AMONG LEADERS AND MANAGERS ACROSS THE WORLD
Prowling with copycats Executive team test RACHEL BOTSMAN DIALOGUEREVIEW.COM
AMONG LEADERS AND MANAGERS ACROSS THE WORLD
The trust paradox
Welcome to Planet Asia Anil Gupta and Haiyan Wang on winning in the worldâ€™s financial centre
Engagement and the end of rules
Join the hotline to ambidexterity
The secrets of hedge fund success
Selling better in a complex world
Focus on qualities not weaknesses
THE VOICES BEHIND THE
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Digest 14 FOCUS ASIAN ASCENT
Prowling with copycats
Brand of gold
We are family
Fortune on Planet Asia
Ben Walker on the rise of Asia
Spark What you need to know
Great minds Michael Chavez meets Tom Klein
Reviews Books, discovery paths and apps recommended for you
Michael Canning on artificial intelligence
Karina Robinson on migration
The big interview
Q1 2018 Dialogue
BEYOND THE WRITTEN WORD AUTHORS WHO ARE EXPERTS
LID Speakers are proven leaders in current business thinking. Our experienced authors will help you create an engaging and thought-provoking event.
A speakers bureau that is backed up by the expertise of an established business book publisher.
In depth LEADERSHIP & PEOPLE
I N N O VAT I O N & TECHNOLOGY
Kate Cooper: The leadership column
Vivek Wadhwa: The innovation column
Change how you change The AI rules of leadership
The human difference
Hotline to ambidexterity
Do you play well together?
FINANCE & AC C O U N TA N C Y
MARKETING & SALES
Giles Lury: The marketing column
Phil Young: The finance column
Sales in a vuca world
Are you ready for change? How to bet your hedges
No more hard sell
S T R AT E G Y & O P E R AT I O N S
Patrick Woodman: The strategy column
Have faith no more
Live strong and prosper
Q1 2018 Dialogue
Dr Anil K Gupta is the Michael D Dingman chair in strategy, globalization and entrepreneurship at the Smith School of Business, University of Maryland; and a visiting professor at INSEAD. He is widely regarded as one of the world’s leading experts in his field, and is ranked by Thinkers50 as one of the “most influential living management thinkers”. He co-founded the China India Institute with Haiyan Wang.
Harvey Chen is chairman of the advisory board of the Center for Creative Leadership, Greater China, and a member of the International Advisory Board of Oxford Analytica. His career has spanned academia (London School of Economics), public policy (International Monetary Fund), the private sector (JP Morgan Chase), the state-owned enterprise sector (Guangzhou Shipyard), consulting, leadership development and organizational transformation.
Professor Annie Koh is vice president of the Office of Business Development and professor of Finance at Singapore Management University. A former Fulbright scholar with a slew of academic positions, Koh is also a sought-after conference speaker, moderator and expert commentator. Her research interests include family business, investor behaviour, alternative investments and enterprise risk management.
Dr Sunnie Giles is a radical innovator, organizational consultant, leadership coach, speaker, trainer and president of Quantum Leadership. With a background in systemic psychology and coaching, as well as heading up marketing functions for Samsung and IBM, Giles is passionate about advancing collective evolution and facilitating higher complexity. She will publish her first book, The New Science of Radical Innovation, next year.
Haiyan Wang is cofounder and managing partner of the China India Institute. Haiyan has spent the last 20 years consulting for and managing multinational business operations in China and the US in several different industry sectors. An award-winning author and regular columnist for Bloomberg BusinessWeek, Wang has previously been short-listed for the ‘2013 Global Solutions Award’ and ‘2011 Global Village Award’.
Vivek Wadhwa is distinguished fellow at Carnegie Mellon University and director of research at Duke University’s Pratt School of Engineering. He is a columnist for the Washington Post and author of The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent, which was named by the Economist as a book of the year of 2012. Wadhwa has held appointments at Stanford Law School, Harvard Law School and Emory University.
Dialogue Q1 2018
“Spending money,” the great Chinese entrepreneur Jack Ma once said, “is much harder than making money.” Ma was talking about the burden of responsibility on the super-rich to use their wealth wisely – to advance society and help people. “Society,” the Alibaba pioneer added, “has entrusted you to invest. But you’ve got to wait for the talent, the organization, and the system to be ready before doing it.” Ma’s words apply just as well to whole nations. The new superpowers of China and India find themselves at a crossroads. Economic success is undeniable but uneven. Where and how should they invest? As our cover story (page 28) clearly outlines, there are many hurdles ahead for the rising powers. China faces major challenges over water scarcity, pollution control and reliance on imported oil, all of which offer gigantic opportunities for multinationals that wish to invest there. India, still a decade or more behind its neighbour, holds vast investment promise in the areas of education, renewable energy, travel and transportation. As our expert authors Anil K Gupta and Haiyan Wang illustrate – Asia, the new centre of global commerce, is a continent of almost infinite opportunity. But, as Ma warned, the conundrum centres on understanding how to spend. For business strategies to succeed in Asia, Western leaders must drop their preconceptions and – in many cases – abandon customs that served them well enough at home. In a stimulating piece, Harvey Chen (page 16) urges investors in China to overcome their cultural discomfort with emulation, and embrace it instead. The fact that your product can and will be copied need not be a barrier to commercial success, Chen argues. In China, it is not that innovation is good and emulation bad, rather that the successful do both rather well.
Elsewhere in the journal, HEC Paris adjunct professors Hervé Coyco, Roger Hallowell and Randall White provide an invaluable text on going beyond employee engagement, imbuing your teams with purpose and loyalty. Core to their manifesto is a persuasive guide to breaking rules. Being a slave to the rulebook doesn’t work; but nor should frameworks be recklessly undermined. Continuing with the practical assistance, Marshall Goldsmith returns (page 46) to challenge readers to examine whether they play well with other executives. Many leaders, Goldsmith argues, have a skewed view of how well they interact. He provides a vital tool for making an assessment and a subsequent improvement. At the heart of good team interplay is trust – the oil of all human relationships. Given that, trust expert Rachel Botsman – making her Dialogue debut – wonders why humans are increasingly delegating the allocation of trust to machines. She argues that the boom in the trust economy has not been accompanied by a commensurate improvement in the systems and algorithms in which people increasingly place their faith. In the digital age, human judgment should become more important, not less. As Duke Corporate Education’s global head of new businesses Michael Canning conveys (page 13), this is precisely the time to focus on qualities that are uniquely human. The world is a volatile place; globalization has opened up markets that once seemed remote. In building new global partnerships and opening new avenues, the human factor is more important than ever. Enjoy the issue. Ben Walker is editor of Dialogue
Q1 2018 Dialogue
W H AT YO U N E E D TO K N O W
Collective intelligence in Seattle Crowdsourcing Week event highlights the purest nature of crowdsourcing: sharing In October, Seattle hosted crowdsourcing leaders and advocates gathered from around the world to discuss trends and developments: from crowdsourcing in machine learning, to ‘what’s next?’ in crowd funding. The one-day event was attended by delegates from the US, Canada, Malaysia and more. Featuring 15 talks and two panels, with speakers from Microsoft, Uber, Smash Haus Music, HeroX and iRescU, CSW, Seattle represented industries ranging from music technology to money transfer platforms. Among the esteemed, tech-heavy gathering, one distinct element stood out on the day: crowdsourcing is all about sharing. With a heavy focus on ‘collective’ intelligence (artificial intelligence + human intelligence = collective intelligence), speakers and delegates alike highlighted the generous ease and thrilling speed of communication and sharing in today’s world, and all of the
many exciting projects made possible by crowdsourcing. The key takeaway for leaders? Gaining input from as many sources as possible enables a product or service to be useful to as many people as possible.
Dialogue is media partner of Crowdsourcing Week. Join us next in Luleå, Sweden, on 20 March 2018 for the next wave of talks, workshops and news from around the crowdsourcing world.
When honesty is akin to self-sacrifice Journalists, politicians and students discuss truth and trust in the media The Menell Media Exchange 2017 in Johannesburg this year played host to a plethora of brave people who have put their careers – and lives – at stake to bring the truth to the masses. Politicians, activists, watchdogs and journalists gathered in South Africa to discuss truths and lies in the media. “‘News’ is an event that actually occurred. By definition there is no such thing as ‘fake’ news – there are only lies,” panellist Dan Moyane of South African broadcaster eNCA, opened. Key lessons were shared about fact and fiction, bravery and caution. The overarching theme throughout the
two-day Duke University event (left) was, however, the media’s plea to government and business leaders to join forces and work together for a better world. “The reason that we ask you [leaders] questions is because we believe you are doing your job, and that you care about it,”explained legal and crime journalist, and longsuffering victim of an organized trolling campaign in her native South Africa, Karyn Maughan. In return, the press in the audience pledged to “equip ourselves to stop misinformation”.
Dialogue Q1 2018
great minds with michael chavez
MailChimp’s purpose of helping the underdog works for Tom Klein
TWITTER LENGTHENS MESSAGE LIMIT You might not think it, but Twitter was initially set up to facilitate the communication of “short bursts of inconsequential information”. Monthly active user numbers are down to 328 million and, with stagnating numbers of account holders, something drastic is needed. Now, it seems Twitter’s USP (a message in 140 characters) will be first in the firing line as Twitter head office reveals a small portion of accounts have been given access to a new capability: the option to compose a tweet up to 280 characters long. Conducting internal research into barriers users face, Twitter revealed: “When people don’t have to cram their thoughts into 140 characters and actually have some to spare, we see more people tweeting.” Speaking about the finding, Twitter product manager Aliza Rosen blogged: “The character limit is a major cause of frustration for people tweeting in English, but it is not for those tweeting in Japanese.” This could be because Japanese characters convey twice the amount of information per character compared to languages such as English, Spanish, Portuguese and French.
Why small is bountiful There is barely a small company out there that hasn’t heard about MailChimp. If you are doing digital marketing and communication – and most companies are – it’s become the go-to product. It’s of wider interest because it’s a great case study in how embracing the freemium model can boost firms’ fortunes. Since MailChimp offered its basic services for free, its commercial performance has spiked. Once customers get through the door, and like the basic product, they pay for an enhanced service. I was lucky enough to bump into Tom Klein, chief marketing officer at MailChimp, at a recent Wharton School reunion. Klein is a Great Mind of the tech age – he has enjoyed a marketing career that focused relentlessly on digital, long before the days of mass computerization. “I met some students recently and realized that I was doing digital marketing before they were born,” Klein told me. Klein’s wealth of experience is paying off. MailChimp, once a niche digital business, posted revenues of around $400m in 2016 without the aid of a sales team. Behind the remarkable success of the model is one of the most interesting company purposes in the digital sector: improving the lot of business’s little guys. “Purpose is very important to us,” Klein revealed. “Our purpose is to democratize technology to empower the underdog. Essentially this means that we are trying to take the greatest technology and put it in the hands of the smallest businesses.” Klein describes the experience as being much more than motivating, citing a recent project where MailChimp was working with small businesses in Alpharetta, a community outside Atlanta, Georgia. “As a business founder myself, I have a lot of empathy for these customers,” Klein told me. “We are in emotional territory when we talk purpose. It attracts people. But we can have this emotional connection
and still be intensely competitive.” Yet the benefits of such a compelling purpose go far beyond the emotional and inspirational. MailChimp’s prounderdog purpose is central to shaping its strategy. “If we find something that fits with our purpose, we must find a way to incorporate it into our strategy,” Klein revealed. “Without purpose to perform that role, your strategy can become a bit static.” MailChimp exploited that very dynamic to reshape the focus of the business following its game-changing move to freemium. “We could have said, ‘We offer a free email and marketing automation solution to small business owners, how can we get them to pay?’ That’s a reasonable business
Our purpose is to democratize technology to empower the underdog question. But we turned it around to put us more in the corner of our customer. Instead, we asked, ‘How do we get our customers happy or even delighted to pay because they’re growing so fast?’ The freemium offering, in our minds, is about getting people to learn, not just a restriction on volume, so that they can get ready for more success and growth. We only grow when our customers grow. We’re in the same boat as they are. If they don’t learn marketing automation, they won’t grow, so purpose aligns our interests.” By giving a hand up to the little guys, former minnow MailChimp is helping the next generation of digital stars break through. It is the underdog that barked – thanks in no small part to the Great Mind of Tom Klein. — Michael Chavez is chief executive of Duke Corporate Education Q1 2018 Dialogue
On February 12, 2018, Duke CE and Training magazine will bring you a compelling, non-traditional, executive event where you’ll get the experience, the so what and now what of what it means to lead differently so your organization can win in today’s volatile world. The Duke CE Leadership Experience: Are You Ready for What’s Next? Join us with Dialogue in Atlanta for this exclusive opportunity. Learn more at www.TrainingConference.com
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A REAL-TIME EMPLOYEE ENGAGEMENT APP
USING EMOTIONAL INSIGHTS TO DRIVE BETTER BUSINESS PERFORMANCE Heartbeat — the engagement app: • Emotional analytics • For all your survey needs, including employee experience, change, culture, wellbeing and events • Real-time transparency • Powerful analytics • Simple and easy to use
A humble consonant holds the key to the future
Leading to a T in an AI world Michael Canning is global head of new businesses at Duke Corporate Education
Where are the signposts for leaders of organizations where job titles might include things like carbon farmers and 3D-printing engineers?
We are all grappling with the effects of new exponential technologies. They are disrupting industries, making our external operating environment more volatile and complex. Customers are more knowledgeable and powerful. New competitors emerge every day, changing the game faster and in unpredictable ways. While we work to develop leaders who can adapt to this new market reality, Paul Roehrig’s recent article (Dialogue, Q4 2017, page 30) showed how technology, AI specifically, is rapidly changing organizations. Artificial intelligence includes a vast range of technologies, from neural networks to minibots. As such, it holds tremendous potential for change. Neuroscientist Dr Vivienne Ming characterizes two vectors of change. First, a scenario in which AI makes us smarter, safer, healthier. We’ll have greater access to knowledge, faster; can build machines to do inherently risky tasks; and we’ll reap the benefits of gigantic leaps in diagnostic and preventative healthcare. Ming calls this the “for 120% of the cost we get 200% of the value” scenario. A second scenario will unfold simultaneously, one where Ming points out: “If you are doing the same job you were doing a week ago, someone like me is going to automate it.” Leaps in efficiency and data proliferation, coupled with machine learning, will enable organizations to automate a wide range of tasks, even those currently done by ‘experts’. As Ming cites, up to 40% of a chief executive’s job can be automated. In this scenario “we get 80% of the value for 20% of the cost”. With each revolution, jobs change but work remains. And we, in turn, evolve what it means to lead a business, work, and people. “Work has always changed,” says Roehrig. “Few, if any, people make a living nowadays as telegraphists and lamplighters.” But where are the signposts for leaders of organizations where job titles might
include things like carbon farmers and 3D-printing engineers? Roehrig’s view about what’s going to be most important is instructive. The things we do naturally – the very human traits such as leading, the ability to engage with others, asking questions, interpreting, applying judgment, showing curiosity and creativity – will dramatically increase in importance. Ming’s view, put so well in her bold keynote presentation at our recent conference (see page 50), asserts that while even complex tasks once performed by experts will be done better by machines, “only one job description for the future matters – creative, adaptive problem-solver”. Applying the human touch, empathy, curiosity, and creative problem-solving reminds me of the ‘T-Shaped Leader’, as first coined some years back by chief executive Tim Brown from IDEO, a firm well known for its human-centred innovation work. The vertical stroke of the ‘T’ is a depth of skill in business or technical specialization that allows people to contribute to the creative process because of what they know (see left). The horizontal stroke refers to the breadth of understanding across the business, and having a disposition for collaboration across disciplines. T-shaped leaders bring depth of knowledge and breadth of understanding. In coming years, the depth on the vertical portion of the ‘T’ might shift from years of accumulated wisdom in a single discipline, to the ability to access, interpret and contextualize insights provided by machines. The top of the ‘T’ will merit a more prominent position because there will be a premium on leaders who have more of these creative, adaptive, problem-solving skills. The big management idea associated with the First Industrial Revolution was to bring scientific principles to management. We have come full circle. In this Fourth Industrial Revolution, we must now accentuate what is uniquely human. Q1 2018 Dialogue
Asian ascent The Asian century is upon us. The world economy is watching as the Asian ascent continues apace. How have the players of the world’s new financial centre adapted to disruption – and disrupted others? What are the opportunities born of the rise of the East – and how can they be maximized? Global executives must develop their skills and knowledge to trade and compete in the Asian world. What are the factors, trends and dynamics that form the framework for their success?
Discovery path Learn more… about leading for business success in Asia and building partnerships with Eastern economies bit.ly/ddpasianascent
Prowling with copycats 20
Brand of gold 24
We are family 28
Fortune on Planet Asia
Dialogue Q1 2018
Prowling with copycats Emulation is an occupational hazard of enjoying China’s gigantic market. Embrace it, writes Harvey Chen
If you want to get a piece of the Chinese pie, you may risk having your lunch eaten by an emulator. On 14 August 2017, President Donald Trump ordered an investigation into “China’s theft of US intellectual property”, using Section 301 of the Trade Act of 1974. The Washington Post reported: “China has long required US firms in many industries to form joint ventures with Chinese partners and manufacture some goods inside the country. “Although the system forces US companies to transfer some of their valuable know-how to Chinese partners that could become competitors in the future, US companies including Microsoft and General Motors have made such deals to gain access to China’s valuable market of nearly 1.4 billion people and a booming middle class.” Everything is big in China. If you are an executive of a multinational corporation (MNC), you should have a ‘go-to-BIG-market’ strategy for China. Chinese companies seem to emulate others a lot. To many MNCs, this raises a red flag. Those who want to tap into the gigantic Chinese market face their innovations being copied. ‘Damned if you do, damned if you don’t’ is the common dilemma faced by most MNCs in China.
Even more puzzling is that the emulators don’t seem to feel embarrassed. A classmate of mine from a Chinese company reveals, quite proudly, that her team reverse-engineered a Russian engine product, and made it better and cheaper. The Russian product, she says, “was so ridiculously expensive, and it is our duty to make it cheaper for the world. We can now produce it at just a fifth of the Russian cost.” Behind the giant Chinese market is a giant unified state, thanks to Emperor Qin, who first unified the warring states circa 221 BC. Historians attribute Emperor Qin’s forceful standardization of the currency, written language and units of measurement, as the key to the unity of the Chinese state. However, as in any large social organization, the official rules alone cannot hold the large diverse population together. Some cultural and social norms, practices and behaviours, mostly informal and unwritten, are also indispensable. Emulation is one example – it helps assimilate information, promote affinity, facilitate communication, spread best practice, reduce learning costs, and form common identity, all contributing to the unity of a large economy. China has strengthened its legal framework
Q1 2018 Dialogue
for IP protection significantly, but informal norms, practices and behaviours remain in force. So, emulation is part and parcel of the big market of China. Learn to live with it, because it will not go away any time soon. A US friend who has been doing business in China for nearly two decades has developed a new mindset about intellectual property. As a market leader in fabric design, his company was the first to register a design trademark in its field in China, but that did not bring him much protection. Now he still devotes resources to new innovative designs every year, knowing that they will be copied by local emulators. The new designs help the company keep its leading-edge brand image. He does not mind being copied by others, and he too follows the informal practice of copying other firms’ designs.
One characteristic of emulation is the low entrybarrier that gives rise to the fierce competition commonly seen in China, and the competition in turn shortens the period of first-mover advantage for an original lead innovator. One remarkable flip side of competition is collaboration among emulators. In one immersion class, a team of MNC executives went to a fabric market in Shanghai, where hundreds of small booths compete side-by-side to sell very similar fabrics and tailor clothing for customers with a 24-hour turnaround. The team came back with bruised arms – from the grabs by the saleswomen competing for their patronage – and reported their surprise findings: 1 The saleswomen kept an eye on each other to prevent the negotiated price from going too low 2 In some instances different booths shared the same tailor 3 The fabrics were from the same few suppliers 4 The booths helped each other with inventories 5 They shared seamstresses
When the entry barrier is low, small emulators collaborate to share resources, save cost and enjoy the externalities of the collective scale economy. This leads to the creation of ecosystems for the emulators, with two interesting effects: one is the ‘bandwagon effect’, the other the ‘platform effect’. The bandwagon effect results from emulators following the original lead-innovator for a proven business model or concept to minimize the investment of doing it themselves. A senior leader of a top-tier Chinese city reveals that the city’s
decision-making process for any new initiative is simply to look for precedents in similarly large cities in developed countries. “If there are three successful cases, we simply copy it,” he says. “And very soon, you will see second-tier cities copy us.” One danger for an MNC facing the bandwagon effect is that if it fails to establish a dominant market share in China quickly, it could soon be dwarfed by the emulators as they grow the market – as we have seen in sectors ranging from solar energy, to mobile phones, to steel. The bandwagon effect has taken a new shape recently. Following the initial success of bike sharing companies such as Mobike and OFO, other bike sharing companies mushroomed all over the country, attracting investment from venture capitalists who are also joining the bandwagon for investing in anything related to the concept of sharing. Shared car services – even shared umbrella projects! – have attracted big funding. The platform effect is evident everywhere you go in China, from the world-famous Yiwu Small Commodities Market, to the world’s largest tea market in Guangzhou with 6,000 tea shops next to each other, and to Taobao, the online shopping platform of Alibaba. What the platforms do is provide a central place – physical or virtual – for businesses to sell their products and services to customers. The platforms can also provide payment and credit check services, user-generated feedback and rating information, shared logistics and so forth. Network externality helps the platforms to attract sellers as well as buyers, and the resulting large-scale market becomes a mega-brand that draws in more crowds. The fact that China has more than its share of platforms may be related to emulation. To emulators, a platform provides an ideal ecosystem to learn, start and grow their business. Even the world’s premium luxury brands with their own bricks-and-mortar stores are tapping into the online platforms – such as Tmall of Alibaba – to attract customers.
