lederhosen to the German World Cup four years ago. “The attempts by FIFA to stop the guerrilla marketing efforts actually helped Bavaria to get even more exposure because without the arrests and the circus surround-
“the idea is to outsmart the competition versus outspending them” Herbert Krabel, Guerrilla Communications ing the affair most people wouldn’t have noticed it,” says Krabel. “Then it became gossip around the world and people everywhere looked it up.” In no time at all Bavaria had become the most searched for beer on the internet, despite the fact that the mini-dresses didn’t feature any logos or even the name of the brewer. However, the plan backfi red to some extent in that armchair football fans heard a lot more about the official sponsor. “The stunt may actually have helped Budweiser too because people found out who the official sponsor was,” suggests Krabel. Continuing the sporting theme, last year Hugo Boss parked a sailboat emblazoned with the company’s logo off the coast of Scotland next to where the British Open golf tournament was taking place. Inevitably,
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the boat provided the backdrop for many of the TV camera shots of the action. There are also plenty of examples of sportswear giants Nike, Adidas and Reebok being involved in stunts to upstage their rivals at high-profi le events, particularly the Olympics. Perhaps the most notorious was at the 1992 Olympics in Barcelona when Nike sponsored the press conferences with the US basketball team despite Reebok being the official games sponsor. Much to Reebok’s frustration, the US players covered their Reebok logos during ceremonies. Micheal Jordan, the jewel in Nike’s crown at the time, covered his Reebok logo when accepting his gold medal. Likewise, sprinter Linford Christie wore Puma contact lenses before the 100 metres fi nal. Reebok had paid US$40 million for the privilege of being official sponsor. At the 1994 Winter Olympics in Norway, American Express ran ads saying American’s didn’t need ‘visas’ to visit the Visa-sponsored games. And in 2000, Qantas Airlines’ slogan ‘Spirit of Australia’ sounded similar to the Olympic Games’ slogan ‘Share the spirit’. Ansett Air, the official sponsor, was none too pleased. Some may deem this form of marketing clever and just part of the marketing game, while others may see it as overstepping the mark, but as Bavaria proved, the exposure can be priceless if the stunt is successful. However, don’t just assume that guerilla or ambush marketing is a cheap alternative to traditional advertising, says Krabel. “There is a gen-
location was quite stunning but it allowed Microeral myth that guerrilla marketing is cheap or soft to get a foot in the door. Th is marketing stunt free, and that is not true. It can be more affordThe pros and cons of created quite a buzz – Sony spent a huge amount able, but the idea is to outsmart the competition ambush marketing of money and the efforts by Microsoft certainly versus outspending them.” But for brands without weren’t cheap either, but Microsoft got the most the marketing might of the big boys, slick gueCreates global exposure if bang for their buck.” rilla marketing is often the only option. “We’ll executed properly Similarly, Donovan says some consumers see more and more attempts by brands to be appreciate a bold statement like the one Micromore clever than their competitors because most Can be considerably cheaper soft made that night. Microsoft isn’t short of a brands don’t even have the option to do standard than sponsoring an event few euros, but to hire the barge and create the marketing,” Krabel explains. “They are forced to slogan was thinking outside the box. “If you do something outside the box if they want to make The stunt goes viral and the don’t have the resources then this could work an impression.” brand penetrates new markets because your product or brand could appeal to a Donovan Neale is the founder and Executive consumer who appreciates cheekiness or someDirector of the CMO Council – a global network Revenues increase thing that is cool or hip. You want to connect of 5000 marketing and branding chiefs. He says with the consumer and make a statement.” But the key here is to push the boundaries to get the The ambush could backﬁre the organisers of global events are fighting fi re public’s attention. “It’s guerrilla warfare so you and be largely ignored with fi re, because without sponsors the World have to attract attention in bizarre, absurd or inCup or the Olympics would never happen. South ventive and imaginative ways. Wherever there is a Legal proceedings against Africa passed a law in the run-up to the 2010 large gathering of people or highly trafficked enyour company could follow tournament making ambush marketing a crimivironment, marketers are going to see an oppornal offence. The London 2012 Olympic Games tunity to put their brand out there because there has also passed similar legislation banning is an affi nity created when somebody does someunofficial sponsors from using the words ‘2012, games, gold, thing that’s really strange, bizarre or radical.” He says today’s digital age silver, bronze’. Those marketers found in violation of the magnifies the interest in a marketing ambush. “Most people carry mobile 2006 London Olympic Games and Paralympics Games Act phones, and most mobile phones have digital cameras so if you experience could face a UK£20,000 fi ne. The problem for the organissomething then you are going to share it – there’s immediacy to it.” ers is that pursuing a conviction just creates more publicity It’s not just sporting events that can fall prey to the ambush marketers. for an offending brand and underlines the fact corporate US President Barack Obama’s Democrat primary election rally in 2008 was sponsorship can be a waste of money. The Chartered Instiambushed by three people directly behind him in the audience wearing tute of Marketing (CIM) published a report entitled the ‘The Abercrombie & Fitch T-shirts. The large logos over Obama’s shoulder disevent that speaks its name’ in which the CIM criticises the Act as tracted TV viewers and led to a heap of publicity for the clothing company. being “draconian”. The paper says the blanket ban on ambush marketClearly product placement works. Product launches too can be hijacked by ing prevents SMEs from gaining any benefit from the presence of the rivals. In 2007, Sony held a lavish launch party for its Playstation 3 console games in the UK. “The trick with most guerrilla marketing stunts in Paris. VIPS, the media and gamers were all in attendance by the capital’s iconic Eiffel Tower. However, Silicon Valley behemoth Microsoft , makers is to