C17AS_001_COV_13284.pdf
www.europeanceo.com
EUROPEANCEO
EUROPEANCEO SUMMER 2017
Short working Danes
Denmark’s economy and employees are thriving due to limited office hours
H A NS-W E R NE R SINN
Out of the pits
Hardcore fans fear excessive change under Formula One’s new ownership
Refreshing rhetoric
Honesty, passion and a clear message are the tenets of modern public speaking
¨ DA L I A M A R IN ¨ B A R R Y E ICHE NGR E E N ¨ E L I Z A BE T H M AT S A NGOU
SUMMER 2017 www.europeanceo.com
For the greater good
Candriam Investors Group is working to redefine the financial industry’s relationship with society as a whole. Gone are the days of chasing profits and efficiency at the expense of what’s best for humanity, according to CEO Naïm Abou-Jaoudé AUSTRIA €10.20 UNITED KINGDOM £4.25 GERMANY €5.10
NETHERLANDS €6.95 SWEDEN SEK 39 BELGIUM €6.75
FINLAND €5.10 FRANCE €5.10 GREECE €9.00
IRELAND €5.10 LUXEMBOURG €6.75 SPAIN €6.75
ITALY €5.10 PORTUGAL €7.50 SWITZERLAND CHF 9
POLAND PLN 18.75 CZECH REPUBLIC CZK 140 SOUTH AFRICA ZAR 129.90
C17AS_001_001_65700.pdf
15 YEARS OF EXPERIENCE? THAT’S A GOOD
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execed.hec.edu European_CEO_210x280_15years.indd 1
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C17AS_001_002_97019.pdf
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C17AS_001_001_95877.pdf
impm
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C17AS_002_001_54985.pdf
Are you an experienced senior manager looking to develop your global experience? This international program is a brilliant opportunity for people and organizations to develop their worldly experience by collaborating with a select group of like-minded professionals from across the world. As part of this select course, you will enhance your perspective on management, advance your senior leadership capabilities, and discover new insights that will have a significant impact for your organization.
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C16ND_001_Y08_42731.pdf
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EUROPEANCEO
EDITOR’SNOTE
Sustainability has been the defining investment trend of the century so far. From partnerships with environmental projects to the sponsorship of charitable causes, companies in the financial sector have been falling over themselves to appear conscientious and caring. How real this commitment is, though, is a different matter. While investors increasingly seek clarity over exactly how and where funds will be deployed, the companies that take and distribute their money have not been so genuine in their concern. Slowly, however, this is starting to change, with a new breed of investment firm working to combat social exclusion and address inequality for the sake of humanity, rather than their balance sheets (p. 26). Of course, acts of kindness take many forms, unified by the good they achieve. In Denmark, an entire nation of employers has nailed its flag to the mast in refusing to give in to the global trend for lengthy office hours and enforced presenteeism. Danish workers enjoy short days, plenty of holiday time, and a positive culture that values a work-life balance. And, as is natural with a social species, kindness begets positive results – the Danish economy is strong, and its people are some of the happiest in the world (p. 56). This is surely a stark lesson for any leader who still equates quality of work with the number of hours spent doing it. That said, there will always be a place for mavericks – those who, through sheer force of will and self-belief, can move mountains and achieve the impossible. When Francesca Bellettini took over as CEO of Yves Saint Laurent, the founder’s full name – the essence of the brand’s identity, from its casual three-letter abbreviation to its iconic logo – had just been dropped. Bellettini took control of this risky strategy and, with the help of legendary designer Hedi Slimane, rebuilt the brand in her own way (p. 158). Now shortened to Saint Laurent, the company is the star brand in parent company Kering’s luxury stable, having thrived in recent years in a generally sluggish fashion market. We must take from these examples the lesson that willpower and strength are not incompatible with gentleness and humanity. Good intentions can be couched in a desire to make money (p. 80), and what makes the world a more equitable place is not always the opposite of a shrewd business move (p. 46). Even the worst tragedies can feed the shoots of newfound fraternity and encourage a coming together of cultures (p. 174). After all, as Leo Rosten put it: “It is the weak who are cruel; gentleness is to be expected from the strong.”
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Tower Business Media Ltd 40 Compton Street, London, EC1V 0BD, United Kingdom T: +44 (0) 207 253 5100 www.europeanceo.com The information contained in this publication has been obtained from sources the proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the Publisher. © 2017 Tower Business Media Ltd. ISSN 1755-2206 Editorial on p20-25 © Project Syndicate 1996 - 2017
EUROPEANCEO
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FEEL THE CHEMISTRY
With its unique position at the heart of the European oil and chemical industry, the port of Antwerp offers continuity and sustainable innovation in a world of constant change. World-class logistics and storage facilities react with unsurpassed operational excellence and customer focus. A chemistry you can really feel. Challenge us at customerservice@portofantwerp.com Follow us at www.portofantwerp.com/en/feelthechemistry
#chemistry
C17AS_011_H04_76377.pdf
SUMMER2017
CONTENTS
COVER STORY 26 INCLUSIVE FINANCE
The financial sector has long concerned itself with nothing but profits. Now, however, times are changing. The social costs of a high-risk mentality have been shown in stark relief, and major firms are beginning to recognise their responsibility towards society
26
148
56
108
FEATURES 56 DANE GAINS
In Denmark, employees work short shifts and prioritise free time and lengthy vacations. As a result, the country is one of the world’s happiest and the economy is strong. Why, then, are workers in the US and UK spending longer than ever slumped over office desks?
108
148
VOX DEI
RACING LINE
In today’s digital-first marketplace, public speaking still has an important role to play. With face-to-face human interaction rare, leaders must make the most of the limited opportunities they have to inspire in person. A clear message and honest delivery are key
With digital promotion effectively ignored under Bernie Ecclestone, Formula One’s new owners are playing catch-up to reach a young, multi-platform audience. However, in rapidly expanding the brand, they must be careful not to alienate their core viewership
EUROPEANCEO
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C17AS_001_Y04_05984.pdf
FOUR CONTINENTS, ONE CONFERENCE TABLE.
Virginia Beach, Virginia
Fortaleza, Brazil
Düsseldorf, Germany
Olongapo, Philippines
Global connections and communication have shrunk our world. That’s not news. But what you may find surprising is that Virginia Beach, Virginia, has gained an international reputation for aggressively and strategically connecting with key markets around the world. Foreign-based corporate leaders appreciate our East Coast location, sophisticated business environment, high-tech infrastructure and skilled workforce. In the past 18 months we have opened offices and forged public-private partnerships in Dusseldorf, Germany and Olongapo, Philippines. Microsoft and Facebook announced plans to connect Virginia Beach and Bilbao, Spain with the highest-capacity subsea cable to cross the Atlantic Ocean. And Telefónica will connect our city with Brazil for ultra-high-speed broadband between North and South America. Learn more about the real global innovation and opportunities here at YesVirginiaBeach.com.
+1.800.989.4567 (US) • +49.2159.5324268 (Europe)
S UMMER 2 0 1 7
CONTENTS
PROFILES
46 BJØRN KJOS
A fighter pilot and lawyer by training, Bjørn Kjos fell into business leadership unexpectedly. That hasn’t stopped him becoming a pioneer in the commercial air travel industry, with Norwegian Air Shuttle cornering the budget long-haul market
80 DANIEL EK
Spotify is one of the most valuable brands in the tech world. At the same time, it has yet to turn a profit. To address this, CEO Daniel Ek is planning to roll the dice and launch an IPO this year. Only time will tell if the plan is madness or a masterstroke
BUSINESS & MANAGEMENT 32 TECHNOLOGY
Millennials will soon dominate the office environment, bringing with them an increased need for fast, highquality connectivity
40 HEALTHCARE
The super-rich have it good in many ways, but also face a unique set of pressures. Specialist treatments simply make sense for such patients
15 All the business and financial insight you need for the coming months on topical issues from around the continent
158
Novo Nordisk is a world leader in diabetes treatment, and has been a success since day one. However, in a changing industry, new CEO Lars Fruergaard Jørgensen could struggle to maintain momentum, and won’t be able to lean on company reputation
Overhauling a muchloved, world-famous brand is never advised. That Francesca Bellettini has managed it with Saint Laurent – an elite of the fashion old guard – is quite remarkable, particularly given the sluggish state of the luxury industry
FINANCE 68 COMPANY CULTURE
Body language is the key to interpreting the truth behind someone’s words. Skilled operators can mislead even the sharpest audience
74 LEADERSHIP
As the US brands itself an insular state, European business schools stand to benefit from a sudden influx of MBA students
REGULARS DIGEST
130
LARS FRUERGAARD JØRGENSEN FRANCESCA BELLETTINI
84 PAYMENTS
The payments industry is experiencing rapid change, with digital invoicing and pointof-sale diversification defining the market
92 PORTS
With Chinese trade set to be the defining economic force of the coming decade, Europe’s ports are getting ready to embrace the influx
114 US DESTINATIONS
As much as Donald Trump’s US might seem like a closed bunker, America remains open to European businesses of all shapes and sizes
134 INVESTMENT
Brexit has had a noticeable impact on investor confidence, but there’s money to be made by those bold enough to take a risk
LIFESTYLE 20 COMMENT
Fascinating analysis from our expert columnists, covering European unity, the digital economy, and Germany’s future
164
172
YACHTING
CULTURE
Elite yacht makers have survived a sluggish market thanks to industry experience, client loyalty, and a dedication to the craft
Generation after generation, radio keeps finding its niche in order to remain both a relevant and popular entertainment medium
EUROPEANCEO
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EUROPEANCEO
SUMMER2017 NEWS & COMMENT GOING UP, GOING DOWN | THE GRID | BIG IDEA | TOP TEN | LEGAL CORNER | MOVERS & SHAKERS BUSINESS BRIEFING | FINANCIAL DIARY | CASE STUDY | WHAT THEY’VE BEEN SAYING | THE PLAYBOOK
▲
GOING UP
2.6%
THE GRID
POPULARITY CONTEST
UK inflation UK inflation shot to 2.6 percent In countries across Europe, populist in April, its highest level in four candidates are challenging the political establishment with mixed results years. Spurred by the weak post-Brexit pound, the increase pushed the rate above the Bank of England’s two percent target, and food prices rose for the first time in more than two years.
200%
Forest fires A report by the European Environment Agency has found forest fires in Europe could increase 200 percent over the century, unless emissions are reduced. Portugal experienced huge forest fires in June.
GOING DOWN
▲
5.8%
German unemployment The unemployment rate in Germany dropped to 5.8 percent in March, the lowest level recorded since the 1990 reunification, indicating 2017 has so far been a year of prosperity for Europe’s biggest economy.
1970
Sea ice levels Rising global temperatures continue to wreak havoc on sea ice. This January, the area of ocean covered by ice was the smallest since records began in 1970. Arctic ice used to grow during the winter months.
France
The tide seems to have turned against right-wing populism in France. Despite Marine Le Pen’s far-right Front National making waves, and terrorist attacks stoking fears about immigration, centrist Emmanuel Macron stormed to victory from relative obscurity.
Netherlands
Dutch voters rejected Geert Wilders, dubbed ‘the Dutch Trump’, and his bid to lead his Party for Freedom to victory. Incumbent Prime Minister Mark Rutte’s People’s Party for Freedom and Democracy emerged as the dominant force in a fractured political landscape.
Italy
Italy’s rejection of constitutional reforms backed by Prime Minister Matteo Renzi in December was widely viewed as a victory for the populist Five Star Movement and Matteo Salvini’s anti-immigration Northern League. A snap general election will take place this year or next.
Greece
Since January 2015, a populist coalition of the far-right ANEL and far-left Syriza parties, headed by Syriza leader Alexis Tsipras, has governed Greece. However, continued bleak financial prospects have forced Tsipras to abandon his manifesto and push for bailout funds.
EUROPEANCEO
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EUROPEANCEO
DIGESTSUMMER2017
BIG IDEA
30 MILES
Single-charge range of the Copenhagen Wheel
TOP TEN Youngest countries in Europe Percentage of population aged 0-19
REINVENTING THE WHEEL
Cycle commuting is a great way to stay in shape and save money. However, long rides in hot weather leave you in a sweaty, flustered state on arrival, which is inconvenient to say the least. Step, or rather roll, forward the Superpedestrian Copenhagen Wheel. It may look like a normal bike wheel, but this sleek device contains a powerful motor capable of boosting your speed to 20mph for more than 30 miles, making long rides less painful. The versatile wheel can attach to almost any bike, and learns how you ride to provide a boost so natural you barely notice it. Smart locking also keeps it safe from thieves.
1
2
3
4
5
36.9%
32.3%
30%
28%
26.7%
6
7
8
9
10
25.8%
25.6%
25%
25%
24.6%
Kosovo
Albania
Turkey
Armenia
Azerbaijan
Montenegro
Ireland
Georgia
LEGAL CORNER
16 | EUROPEANCEO
France
Facebook was fined
¤110M
Face up Increasingly under fire for intrusive data collection practices and, more recently, playing a key role in the alarming fake news phenomenon, Facebook faced one of its heftiest fines to date in May. The European Commission ordered the social media giant to pay a massive €110m penalty for misleading EU antitrust regulators during a 2014 investigation into its €15bn acquisition of encrypted instant messaging service WhatsApp.
Iceland
During the investigation, Facebook claimed it was not able to automatically match user data across the two platforms. However, in August 2016 WhatsApp rolled out an update that did exactly that. The Commission ruled Facebook staff must have been aware of this capability back in 2014. This raises competition concerns, especially in the sphere of targeted advertising, since Facebook can now add data
from WhatsApp conversations to specific user profiles and target advertising very precisely – a potential market advantage that Facebook’s competitors have no access to. Ultimately though, the Commission decided this information would not have been sufficient to prevent the 2014 merger, and Facebook avoided the maximum penalty, which, at one percent of company turnover, would have been closer to €220m.
MOVERS & SHAKERS START-UPS | NEW APPOINTMENTS | ENTREPRENEURS EUROPE NEW APPOINTMENT
EUROPE ENTREPRENEUR
EUROPE START-UP
Jesper Brodin | CEO
Ben Grech | CEO
UNIPLACES
SNIPS
In May, Swedish furniture giant IKEA named company veteran Jesper Brodin as its new CEO. Though he currently heads up the company’s Swedish operations, Brodin will take over the CEO position in September. He should have no problems unpacking the complexities of the role, having served a 22-year stint at IKEA already. Brodin will seek to assemble the group’s online strategy to keep pace with the changing nature of retail.
When Ben Grech moved to Porto to start a business with two friends, finding somewhere to live proved difficult. Their struggles gave him the idea to launch Uniplaces, a platform geared at helping students find accommodation. The site has since helped more than 10,000 students find a home and works with universities in 39 European cities. Having raised $24m from companies including Zoopla, Uniplaces is now set to get even bigger.
Snips, a Paris-based start-up, has developed an app that acts as a personal assistant for your smartphone. Using AI, it learns how you use your device and works out the best ways to assist you based on predicted patterns of use. Staffed by developers with backgrounds at Apple, NASA and Google, Snips has ambitious plans to install an AI assistant in every device that is so smart it makes technology ‘disappear into the background’.
GLOBAL NEW APPOINTMENT
GLOBAL ENTREPRENEUR
GLOBAL START-UP
Patrick Xu | CEO
Thibault Duchemin | CEO
AVA
ROBINHOOD MARKETS
UK advertising giant WPP has appointed Patrick Xu as the new CEO of its Chinese arm. Xu will take over from Bessie Lee, who is leaving to pursue a career in entrepreneurship. With China WPP’s third-biggest market, Xu has a huge task on his hands. However, his prior role as CEO of GroupM China, in charge of WPP media agencies, should stand him in good stead. He will now act as CEO of both companies in a dual role.
As a child, Thibault Duchemin was the only member of his family able to hear. In founding Ava, the 25-year-old has set about giving the hard-of-hearing more of a voice at the table. The Berkeley-based tech start-up has developed an app that can listen to conversations through a phone microphone and automatically transcribe them, allowing the hard-of-hearing to communicate in real time with people not fluent in sign language.