Emulation tends to lead to thin margins that may drive typically cost-heavy MNCs out of the market. This need not be the case, however. If we return to the fabric market above, and look carefully at how the small fabric stores make their profit when competing head-tohead with all the lookalikes, you will find that it comes down to the service, warm attitude, the tailor’s attention to detail, delivery flexibility and patience. It is the customization of an otherwise standard commodity. Several years ago, in the southern city of Shenzhen, emulation reached a new scale known as ‘shanzhai’, literally meaning products from
Dialogue Q1 2018
Does your company meet the following profile?
Want a phone with diamonds on it? You can have it for one extra dollar, with three fake diamonds in your favourite shade of pink
1 Long decision-making cycle 2 Headquarter-centric rather than customer-/ regional market-centric 3 Inflexible rules, systems and processes 4 Lack of collaboration and coordination across functions and geographies 5 Perfection engineering 6 Risk averse
mountain villages. The most famous shanzhai products are cheap mobile phones; some are Apple lookalikes, some are Samsung lookalikes, and you can order any look you like. Most of the phones are driven by the same core chip made by MediaTek of Taiwan. The chip is very versatile and cheap (thanks to the economies of scale generated by shanzhai fever), and the shanzhai makers need only focus on the external look and feel, and peripherals, such as six-speaker audio and one-week battery life per charge. Want a phone with diamonds on it? You can have it in three minutes for one extra dollar, with three fake diamonds in your favourite shade of pink. In this shanzhai ecosystem, the MediaTek chip plays the essential role of the technological platform, and the emulators collectively create a huge market and make their profit by customizing their products. So, what’s the lesson for MNCs? An MNC in information services learnt that protecting the copyright of its digital information products was not only difficult, but also would limit its growth in China. By making the basic information platform available to vendors for a small fee (as with the MediaTek chip), or even for free, eager vendors will soon make the service go viral. They will compete with service differentiation, offering customized information services. This is where the MNC can charge a premium fee to enable such customizations.
Speed is important for the first mover in emulation land, and the internet is an accelerator for the emulation economy. China is home to many internet superstars such as Tencent and Alibaba. Alibaba likes to remind its employees of the “new rule of the jungle: it’s not just about the big fish eating the small fish; it’s about the fast fish eating the slow fish”. Rapid prototyping, fast iteration, fast fail, and quick to market, are the elements of the so-called ‘internet mindset’.
If the answer is yes, you will fail the speed game… So what can be done to change? A major global MNC in China took pride in its ability to coordinate through its matrix organizational structure, but still found itself too slow and too rigid to meet the fast and changing demand of its key customers in China. These key customers include Tencent, Alibaba, Xiaomi and Huawei, representing the new breed of companies in the internet age. In assessing the leadership capability of their China operations, they rated the ability to achieve alignment as their biggest challenge. They concluded that they needed a higher standard of collaboration above and beyond the current global standard of the company. Furthermore, such collaboration should not only be across functions and geographies internally, but also externally. One executive proposed a strategy that builds external networks by providing technical support and brand endorsement to the community of startup companies, without the expectation of immediate payback. The lesson here is that for the go-to-BIGmarket strategy to work, a ‘China standard’ of organizational speed and agility is needed. This is because the key customers of today themselves follow a process of fast iteration and fast fail, so they do not have a fixed spec for you to begin with, and this requires your organization to be super-agile. That requires a new mindset.
China’s own innovation challenge
The China dynamic implies that emulators are followers and are good at innovating by improving and customizing based on the lead innovator’s original idea. But to move up the ladder, China needs more original lead innovators and the emulation market model works against those aspiring to become originators. Until they gain mastery of the art of leveraging the ecosystems and scale economies, and the art of independent and critical thinking, breakthrough innovation will remain beyond them. A lot about first-mover innovation can be learnt from western MNCs. — Harvey Chen is chairman of the advisory board of the Center for Creative Leadership, Greater China, and a member of the International Advisory Board of Oxford Analytica Q1 2018 Dialogue
Brand of gold
Asian companies demonstrate excellence in brand building, writes John Davis
Branding demands commitment: commitment to continual reinvention; striking chords with people to stir their emotions; and commitment to imagination. It is easy to be cynical about such things, much harder to be successful. Sir Richard Branson
Dialogue Q1 2018
A brand should be meaningful value
Branson is right, but why should we even care about building a brand? In short, because a brand is the entire organization as seen through the eyes of its stakeholders. It therefore requires a deliberate and resilient commitment to creating value for all stakeholders. It is not new to say that a brand is more than a logo, ad or slogan. But it is new to state that the impact of that effort is determined across four dimensions of value, and leaders are accountable for leading their business and delivering results so that meaningful value is realized. On a purely financial basis, brand value represents 50% of total enterprise value around the world, and total enterprise value is over $70 trillion, according to 2016 research by BrandFinance, which placed global brand value at roughly $35 trillion. Yet, time and again, too many organizations and their leaders fail to do the deliberate hard work necessary to realize their brand potential. Instead, impatience – and even a willful disregard for supporting the agility and perseverance required to test and refine brand-building ideas – often short-circuits promising efforts. If Roger Federer misses a shot during a match, he does not give up and walk off the court, ending the match prematurely to cut his losses and ‘protect’ the games he has already won. Such behaviour would diminish his reputation and overall value. Instead, he adjusts, tests and probes, learning in real time. Does he always win? Of course not. And nor do companies in their brand-building efforts.
In business, impatience drives short-termism, a narrow-minded focus on a bewildering array of key performance indicators (KPIs) that, when pursued, can drive counterproductive outcomes. Why does this happen? As a company grows, protecting gains takes precedence, and avoiding uncertainty and risk increasingly dominates decision-making. This creates a contradiction: how to grow, since playing it safe is rarely a winning long-term strategy for brand success? New growth opportunities are inherently risky, but they cannot be avoided if leaders want to create meaningful brand value for their stakeholders. There have been significant shifts in how management invests in and builds brands. Brands can no longer be built, or succeed, based on command-and-control efforts from headquarters. Companies can control operations and quality, but they cannot control opinion or perception. Power and influence is dispersed among key stakeholders (notably customers). Brands that once took decades to build can now be undone in a matter of a few tweets over a few hours. In this hyperdynamic environment, where does that leave leaders and their organizations?
four brand value dimensions
Asia represents over 40% of the global economy, so the influence and impact of Asian companies is growing disproportionately. Let’s look at examples through the four brand value dimensions: 1 Reputational 2 Organizational 3 Societal 4 Financial
1 R E P U TAT I O N A L VA LU E
Reputation is trust. The absence of trust means all other dimensions of value are worthless. In most Asian cultures, trust at the individual level is built through elaborate interpersonal and professional practices and routines that – over time – demonstrate a person is genuine and reliable. At the company level, trust is generated when customers gain more than they expect from the performance of the offerings they buy. This includes an expectation that the company operates responsibly toward their workers and contributes meaningfully to the communities it serves. As the Reputation Institute’s report 2017 Global RepTrak 100 summarizes: “Companies that are more open, more genuine, and communicate more often have far stronger reputations.” Look no further than Emirates Airlines and the remarkably consistent positive feedback from its customers. Emirates has grown quickly to attain reputational success, and has been named ‘World’s Best Airline’ four times since the awards were first introduced in 2001, most recently in 2016, and has won ‘World’s Best Inflight Entertainment’ for 13 consecutive years, including 2017. Emirates’ success is not from clever marketing programmes and beguiling advertising messages, since any failure to deliver on expectations would quickly lead to distrust if customers’ experiences were worse than expected. Emirates has built trust over its corporate life through a conscientious investment in service excellence (whether digital or in-person), product quality (from lounges to aircraft), and commitment to follow through (from punctual flights to quick baggage delivery to resolving customer problems efficiently and effectively). Q1 2018 Dialogue
2 OV AR LGUAEN I Z A T I O N A L
This is internal, and is an indicator that employees feel they are part of something special and connected to a larger cause. Such belief inspires discretionary effort. In effect, people will work better and more effectively if they believe their work matters and is aligned to the organization’s values. Shinhan Bank of Korea has garnered recognition for being one of Asia’s top places to work, a remarkable turnaround from 2010 when the bank suffered from internal corruption scandals. To overcome the negative implications from the scandals, Shinhan had to restore trust and confidence with employees and customers. Dongwoo Han took over as chief executive and chairman from 2011 to March 2017, and embarked on an employee– and customercentric set of programmes to strengthen ethical management, inspire a culture of mutual respect and work-life balance, and contribute to the development of local communities. In 2017, Shinhan rose to #1 in the ‘Best Workplaces in Asia’ rankings. As global organizational research and training consultancy Great Place to Work states: “These workplaces are distinguished by their extraordinary levels of trust, pride, and camaraderie.” Roongrote Rangsiyopash is chief executive of Siam Cement Group (SCG) in Thailand. As the construction and chemicals industries undergo massive transformation due to rapid technological change, he has emphasized the importance of inspiring employees to rally around a common cause of being prepared today for a radically different tomorrow, including embracing a far more digital future. While he does not have a crystal ball to tell him precisely what a more digitally savvy future entails, he is clear that “doing nothing is a recipe for failure and we must act now to be more digital, faster, innovative and open-minded if we are to succeed in the future”. His vision has been shared throughout SCG, and employees are embracing more entrepreneurial experiments to identify new, sustainable growth opportunities to transform this multibilliondollar company. Decision-making practices that often took years need to change to behave more like a Silicon Valley start-up.
3 S O C I E TA L VA LU E
If Roger Federer misses a shot during a match, he does not give up and walk off the court, ending the match prematurely to cut his losses and ‘protect’ the games he has already won
Societal value is external and describes the organization’s contributions to improving society. Businesses around the world have a vast footprint and increased recognition of the significant responsibility they have to create positive value for the communities they serve. The 2017 Global RepTrak 100 survey shows that citizenship (defined as a positive influence on society) is among the top three factors that matter to customers. Bangchak Corporation is a Thailand-based energy company. Bangchak’s chief executive, Chaiwat Kovavisarach, is leading a remarkable effort to accelerate the company’s transition from a fossil-fuels-based petroleum company to a renewable energy leader, particularly in biofuels, solar and wind. He is keenly aware that fossil-fuel inventories are in permanent decline, and have deleterious consequences for society. The effort extends to plant operations, retail service stations, and even to its new LEED-Platinum certified corporate headquarters. Employees and visitors experience facilities that are energy-efficient, with lighting and internal climate control that adjust automatically when people enter and leave rooms, to internal hydroponic gardens and recycled construction materials. As Kovavisarach has said: “Our employees and our customers know that we are giving back to society, and that is aligned with our purpose. We are not a charity, and ensuring financial viability remains a core aspect of our success. At the same time, we are more than just a company. We are a collection of people who want to pay back our success to society. We want to be Asia’s leading Greenovation group, as this focus helps
Dialogue Q1 2018
employees rally around an important cause. We have loyal customers who believe in our green products, our natural lighting in service stations, and the fact that we collect rainwater for recycling. And our employees respond to this. We have even embedded CSR into individual performance KPIs.” Singapore has long been recognized as one of the world’s nation-building success stories. A tiny country with just over 5.6 million people, it clearly punches above its weight in global rankings. For ease of doing business it is consistently ranked among the top five, according to the World Bank. Transparency International has ranked Singapore among the top ten ‘least corrupt’ countries in the world for several years (#7 in 2016), the highest ranked Asian country (for select comparison, #1 is Denmark, the US is #18, and Somalia is #176). Its gross per capita income is #4 in the world at US$87,000+ (Qatar is #1 at $129,700+; US is #13 at $57,200+). Its primary and secondary education are ranked #1 in the world, according to the Trends in International Mathematics and Science Study (TIMSS). And it has a dynamic blend of cultures, including Chinese, Malay and Indian. The country has all the right ingredients to further accelerate its global impact, and a new organization called SGInnovate is designed to do just that. SGInnovate is a private-limited company, wholly owned by the Singapore Government. Launched in 2016, SGInnovate’s purpose is to enable ambitious and capable individuals and teams to imagine, start, build and scale globally relevant technologies. Steve Leonard, SGInnovate’s founding chief executive, is an experienced industry leader and tech executive in Asia. He fervently believes that Singapore has all the resources and capabilities needed to tackle ‘hard problems’ that matter to people around the world. As Leonard says: “Singapore is globally known for its work in deep tech R&D and innovation input. With this strong foundation, Singapore can do more in increasing our innovation output, moving all the great research into commercialization. SGInnovate’s priority is to work with deeply-technical founders that have research-originated IP at the core of their company.” He added: “We are not an accelerator, an incubator or any other specific bracket of the ecosystem. Our focus as an organization is on backing these founders through equity-based investments, access to talent, and support in building customer traction. What I’d like to see in the next few years is more people in Singapore believing that they can build something that can solve society’s most pressing challenges. SGInnovate’s objectives are consistent with Singapore’s ambitions since its independence in 1965 to develop a model society.”
4 F I N A N C I A L VA LU E
Full realization of reputational, organizational and societal values then leads to financial value, which is a by-product of doing well in the other three. Emirates is ranked #2 for brand value in the Middle East at just over US$6 billion, and is the fastest growing airline in the world by passengers carried, compared to its 2012 brand value of $3.7 billion. Shinhan Bank had revenues of $14 billion+ in 2016, a market cap of $20 billion and, according to Brand Finance, a brand value of US$5.7 billion (an increase from $1.26 billion in 2011). With a market value of $19 billion, SCG, already a leader in Thailand, is beginning to see increased growth from its nascent entrepreneurial initiatives that promise to help this $12 billion revenue company compete in a faster and more dynamic digital world. SCG’s brand value is estimated to be approximately US$8.7 billion, based on the Corporate Brand Success Valuation from Chulalongkorn University. Bangchak has seen the percentage of its renewable energy revenues increase to 10% of its US$4.4 billion in total revenues, and the company regularly receives awards for its investments in social enterprise, corporate governance and energy conservation. Brand value in the energy sector ranges from 10% to 22% of total revenues, therefore using this rough guide Bangchak’s brand value is between $170 million and $370+ million. SGInnovate invests in companies from the pre-seed to Series A stage. While financial figures are not released, it has Temasek Holdings (Singapore’s largest investment fund) and GIC (another leading fund with $100 billion in assets under management) on its board and, by extension, access to their vast networks.
Asia tells the story
The last 20 years of the 20th century saw the rise of the Asian economies. The first 20 years of the 21st century have shown that Asian businesses have grown increasingly confident and are investing in all four brand value dimensions. With brand values increasing, Asian leaders and their organizations are eager to show the world that they have become the benchmark for how businesses will build brands and create meaningful value around the world. — John Davis is Asia regional managing director at Duke Corporate Education Q1 2018 Dialogue
Dialogue Q1 2018
We are family Family firms are Asia’s engine for growth, writes Professor Annie Koh
Family-owned or controlled enterprises have always been the economic backbone of many countries. According to the Family Firm Institute’s (FFI) global statistics, family enterprises account for two-thirds of all businesses, create an estimated 70-90% of global GDP, and hire at least half of the workforce around the world. In Asia, the proportions are even higher. The majority of Asian family businesses are small or medium-sized enterprises (SMEs), creating jobs for Asia’s growing population. However, there are also leading family-owned powerhouses in Asia which now account for 17% of the world’s 500 largest family firms, for example Reliance Industries from India (oil and gas), Sun Hung Kai Properties from Hong Kong (real estate), and Kuala Lumpur Kepong Berhad from Malaysia (consumer products). China, South Korea and Taiwan are leading the family business boom in Asia. All these have been and are fast-growing economies where family ownership is the main business model. This trend is expected to continue given China’s continued economic growth, with a projected compound annual growth rate of 6%. Despite China’s youth as a capitalist economy, at least 85% of its private enterprises are already family-owned. As China’s growth is driven by private enterprises, with most of them still in their first generation, we can expect many more great Chinese family businesses to be established over time. Their wellbeing is vital to the ongoing growth story, so Asian family enterprises have attracted much attention
from academic institutions, governments, multinational corporations (MNCs) and investors in recent years.
The difference family makes
Being privately-owned makes family businesses quite different from their publicly-listed cousins. The first distinguishing characteristic is that they are free from the tyranny of shareholder pressure and so can genuinely think and act longer term. One necessary driver for longerterm thinking is that no generation wants to be the one that kills the business. But more than survival, family firms want to generate goodness alongside wealth. They want to support and build their communities. In our research supported by the United Overseas Bank (UOB) Riding on Asia’s Economic Transformation – Growth Strategies of Asian Business Families, we found that balancing growth with stability is the top priority for four out of five Asian business families. The emphasis on stability stems from the desire to protect and serve family members, employees, suppliers, customers and the local community. Business owners are keenly aware that the viability of the business is closely linked to the livelihoods of many, and thus, needs to be sustainable for the benefit of all stakeholders. We see trendsetters in Asian family businesses, harnessing business value creation with social value creation to build sustainable family business beyond their own generation. As one of Singapore’s family business members shared with us recently: “We are adopting the Q1 2018 Dialogue
FISH model, where the family is growing not just Financial, but also Intellectual (innovation), Social and Human capital.” There is some change in the structure of family firms. The trend for children to leave and work elsewhere is reversing, as the children dislike the short-term view of businesses they encounter outside. And while there is a strong desire for children to take over the business – where they are not felt to be sufficiently talented or committed, they are supported by professional managers. But even when family firms float the business, the tendency is to retain a majority shareholding to safeguard the ability to think community and think long-term. For example, Bumitama Agri of Indonesia’s Lim family was listed in Singapore in 2012 with a free float of less than 20%, allowing the family to retain control. Let’s look at family firms through the Business Families Institute’s (BFI) four lenses of Generation, Growth, Giving and Global.
Creating value for every GENERATION
Our research collaboration with Deloitte on Asian Business Families Governance: Crossing the Chasm for Intergenerational Change and Asian Business Families Succession – Going the Distance with the Next Generation revealed that 77% of the surveyed business families reinvested earnings. This demonstrates that Asian family firms prioritize building sustainable businesses for intergenerational transfer. The question is how can Asian family businesses do this systematically and sustainably beyond the first three generations? Most Asian family firms are still less than 100-years-old. One role model is the Lippo Group of the Riady family in Indonesia, which has survived multiple wars and economic crises in the past 67 years. With an entrepreneurial mindset and aggressive approach, the founder, Mochtar Riady, grew the business from a small and humble bicycle shop in East Java to a massive collection of companies that cut across countries and sectors. The business empire is built on the Riadys’ ability to identify and act on a wide variety of business opportunities. The Lippo Group has moved from banking to property development to healthcare to fast-moving goods via their numerous ventures over the three generations of leadership. The most recent entrepreneurial ambition is their e-commerce venture, MatahariMall.com, the online version of its Matahari department store chain. Having learnt from the failure of their first attempt in 2000, Lipposhop, the Riadys have persisted in their e-commerce pursuits. With their eye on the surge in digitization and internet penetration in Indonesia, this effort is led by John Riady, the third-generation family member and current executive director of the Lippo Group. Last year, they teamed up with
keep it in t h e fa m i ly
of Asian business families reinvest earnings eastern spark
The ASEAN digital economy has the potential to reach US$200 billion by 2025
Grab, a regional ride-hailing company, which will help to transport and deliver goods to bolster MatahariMall’s services. Keeping abreast of modern business trends is their way of futureproofing the family firm.
GROWTH through technology and innovation
Like the Lippo Group, businesses are harnessing technology, not only to improve business processes, but to reinvent their products and customers’ experience. Sing Lun, a Singaporean apparel manufacturer, serving global brands such as Under Armour and Puma, started out in textile trading. Today, it operates 13 manufacturing and sourcing facilities across Asia, generating annual revenue of around US$185 million. In its quest to keep ahead, Sing Lun started innovating with wearable tech by collaborating with a UK company to create a shirt with washable sensors that measure heart rate and muscle fatigue. Beyond the obvious application in athletics, Mark Lee, the third-generation chief executive, has grander visions, such as monitoring the elderly or those in high-risk jobs like oil-rig workers. Mark Lee is ‘innofacturing’ – innovating in manufacturing to create high-value products. Our UOB-partnered research survey indicated that innovating to improve product quality and/ or drive cost reductions is no longer sufficient to meet today’s demand for unique, high-value products. Mark Lee highlighted that technology changes consumption methods and behaviour patterns, so companies must use omni-channels and social media to promote their brands. The ASEAN digital economy has the potential of reaching US$200 billion by 2025, so this is a key area that the tech-savvy new generations of family business must exploit. BFI@SMU’s (see box) discovery-journey to Silicon Valley in 2015 demonstrated that the Valley’s entrepreneurial spirit of creation and disruption came with an attitude of wearing failure as a badge of honour. This will require a shift in outlook for many of the more conservative Asian families.