explore grey areas and avoid breaking the law,” says Krabel. of Playstation 3’s rival the Xbox 360, decided to gatecrash the party by “Asking for forgiveness versus permission is a good mantra here.” sailing an enormous barge boat up the Seine. On the side of the vessel in The ethics over whether ambush marketing is considered massive lettering was Xbox 360 ♥ You. “What do you think was the most acceptable will rage on. Marketing is a cutthroat business with photographed object that evening?” says Krabel rhetorically. “The event’s brands all vying for a fickle consumer’s attention, even more so in this tumultuous economic period. Sometimes a company has little choice but to get dirty with some guerrilla warfare, particularly if advertising budgets are tight. The rewards or ROI always have to be balanced against the risks. Bavaria’s CMO must have been feeling pretty smug with all the attention the brand received but it would have been tinged with apprehension after news broke of the arrests – although no charges were made – as well as threats of legal action. Sometimes you need balls of steel to mastermind a stunt like this but it’s still a gamble; you never know for sure what the outcome will be. But the proven effectiveness of ambush marketing doesn’t spell the end of traditional marketing and sponsorship. They will continue to coexist with the guerrilla marketers coming up with bigger and bolder stunts to outdo their competitors and capture the public and the media’s attention. Today’s CMO just needs to keep an open mind to the value of an ambush when opportunity arises. After all, it’s war out there.
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INNERBEAUTY Geoff Skingsley_Loreal.indd 127
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For Geoff Skingsley, Executive Vice President of Human Resources at L’Oréal, the world’s largest cosmetics and beauty company, the joys of working at L’Oréal are more than skin deep and investment in staff is a strategic priority…because they’re worth it! By Stacey Sheppard
he advertising catchphrase of L’Oréal Paris is arguably one of the most widely recognised corporate slogans in the world. “Because you’re worth it” is L’Oréal’s way of telling consumers that whatever their age, gender, ethnicity or look, they deserve to use these products. And the slogan, which has been around in its various forms since 1971, seems to have done the job – L’Oréal, which boasts 23 global brands, saw €17.5 billion in consolidated sales in 2009. However, this philosophy seems to be so much more than just a simple advertising and marketing tool designed to boost sales. “Because you’re worth it” is an attitude that extends far beyond the consumer base of the French cosmetics giant’s L’Oréal Paris brand and is also engrained in the company culture of the group, particularly when it comes to Human Resources. And it is because of this that L’Oréal is an award winning company that has been consistently recognised for its human capital initiatives. Geoff Skingsley, Executive Vice President of Human Resources, puts such achievements down to the fact that L’Oréal has always had a long-term approach to managing its people and this is reflected in the numerous policies that have been in place for some years now. The global profit sharing policy for example, which has been running for over 10 years, is a long-term commitment that means that every employee of the group gets access to a share of the company’s profits, depending on its performance in each part of the world. L’Oréal is also very committed to ethics. Their original ethics charter was launched in 2000, but was reviewed in 2007 and made more comprehensive. There is also an annual ethics day in October on which every one of the group’s 64,000 employees are able to chat online with L’Oréal’s CEO about the Code of Business Ethics. This, says Skingsley, is a pretty enterprising initiative.
The L’Oréal Group’s main facts and figures for 2009: · 100 years of expertise in cosmetics · 5 key areas of expertise: haircare, hair colour, skincare, make-up and fragrances · 23 global brands* · Products distributed in 130 countries · €17.5 billion consolidated sales in 2009 · €609 million in R&D investments · 674 patents ﬁled in 2009 · 64,600 employees worldwide * These brands’ annual sales are superior to €50 million.
And it is initiatives like these that make L’Oréal such an attractive place to work. The company is highly ranked by students and graduates as one of the most appealing employers and it frequently appears in the many lists of top employers published by the likes of Fortune, Business Week, the UK’s Times newspaper and Universum, the employer branding company. The draw of L’Oréal, according to Skingsley, can be broken down into two main components. “The first is the nature of our business because we have some very attractive brands and a very good corporate reputation as a business because we’ve been successful for decades. But then, on the other hand, we have a human resource philosophy that has been very powerful in attracting young people because we make a lot of investments around graduates, and we have this long-term HR philosophy which means that when we talk to young people about the prospects in our company, we really talk about the potential for their long-term career,” explains Skingsley. However, a further aspect that Skingsley believes may add to the appeal of L’Oréal for many young people is the fact that it is a global company, present in more than 60 countries, with 23 international brands. “We’re able to offer a very global opportunity because what we offer is not specific to jjust one country. Our message is the same around the world, and the opportunity is the same whether you’re in Taiwan, Argentina or London. This is also one of the reasons why our universal ranking is consistently high in a large number of countries,” he says. For graduates who do take up the opportunity to work at L’Oréal, Skingsley says they can be sure of a rapid job progression in which they are given a fair amount of responsibility quite early on. “The other thing that I think is a key component of our attractiveness is early responsibility, and we deliver on it,” he says. “There are many managers inside the company who can and do testify to what happened to them in terms of being able to get responsibility – either for a brand or for P&L or R&D or for a factory or whatever it is – at a relatively tender age. We have countless examples of people who, before the age of 30, had their first key management responsibility, and that’s part of our promise to young people, and we deliver on it” says Skingsley, clearly proud of the company’s achievements in this respect.