Robinhood Markets is a fintech start-up from Palo Alto with big plans to revolutionise investing for the smartphone generation. As the name suggests, Robinhood wants to democratise trading; individuals can use the app to buy shares in companies on US stock exchanges as easily as liking a Facebook post, with no cumbersome commission fees. Robinhood instead makes money from the interest earned on users’ cash balances.
IKEA
WPP CHINA
BUSINESS BRIEFING A report by the Boston Consulting Group (BCG) in March found banks have paid $321bn in fines since the financial crash, as regulators step up scrutiny of offences from money laundering to market manipulation. European regulators are expected to crack down even more in the coming years. HSBC has announced plans to move 1,000 jobs, responsible for a fifth of the company’s total revenue, from London to Paris once Brexit takes effect. The bank is not alone in planning a swift London exit; UBS will relocate roles to Germany or Spain, Goldman Sachs to Frankfurt and Paris, and JPMorgan to Dublin. German carmaker Daimler is emerging as a European competitor to electric vehicle pioneer Tesla. In May, the company began building a lithium battery plant, the largest in Europe, to facilitate increased production of electric vehicles. Daimler hopes this investment will help it to compete in the future automotive industry. A report by Bain has found the global luxury goods market is finally recovering from its postcrisis slump, and is projected to grow by two to four percent this year. Higher spending in Europe and China will compensate for a slowdown in the US. Europe is expected to enjoy the fastest growth, with sales up seven to nine percent, a significant increase given the market’s recent sluggish state.
EUROPEANCEO
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C17AS
EUROPEANCEO
DIGESTSUMMER2017 CASE STUDY
FINANCIAL DIARY THIS QUARTER’S SELECTION OF THE BEST BUSINESS AND FINANCIAL EVENTS THE CONTINENT HAS TO OFFER SUMMER 2017
BERLIN
European Finance Association Conference
23.08.17
This annual meeting has, in recent years, attracted more than 750 leading economists from business schools and universities. A committee chooses just 240 papers for presentation from 1,800 submissions, ensuring all research presented is of the highest quality.
BARCELONA
Global Export Finance Conference
12.09.17
The largest gathering of its kind, this conference provides unrivalled networking opportunities and encourages interaction and participation. Key themes will include the impacts a changing geopolitical landscape may have on global finance.
LISBON
Web Summit
6.11.17
Web Summit was founded in 2010 as a way to connect the technology community with other industries. Now, with more than 60,000 attendees and 650 speakers, it’s the biggest tech conference in the world; unmissable for any forward-thinking business.
WELL DRONE Inspecting the vast exteriors of Europe’s oil refineries to perform vital safety tests used to be a dangerous and costly manual undertaking. Checking for faults on the huge flaring stack at the Ormen Lange gas processing plant in Norway, for example, entailed shutting down the facility for almost two weeks while engineers embarked on a risky abseil down the 70 metre tower. Now, however, Shell has found a neat and costeffective solution to this problem in remotely operated aerial vehicles, commonly known as drones. These are flown around the facility, filming the plant exterior and feeding the footage back to engineers on the ground in a quick procedure that can be performed while operations are still running. This method is increasingly being used to inspect the conditions of other hard-to-reach places in oil facilities too, such as the underbellies of offshore rigs and platforms.
WHAT THEY’VE BEEN SAYING “This endless negotiation must come to an end. Our finance ministers should do the work to achieve an agreement. This is the only positive result for Greece and for the whole community.” Alexis Tsipras, Prime Minister of Greece, on his country’s continuing quest for eurozone bailout funds 18 | EUROPEANCEO
“Some [manufacturers] have broken the law. The scandal has shown that the responsibility to enforce the law and punish those who violate it can no longer be left to member states.” European Commissioner Elzbieta Bienkowska on the VW emissions scandal and steps to be taken to avoid a repeat
“The decision by the US to leave the Paris Agreement was a big mistake. But the fight against climate change and all the research, innovation and progress will continue.” Donald Tusk, President of the European Council, on the US’ decision to withdraw from the Paris Agreement
“Brexit will show how much more attractive it is to be a member of our union. Thanks to Europe, people enjoy the freedom to live, buy, love and trade across borders.” Jean-Claude Junker, President of the European Commission, on the EU’s stance on upcoming Brexit negotiations
“All told, we estimate that half of the extra GDP growth achieved during the current recovery has been attributable to our policy, with a material contribution from oil prices as well.” European Central Bank President Mario Draghi on the need to maintain negative interest rates to ensure eurozone growth
THE PLAYBOOK
Work is fun Millennials, with little or no experience of the pre-internet, pre-crash workplace, have expectations of work that are, in many ways, far removed from those of previous generations. Known for job hopping rather than serving the traditional 10-year stint at one company, and for prioritising job satisfaction and a sense of fulfilment over salary increases, Millennials will soon come to define working culture. The growing importance placed on a good work-life balance is seeing some of the formalities of
the workplace, such as corporate clothing and office hierarchies, disintegrate. The prominence of freelancing and the gig economy is gradually prompting greater flexibility over office hours too, as employees become accustomed to working outside the boundaries of the traditional nine-to-five day.
NEED TO HAVE
✚ A PPS ✚ DE V ICE S ✚ T OOL S ✚ G A DGE T S
1
PowerRay
This aquatic drone is the robotic fishing rod of the future. It can dive to catch fish up to 100ft below the water surface, and uses sonar sensors to stalk prey that lurks even lower.
2
3
Devialet Phantom
Dark Sky
Totally wireless and free of distortion at all volume levels, Devialet Phantom speakers are designed to be combined into complete next-gen multi-room sound systems.
The handy Dark Sky app can tell you the weather for your exact location. It presents temperature and other stats in beautiful charts to ignite your inner weather geek.
BRANSON OFFERS PERKS SUCH AS CASUAL CLOTHING, FULLY FLEXIBLE WORKING, AND UNRESTRICTED HOLIDAY TIME
NEED TO KNOW
One company going out of its way to accommodate this shift in culture is Richard Branson’s Virgin. Hoping to hang on to Millennials by making the office as fun as possible, Branson offers perks such as casual clothing, fully flexible working, and unrestricted holiday time. He has even begun holding so-called ‘corporate days’, when the fusty old rules are reapplied, presumably to show Millennials just how good they now have it.
EASY OFFICE FITNESS 1 Take regular walks. Recent studies have cast doubt on the benefits of standing desks, instead recommending regular moderate exercise throughout the day. 2 Build high-intensity interval training (HIIT) into your day. HIIT sessions involve short bursts of intense exercise, particularly effective at burning fat. 3 Don’t drive. Cycling or walking at least part of your commute is an easy way to build in exercise while also clearing your thoughts for the day to come.
EUROPEANCEO
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C17AS_020_G08_23722.pdf
EUROPEANCEO
COMMENT
Barry Eichengreen PROFESSOR, UNIVERSITY OF CALIFORNIA, BERKELEY
Surplus struggles
Germany’s current account surplus is not the great evil Donald Trump proclaims, but it might be a sign the country needs to consider investing in infrastructure and public services For US President Donald Trump, the measure of a country’s economic strength is its current account balance – its exports of goods and services minus its imports. This idea is, of course, the worst kind of economic nonsense. It underpins the doctrine known as mercantilism, which comprises a hoary set of beliefs discredited more than two centuries ago. Mercantilism suggests, among other things, that Germany is the world’s strongest economy, because it has the largest current account surplus. In 2016, Germany ran a current account surplus of roughly $297bn, or 8.6 percent of GDP, making it an obvious target of Trump’s ire. And its bilateral trade surplus of $65bn with the US presumably makes it an even more irresistible target. Never mind that, as a member of the eurozone,
20 | EUROPEANCEO
Germany has no exchange rate to manipulate. Forget that Germany is relatively open to US exports, or that its policymakers are subject to the EU’s anti-subsidy regulations. Ignore the fact that bilateral balances are irrelevant for welfare when countries run surpluses with some trade partners and deficits with others. All that matters for Trump is that he has his scapegoat. Back in the real world, the explanation for Germany’s external surplus is not that it manipulates its currency or discriminates against imports, but that it saves more than it invests. The correspondence of savings minus investment with exports minus imports is not an economic theory; it’s an accounting identity. Germans collectively spend less than they produce, and the difference necessarily shows up as net exports.
Deutsche style Germany has a high savings rate for good reason. Its population is ageing more rapidly than most. Its sensible people are sensibly saving for retirement. They are accumulating assets now so they can de-accumulate them later, when old-age dependency ratios are higher. This is why the advice German leaders receive from White House advisors and even from some German economists – that Germany would be better off abandoning the euro and letting its currency appreciate – makes little sense. Changing the exchange rate would not diminish the incentive for Germans to save. Moreover, allowing the exchange rate to appreciate would discourage investment in capitalintensive traded-goods sectors. To
C17AS_021_G08_03844.pdf
be sure, a stronger currency might increase investment in services by raising the relative price of nontraded goods. But the incentive to invest in services would have to be boosted massively, given that the sector is not capital intensive, to offset lower investment in export industries. Better than fiddling with the currency would be to address saving and investment directly. Here is where the two principal parties vying in Germany’s upcoming election differ. Chancellor Angela Merkel’s Christian Democrats suggest cutting taxes. This makes sense insofar as the German Govern-
ment is a massive net saver; the 2016 budget surplus was $26.7bn, a record high. The problem is that there is no guarantee that German households, being voracious savers themselves, will spend the additional income. Extending investment tax credits to German firms might be more effective in boosting spending, but doing so would be politically problematic in a country where labour’s share of national income is already declining. Martin Schulz’s Social Democrats, on the other hand, favour raising public spending, by investing in infrastructure in particular. In the current European environment of near-zero interest rates, there’s little risk that additional public investment will crowd out private investment. And Germany has massive unmet needs in healthcare, education, and communication and transportation infrastructure.
WELL-TARGETED PUBLIC INVESTMENT CAN RAISE PRODUCTIVITY, BOOST LIVING STANDARDS, AND AMELIORATE CONCERNS ABOUT INEQUALITY
For the people Some will object that infrastructure and public services are nontraded goods, so more spending on them won’t boost imports or narrow the current account balance. But if the government, in a fully employed economy, redirects resources toward the production of non-traded goods, households and firms will have to find other ways of satisfying their demand for tradables. The only sure way of doing that is by purchasing additional imports, spending on which will inevitably increase. The question, ultimately, is why Germany should seek to reduce its current account surplus. One answer is to get out of Trump’s sights. A better answer, offered by the International Monetary Fund, is that doing so would be good for a world economy in which investment is in short supply, as evidenced by record low interest rates. It would be good for southern Europe, which needs to export more, but can only do so if someone else, like the largest northern European economy, imports more. Most of all, more investment in infrastructure, health and education would be good for Germany itself. Well-targeted public investment can raise productivity and boost living standards, ameliorate concerns about inequality, and address Germany’s economic weaknesses. For example, there are exactly zero German universities in the top 50 globally. More public funds would make a difference. ‘The world’s strongest economy’ can do better. n
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EUROPEANCEO
COMMENT
Dalia Marin CHAIR OF INTERNATIONAL ECONOMICS, UNIVERSITY OF MUNICH
Tear down the silos
The digital economy is exacerbating the capital-labour disparity in global markets. A new competition authority with global remit is needed to reset the balance The digital economy is carving out new divides between capital and labour by allowing one firm, or a small number of firms, to capture an increasingly large market share. With ‘superstar’ companies operating globally and dominating markets in multiple countries simultaneously, market concentration throughout the G20 developed and major emerging economies has increased considerably in just the past 15 years. To address this phenomenon, the G20 should create a world competition network to restore competition and address income inequality between capital and labour. As a larger share of total income shifts to capital across many G20 countries, the world competition network would seek to reverse the decline in labour’s share of GDP. During the period after the Second World War, 70 percent of national GDP went to labour income, and the remaining 30 per-
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cent to capital income. John Maynard Keynes described the stability of the labour share as something of a “miracle”. But the rule has since broken down. Between the mid-80s and today, labour’s share of world GDP declined to 58 percent, while capital’s share rose to 42 percent.
Power to the few Two forces in today’s digital economy are driving the global decline in labour’s share of total income. The first is digital technology itself, which is generally biased towards capital. Advances in robotics, artificial intelligence, and machine learning have accelerated the rate at which automation is displacing workers. The second force is the digital economy’s ‘winner takes most’ markets, which give dominant firms excessive power to raise prices without losing many customers. Today’s superstar companies owe their privileged position to digi-
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tal technology’s network effects, whereby a product becomes even more desirable as more people use it. And although software platforms and online services can be costly to launch, expanding them is relatively inexpensive. Consequently, firms that are already established can keep growing with far fewer workers than they would have needed in the past.
THE G20 CANNOT SIMPLY TRUST THAT GLOBAL COMPETITION WILL CORRECT ON ITS OWN THE TENDENCY TOWARDS INCREASED MARKET CONCENTRATION These factors help to explain why the digital economy has given rise to large firms that have a reduced need for labour. And, once these firms are established and dominate their chosen market, the new economy allows them to pursue anti-competitive measures that prevent actual and potential rivals from challenging their position. And, as the economists David Autor, David Dorn, Lawrence Katz, Christina Patterson, and John Van Reenen show, the US industries with the fastestgrowing market concentration have also seen the largest drop in labour’s share of income. This increased market concentration is widening the gap between the firms that own the robots (capital) and the workers whom the robots are replacing (labour). But confronting it will require us to reinvent antitrust for the digital age. As it stands, national competition authorities in G20 countries are inadequately equipped to regulate corporations that operate globally. Moreover, the G20 cannot simply trust that global competition will correct on its own the tendency towards increased market concentration. As Andrew Bernard has shown for the US, and Thierry
Mayer and Gianmarco Ottaviano have demonstrated for Europe, international trade favours large superstar firms. Indeed, globalisation may provide advantages to the largest and most productive firms in each industry, causing them to expand, and forcing smaller and less productive firms to exit. As a result, industries become increasingly dominated by superstar firms with a low share of labour in value added.
New framework The US is a case in point. It is host to many of today’s superstar firms, and yet US antitrust regulators have not been able to restrain those firms’ market power. As the G20 looks for ways to address the problem of market concentration, it should take lessons from the US experience, and look for ways to improve upon the US’s failures. Rather than starting from scratch, we will need to build on national-level competition authorities’ institutional knowledge, and include experienced personnel in the process. The European Competition Network can serve as a blueprint for a G20-level network. The objective of a world competition network is to build an effective legal framework to enforce competition law against companies engaging in crossborder business practices that restrict competition. The network may coordinate investigations and enforcement decisions, and develop new guidelines for how to monitor market power and collusive practices in a digital economy. In the past, the G20 has focused on ensuring that multinational firms are not able to take advantage of jurisdictional differences to avoid paying taxes. But the G20 now needs to expand its scope by recognising that digital technologies are creating market outcomes that, if unchecked by a new world competition network, will continue to favour multinational firms at the expense of workers. n
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EUROPEANCEO
COMMENT
Hans-Werner Sinn PROFESSOR OF ECONOMICS, UNIVERSITY OF MUNICH
Brothers in arms
With immediate fiscal union putting the long-term agenda of political union at risk, a military and security partnership is the EU’s best chance to move closer together Emmanuel Macron’s victory in the French presidential election sent a wave of relief and euphoria across Europe. But now a reality check is in order, because we do not yet know how the new leader intends to restore the French economy. The country suffers from an unemployment rate of nearly 10 percent, and its manufacturing sector is still operating 12 percent below its level before the 2008 global financial crisis. Macron has indicated that he does not want to increase the retirement age, change the 35-hour workweek, or make it easier for firms to dismiss workers. At the same time, he wants northern eurozone countries to send money to southern countries to protect French financial and economic markets in these regions.