GIVING back with impact
Family businesses distinguish themselves through their emphasis on planning long-term and giving back to the local community; many founders believe in improving the lives of the less privileged in the community. Most families’ philanthropic activities are driven by the founders’ values and motivations. The more traditional forms of philanthropy are cash donations, or creating family-specific vehicles such as foundations. One example is the award-winning Kanbawza (KBZ) Brighter Future
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the volume button. The police will receive the caller’s location and the caller remains tracked until the situation is resolved. iSafe won the award for ‘Best use of mobile technology’ at Elets knowledge exchange awards 2015, held in Goa, India. UST has further partnered with Bosch to offer an in-car driver and passenger safety app, bridging the gap between vehicle and smartphone in times of crisis. This is a brilliant example of maximizing impact through leveraging the business’ core capabilities to effectively address a key societal need.
The new GLOBAL
BFI@SMU The Singapore Management University (SMU) has recognized the emergence of Asian business families since 2010, and discerned that they require specifically contextualized thought-leadership and applied knowledge. In response to the growing needs of business families in Asia, SMU established the Business Families Institute (BFI) in August 2012. BFI@SMU collaborates with various partners, academic or practice, to be a leader in Asian business family-related knowledge. The Institute also encourages business families to Think Generations, Think Growth, Think Giving and Think Global. In doing so, BFI@SMU addresses familyspecific issues, such as succession, family governance, entrepreneurship and wealth management. The mission of BFI@SMU is to enable business family members to be engaged and responsible stewards of their families, businesses and communities, through education, research and support.
In recent years, we have observed increasing sophistication in Asian family businesses’ giving
Myanmar Foundation (BFM), set up in 2008 by Aung Ko Win’s family, to uplift underdeveloped communities and eradicate poverty. Projects include community development, disaster relief, education, religion, women’s health and more, contributing close to US$84 million in total to date. With these initiatives, BFM has personally led the charge to address Myanmar’s large-scale social issues in order to introduce change beyond charity. In recent years, we have observed increasing sophistication in Asian family businesses’ giving, as they seek to maximize the outreach and impact of their actions. This has resulted in creative endeavours such as the iSafe app developed by UST Global, of India’s Chandaria family, a multinational provider of digital, IT services and solutions. The iSafe app was designed to increase women’s safety in India. First launched in Kerala, the app allows women to send instant alerts to the police by using the panic button or simply by a long press of
In this hyper-connected world, a global mindset that goes beyond geographical expansion to a more holistic view of global networks and opportunities is crucial for collaboration and market-making. Wilmar International, the agribusiness group, recently acquired a 50% stake in Aalst Chocolate, a Singaporean chocolate manufacturer, to enter the Chinese chocolate market. The joint venture is a win-win situation, as Aalst can leverage Wilmar’s vast Asian network, and Wilmar can enter a new product segment with this downstream investment into chocolate manufacturing from their cocoa plantations. Both Wilmar and Aalst are familyowned and demonstrate the long horizon planning mind-set of doing business driven by strong family values.
For family businesses, the next generation is seen as obvious value-creators. Just as every generation that preceded them, they understand the modern world and so are well placed to embrace technology and adopt best practices to lead the family firms’ ongoing transformations. Business savvy, highly educated, well networked, and having access to capital, these next generation owners are expected to build on global connectivity and opportunities to create better and sustainable businesses. However, they too live in rapidly changing times and need to bring professionalism into the business, and recognize that relationships alone are no longer enough to be successful. In sum, this is an era of rapid change offering boundless opportunities. To stay ahead, family businesses need to transform themselves from wealth-creators to value-creators, with good practices underpinned and driven by their strong family values and ethos. We see Asian family firms increasingly doing so by building business for the greater good. Coupled with a global mindset, Asian family businesses look poised to reinvent themselves into the value creators of tomorrow. — Professor Annie Koh is vice president of the Office of Business Development at Singapore Management University Q1 2018 Dialogue
Opportunity on Planet Asia Chief executives need to know how to unwrap Earth’s new powerhouse WriTiNg
Anil K Gupta & Haiyan Wang i L L u s T r A T i o N Aleksandar Savic
From small roads great economies grow. In the early 1990s, China was a relatively small economy that had just built its very first highway. Benefiting from IMF’s help, India had barely managed to escape bankruptcy. How the structure of the global economy has changed over the last 25 years! China is now the world’s second-largest economy, and competing with the US on all fronts – economic, technological, and geopolitical. India is today the world’s sixth-largest economy. By 2022, it will surpass Germany to become the fourthlargest and, by 2025, may even overtake Japan into third place. Southeast Asia is another powerhouse. Home to 600 million people, the ten countries comprising the Association of South East Asian Nations (ASEAN) account for US$2 trillion in GDP, just a tad smaller than India’s and, as a region, make up the third fastestgrowing economic block in the world, after China and India. By almost all measures, it can be said that this will be the Asian Century. Other than ongoing digital disruption, nothing should be more important for Western chief executives than emerging Asian nations – because it is these economies that will play central roles in shaping Asia’s destiny over the next decade and beyond.
Making sense of Asia’s growth
Figure 1 tracks the global GDP share of the world’s three economic legs – the US, Europe and Asia. As recently as 2000, all three legs were about equal in size, each accounting for almost 30% of the world’s GDP. In fact, at that time, the US accounted for a slightly bigger share than the other two regions. It is a
very different story today. Asia is now 50% larger than the US or Europe. By 2025, Asia’s GDP will be larger than that of the US and Europe combined. In short, in a mere 25 years (2000-2025), the structure of the world economy will have changed dramatically. Figure 2 helps us make sense of why Asia is growing at such breakneck speed. The answer lies in the three big legs of emerging Asia – China, India, and ASEAN. All three are growing much faster than the other big emerging markets of the world – Latin America and Africa, whose economies are growing at around 4% a year. Asia’s advantage relative to Latin America and Africa? First, massive scale. As a result, on purely economic grounds, most of the world’s multinationals feel compelled to invest and manufacture within China, India and ASEAN rather than export to these markets. This trend brings not only capital, but also knowhow. Second, a deep love for science, technology, mathematics and engineering (STEM). Just look at Asia’s disproportionate share of PhD students in the STEM fields in US universities. As a result, Asian economies are able to absorb foreign technology at a faster pace than in Latin America and Africa. And in terms of patents granted, China and India are the world’s two fastestrising technology powers. Third, political stability. Country risk is lower in Asia than in much of Latin America and Africa. Lower country risk makes both foreign and domestic companies more willing to invest for the longer-run in Asia than elsewhere.
Fourth, very high rates of saving. As a result, Asian economies have more domestic capital available for investment in infrastructure, a foundational requirement for economic growth.
WHAT COULD HOLD ASIA BACK? Threat 1 The middle-income trap The biggest risk is a middle-income trap, where a country attains a certain income and gets stuck at that level. China’s per capita income has to reach only one quarter of that of the US for it to become the world’s largest economy. India’s per capita income needs to reach only one tenth of that of the US for it to become the world’s thirdlargest economy. In short, given their vast populations, even if China and India were to keep growing as middleincome economies, they would become economic powerhouses. Over the last 100 years, very few countries have managed to avoid a middle-income trap, the exceptions being South Korea, Singapore and Taiwan. Will China, India and Indonesia manage to break through? As in the case of South Korea, this will require massive structural reforms. Asia’s fortunes also depend on how geopolitical tensions play out. North Korea, the East China Sea, the South China Sea, the China–India border, the India-Pakistan border and the Middle East are some of the world’s major geopolitical hotspots, all based in Asia. If any of these tensions morph into fullscale war, the consequences could be catastrophic. Q1 2018 Dialogue
SHARE OF WORLD GDP (%) 35.8% Asia
30.9% 28.0% 27.9%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
G D P G R O W T H R AT E ( % )
as steel, cement, glass and construction machinery – whose fortunes are tied to growth in infrastructure and real-estate development – suffer from slow growth and massive overcapacity. These are no longer viable market opportunities for foreign multinationals. The automobile sector has also slowed considerably. The days of 30+% annual growth are gone. Car sales are now growing at around 5% a year. With the ubiquitous spread of ride sharing, even this level of growth will shortly taper off. Selected opportunities do exist, however. As Chinese buyers trade up, demand is shifting from massmarket cars to luxury brands, including Tesla in electric vehicles. The real growth opportunities lie in industries that cater to new needs and wants.
8.1% 5.8% 5.5% 3.8%
8.4% 5.5% 4.8% 4.0%
Threat 2 Asia becomes more ‘Asian’ Asia is becoming more internally integrated. Rapid growth means that opportunities for exports and imports among the Asian economies are growing at a faster pace than trade with the US, Europe or elsewhere. They also benefit from geographic proximity and shorter supply chains. Figure 3 aptly captures the growing intra-Asia integration via trade. The prospects for further trade integration within Asia look promising. China, India, ASEAN, Japan, South Korea, Australia and New Zealand are currently negotiating an intraAsia free trade agreement (Regional Comprehensive Economic Partnership, or RCEP). As and when RCEP becomes a reality, it will provide another fillip to rapid growth in intra-Asia trade. Asian economies are also coming closer via foreign direct investment. When Chinese and Japanese giants look at big, fast-growing markets for investment, India and ASEAN loom large. Thus, it is not surprising that Chinese technology companies such as Alibaba Group and Tencent have made
some of their largest – multibillion dollar – outbound investments in India and Southeast Asia. This is true also of Japanese and South Korean companies. Japanese car companies enjoy over 50% market share in India. Hyundai from South Korea is the number two carmaker in India. Samsung and LG are the two largest companies in India’s home appliance market. And Japan just launched India’s first bullet train project – the capital investment of around US$20 billion is being financed almost solely by Japanese banks.
ASIA’S OPPORTUNITIES FOR MULTINATIONALS
There are two important ways in which multinational corporations can leverage the rise of Asia: as market destinations as global platforms to expand the company’s reach in other markets
Evolving market opportunities in China As China’s economic growth slows from the average of 10.5% during 1980-2010, to around 6% today, its economic structure is also changing. Sectors such
Industrial automation The driver here is a shrinking labour pool
Solutions for energy efficiency driven by leaders’ desire to reduce China’s massive dependence on imported oil Solutions for pollution control and abatement Along with India, China is home to many of the most polluted cities on earth Solutions for agricultural productivity and water scarcity Even though China is a vast country, only one eighth of its land area is arable. China also suffers from acute scarcity of fresh water Business-to-business services As Chinese companies become bigger, get listed, go global and make acquisitions: they need leading-edge professional services of all types – accounting, legal, investment banking, and so on Business-to-consumer services Highgrowth opportunities exist in almost all domains – childcare, elder care, healthcare and financial services. With a very high proportion of dual-career couples, a growing number of families in China have the financial means but not the time to devote to childcare. A very high rate of savings also means that they need advice regarding how to invest money wisely instead of gambling it on speculative real-estate or ill-advised stock market investments. As the population gets rapidly older, they also need help taking care of their parents – not just in terms of health care, but also retirement homes and nursing homes Higher-quality goods and travel Given the ferocious clampdown on corruption, conspicuous consumption by government officials has come
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down dramatically. Yet, with rapidly growing affluence, millions of Chinese households are trading up in the quality of what they eat, what they wear, how they live, what type of car they drive and how they spend their free time. This may not mean more Ferraris and Porsches, but it does mean more Mercedes-Benz, BMW, Audi and Land Rover cars. It also means more imported food and dining out. Perhaps, most important of all, it means much more foreign travel
Evolving market opportunities in India
India is running about 13-15 years behind China, the time gap between 1978 and 1991, when China and India respectively launched their economic reforms. Thus, market opportunities in the India of 2015-2020 are, in many ways, similar to those in China during 2000-2005. India’s biggest drive today is a rapid buildup of infrastructure. Thus, demand for all types of products and services connected to the construction sector is growing faster than the economy as a whole. This includes not just industrial products, such as construction machinery, but also consumer goods, such as home appliances. Similar to the China of 15 years back, the car market is growing rapidly. India today is the fastest-growing car market in the world. There are, of course, some important differences in today’s India and the China of 2000-2005. Today’s technologies are far more advanced than those of yesteryear. As a result, as India becomes increasingly urban, the government is pushing for the creation of smart cities. As solar power becomes price competitive with fossil power,
coal demand is rising much more slowly than anticipated. Instead, demand for solar and wind power equipment has skyrocketed. Similarly, on the consumer side, some of the biggest growth stories are private schools and afterschool tutors for children, financial services to help people manage their savings, smartphones, social media, e-commerce, ride sharing, ready-tocook food, dining out and travel. After China, outbound travel from India is the second fastest-growing in the world.
Leveraging China and India as global platforms
In 2013, President Xi Jinping launched the Belt and Road Initiative (BRI) with the goal of boosting China’s road and maritime connectivity with the rest of the world, most notably Asia and Eastern Europe. By some estimates, BRI could mean a capital investment of around US$1 trillion over 20 years. Companies such as GE and Honeywell are looking at the BRI as a potential opportunity to leverage their strengths in China and partnerships with Chinese companies to grow their business in the BRI countries. India is playing a different kind of platform role. Unlike China, the Indian government makes the country far more open to foreign multinationals and does not pursue a my-market-for-yourtechnology policy. As a direct result, most of the world’s technology giants prefer to do leading-edge R&D work in their Indian, rather than Chinese, labs. Google has its second largest R&D lab in the world – after Silicon Valley – in India. This is true also of other technology giants, such as IBM, SAP, Adobe and Texas Instruments. Google and Facebook look at India as
% O F A S I A’ S M E R C H A N D I S E E X P O R T S To rest of Asia
2000 Source: UNCTAD
the ideal platform for the development of internet services that would work well with low-end smartphones, slow bandwidth speeds, and be extremely affordable. Once developed for India, these solutions can then be rolled out to other emerging markets. Something similar is also playing out in the automobile sector. Companies such as Ford, Hyundai, and the Renault-Nissan-Mitsubishi Alliance now use India as the launchpad for the development and marketing of cars aimed specifically at emerging markets. The logic is that success in India can be cloned easily in other emerging markets.
Asia’s GDP today is 50% larger than either the US or Europe. By 2025, it could be bigger than the US and Europe combined. Asia will still be growing faster than any other region of the world. Asia is also becoming internally more integrated – by trade as well as investment linkages. Thus, becoming smart and serious about Asia is a strategic imperative, not an option. There exist massive and growing opportunities to benefit from the large markets for almost everything in Asia. In addition, China and India offer the potential to serve as global platforms to enter and succeed in markets outside Asia. Two of the key requirements for success in Asia include making Asia your second home, and learning to make sense of the world, not just through Western, but also Asian, eyes. — Anil K Gupta is the Michael D Dingman chair in strategy and entrepreneurship at the Smith School of Business, the University of Maryland and a visiting professor at INSEAD. Haiyan Wang is managing partner of the China India Institute Q1 2018 Dialogue
Restoration man Takeo Harada says an economic shock could snap Japan into innovating again
Ben Walker photography
Japan is the world’s forgotten power. Once at the zenith of global endeavour – the dynamo of the electronic boom – it lost its edge, and slid into a dilapidating deflationary spiral from which it is yet to emerge. “The Japanese were unprepared in the 1980s,” says Takeo Harada, for 12 years a senior diplomat at Japan’s Ministry of Foreign Affairs, now chief executive of the Institute of International Strategy and Information Analysis. “The Japanese were enjoying the Heisei bubble economy, and it just stopped. They were not aware what caused the bubble economy – so it was quite natural that they didn’t know how to respond to its collapse in 1991. Its lost two decades were just beginning.” Harada believes that Japan remains in a state of bewilderment as to how its fall from grace came about – yet is strangely more optimistic than most about its long-term future. In his book Pax Japonica he urges the Japanese to consider again their relationship with the US, and the nature of the post-war settlement that he says shackled it to the economy of its enemy-turned-ally. In 1945, Japan was occupied by the Allied Powers, the only time it has been
One of the triggers of the renaissance must be the recognition of the ordinary Japanese that Japan could play a much bigger role in the world community
occupied by a foreign power. The occupation ended on the signing of the San Francisco Peace Treaty in 1951. The US became not just a diplomatic ally, but an economic one too. Much of the US’s market principles were adopted and a benign balance of payments between the US and Japan agreed. Yet the new relationship also opened routes for talent to leave Japan. The economic highway to the US, says Harada, would later contribute to a transpacific brain drain, blunting, he argues, Japan’s prospects of recovering from its malaise. Harada speaks of Japan as a nation of “failed innovation” – a far cry from the cutting-edge giant that eclipsed all-comers in the late 20th century. “In the period of oil shock in the late 1970s, the government of Japan tried to gather all the scientists from the Japanese private universities and colleges to try to encourage them to accelerate their innovations,” he says. “By the time the bubble economy took hold in the 1980s, this innovation drive was forgotten and the talented scientists were forced to go abroad, particularly to the United States.” Harada now observes a reverse in attitudes – the talent wants to come back and “make a renaissance”, he claims, and help Japan build its way out of the spiral to which it succumbed. Yet he senses a reluctance within Japan itself to unshackle itself from the postwar consensus built after the US occupation after WWII: “There is a huge dilemma,” he says. “Every single sector adapted US policies. Now [if they change the model] Japanese business leaders live in fear of being shunned by the US.”
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Nevertheless, Harada expects the repercussions of the pact to taper off as the end of the war approaches its 100-year anniversary. “That’s only 27 years away,” he says. He talks about a period of renewed Japanese dominance as the US influence on Japan continues to dwindle. This renaissance period – which Harada calls Pax Japonica (hence the name of the book) – will be triggered, he says, by a growing perception among the Japanese of independence. As the country’s millennial generation comes of age and grows into positions of power, he suggests, Japan has a “50-50” chance of wriggling free of the old model. “One of the triggers will be the new awareness of the ordinary Japanese,” he says. “We were used to living in the previous reality of the US-Japan alliance. In the era of Pax Japonica we should think by ourselves to make something happen for a better world. One of the triggers of the renaissance must be the recognition of the ordinary Japanese that Japan could play a much bigger role in the world community.” More than 20 years after the asset bubble burst, Japan has the highest level of public debt as a proportion of GDP among the world’s advanced economies. This autumn, Prime Minister Shinzo Abe – the architect of the ‘Abenomics’ policy of trying to reflate the Japanese economy through fiscal stimulus, and a landslide winner in Japan’s recent general election – indicated that he might abandon the goal of covering key public expenditure through new taxes. At the time of writing, the cost of insuring Japan’s government debt against default rose to a 15-month high. “The prospect for extra revenue to be spent rather than being used to pay down Japan’s debt is a factor of higher bond yields,” Shuichi Ohsaki, chief rates strategist for Japan at Bank of America Merrill Lynch, tells Bloomberg. “There also appears to be some speculation that such a policy move will lead to a sovereign downgrade.” Harada shares a view with a minority of other economic forecasters that a Japanese financial crisis could arrive by the turn of this decade, yet argues that – as with the oil shock that triggered vast investment in innovation in the 1970s – this could provide the impetus for rapid renewal and restoration. He advances a theory that the Imperial House itself could step in to pump the economy with investment in technology if Japan suffers a major economic shock in the coming years. The resurrection, he suggests, must come from the state because the focus of Japanese private-sector investment is overseas – Japan is the biggest creditor nation in the world. “We are in a liberal economy where we cannot forbid our companies to hold foreign assets,” he says. “Since Abenomics, our wealth has been in held in external assets. The government cannot appropriate the private wealth that these companies hold… [But] the Japanese Imperial Family still holds huge financial power even
compared to other royal families across the world. This could be released in the case of a significant disaster. “If the Japanese economy collapses, then the Japanese, even its government, will be forced to be innovative again, to release new technologies across the world. When this day comes, Japan will think by herself again. And she will play a much bigger role in the world. It might sound ridiculous, but the trigger for Japan’s renaissance could be the default of the Japanese economy.” The preference of Japan’s younger generation to embrace the future – rather than dwell on Japanese tradition; Japan’s high level of education; its benign climate; and good level of Englishspeaking – means it can reclaim its place at the vanguard of global development, he suggests. The alliances Harada has built, particularly during his time at Japan’s Ministry of Foreign Affairs have, he says, have given him to the notion that the Japanese state is prepared to help this great power rise again. “I have been closely connected to
Our talented scientists were forced to go abroad, particularly to the United States the network that dedicates itself to the Japanese Imperial House,” he says. “It is time to show that the role of the Japanese nation will change.” Harada’s predictions sound improbable. Certainly, the markets don’t appear to agree with his 50-50 gambit that the Japanese banking system will collapse within three years – although supporters of his view will point to the overarching economic optimism in the world economy in 2005, three years before the global financial crisis caused meltdown. Yet even if Japan avoids the full-blown economic maelstrom that he feels could trigger Japan’s resurrection, it is possible that the country’s journey to the brink might reawaken the nation, particularly with a youth that is untrammelled by the post-war settlement with the US. The younger leaders now have tickets to the future, he blogs. “They are about to overcome the previous status of Japan as ‘observer’ and change it to another one as ‘player’… beginning with the total reform of Japan’s nation based on technological breakthrough.” — Takeo Harada started his career in the Ministry of Foreign Affairs in 1993, where he was dispatched as attaché to Germany and studied at the Free University of Berlin and the Eberhard Karls University of Tübingen. He retired from the Ministry of Foreign Affairs in 2005, after serving as section leader for North Korean Affairs, when he visited Pyongyang as a member of the Japanese official delegation in 2004 Q1 2018 Dialogue
THE MAN WHO IS ROCKING
HOLLYWOOD, FOOTBALL AND BUSINESS…
The new paperback edition of the success secrets behind asia’s richest man.