Recruitment It is easy to see that the initiatives and policies that L’Oréal has in place go a long way in ensuring that it meets the expectations of the younger generations that are now hitting the job market. But in the midst of a raging talent war, simply putting such initiative, in place and hoping the top talent comes to you just isn’t enough. Companies today have to be much more proactive in the hunt for the very best talent on offer. And as one might expect, L’Oréal is also pulling out all the stops as far as recruitment is concerned. “Recruitment has always been an investment priority in our job strategy,” says Skingsley. “Unlike many other
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companies, we put a large amount of money and very good talent into the teams that run recruitment for us. Recruitment is a strategic job in the HR organisation, and we like to ensure that we are maintaining a continuous pipeline of very high calibre graduates moving into the organisation, and all the investments that we make are basically driven from that strategic imperative.” However, the strategy that L’Oréal pursues is unlike that of other companies in more ways than one. Whilst most businesses seek out experienced, highly accomplished, industry experts to form their recruitment teams, L’Oréal takes a different approach completely. “We have an international recruitment department which is staffed, by and large, by people in their 20s and early thirtes,” says Skingsley, and he is quick to stress that the young people he employs are more than capable of doing a good job. “We make sure that the talents we put in there are very good talents for L’Oréal. They are some of the best talents
we have in the organisation at that level, and they’re also close to student reality because of the age they are – many of them only graduated in the last few years,” he says. “We give them business tools that are very comprehensively prepared and tested, and we know they work. We also devote quite substantial budgets to enabling them to come up with new ideas, and whilst not all of them work, the fact is some of them work spectacularly well,” says Skingsley. Allowing his young recruitment team such freedom to innovate and come up with ways of reaching out to the young generation of workers is indeed a gamble, after all as
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“We give them business tools that are very comprehensively prepared and tested, and we know they work”
Skingsley himself says, not all of them work, but when they do L’Oréal benefits in a big way.
Business games Take Brandstorm for example, one of the business games that make up L’Oréal’s innovative recruitment platform. Launched by the group in 1993, the international marketing competition aims to attract the very best marketing students from around world as they battle it out to defi ne a marketing strategy and communication campaign for a new line of products within an existing international L’Oréal brand. So far the competition has
Human resources at L’Oréal 64,600 employees in 66 countries A commitment to developing the competencies and expertise of all employees to support the group’s continued growth: - 5 development centres around the globe – in Shanghai, Rio de Janeiro, Dubai, New York and Paris. - An online, next-generation learning offer. - A wide range of in-house tailored training programmes. A global recruitment strategy: - Ground-breaking business games: REVEAL by L’Oréal the new online business game, and L’Oréal Brandstorm the creative marketing competition. - A strategy of continuous recruitment of talented graduates. - A vigorous management trainee programme, strongly focused on our rapidly developing markets. - Internship opportunities: 80% of young graduates hired in 2009 were former L’Oréal interns. A strong commitment to diversity: - 110 nationalities. - 57% of managers and 38% of management committee members are women. - over 7500 managers in 32 countries have attended L’Oréal’s diversity training programme. L’Oréal is ranked among the world’s most attractive employers (n°3 worldwide among FMCG companies for business students) (2009 Universum survey).