Macron economics This is an admittedly broad-brush portrayal of the programme that got Macron elected, but it is nonetheless to the point. What else could he possibly mean when he calls for a newly created euro24 | EUROPEANCEO
zone finance ministry that can accrue jointly guaranteed debt and collect its own taxes? What about when he asks for common eurozone deposit protection and unemployment insurance? The motive behind these ideas is all too obvious: support the domestic economy at others’ expense. Macron also supports proposals for a new eurozone parliament, proclaiming a two-tier Europe. But that is simply a recipe for splitting up the EU. Turning the eurozone into a transfer union with its own parliament would only deepen the divide between eurozone countries and the EU’s northern and eastern member states: Denmark, Sweden, Poland, the Czech Republic, Croatia, Hungary, Romania and Bulgaria. Because most of those countries will not join a European transfer union, they would be cut off permanently. As Donald Tusk, the Polish President of the European Council, has wryly observed, we already had a two-tier Europe up until 1989, and we should not wish for a return to that arrangement.
German policymakers, for their part, could not easily help Macron bifurcate the EU even if they wanted to, because Germany’s constitution grants the Bundestag the inalienable authority to manage the country’s fiscal affairs. Even if every single member of the Bundestag agreed to transfer part of its fiscal sovereignty to a European-level institution, such a decision could still be made only through a formal referendum. Germany’s powerful Constitutional Court has already made it clear that eurozone bailouts and other interventions represent the
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outer limits of what is possible under Germany’s Basic Law. The court may have deferred to the European Court of Justice on the question of the European Central Bank’s “outright monetary transactions” scheme, but it will not be able to do the same with respect to fiscal sovereignty, because the constitution is clear, and the ECJ has no standing to interpret German constitutional law.
Combined firepower That being said, it is important that European integration moves forward. There is still much
EUROPE SHOULD TAKE A LESSON FROM THE WARS OF THE 20TH CENTURY AND DO AWAY WITH NATIONAL ARMIES ALTOGETHER
work to do to improve the EU’s cross-border traffic routes, and to strengthen its security partnerships. Indeed, Europe should take a lesson from the wars of the 20th century and do away with national armies altogether. Only then will Europe’s union for peace become a reality, and not just a platitude invoked by politicians. During the post-war era, European heads of state drafted a treaty to establish a western European defence community. But the proposal fell through in 1954, owing to a veto by France’s National Assembly, against the recommendation of Charles de Gaulle. Later, the UK opposed a joint European military. But the UK will no longer be a part of the EU, at least for the foreseeable future; and France has a young, dynamic new president. So, it is time to try again. The German people can probably be persuaded to agree to this form of integration, in the same referendum that will have to be held, anyway, to approve Macron’s fiscal plans. The same can be said for the people of eastern Europe. By pursuing true political integration based on a common army and security partnership for the entire EU, Macron can guarantee his place in the history books. To achieve this goal, however, he will have to break from the precedent set by his predecessors, who always categorically ruled out a political union. And he will have to acknowledge Germany’s concerns that by establishing a fiscal union now, Europe would lose the opportunity to pursue a political union in the future. Combining Europe’s military forces under a joint command is the only way forward. Creating a fiscal union without a political union would forever block the road to European unification, and set the people of Europe against one another more than the euro ever did. No one who wants to build a union for peace can afford to permit, much less encourage, that outcome. n
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A SOCIAL CONTRACT FOR THE MODERN AGE No longer are financial firms merely answerable to clients and shareholders. The strongest power brokers now have a responsibility to society as a whole, according to Na¨ım Abou-Jaoudé, CEO of Candriam Investors Group and Chairman of New York Life Investment Management International »
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C17AS_028_D01_76408.pdf
SUSTAINABLE BUSINESS
he 2008 financial crisis sent shockwaves around the globe, bringing to startling light a system that had gone unchecked and unbridled for far too long. The consequences were the worst recession the world has seen since the Great Depression and a still-ongoing overhaul of the financial industry. In the years that have followed, banks and other financial institutions have, unsurprisingly, experienced ever-increasing scrutiny. Importantly, this scrutiny comes not only from local and international regulators, as was once the case, but also from the broader public, clients, employees and investors. Today, the focus is on creating greater sustainability for the entire industry and for society as a whole. From the very smallest to the biggest of players, long-term viability is imperative. As such, in addition to new regulations, legislation and worldwide best practices, it is also essential for sustainability to begin from within. Though such a transition may be difficult for some, it is well within reach if one has forward-thinking leadership in place that is willing to take bold steps and embrace change. Given the industry’s current state of development, a number of players have begun to look to the future by incorporating greater sustainability in everything they do. In light of this trend, European CEO spoke to Naïm Abou-Jaoudé, CEO of Candriam Investors Group and Chairman of New York Life Investment Management International, about how financial institutions can achieve greater sustainability in future, and what this goal means for the industry.
Change in the air “The financial crisis provided a wake-up call for the financial services industry, showing the world that conviction without responsibility, while potentially lucrative over the short term, is unsustainable and potentially dangerous over the long term”, said Abou-Jaoudé. Though many are still adjusting to this change, the landscape of the financial sector is undergoing a significant shift. This can be attributed to the external pressure of compliance with 28 | EUROPEANCEO
industry codes of sustainable conduct, such as the Global Reporting Initiative and UN Principles for Responsible Investment, together with a growing call for environmental, social and governance (ESG) products and services. Demand in this regard is particularly noticeable among institutional investors. The sector is now expected to manage financial risks in a more viable manner, with a particular focus on risk management, so as to support national and international development goals and facilitate the transition to a green and low-carbon economy. “While there are clear leaders that thrive under such circumstances, when looking at the industry average, there is probably still some way to go”, said Abou-Jaoudé. Some of the most pressing issues that require attention are ethical conduct, bribery and corruption. “Regulatory and civil claims still exist, though there is still a reputational risk to resolve”, Abou-Jaoudé explained. “There is also the need to have internal codes of conduct as part of ‘business as usual’ for every institution, no matter how big or small.” Also lacking in the industry at present is a suitable level of awareness among organisations about their own environmental impact. In order to overcome this, the wider industry must focus on corporate lenders, according to Abou-Jaoudé; the appropriate management of environmental risks in lending portfolios can reduce potential future losses and liabilities significantly. There is also, of course, the endemic risk of climate change. Despite environmental discourse becoming omnipresent across all levels of business, basic blunders still occur. One such example is the financing of harmful developments. “Even though we have seen a withdrawal of several institutions, there is still a large portion of the industry that finances environmentally controversial projects”, explained Abou-Jaoudé. Other more operational challenges include inadequate levels of accountability. “The industry still faces a lack of appropriate transparency in regards to products, charges, terms
Na¨ım Abou-Jaoudé CV Born: Lebanon, 1966 Education: Economics and Finance, Université Paris II
1996
Abou-Jaoudé joined Candriam, then known as Dexia Asset Management, as a member of the executive committee, responsible for alternative investments
2000
Following several years in this role, Abou-Jaoudé was promoted to Chief Investment Officer, but retained his alternative investments remit
2007
Having excelled as CIO, Abou-Jaoudé was announced as the new CEO. In 2014, he oversaw the rebrand that changed Dexia into Candriam
IN THE GLOBALISED WORLD’S QUEST FOR EFFICIENCY AND PROFIT, WE HAVE REACHED A POINT WHERE THE SOCIAL COSTS HAVE BECOME TOO HIGH
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SPECIAL REPORT
Xxx
and conditions. This results in a loss of trust from customers and other stakeholders, which in turn leads to a loss of market share”, said Abou-Jaoudé. “Better reporting is also needed, as the data currently being reported externally is not as robust as other financial information that is reported. Corporate responsibility data quality can really help with this.”
Tech transformation An understanding of what sustainability actually means is a vital starting point for any organisation. “Sustainability typically has two broad definitions: literally, it refers to the ability to maintain a certain rate or level, while more recently, it is increasingly used in reference to resources, lifestyle and the environment”, said Abou-Jaoudé. “As a CEO, both of these
definitions are central to the way I manage the business. I want to build an organisation that is innovative and conviction-driven, yet diversified and focused on the long term, thus ensuring a platform for growth built on solid foundations. I’m also committed to being a responsible and engaged actor within the industry by allocating our capital in a way that achieves return on investment, while also maximising positive impacts for society. “Sustainability is at the heart of Candriam; not only in the way we manage our own business, but also in the way we invest money on behalf of our clients worldwide. Over 20 percent of our assets under management are in socially responsible investments (SRIs). We believe that sustainability comes through acting with conviction and responsibility.” Indeed, the
company’s very name reflects this fundamental positioning: “It embodies the values we stand for. Our own staff is responsible for creating the Candriam acronym: conviction and responsibility in asset management.” Seeking to lead by example, Candriam has a number of initiatives in place to ensure it practices what it preaches at all levels of the company. For example, there is the Candriam SRI rating from the company’s own in-house SRI team, which ensures the organisation is up to standard and up to date for all relevant regulations and guidelines, while there is also the annual sustainability report that records Candriam’s progress and publicises it for all stakeholders. Among the emerging trends in the area of sustainability – be they social, technological » EUROPEANCEO
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SUSTAINABLE BUSINESS
SPIRIT LEVEL $255TRN $426BN $426BN <0.2%
Total global wealth
Wealth held by richest eight people
or environmental – Abou-Jaoudé finds most inspiration in the digital tech revolution. “It continues to be a fascinating trend, both in terms of the speed at which it has progressed and the disruption that it has caused to the status quo. From peer-to-peer platforms and smart grids, to agricultural robots and medical wearables, there is a range of companies doing great work in ESG.” As the CEO of an investment group, AbouJaoudé strives to incorporate these trends into Candriam’s company strategy. For example, the group has an in-house digital working group, which seeks to identify new opportunities to improve its business, products and services in light of the most cutting-edge digital and technological advances. This particular division of Candriam has enjoyed great success in recent years. As Abou-Jaoudé explained: “The digitalisation of financial services has been a rapidly evolving trend in recent years, and our digital working group has pioneered some exciting innovations in the space.” For example, the group is developing an open-access accredited SRI training acade30 | EUROPEANCEO
Wealth held by poorest 50% of people
my to enable distributors to learn more about sustainable and responsible investment. “We have also worked on a report builder, where clients can customise a report themselves with the relevant information bricks”, said Abou-Jaoudé.
Social inclusion In recent decades, free market economics and technological innovation have helped to create considerable wealth. However, the majority of this wealth is held by a tiny minority of the global population, producing an increasing disparity between the richest and poorest members of our society. Abou-Jaoudé identifies a number of reasons for this alarming trend. “First, there is the search for cost reduction within a lower economic growth environment. There is also an inclination towards social dumping”, he explained. Other causes include mass migration as a result of internal and regional conflicts, as well as international policies in taxation and international transfers. “Ultimately, in the globalised world’s quest for efficiency and
Percentage of global wealth held by poorest 50%
profit maximisation, we have reached a point where the social costs have become too high.” This has gone on for far too long: now is the time for change, and the financial services industry is a perfect place to start given its ability to promote social inclusion. “If different groups within a society no longer feel that their economic and political system is broadly fair, this can mean the end of the social contract”, said Abou-Jaoudé. “This leads to unrest and instability – not the kind of environment conducive to the long-term health of economies and businesses.” Despite a sense of urgency, however, not enough is being done to tackle social exclusion. Many companies and individuals are simply resistant to change, which is compounded by policy frameworks that are stuck in the past, and a general difficulty in passing new regulations. “This is concerning, as our current economic growth model creates many social costs and systemic risks”, said Abou-Jaoudé. “Technological disruption and globalisation have led to a situation in which, too often, the winners take everything and most are left behind.”
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SUSTAINABLE BUSINESS
PROMOTING CHANGE IS ALL ABOUT PROMOTING THE POSITIVE PERSONAL IMPACT THAT CHANGE WILL BRING
Source: Oxfam
This is where governments must step in. Thankfully, this is exactly what is beginning to happen. “Environmental externalities are increasingly being tackled by regulators, which means that both companies and investors are becoming aware of the challenges of climate change. For example, mobilisation around energy transition is at last gathering pace. However, we’ve not yet seen the same sense of urgency and international mobilisation for social externalities.” Initiatives such as the Copenhagen Declaration and Programme of Action have served to help the cause. “This is clearly a positive step in the right direction, especially in terms of the recommendations made for eradicating poverty, targeting gender equality and improving access to education”, said AbouJaoudé. “That said, as is often the case with such programmes, to be effective, they must be followed up by an assessment framework and dedicated budgets.” Organisations – Candriam included – can play their own part in promoting inclusive society too. “As asset managers, we need to
do our bit, both in the way we manage our own business and the way we invest our clients’ wealth. We want to invest in companies that have a sustainable, positive impact on society”, said Abou-Jaoudé. “For example, we can address the real systemic risks caused by climate change, and we can look into labour rights abuses or unfair tax arbitrage. We want to have impact as owners, so we must engage with the companies we invest in and consider their social policies, or the fairness of their global supply chains.” In this way, the financial industry is becoming a pivotal player when it comes to promoting social inclusion. Abou-Jaoudé explained there are two principle reasons behind this: “Both economic activities and the launch of new innovative projects require funding, and the financial industry is at the source of this relationship between investors and entrepreneurs. Banking activities have a direct proximity with the public.” What’s more, taking this step is not actually detrimental to business. “The three biggest challenges facing the industry today are also its three biggest opportunities. If we get these right, it will ultimately ensure we change the world for the better, while getting them wrong would mean failing our obligations to future generations.” The three areas in question are “climate change and energy transition, disruptive technologies and economies, and working conditions throughout the entire production and supply chain”. To turn these challenges into opportunities, Candriam guides its investors through the promotion of its SRI approach. This involves incorporating low-carbon investment solutions, as well as robotics and digitalisation. Investments in green bonds, solidarity funds, and microfinance solutions are other key areas that investors can embrace, while more research on the impact of these challenges and opportunities on portfolio investments will help the cause in the long run. Candriam also advises its clients to understand the nuances of sustainability, rather than treating it as a one-size-fits-all concept to be ticked off. “Sustainability is something that results from responsible decisions that apply to one’s specific business model”, AbouJaoudé explained. “The best piece of advice when seeking improved sustainability is to begin with small initiatives that contribute to a more sustainable micro-environment, which in turn will contribute to a more sustainable world. For instance, a good starting point is to raise awareness among staff members, since
they are your ambassadors and the drivers of actual change.”