Anxiety over not knowing leads to irrationality
Embrace uncertainty to make better decisions Kate Cooper is head of research, policy and standards at the Institute of Leadership & Management
Thinking, Fast and Slow has made a significant Richard Thaler has just won a Nobel Prize contribution to how we understand for saying something that many already decision-making processes, distinguishing knew. Those of us who have been party between intuitive and rational thinking. to decision-making within organizations What is often forgotten about decisionare acutely aware that the calls made are making is that a decision should be a choice sometimes – perhaps often – irrational. between real alternatives. Let’s not fool Yet Thaler’s challenge to the neoclassical ourselves that we are making a decision economic model of rational decisionif the proposed courses of action are not making leading to optimum satisfaction and genuine alternatives and properly informed. allocation of resources has been extremely Too often the formulation of the decision, influential. The creation of the UK’s or, put another way, the problem to be Behavioural Insight Team – the so-called solved, says more about the definer than ‘Nudge Unit’ – being one notable example. the problem itself. It is during that period of We hear much about leadership and uncertainty – which is likely to decision-making. Decisiveness be stressful – that we must seek has a longstanding history as a these alternatives and ensure desirable leadership attribute; Nothing that, as far as is possible, they indecisiveness an unwelcome is more are feasible and viable so our trait. Being in a state of difficult, and choice is genuinely informed. indecisiveness – not knowing An informed choice is what to do – was found, almost therefore more an array of options about universally, by researchers precious, than which you have knowledge, Shelley Taylor and Peter to be able to intelligence and credible Gollwitzer to induce a state of decide information; it is not based on neurotic pessimism. Napoleon Bonaparte individual opinion, anecdotal Once a decision has been evidence or weak research. made and we start acting i.e. There should be some sort implementing the decision, of evidence base – or explanation of its we cheer up, feel confident and – ironically absence – for each option. If the quality – much more able to make decisions. The of information gathered to support an period of not knowing, being uncertain alternative is variable, with for example, a and faced with a degree of ambiguity is, more robust and persuasive case presented for many, stress-inducing. We all know for the already favoured option, the decision people for whom the state of not knowing could be considered irrational. is almost unbearable and the quest for There is much dishonesty in certainty imperative. At this point, it would organizations about processes which are seem obvious that ill-informed decisions mere window-dressing for faits accomplis. are likely to be made: the drive to quieten This threatens not just rationality, but the emotions arising in the period being also authenticity. If leadership teams are a rational response; the decision itself to deliver high-quality decisions, they anything but. must develop their capacity to deal with The role of decision-making as a key uncertainty, to recognize that, for many, it’s organizational process first appeared in not a comfortable place. Chester Barnard’s 1930’s book The Functions The best decision-makers tolerate not of the Executive. Subsequently there have knowing. They are aware that, given the been many different takes on how we abundance of available information, it is not should, and do, make decisions. Malcolm Gladwell’s Blink offers insights into the value so much the value of the answers they seek, but the quality of the questions they ask. of intuitive judgments; Daniel Kahneman’s Q1 2018 Dialogue
Change the way you change Many change programmes are doomed the second they get out of the door, write R Kendall Lyman and Tony C Daloisio
â€œIf you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them.â€? Henry David Thoreau, author, poet and philosopher
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At the company of one of our business clients, the head of change has 700 corporate change initiatives he’s responsible for tracking and coordinating. Clearly, that is too many to be effective, so he is trying to prioritize and get them down to a manageable number. As part of that process, he discovers two things. First, many of the initiatives are on the books to deliver results like cost savings, efficiencies or improvements in operations. However, the company is not getting the three- to five-year return on the investment (ROI) calculated during the analysis phase. The second finding is that nobody is managing the implementation, clearing roadblocks or ensuring that stakeholders aren’t confused about each of the initiatives. Instead, change teams do the analysis, build the recommendations, and get approval. Then they throw all of that over the wall to operations, disengage, and expect operations to establish the new norms and achieve the ROI. It feels like a ‘spray and pray’ approach to change – lots of good ideas that the leaders hope will make a difference. But with lousy implementation, a lot of luck is required for success. Whether you are in charge of one or two change projects, or the leader for all change in your corporation, you must tackle the details of implementation and sustainability or you won’t achieve the desired results. We know this isn’t easy. So how do you do it? Think about this story. An air traffic controller was asked how Chicago airport could land so many planes at once, to which he responded: “One plane at a time.” That’s the secret to sustainability – you have to land each change project one at a time. By landing, we mean making sure that the business owns the change. Research has shown time and again that 70% of large-scale change programmes don’t meet their goals (see, for example, John Kotter’s seminal work, Harvard Business School Press, 1996).
If an implementation team isn’t established to work through all the details, employees will treat change like an interruption to their work and just wait for it to go away
It didn’t matter how wonderful the ideas were from the change team; the fact that the operations team had no buy-in or link to the change doomed the change to failure When we shared this dismal success rate with some of our clients and asked how it applied to them, they said: “We don’t manage the rollout of the change. We don’t plan for it; we don’t train people how to do it; we don’t stick around to implement it; and we don’t coordinate it.” Sound familiar? The planning goes well, but implementation falls flat. William Bridges said: “Nothing so undermines organizational change as the failure to think through who will have to let go of what when change occurs.” If an implementation team isn’t established to work through all the details not accounted for by the original change vision, employees will treat it like an interruption to their work and just wait for it to go away. We have identified four disciplines for leaders that increase the probability that change will stick: 1 2 3 4
Validate project readiness Hand off the project to the business Create a discipline of accountability Establish learning and renewal
The second discipline really matters. Ideally, the business has been involved in the project all along. Sometimes however, a change team is set up separately so that the business can continue to run. For change plans to achieve their desired results, the business operating team must be ready to take ownership of the change. Recently we worked with a retail operation that was attempting to transform from a purely physical retailer to a virtual retailer. To minimize vulnerability to the normal streams of business, they decided to break off a group of executives and have them work on the change independent of the operations group. The innovation team did some great work, but it failed to include the operations team in the process and thinking. The result was a disastrous handoff. It didn’t matter how wonderful the ideas were from the change team;
the fact that the operations team had no buy-in or link to the change doomed the change to failure. Three factors help make the handoff to the business successful:
RECONNECT W I T H T H E V ISION
Reconnect with the vision of success established in the beginning. Be clear on what success will look like, and be ready to stop something that might no longer be relevant Reengage with the sponsor team. Make sure they continue to allocate time in their calendars to ensure the successful implementation of the project
ENSU RE DISC I P L I N E IN IMPL EME N TAT I ON
Revise rollout plans from the planning phase according to any changes in the schedule of the business Roll out the change measures and track progress; hold leaders and teams responsible for measuring Highlight cultural and psychological restraining forces and the plans to overcome them
TRANSITION THE PROJEC T TO THE BU SINE S S OPERATING TEA M
Identify the business sponsor; transition ownership (responsibilities and accountabilities) Update work processes, structure, and systems to align with the change Revise the performance management rewards and recognition to foster the new behaviours Conduct closure meetings and ceremonies to communicate the handoff
The change team must hold tight to the change until it is safely in the hands of the business, those leaders take accountability and own moving the change forward. Only in this way will change leaders enable the business to “put foundations” under the “castles (change plans) created in the air”. — R Kendall Lyman and Tony C Daloisio are the authors of the new book Change the Way You Change! 5 Roles of Leaders Who Accelerate Business Performance. As members of the Duke Corporate Education Faculty Network, they help leaders around the world navigate change, improve employee engagement, transform culture, and increase leadership capability Q1 2018 Dialogue
Beyond engagement Breaking rules and winning hearts are leadership essentials
Hervé Coyco, Roger Hallowell & Randall White illustration
The notion that an engaged workforce unleashes both productivity and higher quality is generally accepted wisdom. However, few organizations have broken through conventional engagement to achieve what we call ‘deep engagement’. Deep engagement is a state in which individuals have a sincere and deep emotional attachment to their work and their organization. We see two situations in which organizations create deep engagement. The first situation is driven by the individual. A chef at a restaurant with a Michelin star lives to cook and can make his dreams become reality. An engineer at Porsche lives for sports cars and can apply her talents to mastering her craft surrounded by likeminded, equally passionate engineers.
The second situation is driven by leadership. This form of deep engagement occurs when individuals know that they are cared about as a person first, and as a vehicle to accomplish work second. This remains a rare achievement and, as such, has the potential to contribute to competitive advantage. It may also be particularly important in today’s Vuca (volatile, uncertain, complex and ambiguous) world, in which uncertainty and ambiguity are high, and risk-taking fundamentally important. Why should individuals have the courage to make mistakes, unless they know they are cared for as individuals by their leadership? Why isn’t deep engagement being adopted? We believe two principles – missing at most
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large organizations – facilitate deep engagement and thereby contribute to a company’s competitive advantage. principle 1
People before rules
Treating people as individuals sometimes requires rules to be broken. Most organizations spend far too little time discussing under what conditions rules should, and should not, be broken. And most individuals spend too much time imagining that more rules exist than is strictly true. When a young Hervé Coyco was working late for Michelin tyre manufacturer one Friday night, his boss’s boss approached him – remembering
that Coyco was getting married the following day. “Why are you still working?” the executive asked. Coyco replied that he needed to be sure his team had instructions for the following week while he was on his honeymoon. The manager asked why he was only taking one week for his honeymoon. Coyco explained that he only had accrued one week’s worth of annual leave. The chap ordered Coyco to take two weeks. When Coyco said, “But my boss…” the executive replied, “I will speak to your boss.” In this example, the big boss breaking the rule about annual leave contributed to Coyco wanting to build a career at Michelin, and fostered his desire to do his absolute best for the company. There is, however, an essential note that Q1 2018 Dialogue
must be made to this story: ‘people before rules’ must be genuine. The message is not for leaders to learn a handy ‘people engagement’ recipe, but for leaders to be aware of the value of empowering individuals to break the rules and creating a culture with clear guidelines as to which rules can – and cannot – be broken. Now consider a contrasting example. When Roger Hallowell was a research associate at a well-known business school, he was frequently on the telephone conducting interviews. He had been paired with another researcher in an office slightly larger than a coat closet, making interviewing awkward. Hallowell noticed that there was an empty faculty office next door and there were no plans to place anyone in it. Physical space was an indication of status at this institution; faculty offices were for faculty. Despite knowing this, Hallowell moved only what he was working on at any given moment into the empty office, and kept himself capable of vacating the room within five minutes. Productivity and quality rose and, for a time, everyone was happy. After about a month, however, rumour of the transgression spread and the rules were enforced. The off-limits empty office sent the message that rules were more important than people and their work. These two examples – one engendering a lifetime of loyalty to an organization, and one demonstrating that a bureaucratic rule was more important than people – illustrate the opportunities of responsible rule-breaking. What can we learn from this? When should you, and when shouldn’t you, break the rules? Break the rules when the long-term benefits of breaking them exceed the long-term costs (note that this requires a long-term perspective). Take a look at the hierarchy of rules (see Figure 1 opposite): at the core are rules that are never challenged. The most straightforward examples of these involve legality. Slightly less straightforward are those involving ethics, morality and integrity. More subtle rules that are never broken often relate to cultural icons. For example, for many years at Michelin it was understood that one would never propose a change to decrease costs unless it simultaneously increased quality. Moving out from the core of Figure 1, we experience a set of rules that are rarely broken unless common sense and the organizational culture overwhelmingly support their being challenged. Once a flight ‘closes’ at Singapore Airlines, no more tickets can be sold… except that this rule was broken when Coyco was struggling to get the last flight from Singapore to Paris due to
a family emergency. Singapore Airlines’ culture is about being customer-centric. If a flight isn’t delayed, the only inconvenience of ‘reopening’ a flight is administrative hassle: a cost well worth incurring when you can help a fellow humanbeing in a crisis and thereby reinforce the airline’s culture and strategy – not to mention boost revenue. Moving further out from the core of Figure 1, we see rules that are sometimes challenged. In making a reservation for a rental car, Hallowell’s corporate travel agent cheerfully broke the rule against renting out SUVs when she learned that he would be driving across the plains of South Dakota in February, where the temperature could drop to -40oC, accompanied by a metre of fresh snow. Laid over the very simple framework we have provided, a leader at any level in an organization may consider breaking rules based on need. But will a person or group abuse the freedom they are being given? There is no contradiction in having rules and giving people degrees of freedom. This is not a zero-sum game in which increasing one automatically reduces the other, as long as leaders have a clear understanding of when and which rules to break. At organizations with extraordinary cultures there is an innate understanding of when to break rules. For most organizations, however, the question of when to break rules is opaque at best. We would encourage leadership of all organizations to have an open dialogue about breaking rules. Only if an organization creates its own version of our Figure 1 can it be sure that some rules will never be broken, but that other rules can be subject to judgment and common sense. Open dialogue is an essential part of ensuring individuals believe that their organization puts people first. Having some rules about rules will help all leaders intentionally ask the right questions. Emotionally intelligent leaders, supported by a good culture, instinctively know when to break the rules. principle 2
A lot has been written on this topic, but its execution remains elusive for many leaders. Deep engagement requires leaders of an organization to capture individuals’ hearts, just as Coyco’s boss’s boss did. This starts at the top of the organization through behavioural modelling, and then cascades to the entry level. When done effectively, the organization’s culture reflects the belief that individuals are human beings first, and vehicles to accomplish work second. During Hallowell’s first visit to
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THE HIERARCHY OF RULES Only challenged when common sense, consistent with the culture, overwhelming supports the challenge
Sometimes challenged Rarely challenged
COR E Never challenged
Legal Ethical/moral/integrity Cultural icons
Challenged when the benefits of breaking the rule exceed the cost
Emotionally intelligent leaders know when to break the rules
study Southwest Airlines, he was struck by the enthusiastic way individuals greeted each other at headquarters. What initially appeared to be excessive Texan friendliness turned out to be genuine concern individuals had for one another. Did this come out of nowhere? Herb Kelleher, then chief executive, applied emotional leadership extraordinarily well, genuinely caring about his people and insisting that those behaviours cascade through the company. Kelleher stated: “We say, ‘If you’ve got problems at home, we understand that and we want to help you deal with your problems at home, because Southwest is your family too’… We to constantly show that we care about our people as individuals number one, not just as part of Southwest Airlines, but in the totality of their lives.” In a business-to-business context, another chief executive delivers a similar message. C William Pollard, former chief executive of residential and commercial services giant ServiceMaster, wrote: “When I was in… St Petersburg, I met Olga. She had the job of mopping the floor in a large hotel, had been given a T-frame for a mop, a filthy rag, and a bucket of dirty water to do her job. She wasn’t cleaning the floor, she was just moving dirt from one section to another. I knew from our conversation that there was great unlocked potential in Olga. I am sure you could have eaten off the floor in her two-room apartment – but work was something different. No one had taken the time to teach or equip Olga. No one had taken the time to care about her as a person. She was lost in a system that did not care…”
ServiceMaster learned the hard way that getting competitive advantage requires beliefs and behaviours that are echoed throughout an entire organization to create a culture of caring. principle 3
The Goldilocks principle
Deep engagement can occur in any organization, at all levels, when our two principles are applied: (1) putting people before most rules; encouraging discussion about when rules should and should not be broken; and (2) engaging in emotional leadership; capturing the hearts of your people by showing them you care about them as individuals first, and as a vehicle to accomplish work second. A critically important note: both ‘people before most rules’ and ‘emotional leadership’ can’t be some kind of algorithm. They require true leaders who are empowered and who possess good judgment. Too much rigidity will diminish the moments of truth when deep engagement can be initiated or enhanced. Too much flexibility defeats the purpose and can create longterm problems. What’s needed is ‘Goldilocks Leadership’ – not too hot, not too cold – but just right. Is developing emotional leadership throughout an organization a difficult goal? Absolutely, otherwise people would have stopped writing about it by now. This is why we think being clear about which rules cannot be broken and which can be flexed, changed or challenged, is so important. As is the development of emotional leadership. — Hervé Coyco, Roger Hallowell and Randall White are adjunct professors at HEC Paris Q1 2018 Dialogue
The AI rules of leadership Artificial intelligence owes more to great leadership policy than you might think, writes Dr Sunnie Giles
It was a remarkable triumph for artificial intelligence: exactly a year ago, over 280 million people around the world watched the historic match between Lee Sedol, the reigning world champion of the ancient Chinese board game Go, and AlphaGo, an artificial intelligence developed by Google’s DeepMind. The
match was streamed live from South Korea in March 2016, which Lee Sedol lost one to four to AlphaGo. Go has long been viewed as the most challenging of classic games for artificial intelligence because of its enormous search space and the difficulty of evaluating board positions and moves. Intuition – the
ability to judge the game from the overall picture of the board – is essential to win. Then how did AI achieve this seemingly impossible feat ten years faster than industry sages such as Elon Musk anticipated? The answer is via the exact same method Google – and many
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other Silicon Valley tech companies – use for managing people. Here are five rules both Google and AlphaGo use to dramatically improve their capacity for innovation, which all companies can use to successfully compete in this rapidly changing Vuca (volatile, uncertain, complex and ambiguous) age.
AlphaGo and Google both use selforganizing agents. In AI, the agents learn everything themselves, instead of relying on preprogrammed instructions from chess grandmasters. Google’s stance on this principle is seen in how it manages people: “Hire the best people and get out of their way.” At Google, managers are encouraged to delegate as much as possible, to the point where they start feeling slightly uncomfortable. It is also evident in its 20%-time policy, where employees spend 20% of their time working on what they think will most benefit Google.
Use simple rules
AlphaGo uses two sets of simple rules: (1) policy networks to evaluate positions and reduce the breadth of search, and (2) value networks to predict the probability of winning in a given position and reduce the depth of search. Using these rules increases the speed of computation by reducing the input AlphaGo needs to process. Google, too, uses simple rules as loose guidelines for a diverse population of self-organizing employees. Google’s simple rule to decide when to add a layer under a manager? Have a minimum of seven employees. What about office space? Keep it open to maximize interaction. Ethics? “Don’t be evil.” How to allocate corporate funds? Spend 70% on existing products, 20% on emerging products, and 10% on moonshot projects. These simple rules not only provide loose parameters for employees to align their self-organized efforts, but also speed up decision-making.
General intelligence vs narrow intelligence
Unlike a narrow AI, which is used for very specific purposes, AlphaGo is an artificial general intelligence (AGI)—a single system that can operate on a wide range of tasks. The problem with
It is absolutely okay to try something that is very hard, have it not be successful, take the learning and apply it to something new
narrow AI, such as those used in smart homes, is that it breaks when faced with unexpected situations outside of handcrafted, preprogrammed solutions. General-purpose algorithms, like AlphaGo’s, are much more resilient and adaptive. Similarly, Google prefers generalists over specialists: “Favouring specialization over intelligence is wrong… The world is changing so fast across every industry and endeavour. Hiring a specialist in such a dynamic environment can backfire. A specialist brings an inherent bias to solving problems... A generalist doesn’t have a bias and is free to survey a wide range of solutions and gravitate to the best one.”
Diversity of input
Diversity of input improves AlphaGo’s performance. AlphaGo developers trained AlphaGo with 100,000 games played by decent amateurs and 30 million games played against itself. Google’s views on diversity extends beyond compliance. “Homogeneity in an organization breeds failure,” it says. “A multiplicity of viewpoints – aka diversity – is your best defence against myopia. People from different backgrounds see the world differently. These differences of perspective generate insights that can’t be taught.”
Lots of trial and error
AlphaGo learns by many repeated experiments: trial and error. Rather than brute force calculation, it uses reinforced learning: it interacts with the environment and learns in the process. Many losses were necessary in order for AlphaGo to slowly improve its win rate. Failures are a necessary input to radical innovation. Google runs 20,000 rapid experiments every year, measures the results, and repeats the process for incremental improvement. The inevitable failures during the process aren’t punished. Eric Schmidt spoke on
the failure of Google Wave, a real-time communication platform. “Our policy is we try things,” he says. “We celebrate our failures. This is a company where it is absolutely okay to try something that is very hard, have it not be successful, take the learning and apply it to something new.” These principles, which helped AlphaGo beat Lee Sedol, are the same principles that help Google – indeed, any organization – create a culture that can serve as a primordial soup to spawn radical innovation. These principles are universally applicable to all organizations because they are based on laws of nature.