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attracted more than 37,000 students from 220 schools in 42 different countries. According to Skingsley, the fact that L’Oréal has been using such business games since the nineties proves that the cosmetics giant has an extremely innovative approach to recruitment. “We were a pioneer back in the early ’90s when we invented what was initially called The Marketing Award, which has now become Brandstorm; but we were one of the first organisations to create a really meaningful marketing award,” explains Skingsley confidently. And Brandstorm is not the only example of how well L’Oréal has judged the recruitment market. 2001 saw the launch of the e-Strat Challenge: L’Oréal’s first online business game in which business students from around the world play at being the manager of a virtual cosmetics company via a dedicated website. The game has witnessed massive success with 50,000 players in 120 countries taking part each year since its inception. It has also become somewhat of a benchmark in the field and has been used in teaching programmes at leading universities all over the world. However, L’Oréal recently launched a brand new online business game that looks set to rival the e-Strat challenge as the group’s key hiring tool. REVEAL by L’Oréal, which went live earlier this year, is a unique recruitment game that L’Oréal is hoping will revolutionise graduate recruitment. The game invites students and graduates to work on virtual business tasks across different departments in the company. Players will be given feedback on their performance in the game and those who excel will be invited to local recruitment events or interviews. “It’s a very ambitious project,” says Skingsley, explaining how the company invested several hundreds of thousands of pounds into the game, which had a dedicated team of two people working on it for over a year. He goes on to clarify the two objectives of the game, saying that the first objective is to encourage as many students as possible, from all over the world and from different backgrounds, to take part in the game – hence the reason for it being internet based – and
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to help them discover themselves, by exposing them to a virtual L’Oréal work environment. The second objective is to help people discover the beauty industry, says Skingsley. “We know that one of our challenges is that not everybody understands just how much potential there is in the beauty industry and just how exciting it is.” Before continuing, Skingsley warns me that he is about to sound like a salesman, something he says he is not ashamed of. “It’s a very exciting industry. It’s fast moving and it has this incredible mix between technical performance and aesthetics and emotional values,” he says. “The category of the beauty business is unique in terms of what it takes to be successful, and L’Oreal is the worldwide leader. So, in exposing people to the beauty industry through Reveal we are basically able to attract a certain calibre of students.” And it appears to be working, as L’Oréal has already made nearly 100 recruitments through REVEAL by L’Oréal since its launch. This is one of the main benefits that L’Oréal has been able to capitalise on through its portfolio of business games. “We benefit because it’s a competition and the brightest and best tend to win those competitions. We have a very high strike rate in hiring the bright students that end up being either the country winners or the regional winners or even the worldwide winners of these games,” says Skinsgsley, revealing that many of the marketing managers and marketing directors at L’Oréal today were winners of Brandstorm six or seven years ago.
Integration “We are able to seamlessly integrate from business game to recruitment to career, and it’s a very virtuous circle,” says Skingsley. But the efforts don’t stop once the top talent has been recruited. In fact, going back to what he said earlier about having a long-term HR philosophy, recruitment is just the beginning of the process. One of the main challenges facing employers today is not necessarily hiring top talent, but holding on to them. Anecdotal evidence shows that when the Millennial generation – those born after 1980 – don’t get what they want from a job – usually a collaborative environment and upward mobility in a short period of time – they tend to jump ship, and surveys have shown that most tend to be looking to move on within two years of being in a job. It is precisely for this reason, Skingsley says, that L’Oréal has introduced an integration programme that lasts exactly this length of time. Called L’Oréal FIT (Follow-Up & Integration Track), the scheme is a personalised integration and support programme adaptable to the needs of all new employees at L’Oréal. “The whole nature of how you follow an individual when they join the company needs to have a medium-term perspective and not just a short-term perspective,” says Skingsley. “The FIT programme that we introduced is designed to last two years, but I think it is important to give people a perspective beyond that, and this comes back to what I said before about rapid opportunity and rapid responsibility. Young people need to see those around them getting access
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L’Oréal’s brand portfolio Biotherm Cacherel Diesel Garnier Giorgio Armani Helena Rubenstein Innéov Keraskin Esthetics Kérastase Kiehl’s Lancôme La Roche-Posay Le Club des Créateurs L’Oréal Paris L’Oréal Professionnel Matrix Maybelline NY Mizani Ralph Lauren Redken Sanoﬂore Shu Uemura Shu Uemura Art of Hair SkinCeuticals Softsheen Carson The Body Shop Vichy Viktor & Rolf YSL Beauté
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The Yves Saint Laurent integration story
Geoff Skingsley to positions of responsibility, because it gives them belief in what could happen to them.” If you look at the top of the company today, Skingsley says everybody who is on the board lived through that process of getting access to early responsibility in their late 20s. “We are regularly nominating people in their late 20s to be head of marketing, head of commerce, or head of finance in a division or on a brand,” he says. “We have to make sure that the career promise is being delivered to those people, and even if it hasn’t happened to them by the end of two years, they can see it happening to people around them, and therefore, they can believe it.” However, whilst L’Oréal is putting a lot of effort into meeting the aspirations of the younger generations entering the workforce today, there are certain expectations that Skingsley believes are not quite so necessary to deliver on, particularly the much publicised desire to work when and where you want. “We have to make sure there’s some flexibility regarding how people work, and we have to make sure that we’re in touch with what that generation expects, but what is not talked about much and what we fi rmly believe is an underappreciated part of a successful working environment, is a strong sense of community. And to do that, people have to be physically in a building. They have to interact with each other on a very intense basis, and we believe that’s part of our success, and we believe it’s equally relevant for the upand-coming generation,” remarks Skingsley. With all things considered, L’Oréal appears to be doing a pretty good job at offering students and graduates exactly what they want from an employer, workplace and career, and this undoubtedly helps them not only to attract