We the people When asked where he draws his energy and inspiration from, Abou-Jaoudé does not hesitate: “From my three sons. It’s amazing to see how fast they grow and how at ease they are with the rapid pace of change surrounding them. They inspire me through their laughter and challenge me to do things differently to keep up with future generations.” Of course, challenging oneself and striving for change, particularly when faced with resistance, is no small feat. But it’s up to the leaders of organisations and industries to take such bold steps, even in the face of adversity. “Promoting change is all about promoting the positive personal impact that change will bring and, in doing so, setting the right example”, said Abou-Jaoudé. “You have to believe in the change yourself. Be a defender – show them the bigger picture and personal upside in order to turn resistance into adherence.” While spearheading change is certainly an accomplishment, Abou-Jaoudé is clear Candriam’s biggest achievement since he took the helm is actually the people around him. “I definitely take pride in the longevity of service from our staff. Our group strategic committee shares over 13 years of making decisions sideby-side, and our investment team has an average experience level that is among the highest in the industry”, he explained. “I have always aspired to foster a corporate culture in which people feel engaged and inspired, where they source energy to work as one cohesive unit, with the values of the organisation present within each and every person.” In a bid to continue progressing the group towards greater sustainability, the company will soon launch the Candriam Institute for Sustainable Development, with the aim of promoting innovative research into sustainable finance. Also central to the foundation is delving into exactly how the financial sector can contribute to sustainable growth within a more inclusive society. The institute will sponsor academic research and support programmes with a positive impact on society. For example, it plans to introduce an inclusivity initiative, which will help people with disabilities acquire work experience. “Through the institute, we want to be an even more active advocate across the financial community – a responsibility we take very seriously”, Abou-Jaoudé concluded. n EUROPEANCEO
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BUSINESS & MANAGEMENT
Technology
Generation game
Collaboration is increasingly moving away from fixed systems into workflow applications such as Slack and Microsoft Teams (the chatbased workspace in Office 365), which act as a sort of ‘UC 2.0’. This type of communication is gradually taking the place of traditional channels, such as email, seen by some employees as an old-fashioned method of communication. For IT leaders, democratisation of technology and employee demands for collaborative technologies are a fact of life in the modern workplace. The challenge is to embrace the change and teams are moving into open spaces. Many and enable employees while defining security employees work remotely, and technology standards that protect company data and assets allows them to stay connected with no loss of in a fluid communications environment. productivity or contribution. These physical changes go hand-in-hand Into the future with a cultural shift; the focus has moved from Increasingly, IT leaders are working hand-inindividual work to team-based collaboration, hand with facilities and HR functions to enable and the demand for so-called ‘huddle’ spaces digital workplace transformation, redesign– informal spaces where virtual teams can col- ing the physical layout of the office to suit the laborate with video – is exploding. According new way of working, converting offices and to Andrew Davis, Senior Analyst at Wainhouse meeting rooms to huddle rooms, and equipResearch: “In our recent State of the State report ping these with self-service technology that on enterprise video conferencing, we estimated enables team collaboration. Deploying and that there are 30-50 million huddle rooms offering the correct tools and technologies can globally, and that affordability, self-service, prove pivotal in talent acquisition and retention and ease-of-use will be key factors for video for businesses of all sizes. adoption in these rooms.” Gone are the days of big, expensive and complicated equipment that is limited to the boardroom. The good news for companies today Collaborative culture Unified communications (UC), the underlying is that scaling technology to huddle spaces is technology that has proven pivotal to digital now a realistic proposition with the availability workplace adoption, has enabled communica- of affordable, high-quality video conferencing tion from VoIP to messaging to video conferenc- endpoints, such as Logitech’s new MeetUp Coning. More recently, a major factor in accelerating ferenceCam, ensuring price is not the barrier change has been the advent of cloud-based to the adoption of collaborative technologies. n UC and collaboration platforms, which are more affordable and flexible than the fixed F OR F UR T HE R INF OR M AT ION : systems that came before. www.logitech.com/meetup
Demographics and cloud applications are transforming the workplace. IT leaders must embrace the physical, cultural and technological change, writes Anne Marie Ginn, Senior Category Manager at Logitech Video Collaboration, Logitech EMEA The digital workplace as a concept has been on the radar for a couple of years, but advances in technology, as well as workplace demographic trends, mean digital transformation has gone mainstream. Many companies are now embracing collaboration on a global scale. The advent of cloud-based technologies means there’s an app for practically everything in the workplace. Meanwhile, IT leaders have the tricky task of managing the proliferation of technology – some IT-defined standards, some based on employee preference – while securing and protecting company data.
Harbingers of change Changes in workplace demographics have also heavily influenced the rise of the digital workplace. Millennials make up a sizeable portion of the workforce, and they come to work expecting a technological ecosystem similar to what they use outside the office: social media, familiar apps, and video on demand. As a result, the definition of the workplace is becoming increasingly fluid. Work is no longer a place we go to, but something we do, regardless of location. The way we organise our physical workplaces is also changing; office walls are being torn down 32 | EUROPEANCEO
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CREATING AND INSPIRING EXCITING CAREERS THAT SHAPE OUR DIGITAL FUTURE FDM Consultants are driving innovation and supporting the tech industry across the globe. Find out how we can help your business today. fdmgroup.com
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C17AS_034_B01_56401.pdf
BUSINESS & MANAGEMENT
Technology
Break it down
Ship recycling has for many years been the preserve of shipbreaking yards with poor safety records and little regard for the environment. Now, however, new regulations are encouraging green practices, writes Henning Gramann, CEO of GSR Services Since the dawn of the first industrial revolution, humans have plundered the planet at an increasing rate. Decades of excessive consumption have created an enormous quantity of global waste, and we are rapidly running out of room in which to store it. Landfills across the globe are fast reaching capacity, while the sea is flooded with one refuse truck of plastic every minute. With the global population rapidly rising, waste generation is also on the increase, and is expected to more than triple over the next century. According to the World Bank, we will be creating an incredible 11 million tonnes of rubbish per day by 2100. In order to tackle this growing problem, nations around the world are pursuing ambi34 | EUROPEANCEO
tious refuse reduction efforts, and increasingly putting recycling at the top of their climate change agenda. In many developed countries, recycling has become commonplace in the home and at work, with environmentally conscious individuals stepping up to reduce their personal waste. While these efforts should be applauded, the problem of excessive waste cannot be solved through household recycling alone. Heavy industries such as car making, shipbuilding and chemical production are among the world’s worst offenders for waste creation, and must urgently address their waste management policies. Leading the way among these heavy industries is the ship recycling business, which seeks to safely dismantle end-of-life
ships and salvage their reusable materials. As governments around the world call for greener alternatives to traditional shipbreaking practices, the ship recycling industry is set to boom.
Vessel value Today, most modern ships have a lifespan of 25 to 30 years. Rust, corrosion and metal fatigue all take a toll on these vessels, rendering them uneconomical after around a quarter-decade of service. However, merely abandoning these ships to decay at the end of their life would be unwise, as they contain vast quantities of valuable materials, including steel, non-ferrous materials, wood, machinery, spares and other parts. Indeed, merchant vessels contain nearly
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BUSINESS & MANAGEMENT
Technology
End-of-life ships contain a host of hazardous materials, ranging from asbestos to toxic paints
every form of metal currently traded in global markets. Incredibly, up to 90 percent of an old ship can either be reused or recycled, with many metals sold to be melted and formed into other valuable products. Steel, for example, is recovered in large quantities from retired vessels, and can then be recycled. The steel recycling process consumes far less energy than its production from iron ore, and is also a much cheaper way to manufacture the metal. As such, metal recycling is both energy efficient and economically advantageous. In addition to saving precious natural resources and landfill space, the ship recycling industry also plays an important role in generating jobs and income in many developing coun-
tries. South Asia is home to the world’s largest concentration of ship recycling yards, and the industry has become vital to the economies of Pakistan, Bangladesh and India. At present, the industry employs more than 130,000 workers in the region, with many more involved in associated industries. In areas where poverty and joblessness are rife, ship recycling provides opportunities for workers who might otherwise face unemployment. The industry also supplies south Asia with a valuable source of steel. Bangladesh, for example, has no iron ore sources or mines, and thus relies heavily on recycled steel from the ship recycling process. Indeed, 60 percent of the nation’s steel comes from ship recycling, while recycled steel also accounts for 10 percent of neighbouring India’s needs.
Risky business While there are advantages to ship recycling, the industry is also the subject of some criticism. With a reputation for being one of the world’s most dangerous jobs, there is a worrying lack of regard for worker health and safety in many of south Asia’s numerous ship recycling yards. Wages are low, and employees have no entitlement to overtime, sick pay or annual leave. With inadequate or absent protective equipment, workplace accidents are commonplace, often resulting in serious injury or death. Dangerous fumes and vapours envelop many recycling yards, causing workers to fall ill from inhaled toxins. What’s more, in Bangladesh child labour accounts for more than 20 percent of the total workforce. Ship recycling also poses a significant environmental threat. End-of-life ships often contain a host of hazardous materials, ranging from asbestos to toxic paints, all of which can contaminate the local environment once they arrive at a recycling yard. Adding to the problem, many ship owners sell their ships at high prices to substandard recyclers, without providing an inventory of hazardous materials. This inventory is key to ensuring safe ship recycling, but only a few ship owners currently act properly. Without a reliable list of a ship’s contents, yard workers are unable to identify and effectively deal with a retired ship’s hazardous materials, meaning these harmful toxins are released into the atmosphere, soil and seawater. As such, heavy metal pollution has had a severe impact on south Asia’s biodiversity and marine life, with 21 fish and crustacean species disappearing from Bangladesh as a result of the ship recycling industry. Mercury levels in the seawater and sediment at Alang, India’s
biggest ship recycling yard, are reported to be a phenomenal 15,500 percent higher than normal. To make matters worse, many of the region’s ecologically important mangrove forests have been cut down in order to make room for recycling yards, leaving coastal areas at risk from rising sea levels. Given these significant environmental and ethical concerns, it is clear the ship recycling industry needs to urgently overhaul its operations in order to become sustainable. This is where GSR Services comes in. Focused on changing the industry for the better, we advise ship owners, manufacturers and shipyard managers on how to improve their recycling practises. Effectively, we act as consultants and service providers to ship recyclers and ship owners, guiding both to be compliant with regulations and standards in the most effective way.
Tidal shift As the costs of irresponsible ship recycling become too great to ignore, the industry is now moving towards a more sustainable future. Ever since the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships first came into effect in May 2009, there has been a tightening of international laws and regulations. This year is a landmark one for the green ship recycling movement, as all EU-flagged ships will soon be legally required to possess an inventory of hazardous materials. This year, the European Commission will also announce whether it will continue to allow EU-flagged ships to be recycled on south Asia’s beaches. If the European Commission decides standards aren’t adequate in the region’s recycling yards, then it will order EU-flagged ships to be dismantled elsewhere. This marks a pivotal decision for the industry, which could see the sector shift away from its current south Asian centre. Unsurprisingly, many of the region’s shipyards have now begun to prioritise worker safety and environmental protections in the lead up to the assessment. What’s more, in a further effort to improve worker health and safety, the Indian Government is soon set to deliver a $4.4m grant to the nation’s ship recycling yards, as part of its ambitious Sagarmala maritime investment project. With this fresh injection of capital, the region’s recycling yards may well succeed in improving their practices in line with EU standards. Slowly but surely, ship recycling is shedding its old-fashioned image and becoming a truly green industry. Improved ship recycling practices must now become the norm, not the exception. n EUROPEANCEO
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BUSINESS & MANAGEMENT
Technology
Ikuo Nakagawa President, Konica Minolta Business Solutions Europe
Piecing together the future
The workplace of tomorrow will not be determined by a specific look, but rather by its capabilities. Harnessing data and incorporating interconnected tech will be the key challenges The modern office boasts its fair share of advanced technology, but – on a fundamental level – things have remained broadly unchanged since internet access became commonplace. Now, with the onset of advanced data capabilities, functional artificial intelligence (AI), and Internet of Things (IoT) connectivity, we’re set for a period of rapid change. Service providers capable of harnessing all these elements and bringing them together for the benefit and unobtrusive adoption of businesses large and small will be key to this transitional period. In light of this, European CEO spoke to Ikuo Nakagawa, President of Konica Minolta Business Solutions Europe, one such provider shaping the workplace of the future.
How is the Internet of Things changing the modern workplace? As the modern working environment rapidly changes, so supporting technologies need to develop to keep pace. Konica Minolta is putting a lot of effort and resources into the creation and provision of the workplace of the future, so that people are able to do their best work, with technology serving their needs. Our IoT strategy aims at building a superior ‘cyber-physical’ system to ensure accurate data collection, using a unique mix of cloud and IoT technologies to support cost-effective decision making. This system turns information from the real world into meaningful cyber analysis and solutions, via superior input devices.
How do you envisage the workplace of the future? Work is set to become less about where you go and more about what you get done. Therefore, when formulating the workplace of the future, we need to think less about how it looks and more about what it can actually do for us in terms of productivity, creativity and overall satisfaction. It’s about bringing excitement to business, promoting greater collaboration and productivity, and offering improved efficiency and heightened security. One of Konica Minolta’s solutions to this challenge is the Workplace Hub – a cutting-edge IoT platform that will not only revolutionise the manufacturing industry by collecting, analysing and sharing data throughout the whole production workflow, but will first and foremost revolutionise the IT environment for SMEs. The Workplace Hub is centred on the office. It unifies all of an organisation’s technology via a single centralised platform, as well as driving efficiencies by reducing the overall costs of IT management and service provision. It provides real-time, data-driven insights that will help to improve business processes. What role does artificial intelligence play in Konica Minolta’s plans? Konica Minolta is already planning the next stage of transformation for the workplace of the future. By integrating AI and IoT systems, the Workplace Hub will evolve within
the next five years or so to become the Cognitive Hub. This new platform will apply intelligent computing to AI and augmented human intelligence to extend the network of human interfaces, and enhance collaboration between individuals and teams. The Cognitive Hub will become a nexus for a company’s information flows within the digital workplace, and will provide augmented intelligence-based services that anyone can use easily. It will also be able to connect with the devices of the future, including augmented reality glasses such as our own Wearable Communicator, smart walls, and flexible screens. The Cognitive Hub blends collective company wisdom with AI to gather and process data in a way that makes life easier for individuals, teams and companies, both large and small, helping them to work more efficiently.
What goals do you have for the future? Our vision is to evolve into a digital company that provides new value to businesses and societies. Deriving from our core businesses of business technologies, performance materials, healthcare and optical systems for industrial use, we aim to predict potential challenges for our customers and create solutions together. Konica Minolta understands itself as a true B2B2P company, and the solutions we create contribute to the benefit of our two million customer base and of society overall. ■
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C17AS_001_001_51903.pdf
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C17AS_038_D02_76146.pdf
BUSINESS & MANAGEMENT
Technology
Uroš Rosa CEO, Akrapovic
Perfect sound
Responding to consumer demand for a sporty roar within regulatory guidelines has led to a new period of innovation in the field of vehicle exhaust systems Car designs have changed dramatically over the past few decades. From the boxy cars of the 80s to the sleek, lightweight vehicles of today, car owners continue to take pride in the appearance and performance of their cars, often customising vehicles to suit their personal tastes. And, as tastes have changed and technology has advanced, the automotive aftermarket industry has been boomed. While in the past, drivers sought to enhance their vehicles by upgrading the wheels or in-car entertainment system, now they are beginning to prioritise exhaust systems in their customisation demands. For drivers looking to combine enhanced performance with a quality, sporty sound, there is only one place to turn. Founded in 1991 by former motorcycle racer Igor Akrapovič, Slovenia’s Akrapovič has grown steadily from its humble beginnings, becoming one of the most trusted and well-loved brands in the competitive exhaust industry. Now employing more than 1,000 highly skilled employees, Akrapovič manufactures some of the most technically advanced exhaust systems in the world, uniting performance enhancement with sleek design and an iconic, deeply resonant sound. “Our products are, above all, high performance”, said Akrapovič CEO Uroš 38 | EUROPEANCEO
Rosa. “They are always designed with the top priorities of enhancing performance, producing better sound, reducing weight and giving the driver and rider an overall better experience.” As customer tastes continue to evolve, Akrapovič’s uniquely innovative vision has allowed the company to adapt accordingly, employing cutting-edge technology and quality materials to produce premium exhaust systems. With interest in enhanced exhaust systems now on the rise, Akrapovič is racing ahead of the competition.
Hi-tech solutions At the very heart of Akrapovič’s mission lies a passion for cutting-edge materials and techniques. Since the earliest days of the company, innovation has been the key to the company’s success, with a dedicated team of engine enthusiasts constantly working on the next breakthrough in exhaust design. In order to ensure the highest quality of products and materials, over 95 percent of Akrapovič products are manufactured in-house by a passionate and talented workforce. In 2009, Akrapovič took its commitment to innovation one step further, successfully opening its own
in-house titanium foundry. The company uses titanium as the basic raw material for most of its motorcycle and automobile products, due to its lightness, strength and durability. Indeed, Akrapovič’s titanium alloys are three times stronger than other commercial alloys available on the market, and also have significantly more heat resistance than their alternatives. What’s more, titanium is 40 percent lighter than stainless steel, which helps to improve vehicle performance and handling, through lowering the weight and changing the powerto-weight ratio. As of today, Akrapovič remains the world’s only exhaust system manufacturer with its own in-house titanium foundry, putting the company one step ahead of its competitors. In addition to this on-site foundry, Akrapovič also boasts a fully equipped metallurgical laboratory, where workers are able to test the material properties and quality of products. This on-site testing allows the Akrapovič team to discover better materials, which can then be directly put to use in new products. With over 25 years of experience in testing materials and tweaking designs for optimum power and performance, innovation is truly at the forefront of Akrapovič’s operations.