Leadership changes required for the changing business environment
Incidentally, these are the same principles that paralyze many traditional companies facing Vuca. Leaders are facing simply too many new diverse and interdependent variables, being introduced too fast with too much uncertainty, when they need to make effective decisions now. The increasing complexity of today’s business world makes the industrialera leadership model of commandand-control obsolete. Just as AI had to be upgraded from the brute-force approach to a speedier and more flexible approach to win a complex game like Go, so leaders must up their game to successfully navigate today’s complex business environment. Even the best AI can’t direct current moves based on the expert knowledge that sees through the end of a Go game from each move. Similarly, even the smartest leader cannot see the final consequence of a decision and delegate. The game has become too complex now. Harnessing complexity that makes it difficult for leaders to make decisions by embracing self-organization, simple rules, a generalist approach, diversity of input and profuse experimentation can greatly improve one’s capacity for radical innovation. Remember that radical innovation which introduces a new product category, or reshapes the dynamics of an industry, often is an unpredictable – and bountiful – side effect of experimentation. — Dr Sunnie Giles is an executive coach, leadership consultant, speaker and trainer. She is president of the Quantum Leadership Group www.sunniegiles.com Q1 2018 Dialogue
Do you play well with others? Executives that learn to help each other build better companies, writes Marshall Goldsmith
Do you play well with others? This is a great question. And, it’s incredibly helpful if you answer it honestly. Your answer could lead to your success or demise as a leader. It could be the key factor in your personal and family relationships. So, let’s ask it again. Do you play well with others? Many of us may think “plays well with others” is a category for grading schoolchildren, not grown-ups like us. We tell ourselves, “I’m a successful, confident adult. I shouldn’t have to constantly monitor if I’m being nice or whether
people like me.” We may hold ourselves blameless for any interpersonal friction; it’s always someone else’s fault, not ours. “The other guy needs to change. I shouldn’t have to. In fact, I don’t need to: it’s his fault!” Or we’re so satisfied with how far our behaviour has already taken us in life that we smugly reject any reason to change. In other words, if it ain’t broke, don’t fix it. When my good friend Alan Mulally became chief executive of Ford, he set to work to create an environment where the executive team, notorious for not working together, could
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If Ford had been a schoolyard, and the executives schoolchildren, they would have gotten the highest marks
learn to play well with each other. Through Alan’s leadership, the focus of the team, and ultimately the focus of the entire company, became: “How can we help one another more?” It worked. The company survived through incredibly difficult times, and returned to achieving great success again through working together. If Ford had been a schoolyard, and the executives schoolchildren, they would have gotten the highest marks in playing well with others. How well does your team play together? You can answer this question with your team by trying this simple four-step process, which I call team-building without timewasting. The steps are:
pick the one that they believe will have the biggest impact. STEP 3
T H E C O N V E R S AT I O N
Ask each team member to conduct a three-minute, one-on-one meeting, with each of the other team members. (Do this while standing and rotate as members become available.) In these sessions each person should ask, “Please suggest one or two positive changes I can make individually to help our team work together more effectively.” Then get each person to pick one behaviour to focus on improving.
In a team meeting ask each team member to rate “how well are we doing?” vs. “how well do we need to be doing?” in terms of teamwork. Have each member do this on paper. Have one of the members calculate the scores – without identifying anyone. On a one-to-ten scale – with ten being the highest score – the average evaluation from over 1,000 teams is “we are a 5.8. We need to be an 8.7”. STEP 2
T H E A N A LY S I S
Assuming there is a gap between “we are” and “we need to be”, ask each team member to list two key behaviours that, if each other individual team member improved, could help close the gap and improve teamwork. Do not mention people – only behaviour – such as listening better, clear goals, etc. Then list the behaviours on a flip chart and have the team
Begin a regular monthly follow-up process in which each team member asks each other member for suggestions on how to continue their improvement based on their behavior the previous month. The conversations should focus on the specific areas identified for improvement individually, as well as general suggestions for how to be better team members. When asking for input, the rules are that the person receiving the ideas cannot judge or critique the ideas. He must just listen and say “thank you”. The person giving the ideas must focus on the future – not the past. This is a quick and easy process that helps teams improve and helps team members become better team players. Try it for yourself and see!
— Dr Marshall Goldsmith was recognized in 2015 as the number one leadership thinker in the world and a top-five management thinker, as well as one of the top-ten most influential business thinkers in the world Q1 2018 Dialogue
Training magazine’s 41st Annual Event Conference: February 12 –14 Georgia World Congress Center Atlanta, Georgia
Co-Located Event: February 12 The Duke CE Leadership Experience
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An event designed for learning professionals & executives
I would recommend attending a Training magazine Conference to every trainer. The networking and learning opportunities were limitless. I left the event feeling like I belong to a huge team of people who share my passion for bringing great information to life.” Sue Aderhold, Director of Education, Great Clips
Visit www.TrainingConference.com for more information. 048_Dialogue_Q1_2018.indd 48
The South Asian giant risks repeating the mistakes of Japan and Korea
Complacent India faces rude awakening Vivek Wadhwa is distinguished fellow at Carnegie Mellon University’s College of Engineering
lumbering, crumbling networks that You can see it in their faces, hear it in their wire their industries together. The advent voices. The Japanese and Koreans – on of secure cloud computing means that top of the world in the 1980s and 1990s – a growing proportion of companies are want the good old days back. When I meet doing away with servers altogether. Japanese and Korean companies these The Western contracts that are days I find their executives among the keeping the Indian IT sector in riches most attentive and determined of any in won’t disappear overnight. Company the world. Years of economic stagnation IT infrastructure takes decades to does that to you. Who doesn’t want to escape from a malaise? Willing alone won’t deconstruct. Corporate IT strategy moves at the rate of molasses. There will bring back the boom times – and I’m not be business for a few years yet. But the yet ready to forecast a Northeast Asian eventual outcome is set, no matter how renaissance. What I am ready to do is much Indian contractors would like to predict a South Asian retrogression. The complacency that caused Japan and wish it away. There are $100bn opportunities South Korea to lose their edge at the end elsewhere in the digital of the last millennium space that India has the is about to afflict India. expertise and capacity This is not to denigrate The Indian tech to exploit – yet it shows the talent base on the sector could be no evidence that it is subcontinent – Indian developing artificial likely to take them. digital expertise remains intelligence, robotics Instead, many Indian world-class. It is a and smart cities executives seem happy question of attitude to plough on with more – an unwillingness to of the same, listening face the reality of the to the warnings without changing course. industrial shift that is coming. Most of their companies face becoming Much of India’s IT wealth comes from the Kodaks of tomorrow – anchored to an Western outsourcing of IT services – outdated business model that is destroyed managing New and Old World corporate by disruption. IT systems and the mainframes upon The Indian tech sector could be which they run. Yet about a decade ago, developing the artificial intelligence, the balance of computing power started to robotics and smart cities that will frame change to favour individual users. the new sector long after the cables and Home computers, handheld devices keyboards of corporate tech systems have and personal smartphones are now been dismantled. American factories are frequently more powerful and up-tonot geared up to do it – most don’t have date than the ageing tech found lurking the know-how. in corporate headquarters. The surge of When I talk to Indian chief executives, remote- and home-working has given they recognize the threats of digital employees even greater incentives to transformation – and can see the upgrade their home technology. opportunities for diversification. Yet There are exceptions. But – very they turn away from our conversations frequently – professionals in public to focus on closing another legacy administration, the legal profession and financial sector command more processing outsourcing deal – fiddling while Bangalore burns. power on their own devices than on the Q1 2018 Dialogue
The human difference You can breathe a sigh of relief. In a future world dominated by AI and machines, we still have a place and purpose, finds Kirsten Levermore
Fear of the future resides in the hearts and minds of almost every employee, manager or chief executive in the world today. Some admit it. Some donâ€™t. Think about it for a moment. The human race has never lived through such rapid disruption in how we work and live our daily lives. Within three to four generations we have gone from horseback and steam engines to driverless cars, mobile phones, a few Moon landings and super-powered computers that can outsmart the brightest human minds. So what do we do when faced with these challenges? First, letâ€™s go back a few millennia. Our ancestors would have gathered around their new invention â€“ fire. Tribe leaders would start a conversation about the uncertainties they faced and the insecurities they felt. Others in the group
would chime in, offering thoughts and concerns. The modern-day version of a fireside tribal talk is a conference. The principles are the same. We get together, discuss the latest developments, talk about what this all means for the future and how we feel about it. The great difference is, thanks to the invention of the jet-engine, we also get to fly in some of the leading thinkers on the topic. From the fire breakthrough to the miracle of powered flight, human innovation has led to greater human connectivity.
The human factor
Fast forward in time to August 2017 when more than 100 delegates from around Africa, Europe, Southeast Asia and the US gather in Johannesburg
for a Duke Corporate Education (Duke CE) oneday conference to discuss the key element that will make – or break – the future: humans. What was the theme that brought everyone together? The Human Difference – Leadership in the Digital Age. Speakers included banking executives, a candidate astronaut, Google and renowned neuroscientist Dr Vivienne Ming. Typically, forward-looking conferences tend to focus only on technological developments in the workplace of the future. Duke CE’s Johannesburg event, however, takes a different approach. The Human Difference conference seeks to explore how leaders can empower and enable human beings to work with technological developments to achieve great – and good – things.
Prepare for change
Opening the conference, dean of the Fuqua Business School at Duke University, Bill Boulding, tells Dialogue: “I’d like to see people leave the day totally energized, with a sense of excitement about the opportunity, and energized by the responsibility of being human, and bringing human values into our present and into our future at a point in time when it’s easy with technology to push aside humanity and say, ‘We’re going to replace humanity with robots, machine-learning or artificial intelligence.’” Duke CE’s Africa President, Sharmla Chetty, echoes Boulding’s remarks. “Our job is to help executives and their teams prepare for change in a constructive and engaging way, and not through fear,” she says. Chetty adds: “We have seen the results of this approach in the way large corporations suddenly see the opportunities ahead and adapt their organizational culture accordingly to meet the future head-on.”
Voyage of discovery
One woman who exhibits the spirit of which Chetty speaks is Dr Adriana Marais, one of 100 people selected from around the globe to compete for a one-way ticket to Mars. Dr Marais has signed up to the Mars One project which aims to establish the first human settlement on the Red Planet. “Exploration provides us with the opportunity to find new ways of doing things, new techniques, better and more efficient ideas,” she says. Mars One plans to send several unmanned missions to Mars prior to the arrival of the first humans, the intention being that robots will have built a habitable settlement ready for their human colleagues to populate. Rather than fear a Mars journey, Dr
B R A I N O P T I M I Z AT I O N One key characteristic that fundamentally differentiates humans from sophisticated machines is empathy. Empathy is the ability to understand and share the feelings of others, from the other person’s frame of reference – the ability to place yourself in somebody else’s shoes. This, for now at least, is something that artificial intelligence (AI) cannot do. To experience and openly express empathy, however, a human brain must exist in an environment that:
Four elements make up the optimum atmosphere for the ‘human’ brain
BO NDIN G
B E LON GI N G
HUMAN-C E N T R E D INNOVAT I ON REQUIR E S T H E R I GH T ENV I R ON M E N T IDENTITY
exposes us to others’ emotion, i.e. others are encouraged to show emotion feels safe enough to empathize and express empathy ourselves allows us to identify the person – or audience – with which we are trying to empathize gives us the tools to extract meaning from that empathy In other words, we can only be human in an environment that is conducive to humanity. And the responsibility of nurturing such environments, Human Difference 2017 conference organizers argue, falls to leaders. Together with psychologists and behaviour specialists, Duke CE introduces delegates to their new educational course in building the right environment for a humancentred approach: Neuro Signs Immersion. Delegates are handed light-reflective blindfolds and
nightclub-style glowsticks on entering the blacked-out, fabric-swathed cavern that houses the experience. With guidance from the Duke CE team, randomly selected teams are blindfolded then guided through a maze of challenges and experiences designed to break open the mind to expose its human core and permit true, pure innovation. The immersion delves into human behaviour and the need to create social safety to optimize performance. The Neuro Signs model proposes that the optimum environment for innovation and ‘human-centred’ thinking provides employees with four key experiences: bonding, belonging, meaning and identity (see above).
Robots could build a habitable settlement on Mars for humans to populate. Had Marais been born 50 years ago, Mars would be out of reach
Dialogue Q1 2018
Marais sees it as an unmissable opportunity to use all of humanity’s discoveries to achieve what once seemed impossible. Had she been born 50 years earlier, Mars would have been out of reach. Duke CE chief executive Michael Chavez says while some embrace this change, others fear it. “Disruption is the driving force of the future” he says, as he leads delegates through a discussion on change.
March of the robots
This is where the fear is rooted. What does change mean? “Will robots take over my job?” many ask. To discuss the question, a panel of representatives of human resources, company learning programmes, and managers of companies around the world, including Cisco, Google, Egon Zehnder, MTN, Anglo American, Nedbank and RCL Foods, were invited to take the stage. It is a difficult hour. People face the reality that, yes, part of their job would become obsolete. New skills will have to be developed and not all the outcomes are certain. It becomes clear workforce training is needed, and in many industries and companies across this globe this hasn’t even started. Once again that uncomfortable feeling about the future starts to creep across the room. But not for long. Next, keynote speaker Dr Vivienne Ming takes to the podium.
Dr Ming is a theoretical and computational neuroscientist, serial entrepreneur and world renowned adviser and expert on artificial intelligence. She has turned down jobs at nearly all the major tech companies, choosing to lead in the digital era rather than follow. “The world,” she says, “has never changed this fast, and will never be this slow again.” Not a single person moves from their seat or checks their messages. “AI stands for augmented intelligence. Technology should be humancentric... technology should always challenge us. It shouldn’t make life arbitrarily easier – it should make us better. “AI doesn’t take jobs; it just handles work,” she continues. “Those tasks that are tedious and repetitive, they will be automated. That frees up more time to do more valuable things, to be more human, to do the things AI cannot.” With a wry smile Ming looks the audience in the eye. “There is only one thing I need from you useless bags of organic slush in an AI future: to explore the unknown,” she says. “Exploring the unknown is outside the capabilities of machine learning. It isn’t about being better than an AI; it’s about being you.”
prepare for the ai revolution
Strengthen your mind: skill up in ‘metacognition’ emphasize literacy and numeracy in the first five to eight years of life maintain your cognitive reserve (the strength and speed of your brain) by learning a new language or musical instrument develop a diverse set of strengths above all: “Don’t wait for AI to challenge you, challenge yourself”
This may sound philosophical, but Ming has a very good point. “Software developers get paid a lot of money to solve really interesting problems,” she says. “But they don’t solve problems and make a lot of money because they know how to program, they do it because they are creative, adaptive, problem-solvers. If we force everyone to learn how to program, you won’t build problemsolvers; you’ll build people that aren’t cognizant and don’t know how to use tools.” And that is the lesson. It is not what we know. It is how we think about the unknown. For many in the audience the penny suddenly drops. Earlier in the day they were taken through a step-by-step ‘design school’ problem-solving immersion. Delegates were given a real-time problem and innovation plan carried out by prominent South African bank, Nedbank (see Dialogue Q3 2017, p28). The session takes delegates through the process by using a real-world example: how schools manage parents’ payments for school activities in an increasingly cashless world. The Nedbank team, spearheaded by Brinsley du Plessis, explores the problem itself; ideas; prototype and testing; and product release from an empathetic standpoint: considering it from the viewpoints of key stakeholders such as bank, parent, child and teacher. Duke CE had craftily set up the exercise to take delegates through the various stages of design-thinking: 1 Empathize Get an empathic understanding of the problem you are trying to solve 2 Define Define the problem as a statement in a human-centred manner 3 Ideate As the title suggests, here you generate ideas to solve the problem 4 Prototype Make the solutions to the problem and experiment 5 Test Test your solution to see if it works. Refine the product or service by repeating any of the steps above to get to a better end goal
As Dr Ming suggests, none of the steps instruct you to learn how to code. Instead, we must strive to shift our companies, our teams and ourselves to become the creative, adaptive problem-solvers of tomorrow to unlock the new opportunities that await. Remember, humans have thrived throughout the ages because of this unique cognitive ability. Don’t be scared. — Kirsten Levermore is Dialogue assistant editor Q1 2018 Dialogue
Hotline to ambidexterity The world is changing. Deutsche Telekom got ahead of the curve, write Liz Mellon and Marieluise Maiwald
Do you recall the YouTube video – a company advertisement – launched nine years ago, of a plane being built in the air, while in flight and full of passengers? It’s still out there if you look for it (‘airplane’). If anything, change has only accelerated since then, leaving us with the breathless feeling that we are simultaneously building and changing business, two opposing ideas that are hard to reconcile. This challenge was keenly felt by Deutsche Telekom AG (DT), which is facing severe challenges from digital disruption in the market. The company offers telecommunications services; a full range of fixed-line telephone services, mobile communications services, internet access, and combined information technology and telecommunications services for businesses. It needs to adapt quickly to new technology or risk becoming obsolete. For DT, the answer lies in ambidexterity; the capability to balance exploiting current business (blue) with exploring new opportunities and business models (green). The success of blue business models is measured through indicators, such as efficiency and provides money for investment in new green business areas. Green opportunities are run with different performance indicators, such as the number of ideas generated.
Be the change you wish to see in the world
Actually, Gandhi said something more akin to, if we could change ourselves, the tendencies in the world would also change, but the sentiment is clear. The HR function in DT decided that it needed to establish more effective ways of dealing with complexity and ambiguity. As Christina Schulte-Kutsch, VP leadership
development and culture at DT, says: “Current business models change dramatically. We at DT want to shape digitization and the business world of the future. Our leaders are in the driving seat of shaping our digital future and we want to support them in building the leadership capabilities needed.” Hence, LevelUP! was born. The LevelUP! programme has three streams delivered over ten months. The first stream is Educate, the mandatory component. Delivered virtually, it takes one day per term (four days total) to complete and is the programme foundation. It is primarily designed to inform participants about ambidexterity and to make the concept come alive through current and ongoing industry case studies or future scenarios. The second stream is Inspire, intended to foster innovative thinking and can be delivered virtually or faceto-face, using mechanisms such as ‘Leaders in Cars’, interviews with DT leaders while on the move (based on the ‘Carpool Karaoke’ YouTube videos). The third stream is Transfer, again with a variety of different delivery mechanisms and intended to enable the learning to transfer to daily practice at work. As we all know, this is the critical and most challenging phase in the learning cycle – importing new ideas and practices into the workplace. The transfer stage deploys a variety of methods, including reverse mentoring, design-thinking workshops and team consulting on ambidexterity.
How is LevelUP! different?
The first difference is that no-one was nominated to, or sent on, the programme – it was advertised internally to the top 2,500 executives in the
Dialogue Q1 2018
business. Some 700 places were offered on a first come, first served basis; all participants register themselves. The slots were filled in three days, with an immediate waiting list of 300 people. Already this programme distinguishes itself from more standard HR offerings. More usual qualifying processes would include nomination by a line manager; or talent identified by HR; or mandatory programmes upon promotion; or transfer to a new geography. The second difference is that participation and completion of assignments are not tracked centrally. Just as registration is delegated to the participants, task completion is certified by a buddy. Participants work in pods of eight, with four buddy pairs and an external mentor. Each pod creates its own rulebook for how the pairs, the pod and the mentor interact. Britta Posner is the founder and chief executive of Berlin-based Collaboration Practice consultancy and, as one of the external mentors, has seen the participants change as they go through the experience. â€œDeutsche Telekom is a large organization where seemingly hierarchy and following rules can sometimes prevent things from getting done,â€? she says. â€œThis was a common observation from participants. But while at first this felt like an insurmountable barrier, the programme helped participants to reflect, leading to a change of perspective and questions, such as: I understand ambidexterity, so surely this means we have to work together differently? The Educate programme has allowed participants to go on an individual journey, finding their own questions and reflecting deeply on key topics such as identity, vision and their personal contribution. Q1 2018 Dialogue
One participant had a chip implanted under the skin to pay for goods. How many times does that happen on a standard training programme?
“Those who fully engage with the process own the challenges and the remedies; they share the ideas with their teams and put them into practice. They define targets to track outcomes, for example defining a specific collaboration target, or changing the way they work with their peers from other functions. This experience fosters true ownership and accountability in a way that really feels new.” The third difference is that participants, with the exception of the year-long Educate stream, design their own learning pathways – each participant is empowered to pursue exactly the learning they find most relevant. As they work in their pods and encourage each other to explore, they also experiment. For example, one participant was inspired by Neil Harbisson (the first person in the world with an antenna planted in his skull and officially recognized as a cyborg by a government) to have a chip implanted under the skin to pay for goods. How many times does that happen on a standard training programme?
What do the participants say?
However different this experience may appear from outside, it’s what the customers themselves say that is most important. Soenke Thun joined T-Mobile Deutschland GmbH in 2004 after 12 years in the German Navy. He works in finance on major theoretical projects such as defining DT’s key performance indicators. It is often challenging for executives who ‘run the numbers’ to see the relevance of fluffy subjects like collaboration. Not so here. “Every step along the programme I came to understand my CEO better,” he says. “Obviously I understood why we do things from a business perspective, but now I have a deeper understanding of why all the steps in the process are necessary. Understanding the why, the reasons behind our decisions, helps me contribute better towards this on a daily basis, rather than just understanding what we are supposed to do. “I use the same technique with my team so that they too can understand how their daily work contributes. I also understand now why we separated out the innovative part of our company – building the business and changing the business are very different activities and need
to be handled differently. I like the programme – it’s new, refreshing and fun.” Vladan Pekovic is in charge of technology and IT in the Montenegrin affiliate, Crnogorski Telekom. He joined DT in 2009 and has almost 20 years of telecommunications’ experience in Latin America, the US, Africa and Eastern Europe (for Ericsson, Glotel, America Movil and T-Mobile). “I have attended a lot of training programmes, inside and outside DT, but this is the first with a real twist. It’s not intended to make us all the same, executives in one mould. We also look at industry broadly and its need to digitize overall, not just at our own industry. It’s refreshing. I also have experience of Harvard online, but this programme combines academic input, real DT stories, case studies and online. “Discussion and reflection in our pods has created a real sense of urgency to change; for example, a colleague from Compliance said that the rules should be more flexible if we are to be able to grow! The content is not so new, but it’s not academic and leads easily to application. For example, explore (new ideas) and exploit (create add-on products or services) is obvious and we’ve done it for years. But now there’s a new imperative to explore more – how long can we (and Apple with the iPhone) keep exploiting old ideas? With my team now, I am explicit that we can experiment and fail without blame as we try new ideas and products. I see it as my job to
Dialogue Q1 2018
change me, and also to influence others to adapt to this new spirit of leadership, along with the entire class doing the same.” This process is clearly working. Lest it sound too idyllic, both participants and the external mentor noted that not everyone is active – there are free riders in every pod who drift along without taking much action. However, that has always been true in group work, so while it’s disappointing, it is not at all unusual.