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In June 2008, PPR, the French multinational holding company specialised in retail shops and luxury brands, sold Yves Saint Laurent Beauté to L’Oréal for €1.15 billion, following authorisation from the competition authorities. The acquisition of YSL Beauté presented a number of challenges for the cosmetics giant, not to mention the huge undertaking that was the integration of the brand into its Luxury Products division without making any of the 1300 employees redundant – an achievement that saw L’Oréal scoop the Trophée du Capital Humain 2010 prize in France for management of employment. “It’s quite a big commitment to make,” says Skingsley. “When we take over an organisation with a large number of people, it’s a signiﬁcant commitment to say we will integrate them with minimum loss of employment and then deliver on it. And then on top of that, we did it in 2009 in an economic context that was really pretty unfavorable.” Explaining what it was exactly that enabled L’Oréal to be in a position to deliver on that promise Skingsley says: “Firstly, we mobilised the whole organisation to help make it happen. It wasn’t a single division or a single country, and even though it was piloted by our luxury division, it was actually an effort by the entire human resources organisation to create the amount of mobility necessary to be able to integrate Yves Saint Laurent people, not only into the luxury structure, but sometimes into other parts of the business, which we did.” The integration programme did take time however, and Skingsley highlights the fact that it was important not to rush the process. “We took 18 months to complete the integration of Yves Saint Laurent, but because we gave ourselves that timeframe, it meant that we were able to integrate the vast majority of employees into that division and make them feel a constructive and happy part of the L’Oréal organisation,” explains Skingsley. However, there was also a cultural challenge that the integration presented, since YSL Beauté had already changed hands four times in the previous 20 years and the prospect of having a ﬁfth owner was quite unsettling for the staff. “We had to make sure that they felt comfortable and understood the culture they were moving into, and that’s something you don’t do in one meeting,” explains Skingsley. “It was a long engagement, which took a lot of investment in terms of both time and money, which was primarily done by the human resource teams.” But these efforts clearly paid off and the best proof of how successful the integration was, according to Skinsgley, is the fact that the YSL business is now in such great shape with double digit growth around the world. “You couldn’t do that if you didn’t have motivated, efﬁcient employees,” he says. “Not only have we kept the people, but we’ve kept them in a reasonably positive way, and the best indication of that is the business results.”
the best talent but also to retain it. But where does such an innovative Human Resources strategy go from here? According to Skingsley the strategy is not really going to change that much at all, although the tools and technology that are used to deliver that strategy will obviously need to evolve with the times. “The real question is about reach,” exclaims Skinsgley. “How can we reach further and further around the world into markets where our presence is only just being established?” Certainly, with e-recruitment tools like REVEAL by L’Oréal and Brandstorm this question is already being answered.
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Travel | Gadgets | Books | Leisure | Money Creative Thinking Inspired technology inside IKEA p136
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BLUEPRINT FOR SUCCESS IKEA’s journey from Sweden’s best-kept secret to global retail sensation has been founded on slavish devotion to a carefully formulated business plan. Here, CIO Paolo Cinelli explains why he is looking to apply similar discipline to the firm’s technology function. By Ben Thompson
ou can spot the stores from a mile away: huge, hulking warehouses painted in distinctive blue and yellow, dominating the skyline as their parent company does the home furnishings retail landscape. In a little over half a century, IKEA has expanded beyond the boundaries of its native Sweden to become one of the most successful multinational retailers of the modern age, with global sales of €21.5 billion last year. Here the company’s Global CIO, Paolo Cinelli, reveals his technology priorities and explains how IKEA is tackling the challenge of retailing in an environment where the customer is increasingly king – and one where the right strategic uses of technology will become key competitive advantages and the difference between success and failure.
How important is it for you as an IT organisation to align with company goals? Paolo Cinelli. The trigger for IT4Business was a diagnostic of what we were able to do compared with what the business needed, and it has given us the chance to bring the discussion to a very high level in the company. And senior management have really taken it seriously, because there is a lot of potential in the company to take advantage of information technology due to the nature of the business model, where we have the full value chain – from product development to the end customer like you and me – which is a very powerful vantage point. As such there is a big effort to improve the competencies in IKEA regarding IT and what we call IT demand – formulating requirements and owning projects and programmes on the business side, and improving how to interpret those requirements and execute on them in terms of IT delivery.
I imagine that joining the dots in terms of customer relationships is also especially key for a company like IKEA, where the whole business model is based on a slightly hands-off approach to customers? PC. The unwritten deal with our customers is that ‘you do your part, we do ours’. That’s in the DNA of the relationship. By being prepared to help yourself in
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the store, not only do you feel more free because you don’t have other people interfering with your shopping process, you also know that it’s probably going to cost less as a result because we don’t need to have so many staff on-site. We aim to take the same approach with CRM. In all the opportunities where you have a touch point, customers can do most of the relationship management themselves. For instance, when you enter your card you might want to update some information about yourself. We don’t want to force the customer to go to a sales attendant or sales rep to do that; we see that as old fashioned and inefﬁcient, and something that can be achieved much faster when you can do it yourself. So, we are trying to marry the spirit of do-it-yourself with CRM.
“In all the opportunities where you have a touch point, customers can actually do most of the relationship management themselves”
The rise of mobile commerce and social media offers tremendous opportunities and challenges for retailers. What do you see as the major issuesand andthe opporThe Wing Pier, Hong Kong tunities with regards to both mobile and social?