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BUSINESS & MANAGEMENT
Technology
We have been focusing on the ultra-light design of components, cast components, and the light design of the exhaust itself “In the past four years, we have implemented some innovative products”, said Rosa. “We have been focusing on the ultra-light design of components, cast components, and the light design of the exhaust itself. In the end, our milestone projects have served as a statement of what we are capable of, and proof of how the organisation has evolved over the years.” One of Akrapovič’s standout products of recent years has been its phenomenally successful system with an ‘X-connection’ component. Manufactured using titanium from Akrapovič’s in-house foundry, the X-connection component is designed to ensure optimal sound and performance. The system’s valve flap offers three different sound settings, allowing drivers to customise their vehicle’s sound to suit each drive.
Sounding out For auto aficionados, the powerful sound of a well-designed, high-performance engine is one of life’s greatest pleasures. Over the years, exhaust system manufacturers have developed their own unique sounds, tweaking noise, vibration and harshness in order to achieve the perfect pitch. These varied engine sounds can profoundly influence a customer’s decision when choosing a new sports car or motorcycle.
With customers chasing this ear-catching rumble, exhaust system manufacturers are beginning to prioritise sound engineering in their development process. At Akrapovič, curating the perfect sound is a complex process, involving a number of hi-tech measurement techniques. Sound engineers carry out multiple spectral analyses, determining how the car’s acoustics might be tweaked or improved. However, while Akrapovič engineers have succeeded in carefully crafting an unmistakable sound for the brand, the team is now facing a fresh set of challenges. In recent years, the EU has begun to adjust homologation standards on its roads. “We now have the challenge of delivering a proper sporty sound within the limits of these new, stricter regulations”, said Rosa. “People still want to drive with that sporty feeling and that sporty sound, so sound regulations have become a big challenge for us.” In order to meet these demands, Akrapovič has developed exhaust systems that comply with noise regulations while still delivering the growling, impressive sound that customers have grown to expect from their products. The demand for these regulation-compliant exhausts has proved particularly strong in
Europe, but Akrapovič expects to see interest pick up in the wider world as similar noiserelated laws are introduced.
Racing pedigree Far outpacing its competitors in the industry, Akrapovič has earned its reputation as a highly trusted, premium brand, showing an unwavering commitment to quality over the course of its 26-year history. Starting life as the brainchild of a motorcycle racer, the company has been driven by a passion for performance since its inception. In its early days, Akrapovič’s technically advanced exhaust systems won the brand many loyal supporters in the racing business, enabling the company to grow into the industry titan it is today. “Even if we look back to just four years ago, we can see that many things have changed at Akrapovič”, said Rosa. “We have grown in terms of revenue, profitability and employees. When you have 1,000 employees, you simply cannot operate in the same manner as with two or three hundred people, and our organisational structure has changed to reflect this.” As these organisational shifts continue, 2017 is shaping up to be an exciting year for the brand. Looking forward, Akrapovič is focused on implementing new technologies and exploring new directions, in the hope of further enhancing its premium products. And yet, while innovation takes centre stage at Akrapovič, the brand still remains committed to its founder’s core values. “Hard work, honesty and respect for others – these are the true values of the company”, said Rosa. “At Akrapovič, we live these values each and every day.” n EUROPEANCEO
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BUSINESS & MANAGEMENT
Healthcare
Lonely at the top
For the rich and powerful, life can be as hard as it is comfortable. When addiction strikes, status is no comfort, and can make standard treatment options ineffective, writes Jan Gerber, Managing Director of Paracelsus Recovery Addiction is an equal-opportunity disease that can strike anyone, without regard for wealth or social standing. Nobody is immune. However, percentage-wise, addiction affects people at the lowest and highest ends of the socioeconomic spectrum in significantly greater proportions than those in the middle-income bracket. At its core, addiction is nearly always about self-medicating physical or emotional pain, pressure or stress. While the pain-points for wealthy individuals, senior executives and celebrities are different to those experienced by people without great stores of money, their suffering is real and just as debilitating. Life isn’t easy for those in positions of power and authority, who are by nature exposed to tremendous pressure to succeed. Stress is high, and time for life’s simple pleasures is in short supply: celebrities, constantly in the critical public eye, are reduced to object status; high-level executives take the blame when businesses don’t perform. Such a pressure-cooker existence prompts many to self-medicate with alcohol or prescription drugs, while others resort to stimulants to maintain a high level of energy in an atmosphere of extreme competition. While the lives of ultra high-net-worth (UHNW) individuals, celebrities and top-level executives
are different in many ways, they share common To expect such people to enter highly factors, all central to their very identity and restrictive, abstinence-based, socioeconomiwhich are important to consider when such cally diverse programmes is unreasonable individuals seek treatment. and can even be dangerous, ultimately driving affluent individuals further into the depths of isolation and destruction caused by their Ultra isolation Extreme wealth and power provides a buffer addiction problems. from many of life’s difficulties, but it also creates an impenetrable wall that keeps people Creeping suspicion disengaged and isolated. Life is different for Like any other minority group, the extremely people who travel in private jets and escape wealthy and powerful tend to be highly susto luxury yachts, or who travel first-class picious of those outside their group, which from boardroom to boardroom. Living envi- serves as a protective measure against potential ronments, by necessity, are closely guarded threats. To make matters worse, today’s global and maintain a high level of security. Con- populist movement has created an atmosphere cierge doctors and personal bankers make in which the affluent and those in power are house calls. Life within this rarefied atmos- treated with disdain, perceived as insensitive, phere is comfortable, but can also often self-absorbed people who spend their days doing be painfully lonely. nothing but basking in wealth and influence. Typical rehab centres, even so-called ‘luxIt’s no surprise then that well-to-do peoury’ rehab environments, seem modest and ple are often suspicious and mistrustful of uncomfortable in comparison to opulent living people outside their immediate realm. This environments of these individuals. Most rehab includes clinicians and other treatment procentres around the world have little under- fessionals, making recovery from addiction standing and empathy for the backgrounds of problematic to say the least. UHNW individuals, who tend to be ill at ease Standard rehab centres typically lack in group therapy and other group sessions. the specialised level of empathy required for There is normally little time for one-on-one UHNW individuals, and therapists don’t give treatment in such institutions. credence to the particular challenges facing
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BUSINESS & MANAGEMENT
Healthcare
An effective, well-grounded therapist understands the particular struggles endemic to people of extreme wealth and power
Children of high-level executives or successful business owners are frequently expected to join the family business, and they often have little say about where they go to school, what they study, or even who they marry. Kids who have been shielded from life’s difficulties may not be as resilient as their lower-income counterparts, and they may face a bumpy road, turning to drugs, alcohol or destructive behaviours Abundant wealth ‘Affluenza’ is a term use to describe children or when things get tough. teens who grow up in a culture of great wealth and privilege. There is no official diagnosis Specialist treatment and the term is frequently bandied about by By its very nature, addiction treatment should the press, especially when it is used to excuse be challenging and uncomfortable, but must antisocial or criminal behaviour. first diminish the physical discomfort expeIt’s easy to blame this phenomenon on rienced by those who have made the difficult simple over-indulgence on the part of well- decision to address an addiction. Treatment to-do parents, but research in recent years must meet people where they are instead of suggests a unique set of circumstances can attempting to press them into a one-size-fitscontribute to the dysfunctional behaviour all approach that fails to reflect the reality of of some children who grow up in extreme their very existence. wealth. Children of prosperous parents An effective treatment environment is egooften grow up in painful isolation, but, at the syntonic, or in tune with each person’s identity. same time, the expectations put on privi- Only then is the time right for the clinician to leged kids can be tremendous. Academic present appropriate challenges that move the and social success is of primary importance person to a point where recovery can begin. and, as they grow up, wealthy kids may be Directing the person to an emotionally restricted by family expectations surrounding reparative experience is an art that requires the nearly every aspect of life. therapist to understand when to push and when the wealthy. Nobody enjoys discomfort, but, unlike most people, a moneyed person can call up a private jet and make a speedy exit if treatment becomes too uncomfortable. Sadly, an opportunity for healing is lost when the person flies away. What’s more, sometimes there is no second chance.
to step back. Sadly, such intuition is rare and many clinicians simply demand participation in 12-step meetings and other stereotypical interventions that prove mostly ineffective with this unique segment. An effective, well-grounded therapist understands the particular struggles endemic to people of extreme wealth and power. To be truly effective, clinicians must adopt a postmodern, feminist psychotherapeutic stance that fosters an authentic connection with each patient, creating an atmosphere of collaboration in which personal power and identity is recognised and appreciated.
Confidentiality first Absolute and total confidentiality is a requirement for high-profile celebrities, upper-level executives, and UHNW individuals who are fearful their private lives may be the highlight of the evening news. For this population, exposure creates immeasurable costs and, sometimes, irreparable damage. Most rehab centres, even luxury ones, have published addresses, numerous beds, and treatment modalities in which patients see one another every day. In such an environment, there is nothing to stop eager paparazzi and other gossipmongers. Many wealthy people are justifiably suspicious and fearful of extortion or blackmail if news of a family member’s addiction becomes public knowledge. This means many end up unwilling to enter treatment without an absolute assurance of 100 percent anonymity. Simple solution At Paracelsus Recovery, absolute confidentiality is of utmost importance. Group settings are avoided altogether by treating one patient at a time in a luxurious private residence. Addresses of clinical residences are never published. Instead, a dedicated team of empathetic professionals with particular experience working with this clientele will work one-on-one with each patient. Each residence surpasses the finest fivestar hotel. A butler, chef and housekeeper ensure the comfort of each patient throughout their stay. Unlike typical programmes that are tightly structured and inflexible, treatment is tailored to each client’s needs and responsibilities, allowing for career demands, work, or public appearances. This gives each client the shot at recovery they deserve, in an environment that suits their unique situation and needs. n F OR F UR T HE R INF OR M AT ION
www.paracelsus-recovery.com EUROPEANCEO
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C17AS_001_A03_69992.pdf
BUSINESS & MANAGEMENT
Healthcare
Surgery is not an exact science. Results are influenced by the problems of wound healing and the limitations of genetics
The changing face of cosmetic surgery
Medical treatment is being drowned in a flood of litigation. If surgeons are presumed guilty until proven innocent, the next generation of clinicians will be unable to train, writes cosmetic surgeon Douglas McGeorge Plastic surgery has come a long way during my career. Understanding of anatomy and the blood supply of tissues has allowed us to revolutionise reconstruction following trauma and disease. That same knowledge has also enhanced aesthetic techniques, producing results that are more natural and longer lasting. Science has been introduced to allow better understanding of the healing process, of how tissues behave and age, and has allowed the creation of safe implantable materials to enhance results. This knowledge base continues to grow but, today, we can achieve outcomes that our forefathers could only dream of. At the same time, how medical care is delivered is also changing. We now live in a litigious society, where blame has to be apportioned to someone; ‘bad luck’ is no longer recognised as an explanation. As a result, clinicians are becoming more cautious, no longer trying to push the boundaries, instead finding themselves forced into safe middle ground and mediocrity. 42 | EUROPEANCEO
informed decisions. The paperwork can now take longer than the procedure, so that every detail of care can be justified.
False economy The internet and media have increased patient expectations. Information is shared instantly, but proficiency has to be established. The limitations and complications of treatments are highlighted as errors. Lawyers advertise on TV screens in hospitals, and patients are encouraged to complain. As a result, delivery of medical care is being pushed towards protecting the system rather than benefitting the patient. More and more it is consultant-performed, rather than consultant-led. This may seem good, but it has implications for the future. Surgical throughput is being reduced and costs are going up. New layers of managerial staff are required to cope with the burden of increasing regulation. The emphasis is on defensive medicine, where clinicians are discouraged from thinking outside the box. Consultants are becoming blue collar workers, working within set rules even though nature has none. More worryingly, if all surgery is carried out by senior people, how is the next generation trained? We all have to do our 10,000 hours to become proficient, and this comes from learning and adapting techniques to suit us. Somewhere, the system has to accept that all doctors endeavour to do their very best for patients and that all procedures have limitations. Perfection has to be tempered with realism if we are to continue advancing medicine into the future. n
Naturally imperfect Surgery is not an exact science. Results are influenced by the problems of wound healing and the limitations of genetics. Complications do occur, no matter how good the surgeon and how well the procedure is executed. Anatomy is variable and that variability usually only presents itself at the time of surgery. Everyone runs the risk of infection, which is rarely down to poor technique. Haematomas (collections of blood) do occur, and the quality of scarring is unpredictable. Nature provides a dynamic palette, which we endeavour to harness. The legal system and the regulation of medicine, however, are increasingly slanted towards the patient in the role of victim. It now costs nothing to sue a doctor, while the latter’s costs in successfully defending themselves are no longer recoverable. Clinicians are guilty and have to prove their innocence. We are expected to educate patients into understanding all the options available and not just the best one for F OR F UR T HE R INF OR M AT ION them. We have to show that they have made www.douglasmcgeorge.com
CEO_B_001_O_L_81052.pdf
C17AS_044_F02_54762.pdf
BUSINESS & MANAGEMENT
Healthcare
Gianclaudio Broggi CEO, Mega Pharma
Opportunity knocks
As the Latin American market has slowed, pharmaceutical companies have faced numerous challenges. According to Mega Pharma, however, there are growth opportunities for those with a positive vision Since the results of the Human Genome Project were first published in 2001, the pharmaceutical industry has undergone a rapid transformation in terms of both synthetic and biological drugs. Today, biological and biotechnological products provide treatment for some of the most lifethreatening diseases that afflict us, from cancer to multiple sclerosis and rheumatoid arthritis. This trend is expected to continue well into the future, and can explain why over 50 percent of the industry’s global market growth at present is focused on four therapeutic areas: diabetes, hepatitis, oncology, and autoimmune diseases. What’s more, as well as the drastic changes taking place within the industry, there are many taking place outside it. With the global economy undergoing a transition of sorts, phenomena such as population ageing are now shaping the solutions the pharmaceutical industry must provide. Consequently, the industry is migrating away from the treatment of acute disease to a focus on chronic disease, and is investing increasingly in new therapies that can cope with future healthcare challenges.
Navigating obstacles Drug development times and costs remain principal challenges in the market, and are pushing the pharmaceutical industry to consolidate, mainly through acquisitions. Accordingly, multinationals are now investing in therapies that have already been developed or are in their final stages, as opposed to 44 | EUROPEANCEO
investing in companies that offer just a few untested innovations. Moreover, these new therapies have generated significant changes within the regulatory framework, which has further increased the challenge facing companies that are focused on offering quality affordable therapeutic solutions. We at Mega Pharma are an example in this respect. In light of increasingly tough regulatory demands that have been prompted by the innovation race, we have invested heavily in a state-of-the-art R&D centre and a brand new manufacturing plant in order to ensure we continue producing robust, market-leading products and pharmaceutical technologies for the foreseeable future. Similarly, we have incorporated our region’s best bio-similar platform, which is based in Argentina, and have bet strongly on the development of quality and affordable synthetic oncological drugs. Another arm of this strategy is Mega Pharma’s new plant at the Parque de las Ciencias business and technology park in Uruguay – an investment worth over $100m. It includes a cutting-edge global pharmaceutical plant, as well as hi-tech research facilities. Our R&D centre leads, manages and develops between 15 and 25 projects a year, and has an exceptionally high success rate. In fact, the plant has incorporated the very latest pharmaceutical technology available worldwide, while we are also investing heavily
in process documentation and validation. This will allow us to export not only to Latin American markets, but also to the US and Europe. The new plant is excellently positioned to operate in a rapidly changing regulatory environment, and it also provides an extremely flexible model that can respond quickly to market and consumption changes. All the products developed in our plant are bioequivalent, while all our BE trials are conducted by FDA/EMA approved contract research organisations and comply with international standards. Our plant also complies with Quality by Design standards and procedures throughout all product development. What’s more, it was designed with the future in mind, and can meet Mega Pharma’s expected growth for the next 10 to 15 years.