With my team now, I am explicit that we can experiment and fail without blame as we try new ideas and products
Ambidexterity forms the umbrella theme for this year’s programme content, with DT’s Three Leadership Principles: ‘Collaborate’, ‘Innovate’ and ‘Empower to Perform’ acting as the underlying drivers. HR itself lives these principles through strong collaboration with its external training provider, Duke Corporate Education (DCE), and an innovative design (selfregistration, imaginative case studies based on real industry challenges, buddy certification). And participants are empowered to create their own learning pathways – the ultimate in mass customization, literally self-customized by each individual. But in what ways does designing and delivering training in ambidexterity transform HR into an ambidextrous function itself? HR lives the same principles of ambidexterity, innovating fast for LevelUP! There was a lot of work required by the highly collaborative DT-DCE team to translate this into a viable and engaging educational experience. They had to identify the most appropriate
and useful theoretical underpinnings – tools, concepts and theories – for each term. Learning materials, such as videos, articles, cases and examples, had to be selected and in some cases created from scratch, at speed, before being uploaded to the Educate Promote platform. The whole offering had to fit together to form a coherent and compelling holistic experience. As Marieluise Maiwald from the Duke team says: “We knew that to keep participants engaged in a purely virtual environment over a yearlong programme, we needed different ideas and very different approaches for each term, from simulated future scenarios to personal, innovative experiments.” The delivery team needed to run the programme efficiently (making sure the materials and experiences were where they needed to be, when they needed to be) as well as offering high levels of innovation, such as the Quest activity, which involves weekly challenges. “The pressure of producing a new, highquality educational-experience fast requires intense collaboration – team calls twice a week were common – as well as robust project management using world-class tools like Trello,” says Duke programme lead Dr Ian Turner. “The team was designing on-the-go, often only six to eight weeks ahead of the programme, to meet each need as it arose. You can’t teach ambidexterity without being ambidextrous yourself.” — Liz Mellon is chair of the Dialogue editorial board — Marieluise Maiwald is program director at Duke CE Q1 2018 Dialogue
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Mastering finance means perfecting the patois
Learn the lingo Phil Young PhD is an MBA professor and corporate education consultant and instructor
A small but very important part of understanding what a company does is mastery of its acronyms
To get behind the numbers, you must get past the acronyms. A few months ago, US multinational General Electric (GE) announced that it was selling its Industry Solutions (IS) business to ABB for $2.6 billion. IS makes all kinds of electrical equipment. The deal is expected to close sometime early next year. Last year’s revenue for this segment of GE’s total sales is quite small, $2.7 billion out of a top line totalling $110.8 billion. But it does represent a relatively larger part of ABB’s turnover last year of $33.8 billion. So this acquisition will represent a noticeable upward nudge to its top line. But how about its bottom line? Is IS a profitable business? If so, why would GE want to sell it? If not, why would ABB want to buy it? The official press release on this deal cites IS’s EBITDA and EBITA margins to be about 8% and 6% respectively. Are these margins high or low? Are they good or bad? At this point, I dare say that readers with a financial background will have a good idea of how to answer these questions. Understandably, those less familiar with finance might not. I’m guessing that one reason is because financial professionals often use different terms for the same concept. They also use a lot of acronyms. In the opening paragraph, I deliberately used other ways besides ‘revenue’ in reference to the monetary value of a company’s sale of its products and services. EBITDA and EBITA are good examples of the common practice of using acronyms rather than the actual name of a financial term. EBITDA stands for earnings before interest, taxes, depreciation and amortization; and EBITA stands for earnings before interest, taxes and amortization. EBITDA and EBITA are variations of EBIT, or earnings before (subtracting) interest and taxes. In other words, EBIT is operating profit. Simply put, EBITDA and EBITA margins measure the profitability of the operations of a business in a way that is closer to its actual cash flow because the non-cash items – depreciation and amortization – are not subtracted from revenue when computing operating profit. A simple numerical illustration should
suffice. Suppose revenue is 100, and cost and expenses are 95. Operating profit or EBIT would then be five and the EBIT margin would be 5% (5/100). But suppose further that depreciation makes up two and amortization one of the company’s total cost and expenses. By not subtracting these items, we would have an EBITDA margin of 8% and an EBITA margin of 6%. I assume that financial analysts would generally agree that these figures are relatively low for a business that makes things, particularly when compared to the higher margin products that both GE and ABB make. In fact, some analysts are wondering if ABB might be paying too much for this particular asset. For GE, this deal looks like a good one. It will be shedding a lower-margin part of its business as it seeks to focus on the higher margins in its other businesses (e.g. jet engines and medical equipment), while also building up what promises to be the next big thing in technology: the internet of things (IoT). The fact that ABB agreed to pay $2.6 billion must mean that it believes it will benefit from various synergies. Indeed, that is what ABB’s chief executive said in a presentation to analysts. I’m sure all Dialogue readers would know what GE stands for. But how many, particularly those in North America, would know what ABB stands for, let alone what it makes? I happen to have done corporate education work for ABB in years past. (Besides electrical products such as circuit breakers and transformers, it is one of the world’s leading manufactures of industrial robots.) For a consultant, a small but important part of understanding what a client company does is the mastery of its frequently used acronyms. ABB uses quite a few. I once told the managers in one of my seminars that it is sometimes confusing to understand what they do and their key business problems, because they use so many acronyms. One manager in the class responded by asking me, “Don’t you know what ABB stands for?” I quickly replied with great confidence “Asea Brown Boveri…” “No,” he quipped, “it stands for Acronyms Beyond Belief.” Q1 2018 Dialogue
Are you ready? The average lifespan of a company listed in the American stock market index Standard & Poor’s top 500 US companies (S&P 500) has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years today. From a multigenerational workforce to artificial intelligence and changes in workforce values that reflect inclusion, wellbeing and individualism, the ability to manage talent will increasingly be a differentiator for organizations in future. Nowhere is this more acute than in financial services, which continues to strive to attract, develop and retain talent in what remains a low-trust sector. In the same way that rideshare companies have created trustworthy, simple mechanisms to access and pay for a service, financial services firms must develop similar finesse for any number of spending and saving decisions that their diverse customer base makes. The financial professional of the future will be expected to find creative ways to win access to an individual’s life, so that financial transactions are perceived as seamless and supportive of their short- and long-term financial goals. They will also need to elicit positive emotional reactions through the design of their services. What does this mean for a financial services professional today plotting the next steps in their career? How do we develop appropriate expertise over time to maximise overall long-term career success? How do we develop a portfolio of transferable skills that can be flexed over time to meet changing contexts?
Clearly express what matters to you and why
Being clear on what interests and motivates you helps you position the value you can bring to others. Mellody Hobson is president of Ariel Investments, and board member at Estée Lauder, Starbucks and DreamWorks Animation. Hobson has championed the cause of financial literacy for most of her life, underpinned by her own experience. “I was desperate to understand money, desperate for financial security,” Hobson wrote in Lean In for Graduates. “I felt like financial
The landscape in financial services is shifting apace. Be prepared, writes Camelia Ram security would be the biggest gift I could ever have, ever. Even though I will never be evicted again, I am haunted by those times and still work relentlessly.” Whether your passion is driven by necessity or natural curiosity, the ability to position your personal brand will matter more as the industry is automated. Develop the capability to tailor your story to diverse stakeholders, regardless of your role to inspire confidence in the value you can add.
Invest in marketability
Disruptors such as Credit Karma, Mint, Lending Club, Square, and robo-advisers like Betterment and Personal Capital, have all based their business model on using machine learning and artificial intelligence to provide proactive analysis and advice. Acting as a neutral intermediary, these disruptors serve as a platform for content that others provide. This is in stark contrast to traditional financial services institutions, who have tended to require their customers to check-in for information, guidance and tools they need to understand their options and take action. The rapidly evolving nature of such services makes it imperative for professionals in the sector to be ever more aware about how career choices can be made today that offer a more diverse set of options in future. Skills such as the ability to synthesize information, support decision-making based on an awareness of rational and emotional factors, as well as technical and design capability to create solutions tailored to an individual’s objectives, are key transferable skills.
Choose stretch opportunities where you can add substantial value When Starbucks’ share price dropped almost 50% compared to the previous year in 2008, the company chose to reinvigorate customer attachment to the brand through the Starbucks Experience, which
Dialogue Q1 2018
offered a ‘third place’ beyond home and work for people to gather. The hugely successful Starbucks app, released in 2009, was key in driving this. It allowed customers to locate the nearest store, learn more about the company’s coffees, order their drinks in advance and access premium digital content in-store, delivered via a free wifi connection. The app has been successful not merely because it is linked to the story of the brand, but because its design and delivery has formed part of a powerful portfolio of initiatives, such as optimization of the marketing media mix to yield convenience for customers, an upgrade in point-of-sale technology, and reduction in processing fees. To achieve this, they created teams with marketing, digital and finance expertise, which, when combined, could explore a holistic view of the Starbucks experience. The lesson for financial services professionals is this: by taking on seemingly non-traditional assignments, which allow you to hold on to depth of expertise and apply skills in a different context, can act as a career accelerator. To this end, it is invaluable to seek honest feedback on
performance and potential inside and outside the organization. In this way, gaps that might exist between current individual capability and future marketability can be managed.
As the financial services sector undergoes disruption, for those with specialist expertise in the sector, the message is simple. Expand your horizons. Consider how your role fits into a broader ecosystem. Address problemsolving by being diligent about how others with relevant insights may frame issues and options for solving them. Position the value you can add in context of these perspectives by facilitating cross-fertilization of ideas. Ultimately, pursue those opportunities that give you the best chance of making a noticeable positive difference. Regularly engage others to challenge your assumptions about the value you are creating to be able to course correct before your skills are redundant.
Being clear on what interests and motivates you helps you position the value you can bring to others
— Camelia Ram holds a PhD in operational research from the London School of Economics
Q1 2018 Dialogue
How to bet your hedges Picking winning hedge funds boils down to asking the right questions, writes Frances Cowell
Each hedge fund manager professes to be good at some particular strategy, such as relative value, equity long-short, or investing in less liquid assets, such as high-yield corporate bonds or distressed debt. Typically the manager has found that it worked well in the past. Look for two reasons why it might not work so well in the future. The first is that the opportunity-set the hedge fund manager depends on may dry up: if the strategy is lucrative, other investors will imitate it, and the effect of more funds seeking similar trades can squeeze the opportunity until it disappears completely. Some strategies
are inherently unstable, for example if they are subject to changes in central bank interest-rate policy or fluctuations in currencies. When his favoured strategy loses its appeal, your manager might be tempted to try something else to earn enough returns to get beyond his targeted required rate of return, or â€˜hurdle rateâ€™. The problem with this strategy creep is that it will probably lead him into less familiar territory where his competitive edge is less potent. Apart from being a poor use of his skills, it can double up or cancel out the other exposures in his portfolio, introducing unmanaged risk or
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damping returns. The second reason is that the strategy may be over-dependent on leverage. This exposes you to extra risks, especially in the event of a market shock, when the fund may be obliged to crystalize losses that otherwise could be avoided. “For me it was more about who’s making money, and why is he is making money, and can he explain to me in an intuitive way how he is making it?” John Breit, former risk manager at Merrill Lynch
Once you’ve chosen a strategy that fits your portfolio, you will also have decided what return you are seeking, know how much risk you are willing to bear – and how much you can tolerate losing. The question now is about tactics: how the manager implements the strategy. Earning attractive returns and managing risk are two sides of the same coin, so it is also about risk management, as Benjamin Graham reminds us… “The essence of investment management is the management of risks, not the management of returns.” Benjamin Graham, the father of value investing
But not all risk is rewarded with return: returns are possible only when risk is properly harnessed and used wisely, which in practice means targeting it at the most promising sources of return. Hedge fund managers are usually very good at finding promising assets and trades to invest in. But many are surprisingly poor at putting them together into a coherent portfolio, and this is where unwanted risk concentrations can creep in. A common misconception is to conflate risk exposure with money allocation. For many assets they are indeed the same – or nearly so. For example, a US Treasury bond brings exposure to the US Government and to US dollars. By contrast, shares in a commodity producer may or may not bring exposure to the commodities it produces. That exposure will be cancelled out if the producer has already contracted to sell its future production at a fixed price. On the other hand, if it hasn’t sold forward its output, but is itself levered, then the fund’s exposure to the commodities will be greater than its money allocation to the stock.
Equating allocation and exposure can bias calculations about correlations between assets, and cause risk to be poorly estimated
Equating allocation and exposure can bias calculations about correlations between assets, and cause risk to be poorly estimated. So, the first task is to identify the true risk drivers in each strategy and to link each to an expected outcome. This entails actively targeting risk that will deliver return and getting rid of incidental risks that drag return. Risk – as opposed to money – allocation should reflect the manager’s conviction about where the best returns are to be earned. Most hedge funds have 12-18 strategies (deals or bets) in them. Ideally they should be independent, meaning that the risks they are exposed to should not overlap. But true independence is rare, so the manager needs to have a good grip on interactive effects between strategies. Identifying risk factors and ensuring good diversification are necessary but not sufficient: a few common-sense measures can mean the difference between success and failure. For example, each of the 12-18 strategies should have: A target return, tolerable loss and expected lifespan Defined trigger points for re-evaluating and closing it down An exit plan
Sustainable strategy with judicious use of leverage, and an astute eye for the real drivers of risk and return coupled with conscious harnessing of risk to defined return objectives, are essential. Together with simple discipline rules, such as stated return objectives, tolerable losses and trigger points for rebalancing and closing down each strategy, they indicate a cool and pragmatic investment technique that stands a good chance of delivering consistently strong returns. — Frances Cowell is a specialist investment-risk consultant working in R-Squared Risk Management in Paris and London Q1 2018 Dialogue
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Renewed focus on customers has ushered in a shift at the top of the marketing business
The CCO will see you now Giles Lury is director at The Value Engineers and author of How Coca-Cola took Over the World: and 100 more amazing stories about the world’s greatest brands
The customer is well and truly king again and at the centre of everything we do
Things are changing at the top of the marketing game. A number of companies have recently been adding to their C-Suite of executives, but rather than more marketing directors becoming chief marketing officers, it is chief customer officers that are on the rise. Led by a number of high-tech companies, then followed by retailers, service brands and now even FMCG companies, chief customer officers have been appointed in ever-increasing numbers. Various surveys suggest that it may be as many as 50% of companies that now have a CCO. Though still a relatively new addition to the array of three-letter acronyms, there is already a trade body for CCOs: The Chief Customer Officer Council. It provides what it says is the ‘proper’ definition of a CCO as “an executive who provides the comprehensive and authoritative view of the customer, and creates corporate and customer strategy at the highest levels of the company to maximize customer acquisition, retention and profitability”. CCOs are therefore responsible for all activities relating to customer relations, including marketing, sales, call centres, user interface, finance (billing), fulfilment and post-sale support. They have control of technology, data, digital, insight and innovation and, in many cases, they are also responsible for customer service and the physical operations (store, branch).The CCO typically reports to the chief executive, and is, in nearly all cases, a member of the board of directors. So why are they on the increase? Firstly, there has been a shift in focus. If the nineties and the noughties were the decades of the brand, this decade has seen a return to the pre-eminence of the customer. While their importance never really went away, brands, branding, and especially rebranding, were all the rage. Yet over the past few years, we have
seen the emergence of ‘the customer experience’, understanding ‘the customer journey’, and many and varied ‘customer touchpoints’. The customer is well and truly king again, and at the centre of everything we do. Looking at the stream of announcements about the appointment of new CCOs, the recurring theme is driving company growth and integrating functions to help the business become more customer-centric. One cause for the emergence of CCOs is that marketing directors are seen as ‘just’ marketing specialists – not all-round customer specialists. Marketing directors deliver communications (including advertising and design), innovation and insight, but are not necessarily involved in all those other customer touchpoints; from call centres, to online user experiences, store formats and layouts. These activities fall into the remit of most CCOs. The rise of the CCO is also a reflection of the growing role and importance of data. Tesco and Netflix are obvious examples of data-rich organizations – customer data. It is this customer data that provides the information on performance and insight on effectiveness that is crucial for a CCO, and roots their role in delivering directly and measurably to the bottom line. Research by the likes of Marketing Week shows that, while it does vary to some degree by industry sector, CCOs tend to come from ‘multichannel’ roles, with experience of both traditional and digital, though the latter is most important. The same research suggests a unanimous view of what their next role will be – chief executive, of course. While it may be a little premature to say that the chief marketing officer is passé, they do appear to be going out of fashion. There is a new C-Suiter on the block, and if marketing directors want to move into this role, they will need to take a broader role; as digital experts and specialists in customer touchpoints. Q1 2018 Dialogue
Selling in the Vuca vortex
The sales playbook is changing, and will change again, write Ben Laker & Claire Edmunds The pace of technological advancement and the impact of globalization are having unforeseen, often disorienting, effects. Their ultimate consequences are profound. The world’s largest accommodation provider owns no property. The world’s largest taxi firm owns no cars. The world’s most popular media company owns no content. Every industry is mutating and business roles are being reconsidered, reconstructed and repurposed, reveals research from Clarify. Take, for example, the UK. Since the steam-powered train revolutionized global transport, Britons have tended to play by the rules when it comes to innovation. In a digitally disruptive
The only solution is for every business to behave like a software business world, that needs to drastically change, fast. Findings from Clarify’s research suggest that 68% of businesses across post-Brexit Britain are falling behind their European counterparts, and 23% of these businesses will die within the next 24 months if nothing changes. To help these organizations, the UK must create an environment in which innovation is prioritized, particularly as its economy is now among the worst performers in the European Union. With Q1 2017 growth of just 0.2%, the UK is already falling behind, and, given that big City banks are set to move 9,000 jobs to Frankfurt and Dublin, its future looks bleaker still. Against this backdrop of gloom, traditional buyers are being replaced with line-of-business stakeholders. And traditional types of deals – and how you win those deals – are changing
with them. Some 85% of B2B customers now start their purchasing process via referral, with peer recommendations influencing more than 92% of buying decisions. This represents a great disintermediation of salespeople from buyers. The dramatic rise of ‘decisions pending’ deals that are clogged up in purchasing pipelines across the world exacerbates the breakdown of traditional dealmaking. These ‘Schrodinger’s Deals’ – neither alive nor dead, simply awaiting a decision – are now responsible for more than 27% of opportunities forecast and pursued by salespeople. They have a notional value of a cool $20tn globally, meaning that there is often more money to be made in unlocking frozen decisions than making new sales approaches. The only solution to this radically changed sales landscape, says Clarify, is for every business to behave like a software business; this is the only way to survive and prosper. The challenge foreseen by the research study is that board members of these businesses are not technology experts. They need help to understand what is worth placing a bet on, and this information must come from the tech world, where they understand the art of the possible. The delivery of this message is the core responsibility for tech sales leaders: they have a duty to communicate what their organizations can offer other businesses – who often have no knowledge of their product. In a world in which change happens so fast, it’s therefore how you sell this message that matters most.
The sales leader of today
The modern salesperson has a big task on their hands. Not only must they deal with their own triad of challenges – the pace of change, the move from player
to manager, and the necessary skill shift – but they must also navigate more internal politics than ever before. Following the 2008 financial crisis, sales leaders sought to trim costs and preserve profit. With those cuts made, there’s little fat left to trim from the bottom line anymore. Now profit needs to be created by lifting the top line. This makes the business process of selling mission-critical. The relationships between senior executives and sales leaders must be nurtured into trusted and credible partnerships to help them invest in long-term sales planning while delivering world-class sales performance in the shorter term. However, Clarify’s research identifies a major threat; an emerging deficit in consultative salespeople able to execute the transformation message. Author of SPIN-Selling, Neil Rackham, also recognizes the shift from transactional to consultative sales due to increased automated sales and the
Dialogue Q1 2018
need to educate these new buyers about the possible uses of new software. This dichotomy of sales behaviour is forcing sales leaders to reevaluate their team structure. Clearly, sales is changing dramatically. And by extension, the salesperson must change dramatically with it.
The sales leader of the future
The modern sales leader doesn’t only take one form. There is the Coach, the Follow Me and the Spreadsheet Jockey. There is the Political Animal, the Entrepreneur, the General Manager and the Fixer. All these sales leader ‘types’ have strengths and weaknesses. The Coach, for example, creates a learning environment, and is best suited to a changing atmosphere where he can help others to adapt. The Spreadsheet Jockey, in contrast, is a high-detail, analytically minded individual who is brilliant in front of a sheet of numbers but less competent in front of a client.