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PC. Mobile technology is making communication faster and easier, and we don’t see this as a threat but an opportunity; however, we still have to ﬁnd our way in this area. For example, we are reluctant to become a mass marketing company that puts pressure on customers to go and buy through the use of big promotions; we are not into aggressive mobile marketing. We see it more as an opportunity to provide information and to make people more aware, but certainly not in an aggressive way. With regards to social media, we see big opportunities in areas like user-generated content and co-invention. We have a lot of people that are willing to share – both amongst themselves and with us – how they use IKEA products. There are people that only have IKEA furniture in their home, and they’re even using things in ways they were not designed for. We respect those types of activities and don’t want to interfere with them. The question is, how can we contribute to that? What’s the impact of that on our business? And I cannot say that we have sorted that out yet.
When you visit an IKEA store, it’s a unique shopping experience. How do you translate that to a multi-channel environment? And as an IT professional, how do you support that? PC. One new way we’re looking at this is using the concept of inclusion, rather than seeing store and web as two competing things. The paradigm of the past was to see these as opposing forces. One school of thought said we should only sell online; another said we should only sell in stores. For me, that is the wrong starting point. It’s more about how the two channels can complement each other. They have different possibilities, opportunities and roles, but at the moment, we are not always in the best position to take advantage of them. For example, home shopping can be very good for selling some things – e.g. repetitive purchases or simple items – but nobody would feel comfortable buying a kitchen online. For that you want to be instore, you want to talk it through with someone. So the point is to ﬁnd the best complementary approach and to enrich the services in the process.
same challenge – that of having a big legacy drawing the majority of resources. So how do you address that? First of all, it goes back to the transformation that I mentioned at the beginning. Someone has to take the lead in cutting the loop, in saying, “Okay, we will not ﬁx this overnight, but if we don’t act now it will grow worse and worse.” That’s the ﬁrst realisation. Next, it’s about bringing the same level of standardisation and consistency to the IT architectures that we bring to the rest of the organisation. One of the things I found a little strange on joining the company is that while the stores are pretty much the same everywhere you go – they look the same, they have the same products, they have very similar layouts – there is a massive deviation between the different IT systems we use across the organisation. So we put this example in front of senior management and asked what would happen if our stores suffered from the lack of planning that the IT systems suffer from. Imagine what they would look like? Badly planned, disorganised, inconsistent – if, as a customer, you were ever able to get out of that store in the ﬁrst place, you would never come back again. And that discussion triggered the sponsorship of an IT architecture landscape redesign for the future. It won’t happen overnight – it took a long time to get the stores as they are now, and we still haven’t ﬁnished yet – but at least we’ll have a reference architecture that can drive our decisions going forward. Managers from the big departments will worry about having to retrain all their people to shift from the current systems to whatever standard system we will implement, so the effort ahead of us is daunting; I am not denying that. But I think overall the balance of the company is determined to do it, which is great.
How do retailers – and specifically their IT departments – address the problems of today while also anticipating the needs of the future? How do you balance the need to focus on the complex legacy of the past as well as build for tomorrow? PC. I can’t speak for other companies but my feeling is that most face the
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Technology for today’s executive Nokia E7 Nokia has been slow off the mark in the smart-phone market, and in recent years has been over-shadowed by rivals at Apple and BlackBerry. Now, the Finnish manufacturer is ﬁghting back. The E7 boasts the familiar large screen, but slides to reveal the Qwerty keyboard facility, designed to appeal to the business market. Microsoft Exchange ActiveveSync support system allows users to access emails in Outlook, as well as edit Windows ﬁles direct from the handset. Perhaps less slick than the business models put out by rivals, vals, the E7 is certainly the best corporate phone from the Nokia portfolio for a while.
New Amazon Kindle The latest Kindle has been hailed by UK broadsheet The Daily Telegraph as “the ﬁrst ebook reader that has a credible chance of cracking the mass market.” The device is loaded with attractive features to lure new converts to the e-reader market. Weighing only 240g, it is comfortably manageable with one hand , can sit inconspicuously in a laptop case, and has a battery life that lasts a full month. Improved e-ink technology makes the device readable in direct sunlight ¬– unlike the iPad as Amazon’s marketers are quick to point out. The memory can hold up to 3500 books and with more print media outlets expanding their use of the e-reader platform, the Kindle will soon be able to hold your daily newspaper as well. Those who opt for the marginally more expensive 3G model can also beneﬁt from instant access to the Amazon store.
Samsung Galaxy Tab Ever since the iPad barged its way rather arrogantly on to the technology scene in January, Apple cynics have eagerly awaited its rival. Well here it is. The Android powered Samsung Galaxy is 2.5 inches smaller than the iPad and with similarly sleek aesthetics. The 3G internet connection combined with front screen camera allows for video calling. Users can of course beneﬁt from the increasingly wide range of apps from the Android store, and Samsung has developed its own range of applications designed for this screen. Perhaps it’s still early days for Android tablets to seriously contend with the iPad; however, Samsung’s effort is commendable, and with high deﬁnition voice calling capabilities, a well developed email application and compact size, this could be the next essential business accessory.
Canon G11 It is generally considered that lowering the spec on a device is moving in the wrong direction. However in the instance of Canon’s latest compact camera, lessening the capability of one function has improved the product as a whole. Canon decided to lower the megapixel count from the previous G10 model, in order to improve the pixel density on the sensor, and Canon’s ‘G’ range has already established itself as the best compact range on the market, with convenient body size and an impressive zoom. It is not without its ﬂaws however; the menu system is awkward for a device of such capabilities and the price is extremely high, which may damage the G11’s success in the market.