Regional expansion This was an important move, as Latin America’s overall market has recently slowed, mainly due to lower commodity prices and a more competitive and regulated legal framework. For this reason, clearly defining company goals and aligning resources is key in today’s growth strategy. That is also why, in 2015, we devised a very aggressive 2020 plan aimed at doubling our turnover and capturing greater market share in a time when other companies are reducing their expansion plans. Our 2020 plan can be broken down into three main pillars. First, it involves achieving double-digit growth in USD, which can be
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BUSINESS & MANAGEMENT
Healthcare
used as resources for all of our brands. Second, it focuses on accelerating the launch of new products that emerge from our cutting-edge R&D Centre in Uruguay. Finally, it includes an aim to continue seeking new opportunities for products and company acquisitions in strategic markets and sectors where we still hold limited presence. For this purpose, we recently acquired the oldest pharmaceutical company in Brazil, which provides a growth springboard into that market.
Core values Very few branded generic companies have regional presence in Latin America, and this remains our main competitive advantage. We target a market comprising 600 million people, which facilitates significant economies of scale and promotes investment in new technology and processes. Our success is built on the knowledge we have gained from the medical experts and physicians with whom we work closely. In turn, they trust us, as do their patients who have learnt to rely on the quality of our products, which are both affordable and effective. Mega Pharma ensures customers have the best experience possible by investing in our processes, infrastructure and people. Companies are not only products plus infrastructure; we believe values and culture are an organisation’s principal assets. Within Mega Pharma are people who work with passion and take pride
in their work – they shape our organisational culture. Investing in our people guarantees our clients’ needs are fully met. In order to ensure workforce diversity, we have clearly defined our company’s code of ethics, which bans all discriminatory practices and any form of harassment based on nationality, race, belief, gender, age, disability, or any other factor. Similarly, our recruitment and development processes meet these standards, and promote a healthy and integrated workplace. This culture extends to our team’s expertise as well, as our R&D, marketing and IT departments are multidisciplinary teams that share different projects in different markets. We also promote interchange across different departments and countries, which involves training for our subsidiaries and local benchmarking to ensure best practices are fluently communicated throughout all aspects of the organisation.
Communication is key Our multichannel communication strategy has resulted in a significantly improved experience for all our physicians, clients and patients. Today, we have a significant presence in digital media, which includes sophisticated websites, Facebook pages and a YouTube presence. We also remain present in person, through visits to physicians, the delivery of medical samples, permanent training, medical conferences and other events.
Companies are not only products plus infrastructure; we believe values and culture are an organisation’s principal assets
We believe we must be available to our clients at all times, since nowadays patients and professional associations have a growing impact on social media and can affect prescriptive trends. That said, our digital presence is limited to those brands where digital promotion has been authorised by regulatory frameworks. Patient communities have evolved and have developed a much greater understanding of the clinical experiences of others. In fact, patients also now have access to technical data that has not always been issued by authorised clinical systems. This raises the importance of the therapeutic solutions we offer, which are appropriately designed for the final user’s understanding and assessment. Through constant research and innovation, while also acting under ethical and accountable standards, we aim to strengthen our market-leading products in Latin America, expanding our presence into new markets. In so doing, we hope to help every single patient and physician with whom we interact. n EUROPEANCEO
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C17AS_046_G05_13782.pdf
CEOPROFILE Bjørn Kjos C E O | N OR W E G I A N A IR S H U T T L E
Low-frill skills
As CEO of the first company to make a real success of budget long-haul flights, Bjørn Kjos has set the bar high. As competition inevitably intensifies, his business acumen will be tested to the limit Bjørn Kjos, known for his colourful personality and enthusiastic entrepreneurial spirit, is often described as Norway’s answer to Richard Branson. He has recently made waves for pioneering a business model that successfully operates long-haul flights across the Atlantic at rock-bottom prices. While Kjos’ entry into the low-cost, longhaul market has attracted a great deal of attention over the past few years, the scale of this ambition it is nothing new for Kjos, who has led Norwegian Air Shuttle through rapid expansion right from the start of his tenure. He has held the role of CEO for 15 years, during which time he has transformed the airline from a small-scale domestic carrier to the international player that it is today. Going back to Norwegian’s modest beginnings, Kjos has always fully embraced the lowfrill, low-cost market. Talking to European CEO, he said the company vision is to create “affordable fares for all”. Indeed, he has already made
substantial headway towards this goal, having expanded the company’s reach first into Scandinavia, then into Europe, and now towards the US, Asia and Latin America. When he took on the role of CEO in 2002, passenger numbers per month were well below 100,000; the airline now carries almost three million passengers over the course of an ordinary month.
Accidental CEO While aviation has held a lifelong fascination for Kjos, his career trajectory has taken a roundabout route to bring him to the commercial airline industry. “Aviation has always played a central part of my life; flying has been a great interest of mine since I was a child because my father owned a small aeroplane”, Kjos said. “I trained to become a fighter pilot and worked in the Norwegian Royal Air Force from 1969 to 1975; this experience has no doubt been valuable for me as CEO of Norwegian.” During his time with the Air Force,
CV BORN: 1946, NORWAY
he piloted the famously dangerous Lockheed F-104 Starfighter, patrolling Norway’s airspace and intercepting Russian jets at the height of the Cold War. After serving as a fighter pilot, however, Kjos found himself unable to secure a job with Scandinavian Airlines, which at the time was not recruiting new pilots. Instead, he turned his efforts to law, choosing to retrain at the University of Oslo. He then spent a two-decade stint as a lawyer, during which time he served as a judge in Moss District Court and took on Supreme Court cases. According to Kjos, this experience in the field of law is something he continues to draw upon in his role as CEO at Norwegian. On top of his experience as a fighter pilot and lawyer, Kjos has tried his hand at writing. During his spare time, he wrote Cold War crime thriller The Murmansk Affair, which was published in 2006. More recently, he penned a nonfiction book that he described as “the story »
NORWEGIAN AIR SHUTTLE |
EDUCATION: LAW, UNIVERSITY OF OSLO
IN NUMBERS
1969
1975
2002
2014
Having always been fascinated by aircraft, Bjørn Kjos joined the Norwegian Royal Air Force as a fighter pilot at the height of the Cold War
Following his military stint, Kjos applied to work for Scandinavian Airlines as a pilot, but was turned down. Instead, he went to study law
Having bought a majority share in the failing Norwegian Air Shuttle, Kjos became CEO and set about turning it into a budget provider
With the short-haul market cornered, Kjos ambitiously turned Norwegian’s focus to budget transatlantic flights, pioneering this market
1993
130
¤2.7BN
¤189.6M
FOUNDED
REVENUE 2016
46 | EUROPEANCEO
FLEET SIZE
PROFIT 2016
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CEOPROFILE
In the Air Force, Kjos piloted the Lockheed F-104 Starfighter, intercepting Russian jets at the height of the Cold War
of Norwegian”, in which he documented the battles he fought when growing the company in its early years. By his own account, Kjos landed in the role of CEO largely by mistake. Reportedly, his story with Norwegian began when he was asked by some friends to draw up an investment strategy for their failing aviation company, which at the time was just a small domestic airline. When the venture struggled to entice any new investors, Kjos and his brother decided to invest themselves, initially taking on a 55 percent stake in the company. Asked what made him so determined to buy into a struggling firm, Kjos said: “The risk of hundreds of people losing their jobs was probably what triggered my decision to invest the most. At the same time, I was sure that the low-cost model would work, which made me even more determined.” During his early days in leadership, Kjos relaunched the company as a low-cost airline and rapidly expanded into the European market. “Aggressive competitors were doing everything in their power to stop us”, he said. “But we had a business model we believed in and we knew that customers had had enough of overpriced tickets, so the timing was right.” 48 | EUROPEANCEO
Fresh success While the business model for budget airlines has been wildly successful for short-haul flights over the past two decades, it has largely proved unsuccessful when applied to long-haul trips. When Kjos launched Norwegian’s budget Atlantic flights in 2014, the venture was met with cynicism from many in the industry, who questioned whether the concept would prove commercially viable. Fast forward to the present, however, and talk of Kjos’ business model has made its way into White House press briefings, and several aviation giants are gearing up to follow suit. Notably, Kjos was not the first to attempt to offer rock-bottom prices for long-haul flights. Many tried and failed before him, including Ryanair’s Freddie Laker, who attempted to run budget Atlantic flights in the 70s before declaring the venture a failure just five years
later. Other attempts included Canada’s Zoom Airlines and the Hong Kong Express, which similarly ground to a halt after just a few years. At the heart of Norwegian’s success has been the new generation of fuel-efficient aircraft. “New, fuel-efficient aircraft are a winwin for customers, the environment and the company’s costs”, explained Kjos. Indeed, the Boeing Dreamliner 787 – the jet which forms the bulk of Norwegian’s long-haul fleet – can run on around 20 percent less fuel than others in the market, and as such is able to bring down the fuel costs that form a substantial chunk of an airline’s outgoings. A state-of-the-art plane such as the Dreamliner 787, however, comes with a heavy price tag, and is not the only key to Norwegian’s success in the long-haul market. “It is essential to the low-cost model to have a low-cost operation”, said aviation expert John Strickland. “Only a
C17AS_049_G05_64691.pdf
Norwegian’s success in introducing budget longhaul flights has prompted a flurry of imitators across the industry
30%
Norwegian’s predicted 2017 fleet growth few airlines have managed this successfully so far, and Norwegian has had to go further than others. Kjos has had to be more creative and innovative to find other ways to reduce costs.” For example, Kjos has fought many bureaucratic battles in order to establish bases outside Scandinavia, allowing the company to access cheaper international labour.
In for the long haul Now Kjos has proven the no-frill, long-haul concept can work, he is speedily expanding Norwegian’s fleet. The company’s order book for new jets is piling up: as well as the 130 aircraft that currently make up the fleet, it has an additional 250 on order. “We made one of the biggest aircraft orders in European history”, said Kjos. “We boast one of the world’s youngest and greenest fleets, with an average age of just 3.6 years.” Overall, Norwegian’s
capacity is scheduled to grow by 30 percent over the course of this year. Over recent months, Kjos has been busy launching new routes for Norwegian’s fastgrowing long-haul fleet. He is currently in the process of launching new transatlantic routes from Europe, as well as expanding into Asia and Argentina. However, according to Strickland, finding new markets to support such rapid expansion could prove challenging. “The London market to the US is one of the biggest in the world, so you can easily fill a plane on such routes, but other markets will require more work to deliver profitability”, Strickland explained. “The jury is out at the moment over how many markets of this kind Norwegian will be able to find to turn into flourishing, longterm, sustainable, profitable routes.” Further to this, industry experts predict rapid expansion carries the risk of weighing on unit costs as a result of the associated training, recruitment and marketing costs. “Norwegian has technology and experience on its side, but it is a significant step to move into these markets, which are not tried and tested”, Strickland added. “The expansion will certainly test the management’s skill in finding markets for these aircraft, given that they are moving into new areas with different regulatory challenges, operational considerations, and even varying responses from competition.” What’s more, this is by no means the only challenge facing Norwegian in the future. The company’s success in introducing budget longhaul flights has prompted a flurry of imitators across the industry. Close to home, Scandinavian Airlines is looking to follow in Norwegian’s footsteps in acquiring an Irish licence that will enable it to base its crew in the UK and
Spain. Furthermore, competition is beginning to heat up from other big players. “IAG is founding a whole new long-haul, low-cost operating platform in Barcelona to counter the strategic threat from Norwegian growing there, while in London, BA has opened new B777 routes to JFK, Oakland and Fort Lauderdale, flying wingtip-to-wingtip against Norwegian on these routes”, according to an HSBC industry research pubication. In a sense, imitation by others proves many were simply waiting for the floodgates to open. Yet, while this is the case, fresh competition could certainly pose a challenge for Norwegian. Indeed, according to Strickland: “Some airlines are not going to give too much breathing room and opportunity to grow without a bit of a fight. When low-cost airlines came into existence as much as 20 years ago, these traditional airlines were complacent – they didn’t believe this low-cost model was ever going to catch on in Europe. By the time they realised it was going to work, they had left it a bit late. The management of IAG has learnt that lesson, and they are not going to give an airline like Norwegian any breathing room, only to regret it a few years later.” For Kjos, however, competition is no reason to tone down Norwegian’s rate of growth. He argues both expansion and scale are crucial to the company’s sustainability: “Without the expansion, we wouldn’t be able to survive with the fierce competition we’re facing today. Opening new routes all over the world and offering low fares to new customers is important”, he said. Overly ambitious, perhaps, but judged on his past experience, Kjos certainly has a knack for tapping into new markets and judging when the timing is right. n EUROPEANCEO
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C17AS_050_C02_52199.pdf
BUSINESS & MANAGEMENT
Travel
Take wing
Investing in business aircraft provides more than just prestige. The freedom to be present anywhere in the world is priceless, writes Tom Perry, Textron Aviation’s Vice President of Sales for Europe
Cessna Citation Longitude cabin
In business, we all want to find that competitive edge, and that’s what makes business aircraft so valuable. Even in this modern world of extraordinary communication technologies, there is still no substitute for a face-to-face meeting. Whether you’re signing lucrative new deals around the world, or visiting your global offices to launch exciting initiatives, a business aircraft will dramatically improve your impact, productivity and efficiency. As you fly, you’ll literally leave your competitors behind. The benefits of flying in a business aircraft, compared to travelling by commercial airline, are significant. You’ll never need to worry about flight schedules again; you’ll fly exactly when you want to. There’ll be no more long taxi journeys or time-consuming airport transfers because the airline doesn’t actually fly to your final destination; you’ll choose where you take off and you’ll choose where you want to land. While your competitors are sitting, tired and frustrated, in a congested airport lounge waiting for a delayed flight, you’ll already be back in your office. And absolute privacy in a business aircraft means you and your colleagues can hold inflight meetings and discuss confidential matters without any fear of being overheard.
same clear, objective analysis you would apply to any important investment. Think carefully to establish exactly what your company needs. There’s a business aircraft for every requirement. If, for example, you and a small team need to fly from Paris to London every week, a long-range, large-cabin jet would be unnecessarily costly. Instead, you’ll want, for example, a seven-passenger Cessna Citation M2. Alternatively, for longer journeys with larger teams within Europe, a Cessna Citation CJ4 would be perfect. The aircraft can carry 10 passengers and has a longer range (2,165 nautical miles) and higher maximum cruise speed (451 knots true air speed) than the M2. If, on the other hand, you regularly travel with a large team from Europe to the MENA region, you should look at the Cessna Citation Longitude, which offers a maximum cruise speed of 476 knots true air speed. Not only can the aircraft carry up to 12 passengers, the spacious baggage compartment (accessible in flight) will easily hold all those overnight bags. The double-club, flat-floor cabin allows maximum comfort, and is the quietest in its class.
Careful choice The key is making sure the aircraft you buy reflects your requirements. At first glance, many business aircraft might look alike, but seemingly small differences can be economically significant in the long term. Buying a business aircraft needs to be addressed with the
While your competitors are in a congested airport waiting for a delayed flight, you’ll already be back in your office
50 | EUROPEANCEO
At Textron Aviation, the leading general aviation authority and home to the Beechcraft, Cessna and Hawker brands, we have been investing heavily for years in developing our family of business aircraft. The nine-passenger Cessna Citation Latitude entered service in 2015, and has been an instant success, securing more deliveries in 2016 than any comparable mid-size business jet. The first flight of the Cessna Citation Longitude took place in 2016, with certification expected in 2017. This stunning 12-passenger aircraft will offer the longest range (3,500 nautical miles) of any Citation, but not for long; we are working on the Cessna Citation Hemisphere, with a range of 4,500 nautical miles, which will give companies true global reach.