Clarify’s research finds no silver bullet. The optimum sales leader combination depends on factors that include the maturity of the market, the level of disruption the product/service brings, the size of the deals and who needs to be sold to. Selling into a mature market – when the value delivered by the product
The Spreadsheet Jockey is brilliant in front of a table of numbers but less competent in front of a client is well understood – sales cycles are relatively short. This scenario is perfect for a Spreadsheet Jockey. They can easily track and manage their team based on outputs (value and number of deals), as focused activity is the core driver behind success. Conversely, when the value of the product/service is not widely known
by the market, a different set of sales coaching and management skills are required to drive success – this is where the Follow Me sales manager excels, as her best skills are developing and evolving a successful sales process. The key takeaway is that current selling playbooks will last two or three years at the most. As a result, sales leaders, regardless of type, must challenge and transform the structure of sales to generate scalable and predictable pipelines, improve win rates and drive profitable growth. This must occur handin-glove with building enterprise in new and existing markets. Failure to do so will lead to millions of B2B sales job losses. The lasting message from Clarify is a call to action: now is time to sell big, sell global and stay relevant. Your sales function depends on it. — Dr Ben Laker is co-author of The Saleperson’s Secret Code. Claire Edmunds is chief executive and founder of Clarify, a specialist business development firm
Q1 2018 Dialogue
No more hard sell
Customers come naturally when you have what they want, writes William A Cohen
More than 50 years ago Peter Drucker proved that marketing and selling are not the same thing. Drucker may have made as much as $10,000 an hour as a consultant, yet he did no selling or advertising of his services. He also argued that perfect marketing would make selling unnecessary.
distributors. These are all marketing – not selling – functions. Selling was no longer required. Of course, it is necessary to get to that point. To do that, companies still need first to focus on the customer and what the customer values – and that’s true in both marketing and selling.
Marketing trumps selling
Marketing is about having the products or services desired by your prospective customer. If you have such a product or service, you have a much easier job in presenting the product to prospects and convincing them to buy it – both important steps in selling – without advertising. Impossible? No. For 70 years, The Hershey Company did no selling or advertising for its famous candy bar. According to an ad executive, it didn’t need to: “This was a brand that was an American staple, had been passed down for generations, and that people could remember enjoying as a kid.” The Hershey people had a product that was desired and could get it to
No matter how smart we are, we don’t get to decide what the customer wants and values. Sometimes this can result in sales that we never thought were possible. Years ago, Joe Cossman introduced to the gardening market the flexible garden hose with holes as an alternative to the water sprinkler. Practically everyone that owned a lawn or garden bought at least one. Cossman tracked all the wholesale orders of his product. It was a wise move. He found that farmer supply and feed stores were ordering his product in large quantities. Since homeowners seemed to fall outside the regular customers of feed stores, he contacted the stores to inquire
about the reason for the unexpected sales. He learned that chicken farmers had discovered that his garden hose with holes made an excellent – and less expensive – air conditioner for lowering the temperature of chicken coups during the hot summer months. Cossman had unearthed a large – but unsuspected – market. Drucker was not surprised: once-hidden markets were frequently unmasked in the course of business. What did surprise the great management consultant was how frequently some marketers ignored – or even intentionally avoided – unexpected sales. He decided the problem was that suppliers frequently made incorrect assumptions about what certain prospects wanted. Yet it was always the customer who defined the product or service, not the supplier.
Soldiers are using tyres for headwear
DuPont introduced Kevlar in the early 1970s. Kevlar is a super-cloth with fibres five times the tensile strength of steel. The engineers thought it would make
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customer wants. Consultants spend a lot of money doing research, analysis and presentations on what and how they think about their customers’ operations. Drucker was in high demand because he asked questions of his clients to uncover what his clients thought. Rather than claiming expertise, he said that he made his money not from his knowledge and experience in an industry, but from his ignorance. When clients gave him solutions to their problems based on their own knowledge, he simply asked: “What are you going to do about it?” His expertise was based on asking his clients the right questions. As one wrote: “He knew how to ask the right questions so that through our knowledge and experience, we came up with right answers to solve our own problems. He was expensive and an unconventional consultant, but he was worth every penny.”
an excellent substitute for the steel reinforcement in heavy-duty tyres. It did. In addition, when impregnated with rigidity to protect against blunt trauma, it could be used as the basic component in protective helmets. An impregnated super-cloth originally intended for automobile wheels soon replaced the US Army’s ‘steel pot’
No matter how smart we are, we don’t get to decide what the customer wants and values helmet of World War II fame. The Kevlar folks made even more money. Even so, Drucker was shocked to find that some marketers even discouraged sales when someone used a product other than how it was intended. Pharmacologist Alfred Einhorn became so distressed when dentists began using his anaesthetic drug Novocain that he
toured Germany trying to get them to stop. He angrily insisted that his invention was intended for use by MDs, not dentists. Legendary US retailer RH Macy tried to stop appliance sales because – by the established norms of the time – appliance sales were supposed to be significantly lower in a department store, where the emphasis previously was strictly on clothes. Macy’s tried to stop sales, even though it was in its own and its customers’ best interests to exploit the unplanned and unexpected increase in sales via the appliance market. Ultimately, appliances proved to be a much larger market – one that complemented fashion sales in Macy’s department stores. Drucker warned that marketers introducing new products or services should begin with the assumption that their products or services might find uses and markets that they never imagined. If you want to make $10,000 an hour in consulting (or in any business), ensure you know what the
Drucker neither sold nor advertised his consulting. Yet he found a way to attract customers to come to him. He had a background in writing. He wrote articles and books about subjects that his potential clients were interested in, such as a consulting engagement with General Motors. It is said that particular automotive client did not even agree with Drucker’s conclusions. Never mind, others were intrigued by his analysis. He didn’t sell his services to build his practice – clients went to him.
Be like Drucker
You can do the same. It certainly fits Drucker’s principle that marketing is primary over other business functions. Moreover, it almost automatically ensured Drucker had a product that prospects desired and valued. Every part of the Drucker business was involved in this marketing effort – from his books and articles in Harvard Business Review, to tapes, videos, seminars and workshops. In time, Drucker no longer needed to use his writing abilities to get clients. They just kept coming. I’m sure he even received consulting queries when he was in his nineties, long after he had officially retired. He had what his prospects wanted. And that is a lesson for us all. — William A Cohen’s new book Peter Drucker’s Way to the Top is due to be published by LID Publishing in 2018 Q1 2018 Dialogue
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The collapsing of hierarchies leads some to the wrong conclusion
Fear not: management is alive and kicking Patrick Woodman is head of research and advocacy at the Chartered Management Institute
What if – far from killing the idea of management – innovation is simply redefining it for a new generation?
Is management dead? For some exciting young businesses, it certainly seems that way. Inspired not only by the commercial potential of new technologies, but by doing business in new ways, the old ideas of management seem as relevant to today’s growing company as the Model T does to today’s car buyer. “Management is a dirty word,” one fintech leader told me recently. Autonomous teams keep decisions as close to the customer as possible, making – in their eyes – the role of management redundant. But the evidence of other organizations suggests this only goes so far. What if – far from killing the idea of management – innovation in the workplace is simply redefining it for a new generation? What this redefined role could look like starts to emerge from interviews with leading companies for the new Chartered Management Institute (CMI)/Glassdoor ‘Leadership and Culture at Work Top 20’ company rankings. The 20 were identified from some 3.3 million employee reviews, focusing on evaluations of senior leadership and company culture. It is a diverse list, topped by energy consultancy Northern Gas and Power, and taking in global giants like Facebook and Bain & Company, as well as Skyscanner, Cloudreach and video company VistaBee. Yet there are some intriguing similarities in approach. One of the most eye-catching themes relates to the question of who actually goes into management. Traditionally, management has been the main tool for giving people progression in work (and in their salaries). That doesn’t guarantee a great fit between people’s aptitudes and the demands of the role. It has led to the ‘accidental manager’ phenomenon, the person promoted to management without preparation or development. Yet many employers now separate technical from management roles. Far from dismissing the role of managers, they recognize the vital importance of great management and leadership – but adopt a smarter approach that doesn’t try to
shoehorn technical specialists into the job of leading people without training them first. Facebook made the list of 20, and told us: “It’s a lateral move to become a manager, not a promotion.” Recognizing that people will take different career paths, they see being a manager as “a fluid role”, and “there is no stigma if managers decide to become individual contributors again”. Similarly, Heidi Pitt of cloud technology company Fourth told us: “There are technical specialists and people specialists. We try not to confuse the two, and have a structure that clearly values both.” Cloudshare’s approach to development puts employees in either a leadership track or an expert track. This approach is often complemented by a conscious focus on flat organizational structures. They may not go as far as the radical ‘Holacracy’ model of Brian Robertson, which has no managers but rather ‘circles’ for decision-making, most famously adopted by Zappos. But for many, traditional hierarchies are firmly out. That means a very different view of management and leadership compared to its roots in early 20th-century manufacturing: not commanding and controlling, but coordinating and influencing, channelling the energy and expertise of autonomous teams; engaging and motivating highly skilled employees; role-modelling positive behaviours; building a sense of team with shared values and common purpose; and, of course, playing a pivotal role in the development of colleagues. Indeed, many of today’s most respected employers place an emphasis on coaching and mentoring by senior leaders. Alongside that, they invest in formal learning too, like Cloudshare, whose new leadership programme will see participants become chartered managers. What managers do, changes continually. But is management dead? Hardly. Long live management. — Read more about CMI/Glassdoor ‘Leadership and Culture at Work Top 20’ at bit.ly/bestUKcompanies Q1 2018 Dialogue
Dialogue Q1 2018
Have faith no more The buck now stops with nobody in particular
Rachel Botsman illustration
I placed my trust in others just as trust in the wider world collapsed. While being lifted aloft on a chair, as is traditional for a Jewish bride, Lehman Brothers filed for bankruptcy. It was Sunday 14 September 2008. Nobody at my wedding quite knew then the scale of the pandemonium that was to play out when the
markets opened the following morning. But as they drank the night away and learned of the ensuing crisis on their smartphones, most of them justifiably feared the worst. As guests danced around us shouting â€œOy! Oy! Oy!â€?, outside the venue, the global financial crisis was just getting started.
Q1 2018 Dialogue
A decade later, and the world has not only learned to trust again, it has done so on a grand scale unimaginable in the febrile days of the late noughties. Trust has become the global currency – everything, from vintage goods to home improvement loans, is traded by trust. Conventional systems remain, but the trend is all one-way. When I wrote my first book in 2011, I expressed surprise that a little disruptor called Airbnb held 10,000 properties on its site. My gasp of amazement feels faintly embarrassing now. By the end of 2017, Airbnb boasted three million listings in 191 countries. It is – by far – the biggest hospitality company in the world.
has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.” When things go wrong in this brave new world they raise the critical question of where accountability lies, and how we find the right balance between self-regulation and traditional top-down compliance that was not designed for an age of ‘distributed trust’.
The old-fashioned way
But who is regulating the giants of the trust economy? eBay is a peer-to-peer trading platform that is self-regulated by its buyers and sellers, via feedback and review. Yet only 2% of its feedback is negative or neutral. Buyers who don’t like what they get from eBay tend to leave no feedback at all, fearing either tit-for-tat reprisals (the seller can give them bad feedback in retaliation), or else decline to comment because of an antiquated sense of politeness which holds that if you have nothing nice to say then it’s better to say nothing at all. But without negatives, positives are near worthless. Grade inflation on eBay, TripAdvisor, Airbnb and elsewhere is hindering the system. The stars are hopelessly misaligned.
In January 2013, UK retail giant Tesco had to withdraw 10 million hamburgers and other products from its shelves. The reason? Many of its products, purporting to be made of beef, had been exposed as containing horsemeat. The discovery sparked a national outcry and was headline news for several days. Even the then prime minister, David Cameron, got involved, reassuring a horse-loving country that everything possible would be done to address a “very shocking crime”. To some degree, Tesco deflected, saying that its supplier the Silvercrest factory, which was then owned by the ABP Food Group, had breached its trust. Yet it issued a full apology and publicly accepted responsibility for the fiasco. When a customer shops at Tesco, their trust clearly lies in the supermarket, not the (largely hidden) companies further down the supply chain. The same principle fails to apply to technology platforms, from Facebook to Amazon, Alibaba to Uber, where the question of who we trust still lacks a clear answer.
Who is accountable?
Who do we trust?
The star rating fallacy
If users are not taking responsibility, who is? Whose job is it to act? The buck certainly doesn’t appear to stop with the companies, who have a mixed record at best. When regulator Transport for London revoked Uber’s licence to operate in the city, there was uproar from some, before the city’s mayor Sadiq Khan made the point that it could not be right that a technology platform be waived the responsibility to meet local regulations simply because it had lots of customers. Issues of accountability are incredibly complex in an age when platforms offer branded services without owning any assets or employing the providers. Tom Goodwin, a senior vice president at Havas Media, put it well when he wrote in an article: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer,
When things go wrong... they raise the critical question of where accountability lies
Just as traditional engineers build bridges, roads and railways so reliable that we don’t consider their use a risk, contemporary trust engineers build computer systems so ostensibly foolproof that our minds settle in a place where we don’t consider the risks we are taking. Tinder, the dating app, is a platform designed to match singletons for nights out or something more; to arrange hook-ups based on shopping through a handful of words and a catalogue of photos. Where once at least some face-to-face contact was required, now a face on a screen is enough. “I used to think it was completely ridiculous to compare trust between people with trust in these online platforms,” Professor Coye Cheshire, a social psychologist at Berkeley tells me. “I’m not certain that is the case anymore, because in some ways we have offloaded some of our cognitive power.” The challenge of trust in the digital age is the speed at which we grant our trust with a swipe, click, share or accept. Once we are in an accelerated state of trust, it can be hard to slow down. “The problem comes down to social translucence,” says Cheshire. “How much of the social interaction – our behaviours and the underlying mechanisms that enable interactions – is visible?”
Dialogue Q1 2018
THE TRUST ILLUSION In the trust game there are two participants, a sender and receiver. They are anonymous strangers. Both are given $100. The sender can send any amount of the money, or none of it, to the receiver. The sender is told that whatever amount they send will be trebled – by the experimenter – for the receiver. The receiver then has to decide how much of his money to return to the sender. He can send any amount of it back, or none of it. Therefore, the sender can turn a profit or lose everything. The point of the game is that sending a large amount indicates a high degree of trust that the unknown recipient will give back at least what he was sent. The late Professor J Keith Murnighan created an experiment whereby he asked participants to list the names of people they trusted and those they distrusted. These names were then flashed up on a screen in front of the participants – so quickly they had no chance of reading them – prior to their taking part in the game. The results were stunning. Senders who had been exposed to the names of people they trusted sent an average 50% more to the
The history of new technology is not that we trust it too little, but that we trust it too much
For one week in 2012, social psychologist Dr Adam DI Kramer launched an experiment using the world’s biggest laboratory of human behaviour – Facebook. He wanted to discover the propensity for ‘emotional contagion’ – do the emotions expressed by our Facebook friends affect our own mood? By tweaking the algorithms to include more positive or negative content, Kramer was able to assess the extent to which the posts of others made users more or less happy, and more or less likely to visit Facebook. What was extraordinary about the experiment was not so much its findings (the changes were, relative to Facebook’s scale, miniscule) but the reaction to it. The experiment became notorious; its users complained of being ‘lab rats’. Yet, even according to Facebook itself, the chances of users of the platform being experimented upon are precisely 100%. “At any given time,” says Dan Farrell, a Facebook data scientist, “any given user will be part of
anonymous receiver than those exposed to the names of the people they distrusted. “We found we could stimulate feelings of trust for a stranger without people even realizing,” wrote Murnighan. “Imagine a fanatic fan of Elvis Presley. If I know someone is a huge fan of Elvis, I might casually drop Elvis’s name to activate more trust in me. There is clearly a risk of manipulation.”
ten experiments the company happens to be conducting.” When the University of Illinois surveyed Facebook users, it found that 62% of them were unaware that it manipulated its feed at all. That means that of its more than 2 billion users, more than 1 billion of them think the system instantly and without prejudice shares whatever they or their friends post. The real truth is out there, but few hear it. The tech giants – through careful trust engineering – have manufactured an image of being neutral brokers, platforms that act as meeting- or trading-places between users. The shock at which Fake News was exposed as such following the US presidential election was a consequence of a human race that is now more likely to place its trust in a distant algorithm than experts or authorities. The history of new technology is not that we trust it too little, but that we trust it too much. Traffic lights, stop signs and road lanes – latterly airbags and seatbelts – arrived decades after the motorcar. Similar checks and balances on the trust economy will need to arrive much more quickly. No system is ever completely foolproof, but we must hope that our recent bump with the trust economy is just a minor collision, not a fatal accident. — This piece is based on Chapter 4: Where Does the Buck Stop? in Rachel Botsman’s new book Who Can You Trust? (Penguin Porfolio) which is now available (see review, page 80) Q1 2018 Dialogue
Live strong and prosper Owning your strengths and weaknesses, and letting others know them, is key to financial and emotional fulfilment, finds Kirsten Levermore
“The team doesn’t need from you some vague willingness to ‘do whatever it takes’. It needs you to understand your strengths and weaknesses in vivid detail and then take it upon yourself to figure out how to navigate towards the strengths and away from the weaknesses.” – Marcus Buckingham, Go Put Your Strengths to Work
Soccer player Wayne Rooney is England’s leading goalscorer of all time. He has kicked, headed and nudged more than 250 England, Everton and Manchester United goals, mostly from centreforward. A specific set of strengths is needed to play from this position: a high degree of stamina, decision maker, creative, team player and a natural connector. Unfortunately, say many critics, Rooney has not always been in a position that plays to his strengths. Many managers wasted him by playing him on the wing. Playing in that position requires an entirely different set of strengths. The former England captain struggled on the wing, just as he shone in the middle.
The work example
Playing – or not – to your strengths can be career defining
Sally Bibb, consultant, coach and author of The Strengths Book (LID Publishing), is a prominent advocate for embracing an individual, team or organization’s strengths. “So often people hear from new companies, ‘We want you to be your whole self at work.’ But what,” Bibb asks, “does that mean in practice?” Would you make an accountant submit graphics to marketing? Or, if an IT technician happened to be a great communicator, would you consider assigning them public-facing projects, or sending them to conferences to speak about your business? People who use their strengths every day are six times more likely to be engaged in their work (Sorenson, 2014; Minhas, 2010). And, when strengths are factored in at the recruitment stage, salespeople at Standard Chartered Bank brought in 40% more revenue between three and six months than those hired in the traditional manner (HR, 2014). “It makes sense emotionally, as well as financially,” Bibb offers. But how does a person, or organization, identify their own strengths, let alone share them?
Find your strengths
Ask yourself: what did I do recently in work, or at home, that I really enjoyed doing? What is it about me made that thing so enjoyable? That is a strength.
Strengths Things you are naturally good at Things you love doing Things you are energized by Values Motivators Things you can’t not do
Examples of strengths include communication, competitiveness, kindness, thriving under pressure, bravery and being a good listener.
Weaknesses that matter
“Too often,” notes Bibb, “companies sideline ‘weakness’ as a ‘development point’ or, worse, rebrand ‘weakness’ as ‘problem’ or ‘difficulty’.” And this, The Strengths Book says, can be a dangerous – and limiting – label. “Being human is important, and having weaknesses is a part of that. The key is deciding whether or not you want to do something about them.” It is with this in mind that The Strengths Book asks you to reflect on the things you’re not so good at, to which you’re not naturally inclined, or don’t enjoy doing. You are then asked to highlight the ‘weaknesses’ that you actually want to change, and consider how you might go about that. It’s a freeing experience. And besides, Bibb points out, weaknesses aren’t actually that important to success: “Many studies have shown you’re far more likely to be successful if you focus on improving your strengths than on trying to develop all of your weaknesses.”
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1 Don’t overdo it
The line between ‘strength’ and ‘weakness’ can also be blurred. Bibb highlights an overplayed strength as one such tricky space. “Someone who is great at analysing situations might come across as picking things apart to an extent that they’re seen as overly negative,” she writes in the book. Understanding and owning your strengths, the book argues, can help you avoid mistakes in two significant ways: 1 You are more aware of your behaviour and priorities, so you are less likely to be tripped up 2 People who know your strengths are less likely to perceive what you are doing, or your intentions, negatively
What makes you feel energized, excited, at ease? What comes naturally to you?
What are your weaknesses?
What are the weaknesses that matter to you?
Which strengths could be interpreted negatively?
Henley Business School: “A CV rarely describes a real person, or who you really are.” Bibb agrees. “Knowing your strengths can save you from embarking on a career path or job that wouldn’t suit you, or make you happy.” The argument, she believes, also works the other way: “You wouldn’t get the best from someone in a management position if they don’t like being in charge. Placing people in positions that play to their strengths makes sense – financially and emotionally.” Ways to share your strengths (and weaknesses): Share strengths privately, with key members of your team, family or friends Share strengths outwardly, by pinning a list to your wall or desk Host a ‘strengths’ event (e.g. workshop, coffee morning) where people have to introduce themselves by their strengths Include strengths in an e-signature or social media biography Include a ‘strengths and weaknesses’ section in your CV Frame a behaviour: “I don’t mean to interrogate you, I am just trying to get a clear picture of the situation,” for inquisitive decision-makers
Reflect on how your strengths are related to your behaviour – do you act a certain way because of your strengths? Can any of these actions be negative, or interpreted negatively?