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BOOK REVIEWS 139
Copycats: How Smart Companies Use Imitation to Gain Strategic Edge By Oded Shenkar
2 Organisation Culture: Getting it Right By Naomi Stanford
With this book Stanford addresses the importance of a business’ culture to sustainable success. For most organisations, their culture will either be an advantage or a disadvantage and has the potential to be a powerful driver of business success. Managers looking to better understand the role that company culture can play would be well advised to study the examples in the book, which range from Ikea, Microsoft and McDonald’s to the likes of Unilever, Google and Tesco. BM says: Full of practical exercises that will help managers analyse their organisation’s culture and use it as a strategic business tool.
How Women Mean Business By Avivah Wittenberg-Cox
Written by the CEO of a leading gender consultancy, this book is a follow up to the successful Why 3 Women Mean Business, which provided a compelling illustration of why women represent a huge, global economic opportunity for business and why companies should be looking to achieve gender balance. The second book, however, presents a pragmatic approach to the ways in which companies can improve gender balance and thereby drive growth. BM says: Full of informative research and real-life case studies of blue-chip companies How Women Mean Business is a must read for companies looking to drive business growth and offers a step-by-guide on how to use gender to do so.
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For the last few years, “innovation” has been the main buzzword circulating in the business world, with those companies who excel at innovating being touted as the ones who are the most likely to survive and thrive. However, in this book, Oded Shenkar argues that imitation – the copying, replication or repetition of an innovation – is just as critical to business survival and prosperity as innovation its self. Shenkar also presents a strategy for pairing imitation with innovation to gain a strategic edge. BM says: An insightful and practical look at how companies can use imitation as a strategic business tactic, and is full of examples of companies that have already been successful doing so.
Design Value: A Strategy for Business Success By Peter Zec & Burkhard Jacob
The two authors of this revolutionary book present a completely new perspective for 4 looking at design and business, which makes it possible to measure the value which companies generate through design. Previously seen by many companies as a pure cost factor, design value can now be measured through the use of a simple formula that allows companies to see design as an investment and driving force for economic growth and value creation. The book outlines the results of long-term monitoring carried out by the red dot institute for advanced design studies, which shows that companies that invest in innovative and well designed products in the long-term often achieve above-average proﬁ t and sales ﬁgures as well as clear advantages over competitors.
How They Blew It By Jamie Oliver & Tony Goodwin
This fascinating book is about the business leaders and entrepreneurs who built up remarkable business empires worth billions, but who somehow managed to lose it all in some of the world’s most spectacular business failures. Oliver and Goodwin do not, however, set out to name and shame those who fell from grace, but rather by examining the demise of corporate gurus such as Bernie Ebbers, Adolf Merckle and Ken Lay, the authors hope to highlight lessons that other would-be entrepreneurs and business leaders can learn so that they may avoid such mistakes themselves. BM says: A thorough examination of the ﬁne line between success and failure in which the authors attempt to get into the minds of the people behind some of the greatest business calamities of our time.
(See our article The business of design on page 38) BM says: Broken down into ﬁ ve manageable chapters that explore the beneﬁts that design can bring to business, this book provides a method for concrete, formulaic analysis that business leaders require in order to see a business case for investment.
36 hours in... Las Vegas Time: -8hrs GMT | Currency: Dollar | Average temperature: 19.5°C
‘Bodies…The Exhibition’ at the Luxor Hotel
The sparkly lights of Sin City lure hardened gamblers and those who just fancy a flutter from all over the world. However, it’s also the convention capital of the world and a popular business destination, as BM discovers.
he city that never sleeps – and it truly never does – is without doubt the world’s largest adult playground; exchange the climbing-frames for blackjack tables and swings for slot machines and you get the idea. But nothing can replace the moment when you realise you’ve just walked past two pyramids and a sphinx in the middle of the Nevada Desert while the skyline illuminates everything behind you. Fortunately, Las Vegas is a hub of events and conferences, spanning across hotels, arenas, and incredible customised venues that have been serving the industry’s biggest and brightest for a good few years, so if you haven’t had the privilege of having your jaw-dropped recently, BM has the answer in its own version of Las Vegas tourist information. Take our word for it.
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The Stratosphere Las Vegas Hotel and Casino Two types of people walk through the doors at the Stratosphere – those there to relax, which is completely understandable for a hotel – and those there for an adrenaline rush. If you’d consider yourself one of the latter, then this is a must. Standing at a chilling 1149 feet high in the Vegas skyline, the Stratosphere Tower boasts of being the tallest observation tower in the US. Not that exciting? Well, add three roller coasters and a controlled free fall, all outside the roof of the tower, and you have your answer. The ‘X-Scream’ propels you 27 feet over the edge of the tower while you look 866 feet below you, while ‘Insanity’ extends you 64 feet out from the tower on a huge mechanical arm and spins you with a force of 3G for a truly memorable experience. Just don’t try to take your drink up with you.