Continuing support To gain the best return on your aircraft investment, you need to maximise the availability of the aircraft. Exceptional after-sales service and maintenance is essential, and there is no substitute for factory-direct support. With company-owned service centres in Doncaster, Düsseldorf, Paris, Prague, Valencia and Zürich, and mobile service unit stations in Nice, Cannes, Geneva, Bremen, Luton, Stuttgart and Frankfurt, Textron Aviation’s ability to provide fast and comprehensive support across Europe is simply unrivalled. The largest network of companyowned service centres supports customers worldwide through the industry’s most capable service network. n
C17AS_001_001_96080.pdf
INVEST IN AVIAPOLIS Future Cities Are Built Close to Busy Airports Airport City Aviapolis is the fastest growing business area in Helsinki metropolitan region, Finland. Surrounding Helsinki Airport, a hub that connects the East and the West, the whole world is just next to us. Prepare yourself for landing!
aviapolis.fi/en
C17AS_052_F01_74128.pdf
BUSINESS & MANAGEMENT
Travel
Gerrit Basson President, Luxaviation Group
Doing it together The value of consolidation goes beyond pooling revenues and staff. Shared intelligence and strategy lead to exponential gains for all parties Industry consolidation is increasingly common across Europe. Whether you are a service provider or user, consolidation can be a powerful business move. Business aviation companies – from operators and brokers, to fixed-base operations (FBOs) – are opting to combine their talents with erstwhile competitors, and this trend towards consolidation is only set to continue. ExecuJet has been a part of the Luxaviation Group since 2015 and, as a result, benefits from economies of scale that offer significant cost savings in areas such as fuel, FBO fees, insurance, and pilot training – some of which can be passed on to the customer. We are also able to offer customers access to a combined fleet of more than 260 business aircraft worldwide, meaning increased aircraft availability and a broader range of models. There is also the opportunity to pool experience with peers who have faced similar challenges, whether in operations, regulatory compliance or marketing. Together, ExecuJet and the Luxaviation Group are setting new standards in business aviation management, customer service and safety. We work towards the most highly recognised industry regulations in order to deliver 52 | EUROPEANCEO
ExecuJet’s FBO lounge in Zurich, Switzerland
excellence at all our FBOs and in every area of our business. In the last few months, ExecuJet has achieved great success under the wing of the Luxaviation Group, pointing to industry consolidation being a truly positive thing.
New bases In June 2016, ExecuJet announced the acquisition of its first FBO in the Caribbean, at Princess Juliana International Airport on the island of St Maarten. Also in June, we celebrated the opening of our first Mexican FBO at Del Norte International Airport in Monterrey, Mexico. In February 2017, we expanded our presence in Sydney, Australia with the acquisition of an FBO to complement our existing maintenance, flight operations and administration facility. The recently renovated FBO is located at Sydney’s Kingsford-Smith Airport, just 12km from the city centre, and consists of a dedicated VIP guest lounge, passenger amenities and private meeting rooms for guests in transit, and customs and immigration processing facilities. Our new Brussels FBO, meanwhile, has gained International Standard for Business Aircraft Handling accreditation, making it the first FBO facility in Belgium to do so. The Brussels FBO, previously managed by Abelag and integrated under management by ExecuJet since December 2016, is based at Brussels International Airport.
management, and crew travel coordination for companies in the group’s network. The department operates out of our Cambridge, UK headquarters, and is an evolution of the former shared services department, which was managed by ExecuJet. The new department provides a consistent level of excellence and also enables us to provide a team of more than 90 staff to manage the group’s fleet. Luxaviation’s group broker desk is our first worldwide sales office, continuing to unite the global charter fleet since its launch in December 2016. The group broker desk provides brokers and clients with access to Luxaviation’s fleet of aircraft – including ExecuJet’s Embraer Lineage 1000, Dassault Falcon 8X, and Bombardier Challenger 5000s – from every entity of the business, offering more solutions and a quicker and easier charter process. We continue to develop relationships with brokers and clients, supported by our colleagues in the group’s global charter offices. We also work closely with our group broker desk satellite offices in Miami, Moscow and Hong Kong, where the teams are building and developing relationships with brokers in their own regions. ExecuJet is a leading global business aviation organisation, offering a range of services, including aircraft management for private and commercial aircraft, charter, maintenance, completions management, and fixed-base operations. ExecuJet operates in six regions: Africa, Asia-Pacific, the Caribbean, Europe, Latin America and the Middle East, with a workforce of more than 1,000 staff. n
Support services We have recently announced the opening of our central operations support service, which essentially oversees all activity related to the F OR F UR T HE R INF OR M AT ION provision of CAMO, dispatch, crew training www.luxaviation.com
C17AS_001_001_75024.pdf
SOMETHING BIG IS HAPPENING Accellerate
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C17AS_054_C09_55353.pdf
BUSINESS & MANAGEMENT
Travel
Up and away Traditionally, airports and cities have been linked, but physically divided. As the world becomes smaller, airport cities are rising. Airport City Aviapolis in Finland is one of the leading examples, writes Arja Lukin, the city’s Project Director While the skies have dominated the way people travel and conduct business for decades, airports are typically some distance from residential and corporate hubs. However, as new centres emerge, a wave of vibrant business and residential destinations is growing up around airports, creating locations where the whole world can be easily reached. One such place is Aviapolis at Helsinki Airport in Finland. The airport was constructed in 1952 for the Olympics, and in the years since it has developed into an attractive business area, due to its rail, road and air connections. The ease of access it provides to Europe, Asia, and the wider world has seen it become a destination of choice for businesses. As Aviapolis is on course to become one of the world’s foremost international business hubs, a master plan for the city is ensuring it follows a template that is smart, connected and green. The aim is to ensure the area provides a bright future for those who live and work there.
Location, location, location The location offers a stable and modern environment for the growing number of businesses deciding to call Aviapolis home. As we evolve into an ecosystem where businesses want to be located close to each other in order to utilise, for example, shared spaces, equipment or energy sources, new kinds of business models will open up. The workplaces of the future will be built in Aviapolis. Over 1,800 enterprises have already moved in, supporting a workforce of 35,000 54 | EUROPEANCEO
Image: Skanska
people. While the majority of businesses directly support the airport, a growing number of service industries have also established a presence. International companies are also signing up, supporting approximately a third of all jobs in the area. As well as transport, Aviapolis offers a wealth of locations suited for a variety of uses with the full support of local government and stakeholders, thanks to the master plan governing the development’s future. One such focus of the plan is making sure Aviapolis’ workforce is fully supported with intelligent urban design. High-quality and appropriately scaled routes to meet walking, cycling and public transport needs will be created. What’s more, smart parking design will also reduce traffic in the area. With this coordinated planning methodology, Aviapolis is transforming into a smart and
clean airport city, avoiding the common issues that surround many other airport developments. Improved communication and networking between an airport and its surrounding region will enable the success of airport cities in the future. This approach has made sure the area only suffers a limited impact from the sounds of the airport, and ensures flight paths are not over populated areas. This is all alongside the development of Helsinki Airport itself, which sees more than 17 million passengers pass through annually. Ongoing development projects at the airport have seen it emerge as a major connection between Asia and Europe.
Work life balance As well as employment, Aviapolis is also becoming a huge residential location. Boasting impressive housing density and a wealth of jobs, the overall master plan will also foster a modern city lifestyle for residents. Furthermore, as the whole region transforms, an international design competition is shaping the future of the area. The Aviapolis Urban Blocks competition received 49 entries offering innovative solutions to designing a 15.6 hectare area. The winner will be announced in autumn 2017. Overall, this complete planning approach will ensure business and residential areas will grow in harmony with one another. Aviapolis is unique among evolving airport areas; it is being built as a vibrant city, where work, living, services and recreation are combined in an urban way. n
C17AS_001_001_98675.pdf
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14.06.17 09:23
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NORDIC CHILL Denmark is home to some of the world’s happiest and most productive workers. Is it a coincidence, asks Emily Cashen, that they also work some of the shortest and most flexible hours in Europe? »
EUROPEANCEO
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W H AT A W AY T O M A K E A L I V I N G
“I think that there is far too much work done in the world, [and] that immense harm is caused by the belief that work is virtuous”, said Bertrand Russell in his celebrated 1935 essay In Praise of Idleness. In the years since the essay’s publication, the standard nineto-five working day has become a thing of the past, with many people routinely working well in excess of 40 hours per week, often without adequate breaks or overtime pay. If Russell believed excessive work to be harmful, then recent scientific studies have proved his decades-old assertion to be true. According to the Mayo Clinic, workers who spend four or more hours sitting at a desk each day have a 125 percent increase in heart disease risk, as well as a 50 percent increased risk of death from any cause. What’s more, researchers at University College London have discovered long work hours can more than double the risk of developing depression. From work-related stress to unhealthy diets, long hours in the office are making us physically and mentally unwell. Despite this damning evidence, many OECD countries have experienced a cultural shift towards longer working days in recent years, with all-nighters and 24/7 availability accepted as a part of working life in Europe’s competitive financial hubs. And yet, while some nations appear intent on pushing their workers to the limit, others are moving in a different direction. According to the OECD’s Better Life report, Denmark has the world’s best work-life balance, with just two percent of employees regularly working very long hours. With the Scandinavian nation also boasting the happiest workforce in the world, we might have a thing or two to learn from the Danish model.
Toxic culture In 2013, a 21-year-old Bank of America Merrill Lynch intern collapsed and died in his London accommodation after working for 72 hours in a row. The young intern’s death sent shockwaves around the City, prompting the district’s biggest financial players to examine the cutthroat corporate culture that saw all-nighters as a rite of passage for young workers. In response to the sad incident, Goldman Sachs announced it would be capping its interns’ workdays so as to avoid overwork – benevolently setting a limit of 17 hours per day. For many, this announcement proved just how warped and out of touch work culture in the City had become, and little has been done to improve the situation in the years since. London’s financial district may be an extreme example of work-life imbalance, but a culture of long hours is pervasive throughout the UK. A third of UK workers do not take their full holiday entitlement, and 13 percent of employees are said to regularly work very long hours. A wave of presenteeism and office martyrdom has swept the nation, with employees regarding late nights at their desk as a masochistic badge of honour. However, while UK workers forgo their lunch hours and work late into 58 | EUROPEANCEO
HEALTH IMPLICATIONS OF EXTENDED SITTING
50%
INCREASE IN RISK OF ALLCAUSE MORTALITY
100%
INCREASE IN RISK OF DEPRESSION
125%
INCREASE IN HEART DISEASE RISK Source: Mayo Clinic / University College London
“BIZARRELY, A CULT OF OVERWORK PERSISTS IN THE UK DESPITE RESOUNDING PROOF THAT LONG HOURS DIMINISH PRODUCTIVITY AND QUALITY OF OUTPUT”
the night, Danish employees are more likely to be found at home, enjoying dinner with their families. “There isn’t the same culture of presenteeism in Denmark, and that’s really vital”, said Helen Russell, author of bestselling book The Year of Living Danishly. “People often work from 8am until 4pm, and you’re unlikely to be at your desk past 5pm. You don’t get a pat on the back for still being there at 7pm – in fact, you’re more likely to get a lecture on inefficiency and time management.” Simply put, Danish employers trust workers to do their jobs and do them well. They understand the quality of an employee’s output is of far more importance than the time spent on a job, and that longer office hours don’t necessarily mean more work gets done. Without a culture of presenteeism, Danes need not feel guilty about clocking off at 4pm, as it is understood their colleagues will all be doing the same. Of course, leaving the office at a reasonable hour means Danes have more time to indulge in leisurely pursuits, and are free to spend around two-thirds of their day cultivating a life outside of work. “Geographically speaking, the UK is in the middle between Scandinavia and the US, and I think that culturally it is too”, said Russell. “We’ve got so much of that US influence in terms of our work culture, and some of that takes the form of these long hours.”
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W H AT A W AY T O M A K E A L I V I N G
Less posturing, more output With the workday ending early at 4pm, it might be tempting to think Danes get less done than the average European. In fact, the very opposite is true. According to researchers at the OECD, worker productivity actually improves with shorter working days, while output takes a sharp nosedive when employees clock up workweeks in excess of 48 hours. The OECD’s data from 2016 shows that, of the 10 countries with the highest GDP, seven (Denmark, Germany, Luxembourg, Norway, Sweden, Switzerland and the Netherlands) also feature on the top 10 list for the shortest working hours. As these flourishing countries suggest, shorter workweeks might be the key to prosperity. Unlike its mainland neighbours, however, the UK is suffering something of a productivity crisis, with the OECD ranking it as the 25th hardest working nation out of a possible 38 countries. Bizarrely, a cult of overwork persists in the UK despite this resounding proof that long hours diminish productivity and quality of output. Simply showing up to the office and staying put at a desk for nine hours does not guarantee results, and workers are likely to feel less engaged with their roles due to a poor state of general wellbeing. Last year, a YouGov survey revealed over half of UK workers believe a working day of seven hours or less would be most productive, and 44 percent would support a workweek shorter than five days. With the average Brit clocking up far more than seven hours of work per day, it is easy to see how employ-
ees begin to resent their jobs for keeping them in the office past 5pm. Rather than staying focused on the task in hand, workers may even feel entitled to procrastinate, scrolling through social media at their desks in what they might see as a well-earned break. Without the added time pressure of a shorter working day, workers may also delay getting started on a task, as they feel reassured that they have plenty time to complete it. In Denmark however, being at work means you are actually working. “It’s just a given that you’re not checking Facebook during the day at work – you’re working the hours that you’re there and then you go home”, Russell said. “In the UK, there’s a lot of just showing up and being the office martyr, and that’s just not done here.” Danish workers may also enjoy a productivity boost through the clear division of professional and personal life. Today, technology means we’re available 24/7, with no boundaries and no breaks. For many, leaving the office does not mean leaving work, as a steady stream of emails continues to pour through on smartphones and laptops. While UK office workers might be tempted to finish off a project at home, other European countries are taking a stance against the intrusion of work in the private sphere. France recently passed a law banning companies from emailing their workers outside office hours, and Germany already has similar out-of-hours guidelines in place. In family-focused Denmark, such laws simply do not need to exist, as the damaging ‘forever on’ culture has never taken hold. »
WASTED LIVES
D A I LY
15.9
H O U R S
15.2
15.6
T O
15.2
L E I S U R E
15.6
50 +
A N D
15
7.8% H O U R S
9.8% P E R
P E R S O N A L
16.4
15.9
12.8% W E E K
UK
W O R K I N G
6%
PORTUGAL
5%
FRANCE
E M P LOY E E S
D E V O T E D
15.9
3.6%
CZECH REPUBLIC
DENMARK
O F
SWEDEN
NETHERLANDS
P E R C E N TAG E
3%
GERMANY
2.2%
FINLAND
1.1%
NORWAY
0.4%
C A R E
14.9
Source: OECD
EUROPEANCEO
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W H AT A W AY T O M A K E A L I V I N G
Joy boost It’s not just shorter working hours that have a positive impact on productivity. Researchers from the University of Warwick have discovered happiness makes people around 12 percent more productive at work, suggesting there is a real economic benefit to prioritising employee support and satisfaction. And, if economies around the world want to boost worker morale, they need look no further than the example set by Denmark. For the Scandinavian nation, the key to a happy and productive workforce is prioritising life over work. In addition to enjoying shorter working days and greater work-life balance, Danes also benefit from a flexible working culture that supports their wellbeing both inside and outside the office. For example, workers can often choose when they start their day, and many have the option of working from home when it suits them. What’s more, lunch breaks are often at a designated time each day, encouraging colleagues to leave their desks and eat together, supporting socialisation and friendships between workmates. When it comes to holidays, all workers are entitled to a minimum of five weeks of paid time off, as well as numerous public holidays. Interestingly, most workers take the majority of their holiday entitlement in one long block over the summer, meaning offices tend to shut up shop for a month at that time of year. “In July, the whole country shuts down”, Russell explained. “Everyone takes their summer holiday en masse, and things just stop because it’s understood that that’s the custom.” This phenomenon is described as ‘collective restoration’ by Swedish researchers, and is common in several European nations, including France and Italy. According to health researchers at Sweden’s Uppsala University, this period of collective restoration essentially makes entire countries happier, with antidepressant usage falling at an increased rate when workers holiday at the same time. The link between collective time off and happiness is not hard to find, as it is simply easier to nurture and strengthen relationships with family and friends when everyone is available at the same time. Furthermore, workers are free to fully relax, safe in the knowledge work isn’t piling up on their desks and their inboxes aren’t filling rapidly. “When workers return from this break, everyone is in a better state of mind”, said Russell. “You are able to properly relax when you’re away, because you know that nobody else is working.” As a family-orientated nation, Denmark is also committed to ensuring quality family time for new parents. Danes are entitled to a generous 52 weeks of shared parental leave, with new mothers and fathers choosing to split the time as they see fit. To help new parents get back to work, the Danish Government also pays 75 percent of the costs of childcare from six months onwards, and covers the cost entirely for lowincome families. Kindergarten hours are often organised around office hours, and all Danish children are guaranteed a childcare place from the age of 26 weeks to when they start school. Given all these generous options, it’s 60 | EUROPEANCEO
“DANISH WORKERS CAN OFTEN CHOOSE WHEN THEY START THEIR DAY, AND MANY HAVE THE OPTION OF WORKING FROM HOME WHEN IT SUITS THEM”
perhaps unsurprising an incredible 86 percent of Danish women return to work after having a baby. “There’s much more balance between the sexes here in Denmark”, said Russell. “It’s perfectly accepted that both men and women will leave work to pick up the kids from daycare and start making dinner. Over 80 percent of women work, and kids seem to be thriving on it.” Denmark has been voted as having the happiest workforce in Europe, and this can largely be attributed to the country’s flexible work culture. Employers not only care about their workers’ wellbeing and happiness while they are at work, but they also recognise the important of a life outside of the office, encouraging employees to make personal time a priority.