Your place on the field
Sharing your strengths is not bragging – it’s crucial, says The Strengths Book. Consider, it urges the reader, how leaders can ever know the motivations, efficiencies, skills and personalities of a large staff? If they had quick and easy insight into such things (i.e. their strengths and weaknesses), teams could be quickly assembled, workspaces, money and projects allocated to the correct configurations. The same goes for recruiting new staff. “Recruiters can look at an online profile or CV and think, ‘Does this person even need to pee?’” Ade McCormack recently commented to a delighted World of Work 2030 conference at
If Wayne Rooney’s strengths had been recognized earlier, if he had been played from the correct position from the beginning, he might have flourished earlier, developed faster, achieved more records, and set even higher targets. It’s up to leaders – and to you – to share your strengths, and then utilize and develop them for all their worth. — Kirsten Levermore is assistant editor of Dialogue Q1 2018 Dialogue
The silicon and steel silk road China’s Belt and Road Initiative is set to unite 62% of the world’s population
K A Z A K H S TA N
U Z B E K I S TA N I TA LY
PA K I S TA N IRAN
M A L AY S I A K E N YA
In one of the most ambitious globalization projects of all time, China plans to develop trade and transport routes that will connect Asia, Europe and Africa. But not everyone is eager to join in, and the project has been plagued by land disputes and delays. But China says they are on track.
FAC T F I L E C H I N A Land area
3,600,947 sq mi
GNI per capita
(9,326,410 sq km)
We have no intention to form a small group detrimental to stability…what we hope to create is a big family of harmonious coexistence Chinese President Xi Jinping
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A ROSE BY ANY OTHER NAME
Number of names the project has: initially called the One Belt, One Road project, Chinese officials changed the English name to The Belt and Road Initiative (or BRI) after people were “too confused” by the idea of a single highway ALL IN
GLOBAL ECONOMIC INFLUENCE
Join the Dialogue
The successful BRI will unite a significant proportion of the world’s economic output FRIENDS UNITED
Number of countries expressing a level of cooperation with BRI. China is hoping for 69 solid commitments
Projected cost for the initiative in its entirety
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DIALOGUE IS BROUGHT TO YO U B Y… EDITORIAL BOARD
Dr Liz Mellon, chairman Tom Albanese, chief executive, Vendanta Resources Michael Canning, chief executive, Duke Corporate Education Professor Pedro Nueno, president, China Europe International Business School Karina Robinson, chief executive, Robinson Hambro Ben Walker, editor, Dialogue EDITORIAL
Number of official overall maps or plans of BRI available to the public
Ben Walker, editor Kate Harkus, art director Luisa Cheshire, chief subeditor Kirsten Levermore, assistant editor Miro Iliev, digital products marketing executive MANAGEMENT
ALL ROUTES LEAD TO CHINA
Martin Liu, publisher Niki Mullin, business development manager firstname.lastname@example.org Alexandra BoudreaultManos, business development executive
Number of major routes that will make up BRI, by land and sea
Published in the United Kingdom by LID Publishing, Studio 204, 16 Baldwins Gardens, London EC1.
Disclaimer Copyright 2017 by Duke Corporate Education and LID Publishing Ltd. All rights reserved. Material may not be reproduced without permission of the publisher. While we take care to ensure that editorial is accurate, independent, objective and relevant for the readers, Dialogue accepts no liability for reader dissatisfaction rising from the content of this publication. The opinions expressed or advice given are the views of individual authors and do not necessarily represent the views of Dialogue. This journal is also supported by Knowledge Partners, including Duke Corporate Education as Lead Knowledge Partner. Whenever an author is related to a Knowledge Partner it will be noted as such. Dialogue takes every effort to credit photographers but we cannot guarantee every published use of an image will have the contributor’s name. If you believe we have omitted a credit for your image, please email the editor. ISSN 2053-4361 Printed by Pensord www.pensord.co.uk
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Look into their eyes Trust is the global currency that no-one knows how to handle, finds Ben Walker
Who Can You Trust? Rachel Botsman Penguin Books bit.ly/ whocanyoutrustbook
Some might say that those who rail against the harmonization of international trade are fighting yesterday’s war. Trust – measurable in stars or reviews or some other easily digitizable metric – has quietly arrived as the global bartering system. You aren’t trustworthy? You can’t sell. You don’t want to trust? You can’t buy. Dollars, euros and the like are merely the medium. Trust is the currency. The progression of trust from something that was once gained face-to-face to something that is codified and gamified seems to worry Rachel Botsman, although she is keen to avoid offering ‘answers’ to the problem (if indeed it is a problem). Yet her book Who Can You Trust? poses several interesting questions. The first concerns our faith in star ratings. Why do users give so much credence to trustometers that passengers still get in an Uber when they know a serial killer driver is at large in their city? Note that Jason Brian Dalton, who shot dead six people on his rampage in Kalamazoo, Michigan, had a rating of 4.73 stars out of five. What are the consequences of grade inflation – the phenomenon whereby buyers and sellers operate effectively as a ratings cartel? Buyers don’t want to give bad ratings lest their seller loses business (and therefore their livelihood) or gives them poor feedback in retaliation – suddenly reducing the buyer’s chances of getting an Uber or an Airbnb room. Those who have bad experiences are apparently less likely to give any feedback at all; negative data is being lost to a mixture of politeness and fear. Less than 2% of Ebay reviews are negative or neutral, finds Botsman, suggesting that e-commerce is full of the sort of cockeyed optimism of which Voltaire’s Dr Pangloss might be proud. As Botsman drives deeper and darker, she sheds more and more light, her book rapidly becoming brilliant. Botsman’s seemingly fearless adventures inside the dark web’s narcotics market reveal a well functioning trust-based platform that might still shock the presumably
vast majority of her readers that don’t spend their evenings shopping for contraband. Not only is the product of apparently higher quality than that found on the streets, a completely trustbased market delivers – most of the time – to its users on time and with absolute discretion. Reviewers score the drugs and service like eBayers might. Only the strongest sellers seem to survive. “Effectively,” writes Botsman, “they are creating trust in a zero-trust environment. Nobody meets in person. There are obviously no legal regulations governing the exchanges. It looks like a place where buyers could get ripped off… yet this rarely happens.” Some dealers run two-for-one offers. Improbably, others market their goods as organic and ethically sourced. Botsman found opium for sale that was supposedly ‘conflict-free’ – its purchase supporting local farmers in Guatemala rather than violent drugs cartels. If her foray into the shadows of the dark web weren’t enough, Botsman continues to provoke with her exploration of personal trust ratings: a kind of digital points-on-your-driving-licence
If this sounds like the sort of sinister future imagined by Philip K Dick or Paul Verhoeven, learn that it is already here that follow you wherever you go. If this sounds like the sort of sinister future imagined by Philip K Dick or Paul Verhoeven, learn that it is already here. The Chinese government, finds Botsman, is launching a ‘Social Credit System’ that – in its own words – “will forge a public opinion environment where keeping trust is glorious”. Participation is currently voluntary. By 2020, says Botsman, it will be mandatory: “The behaviour of every single citizen… will be ranked and rated, whether they like it or not. Teachers,
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scientists, doctors, charity workers, government administrators, members of the judicial system and even sports figures will be under special scrutiny.” Your shopping habits, comments on internet forums, the friends and followers you make, your health (via Fitbit etc) can all contribute to your Citizen Score. The implicit question in this Big Trust world is, who is the arbiter of trust? In this case at least, the answer seems to be the government. If Pangloss kicked off the trust economy, Big Brother is apparently the man to take it forward. The book paints such a forbidding picture that, by the final chapter, the reader might be given to thinking that all is already lost. It might be, but history teaches that many threats wind up being mitigated by humans’ resistance to imbalance. Nevertheless, trust is the oil of all human relationships, and the book raises an
important question as to why such an ostensibly positive force is being calculated by algorithms and appropriated by governments. Are individuals too weak to manage it themselves? Perhaps, implies Botsman in her summing up, the speed at which we are expected to express our trust works against good decisionmaking. We might decide whether to trust a prospective contractor for our company only after a series of meetings; yet in the new world it takes a mere second to click, swipe, share and accept a good or service. Botsman’s closing suggestion of a ‘trust pause’ – a period of cooling off before granting our trust – forms a decent starting point for answering one of the biggest questions of our time: Who can we trust? It would a good idea to find out, before others decide it for us. Q1 2018 Dialogue
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THE LEARNING CURVE WITH HEATHER MACNEILL
Employees will quit if you don’t develop them
Why learning is worth the investment When weighing the costs of running an organization and keeping employees happy, sometimes the c-suite has to make tough decisions. Decisions include investing in technologies for standard operations, funding various company culture projects and, of course, whether to invest in continuous learning opportunities for employees. Not surprisingly, prospective employees see professional development as a key perk when hunting for their next gig. Despite this, there seems to be a looming disconnect among talent pools and organizations. Half of learning and development decision-makers think that learning is not seen as important by leaders within their organizations. That’s according to The Challenges of Global L&D survey, conducted by Open University Business School. Ignoring the benefits of learning is a major cause for concern. PwC estimates that the cost of losing an employee in their first year equals about three times the person’s salary. To that end, seven in ten professionals say development opportunities influence their decisions to stay with a company. So, without clear and present opportunities for learning and growth within an organization, employees won’t stick around for the long haul.
Benefits of investing in employees
Aside from the cost savings associated with rehiring and retraining new team members after an employee leaves, there are more impactful benefits of investing in employees’ ongoing professional development. When I talk about professional development, I don’t mean flying your team to countless conferences around the world. I mean investing in collaborative learning: content and technology that integrates into everyday work. Collaborative learning platforms are a key solution for
such integration. For example, a platform like BlueBottleBiz provides access to expert content built around collaborative tools and a professional network, so employees can take control of their learning when and how they want. Here are five benefits of collaborative learning:
Increase staff retention
Employees won’t stay with organizations that don’t invest in learning opportunities. With 24/7 access to published content – via desktop or mobile device, a culture of continuous learning is easily achieved.
Increase your ability to hire internally
One of the reasons professionals today value opportunities to learn is because they realize shifts are taking place across many different industries. Industries are blending, and as a result, professionals need to be adaptable. Today’s employees need to learn what’s next in their industry before the change occurs. By providing employees with the content and tools needed to skill up, the next time a position opens within your organization, you can look to your team and promote internally rather than spending time and money searching for the perfect external candidate. With a collaborative learning platform like BlueBottleBiz, it is easy for leadership to pinpoint the best internal candidates for new openings, based on team engagement in the platform.
Increase your team’s productivity
Today, learning and training closely integrate. Collaborative learning serves as a complement to mandatory employee training, and can be used by your team to expand on concepts derived from each training. Investing in collaborative learning means providing
employees with the resources needed to find quick answers and solve problems independently, as well as share new ideas to help others. All of these factors play into building a more productive and efficient workforce.
By investing in modern learning platforms and other cutting-edge technologies, you’ll lead by example when it comes to embracing innovation. With an open, collaborative learning platform, not only will your employees get to learn using innovative tech, they’ll also have direct access to innovators and experts within various industries.
Boost your company’s reputation
If you go the route of investing in collaborative learning, employees won’t be the only ones that benefit. Clients, customers and prospects will too. The more your team invites external audiences into the learning experience, the more these audiences will realize the investment your team is putting into them. For example, in BlueBottleBiz your team is able to build out Discovery Paths – collections of bite-sized content – which can be shared with clients to bring them up to speed on specific topics.
When employees learn, your company excels
The benefits of collaborative learning can make a big impact on your employees’ happiness and willingness to go all in with your company. Investing in employee happiness results in a thriving organization with low rates of attrition, higher levels of productivity and satisfied customers.When will you begin reaping the benefits of investing in your employees? — Heather MacNeill is head of communications at BlueBottleBiz
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PIERS CAIN ON BOOKS
You can get 50 top thinkers for the price of one
The brainiest dinner party on Earth Piers Cain is a management consultant
Be wise and spend your time helping other people be the heroes. Your role as boss is to serve
Few real chief executives will have the chance to access such insight. The royalty of management and leadership thinking, such as Professor Julian Birkinshaw, Dr Liz Mellon and Tom Peters, were asked to write a letter of advice to an imaginary company boss on what he or she really needs to know. Arranged in alphabetical order by contributor, this book initially feels like a buzzing dinner party at an international convention of business schools – each of the distinguished guests at some point gets to have their say, but doesn’t get long to say it. Naturally, while the party is in progress, in spite of a general cacophony of differing opinions, certain themes emerge, if the reader is prepared to wait for them. The common strands are at times depressing. Chief executives must be concerned about the performance of their staff and the management of their organization – including protecting and enhancing its reputation. Yet the authors are unanimous that current leaders have generally done a poor job: modern business is soul-destroying and doesn’t work anyway. The callous treatment of employees as disposable ‘human resources’ has alienated people and wasted their talents. Not surprisingly, therefore, many of the writers see their typical chief executive as an embattled, remote and unpopular figure. So it is important to attract the right talent, and equally important to humanize the working experience of employees. Improving the career prospects of women is seen as a priority, and several writers express frustration that little appears to have changed. Mellon, a tireless champion of reducing the quantity of testosterone on company boards for social and commercial reasons, notes that virtually her entire cohort of female executives has fallen by the wayside as she has progressed her career. Rather than providing advice, she asks a question: “We’ve tried fixing the women. We’ve tried fixing the men. And we’ve tried
fixing the culture. Given that what gets measured gets done, should we set quotas to push us over the line?” Her anxiousness is seemingly born of frustration rather than conviction: nothing else has worked – good intentions alone simply keep men at the top. Chief executives are responsible for the existing financial security and future sustainability of their organizations. One theme – sometimes approached with gloomy relish – is that accelerating change, complexity and disruption make the challenge of the chief executive almost impossibly hard to achieve. We are experiencing an economic revolution – is the unanimous claim – and few established businesses will survive. In these circumstances, much is made of the need to innovate, to reinvent the organization and to experiment with new business models. About a third of the authors are clearly in love with technology and all the new frontiers it makes possible to push back. Quite a few recommend complex approaches that, by coincidence, are aligned to their research interests and theories. Yet Tom Peters wonders aloud whether all that glisters might not be gold. Another dissenting voice rises above the hubbub. Roger Martin leads the backlash against Big Data. He believes it has become a fetish of the boardroom, providing the illusion of rigour and often misapplied. A chief executive is a figurehead whose actions and values profoundly shape his organization. So there is plenty of advice on how to behave, as well as what to do. Perhaps the simplest was provided by Marshall Goldsmith, an executive coach: don’t spend your time proving how smart you are, be wise and spend your time helping other people be the heroes. In other words, your role as boss is to serve. — Dear CEO: 50 Personal Letters from the World’s Leading Business Thinkers Compiled by Stuart Crainer and Des Dearlove, Bloomsbury Business, 2017 Q1 2018 Dialogue
bbb-ad-dialogue-traced.ai 1 06/11/2015 13:46:23
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Banking laid bare Naked Banking reveals how and why your bank is hurting your finances, and what to do about it, finds Kirsten Levermore
The trip to the bank manager’s office. Might as well be going to the dentist: the pain won’t last as long, and at least you have a reasonable chance of understanding what they are talking about. Root canal? Yes. An ISA on 1.5% AER for the balance up to X amount? Perhaps not. With their book, Naked Banking, three heroes say they are going to change the way people bank, forever; Metro Bank’s business banking lead Stephen Hogg, chief commercial officer Paul Riseborough, and Silicon Valley sparkler, Karolina Banna (née Morys), have written a banking tell-all to end the confusion and save you money. In their own words, “Back in the day, banks were largely trusted and products were simple. Today, customers have to navigate a blizzard of product promotions, all with confusing terms and conditions, rip-off fees and constant rate changes. They can, and do, make mistakes with their finances, but nowadays banks seem to design new products so that they can profit from these slip-ups.” Including a step-by-step guide for non-banking experts, to inform readers’
Today, customers have to navigate a blizzard of product promotions, all with confusing terms and conditions, rip-off fees and rate changes
Its value is not limited to the layperson, however: the book has a second section, devoted to examining why banks “no longer seem to want to do the right thing”, with reasoning from expert retailers and seasoned product developers imbued throughout. Going to the bank and being told, “We can’t give advice,” always frustrated this reviewer; it felt like a trick. Now, with Naked Banking in the arsenal, we can have an honest, frank conversation about how we can both get what we want – a true transaction. approach to new banking products, switching banks and even exploring investment versus saving, Naked Banking is empowering, informative gold dust.
— Naked Banking Stephen Hogg, Paul Riseborough & Karolina Morys LID Publishing
APPS FOR LEADERS: MEETOO
Meetings need not be boring, finds Perry Timms We all have them. Too many of them, really. But what if you could turn your meetings, and even learning gatherings, into a polled, chat-sharing, Q&A friendly space? Meetoo does that. Okay, not for those small, short catch-ups, but for allhands events: town-hall addresses; larger strategy days; courses; and even perhaps some remote events where you can exchange dialogue in real-time. Meetoo is an iOS and Android app, which does bear a fee beyond trial versions, but can energize your forums – turning them from formal
and drab affairs into socially inclined, realtime feedback events. You can even turn presentations into interactive experiences, with its integration to load slides; and instantly get responses and views from participants. No more death by PowerPoint. Instead, more inclusion and interaction through the screens we all use in our work and lives. Business School programmes, corporate product briefings, reactions to news and events across a global company – this is a way of taking people out of their inboxes and bringing information to life with chat, reactions and engagement
feedback in real-time. Customizing means it will look like part of your brand. Set up through easy-to-follow guides, it can be deployed with planned methods and got going in minutes.
— Meetoo is an iOS and Android app — Perry Timms is an independent HR/OD practitioner, speaker, writer and CIPD adviser on social media and engagement. Follow him on Twitter @PerryTimms Q1 2018 Dialogue
Visionary thinking is happening on the mass movement of people
Bright ideas on migration Paddington Bear, the ultimate refugee, would never have made it past the recent terrorism and refugee-inspired border controls. Here is one reason for the checks: in the first half of 2017, the Italian Ministry of Interior registered 83,752 new migrant arrivals. This is the highest number recorded in Europe for this period since 2014, with thousands arriving every week in the peak summer months. Given that large movements of people in search of a better life are going to be an increasing feature of our society, valiant attempts to categorise ‘economic migrants’ separately from ‘refugees’ fleeing war, with rights under international law, are useful only at the margin. Migration per se is not a zero-sum game where one less migrant means one more job for a local – the local may well be the product of a substandard education. For the many countries with declining working-age populations, lower migration means crops left unpicked, engineering jobs left unfilled and a faster uptake of robots. Dealing with repercussions in the social order, integration, and a host of other issues, is a challenge for us and the next generations. Visionary ideas are needed. I came across two recently. Former US Secretary of State John Kerry gave the 53rd annual lecture at think tank Ditchley Foundation in Oxfordshire in July. Kerry called for a Marshall Plan for the 21st century by a doubling up of the developed world’s bet on the promise of globalization – not only confined to the developing world, but to the West and wealthy OECD countries – in order to strike at the roots of populism and extremism. He spoke of the “largest public-private partnership the world has ever seen” by having the West partner with China, busy with its Belt and Road policy of investing in the developing world to boost trade and stimulate economic growth across Asia. Kerry called for a global initiative that would release “some of the $12-13 trillion that today is sitting in net negative interest rate
Paddington Bear, the ultimate refugee, would never have made it past recent border controls
status around the world”. He believes this would strike at the roots of extremism and hopelessness by developing education and job opportunities around the world. His vision encompassed developing clean energy, which has the potential to become the largest market the world has ever seen, and harnessing the power of technology that is already leaving too many people behind. Rather than reacting to change, the private sector and governments need to do more to shape the future through unified action. Rooting out corruption would be critical to delivering the programme. The second visionary idea comes from Tolu Olubunmi and the World Economic Forum, which already recognized her a couple of years ago as one of 15 women changing the world. She co-chairs Mobile Minds, an initiative focused on remoteworking as an alternative to migration. For countries with declining populations, remote-working is a way around the political backlash from local populations. Benefits for companies include increased access to talent, cost savings and reduced turnover, while societal benefits include global traffic mitigation and a decreased brain drain from the developing world to the developed world. US-based Olubunmi does not underestimate the challenges of a widespread implementation of cross-border remote work – compliance issues, consistency of fair labour standards and a tangle of employment laws, among others. But as a Nigerian national and a trained chemical engineer who arrived in the US as an undocumented and unemployed migrant, her own story gives credence and lends determination to this globally transformational agenda. An immigration officer would have judged Paddington Bear as lacking in skills, so not GDP-enhancing. Yet if one could have predicted the value he would go on to add, delivering joy to children and adults alike, he would have sailed through the gate. — Karina Robinson is chief executive of Robinson Hambro
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CLEVER CONTENT, DYNAMIC IDEAS, PRACTICAL SOLUTIONS AND ENGAGING VISUALS – A CATALYST TO INSPIRE NEW WAYS OF THINKING AND PROBLEM-SOLVING IN A COMPLEX WORLD
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