Perhaps not one to visit immediately after the Stratosphere rides, ‘Bodies…The Exhibition’ will easily trump any science lab dissection you did at school. With an intricate, 3-D vision of the human form, visitors get to see real bodies preserved along with their inner organs. Showcasing 13 wholebody specimens from China and more than 260 organs and partial body specimens, each piece goes through a method known as polymer preservation where all the tissue and water is replaced with silicone rubber. There are sections dedicated to bodily decay, wonders and anomalies that will leave you with a completely different perspective on the human body – after all, it’s not everyday you get to see what makes you tick.
Top five hotels 1. Wynn Las Vegas: The newest hotel to hit the strip, the Wynn holds original Van Gogh and Picasso pieces strewn around Louis Vuitton and Chanel shops – if you didn’t feel luxurious enough already. 2. Four Seasons: A hotel within a hotel, based on ﬂoors 35-39 of the Mandalay Bay hotel. Say no more.
The Freemont street experience Legendary casinos, free entertainment, old-fashioned gambling hospitality – this is the vintage Vegas of the Freemont Street Experience. On any given night you could bump into famous bands, strolling showgirls or be privileged enough to witness an amazing saxophone performance. The ﬁrst paved street in Vegas, Freemont Street boasts a seven-block, open-air pedestrian mall underneath a 90-foot LED canopy that projects a myriad of eye-popping colour combinations, while 12.5 million bulbs ramp up the resolution to literally blow your mind. To cut a long story short, no visit to Vegas is complete without a walk down this legendary street.
The Bellagio conservatory With over 100 cast and crew members, this could very well be Vegas’ biggest free gig. With over ﬁve million visitors each year, the conservatory lets the seasons dictate its contents and, just like a Broadway show, the ﬂoral theatrical productions take months of work and an army of talented people. From giant ants to dragons throughout the walk, you can’t help but become a small cog in the imagination of the Bellagio – inspired, of course, by Mother Nature herself. Last year’s summer event was witness to a 40-foot tall ferris wheel and an assault of 16-foot tall poppies, and the word on the grapevine is that this year’s event promises to surpass any other they’ve ever done. The best bit about it all – it stays open 24 hours a day so there’s no need to interrupt your luck at the tables.
Siegfried and Roy’s secret garden and dolphin habitat at The Mirage hotel
Gondolas at The Venetian
Not only is The Mirage hotel an icon in Vegas, but many of the attractions it holds are too – and Siegfried and Roy are no exception. Their secret garden and dolphin habitat lets you come face-to-face with white lions and tigers, panthers, leopards and a family of bottlenose dolphins; if looking at them isn’t enough for you, or indeed your little nippers, then you can indulge your fantasy and become a dolphin trainer for the day. Working with their dolphin specialists, you’ll participate in plenty of activities including playing with, training and getting in the water with the dolphins. When you ﬁnally tire of your aquatic shenanigans, there’s a three-course gourmet lunch waiting for you. Didn’t think you could do that in the desert did you.
I’m sure everyone is aware of the gondola rides in Vegas, but how many people have actually been there? For those of you who haven’t –shame on you. But you can make it up by taking a stroll down to The Venetian hotel and casino at the intersection of Las Vegas Boulevard and Spring Mountain Road to witness the surreal for yourself. With opera singers, a strolling juggler and various violinists all under a painted fresco overhead, a visit is sure to entice your Italian side out to play. If shopping is your thing – or your other half’s thing – then the Grand Canal Shoppes has everything to offer, including exceptionally high-quality blown glass and unique Venetian masks. Of course, you could just use it as an excuse to lose someone and go gambling. The choice, as they say, is entirely yours.
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3. The Bellagio: Remember Ocean’s Eleven with the amazing hotel fountains and the angry boss? This is that hotel – minus the angry boss. 4. THEhotel at Mandalay Bay: If you’re looking for the biggest rooms in Vegas, look no further. 5. The Venetian: Italian opulence, complete with marble baths in every room, provides a truly relaxing stay away.
Wynn Las Vegas
Hot wheels German auto giant Mercedes updates a winning formula. If you’re looking for an executive motor with power and reﬁnement, then feast your eyes on the pictures of the new Mercedes CLS, due to be unveiled at the Paris Motor Show this month. Mercedes sold more than 170,000 models of the original CLS – launched six years ago – and this latest version retains much of the aforementioned coupe’s looks, including the sloping rooﬂine. First to be released is the CLS 350 BlueEFFICIENCY, which boasts a 306hp, 3.5-litre petrol engine kicking out 306hp. A diesel-engine model will follow along with the 500 BlueEFFICIENCY, capable of 408hp. The CLS, which has an interior that is both sumptuous and reﬁned, with a combination of satin and high-gloss ﬁnishes, also comes with a choice of ﬁve interior colours and design trims, including three types of leather. The CLS also lays claim to a world’s ﬁrst: fully LED performance headlamps, handy for that late evening jaunt in the countryside.
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French protesters rally against a government pension reform bill on September 15, 2010 near the National Assembly in Paris. President Nicolas Sarkozyâ€™s controversial pensions overhaul, including raising the retirement age from 60 to 62, has been opposed by Franceâ€™s powerful labour unions who have taken to the streets of Paris to demostrate against what they see as an attack on the French way of life.
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