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Millennials go Danish As Millennials begin to make up a larger portion of the workforce, we are starting to see a cultural shift away from the standard working day. A slow climb up the ranks of a company might once have been a worker’s projected career path, but employees now demand greater flexibility in their work, with freelancing and self-employment on the rise. According to Statista, work-life balance is now the second most important factor when choosing a job, coming second only to salary and financial incentives. Among Millennials, work-life balance is considered particularly crucial, with a recent Millennial Branding report showing that 45 percent of Millennial respondents would choose workplace flexibility over pay. Along with desiring greater flexibility in their work, Millennials are also demanding a level of personal fulfilment from their jobs, and are more likely to leave a company quickly if they believe it simply isn’t a ‘good fit’. For this generation, the Great Recession has had a lasting effect on Millennials’ economic prospects, with many entering the job market in the wake of the 2008 global financial crisis. As such, many have become accustomed to economic disruption and uncertainty, and are therefore more likely to take risks in their careers. “[After] the financial crisis, there is less job security and fewer financial guarantees for young people”, said Russell. “Unemployment is common and it’s increasingly difficult to get into the housing market, so Millenni-
als are less inclined to show loyalty to their companies, and less likely to decide that their work should be prioritised over their life.” Millennials have been accused of being the ‘me, me, me’ generation, but their demands for flexibility and fulfilment in their jobs should be respected. Indeed, given the positive impact shorter workdays and worker happiness can have on productivity, it might be high time to embrace these Millennial expectations. With an emphasis on work-life balance and personal fulfilment, Millennials are taking inspiration from the Danish model and creating a new attitude. After all, it’s clear the Danish model works, and works well. It acts as something of a virtuous circle: workers are happier because they work less, and get to spend more time cultivating a life outside of the office; in turn, they are more productive because they are happier; finally, they can afford to work less, because they are more productive when they are working. While UK employees are overworked and unhappy, Denmark’s flexible culture has created a uniquely productive and fulfilled workforce. If employees can embrace the Millennial vision of a changing workplace, then we may begin to see the successful Danish model replicated worldwide. “We attach too little importance to enjoyment and simple happiness”, Bertrand Russell bemoaned in his essay. Perhaps he might revise this statement if he could only meet the famously happy 21st century Danes. n EUROPEANCEO
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People investment External success is usually the main focus of business, but looking inwards and ensuring staff are happy can have just as significant an effect on performance, writes Jon Gladwish, CEO, 60K Contact Centres
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Since starting 60K in 2008, we have always believed in putting people first. As CEO, I and the other investors in the company envisaged creating a business that put people at the forefront of our thinking and business strategy, starting with our employees, our clients and their customers. To sum it up, we wanted to create a place where young, ambitious people would love to work, with the opportunity to gain experience in an international environment, having the right tools, training and facilities in place to do their jobs and, above all, to be able to develop professionally and personally. At first, this was easy to achieve, as we were a small company with around 200 employees who I knew personally. I could put a name to every face, knew which projects they were on and each person’s position, and I had time to talk to them and hear their views, in order to build these things into our business strategy. However, our success was also our biggest drawback: as we grew rapidly (around 40 percent year-on-year) both in revenue and resources, it became harder and harder to maintain this family feel within the com-
pany. Over the following six years, competition for labour drove up expenses, especially in terms of salaries and benefits. What’s more, although our revenue had steadily grown, our EBITDA was being dramatically eroded, and we were haemorrhaging staff because of new players in the marketplace offering higher salaries: attrition rates rose from three percent to around 30 percent per year. We knew we had to take major steps to stabilise the company if we were to build on the successes of the past. Our forecast was to grow by a further 1,000 seats over the following two years, and the indication from both our existing clients’ expansion plans and potential clients in our sales pipeline was that we would be able to achieve this.
Path to perfection Due to 60K’s rapid expansion, the way the organisation worked had to change if we were to achieve our goals. The reactive nature of our business meant we were working in an ad hoc, haphazard manner. This works well for start-ups and smaller companies, but
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Everyone has an equally important part to play in the success of an organisation, whether it’s the CEO or the cleaner
we needed to transition to a more focused and organised approach. After some investigation in the marketplace, we found a solution that met our needs while providing the company with a solid foundation on which to build. This was the multinational Investors in People standard. The standard is well known worldwide, and is awarded to companies with strong HR practices. As one of those companies, 60K truly believes in the potential of its employees. We are always looking for feedback and ideas on how we can improve our working environment. This is an important part of our company policy, and we keep pushing to be better because people are our biggest asset. During the year following this, we worked in close cooperation with IHR, a consulting company and the exclusive representative of Investors in People in Bulgaria. IHR held individual meetings with around 90 of our staff members, and explored how closely we adhered to the standard. Basically this was a ‘gap analysis’ to help us understand where we could improve in future.
The analysis was carried out on the basis of 10 main indicators: business strategy, learning and developments strategy, people management strategy, leadership and management strategy, management effectiveness, recognition and reward, involvement and empowerment, learning and development, performance measurement, and continuous improvement. We were assessed on these indicators at every level of our business, from me as CEO right across to the newest recruits. All our projects were rated highly, mainly due to our entrepreneurial culture. However, to be even more successful down the line we had to shift to a more balanced community culture, working to bring into reality my goal of making 60K ‘the place where all the happy people work’. We had actually already started to do this with our ‘Rhythm of 60K’ project two years earlier, alongside our code of ethics. These concepts were extended throughout the company, until they became standard behaviours we worked and lived by. From these beginnings, we came up with four core company values that were produced to encompass our mission and vision statements, combined with our company strategy from the top down and our code of ethics from the bottom up. So, in effect, everything links together. Our vision is: ‘Striving to become a world leader in putting people first in their customer experience.’ The mission that underpins this vision is: ‘60K promises to provide service that exceeds the expectations of our clients, their customers, and our staff.’ Our strategy is: ‘By putting people first, they will strive for excellence in providing services for internal customers (their colleagues), for clients, and for our clients’ customers. This will ensure that 60K grows in market share, leading to increased
revenue and EBITDA (profit), and enhancing 60K’s reputation in the market as a preferred supplier and employer.’ As mentioned before, these statements fed into our four core company values, which are: happiness (related to our motto ‘the place where all the happy people work’); success (exceeding clients’ expectations); professionalism (the model of behaviour we expect 60K members to have and to demonstrate); and friendship (providing a working environment that motivates people both personally and professionally). To sum all this up, we created an easy-to-remember statement: ‘Happiness and success are easy to achieve when you work with great professionals and true friends.’
Continuous growth A further weakness we had related to communication. Healthy communication should come not only from the top down, but from the bottom up. This is something we have been working on and continue to work on. I always end my emails with: “Please remember I am always available, in person, by email or by phone, if you have something to share with me. Your team leaders, supervisors and managers are there too – this is an important part of their responsibilities as part of 60K.” In support of this progress, we embarked on training for all our senior and middle management staff to develop their people management skills and improve their communication skills. This was supplemented by ongoing training throughout the year. I truly believe everyone has an equally important part to play in the success of an organisation, whether it’s the CEO or the cleaner, and everyone should be treated with both politeness and respect. At the end of the year, two accreditors from Investors in People conducted interviews with randomly selected staff from all projects and areas of our business, in both our Sofia and Plovdiv locations. They determined how closely we aligned with the standard. Following the evaluation, we were awarded Silver Accreditation, which was no mean feat for a company that was growing rapidly in two sites, and had recruited an additional 400 new employees at the same time. There had also been changes to the senior management team, as well as various new procedures. The effects of the changes we made during the process were sensational. Our business operations improved, staff attrition fell, revenue grew by 58 percent, and EBITDA increased fourfold. Now 60K is truly known as ‘the place where all the happy people work’. n EUROPEANCEO
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Michael Tsamaz Chairman and CEO, OTE Group
Growth in times of crisis Having undergone a radical overhaul after a period of poor results, OTE Group is now the Greek standard-bearer for the digital age There are two ways to face a crisis: lose heart, panic, become introverted, and hope for the best; or keep calm, treat it as an opportunity, come up with a concrete strategy, and get to business. In our company, we pursue the latter without the slightest flicker of doubt. The results have rewarded us. OTE Group, a member of the Deutsche Telekom Group, is the technology powerhouse of Greece and the enabler of the country’s digital transformation. The company offers a full range of services, from fixed and mobile telephony, broadband and wholesale telecommunication services, to pay-TV, ICT solutions and marine communications. Together with its subsidiaries in Romania and Albania, it is one of the leading telecommunications groups in south-eastern Europe. To get to this point, the group had to go through tough times and a radical structural overhaul, transforming from a state monopoly into a modern, competitive company. What’s more, all this was achieved against the backdrop of a severe financial and social crisis, and a volatile geopolitical environment.
Transformation strategy In 2010, OTE’s fixed-line segment was trapped in a vicious cycle of low competitiveness due to its eroding financial results, hostile regulatory environment, and fierce competition. Due to the Greek financial crisis and the inability to raise capital from the market, OTE’s inherited debt and solvency were at risk. 64 | EUROPEANCEO
A concrete plan was set in 2011 to get us through this period, which aimed to fix the basics, progressively focus on growth, and ultimately lead us into the digital era. Our multilayered turnaround strategy was based on six pillars: technological superiority, industry-leading customer experience, new revenue streams and enhanced leadership in core business, on the back of operational and cost optimisation and a modern human resources strategy. We took bold decisions and changed more or less everything in the group. The first milestone along this path was ensuring sustainability, through the liquidation of assets that didn’t conform to our long-term strategy, alongside a successful bond issuance that defied the turbulent market environment at the time. Notably, OTE is one of the few Greek companies to have access to international markets. Currently, OTE’s bonds are trading at levels well below three percent. Additionally, a personnel cost rationalisation programme through voluntary exit schemes was implemented in a socially responsible manner. The second achievement was capitalising on our competitive advantage: network superiority. We did this by investing in new generation networks to reinforce the quality of services and to be one step ahead of the competition. To reinvent OTE, we had to establish a new customer-centric philosophy, and transform our internal and customer-facing processes and systems. We also had to change how our people positioned themselves within the company and towards the customer. To that end, the company
implemented a strategic, multilayered, crosssectional, internal communications plan to spread the strategy and inspire people. The operational integration of fixed and mobile operations contributed to the optimisation and centralisation of functions and services, added more clarity on roles, and raised organisational effectiveness. The establishment of the common fixed-mobile brand COSMOTE in 2015 and the launch of converged programmes offering a whole new world of communication, entertainment and benefits for our customers was the natural result of OTE Group’s transformation. A cornerstone of this successful transformation was top management’s commitment, while the establishment of sustainable growth policies for the group, its employees, the economy, society and the environment have been the key result for everyday operations.
The new group OTE Group today leads the Greek market in fixed and mobile telecommunications, broadband, ICT and pay-TV, offering best in-class services and constantly increasing value for customers and shareholders. Having reduced
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We live in the new digital age. It changes everything: the way we learn, work and live; the way we perceive our world
its headcount by 24 percent and personnel costs by 37 percent, as well as overall costs by more than 25 percent in six years, the group operates in a lean and efficient way and delivers solid financial performance. In 2016, OTE Group reported consolidated revenues of about €4bn, €1.3bn adjusted EBITDA, and a highly resilient group EBITDA margin at around 34 percent. The group’s net debt has been reduced by almost 90 percent since 2010, from €4.3bn to about €0.6bn. These figures are the reward of the hard work we have put in, and they propel us to achieve more in future. We are far and away the largest investor in telecommunications in Greece, having invested over €2bn over the past six years and committed to another €1.5bn by 2020, notably to establish fibre and mobile networks to enable our customers and country to succeed in the digital era. In 2016 alone, our share of market investments was 65 percent. In terms of fixed telecommunications, we are Greece’s leading provider of optical fibre services. We already provide high-speed VDSL access to over two million households and businesses. In the mobile segment, our
4G network reaches 95 percent of the Greek population, while 4G+ coverage is at 85 percent. We are one of the first networks worldwide and the first in Greece to have launched commercial speeds of up to 500MB/s. We want every household across Greece to be able to get connected, and we want a flawless broadband experience to be the number one reason customers choose us. We are the partner of choice for businesses seeking advanced solutions in the fields of healthcare, tourism, information security, energy, data centres, cloud and Internet of Things (IoT) services, based on our know-how in the ICT field and our high level of activity in the field of IT integration. A pertinent example of an ICT project we have already delivered is the €43m installation and operation of Coca-Cola HBC Group’s data centre for 28 countries. Capitalising on our excellent networks, industry-leading customer experience, and complete range of products and services, we want COSMOTE to become a ‘love brand’, not only in the telecommunications industry but also across the Greek market as a whole.
Time for digitalisation At OTE, change is primarily a mindset. We are in constant pursuit of change in order to become more efficient and address the evolving needs of the modern era. Our transformation into a modern, competitive company has been successfully concluded. A new challenge lies ahead: our digital transformation. We live in the new digital age. It changes everything: the way we learn, work and live; the way we perceive the world and ourselves in it. Digital transformation is not a matter of choice; it is primarily a matter of survival, and secondarily a growth issue. No industry or organisation can survive without adapting its structure, processes, people and strategy. We have come a long way in the past few years, and we have prepared the group well for the upcoming challenge of helping customers and the markets where we operate take full advantage of the new digital world. We now have a new vision: to become a digital transformation paradigm in Greece, as well as in Europe, by 2020. For this, we have compiled a 360 degree digital transformation programme that will lead us on our new journey, help us adopt a digital mindset, and allow us to exploit digital capabilities to the benefit of our customers, employees, partners and suppliers. OTE Group could be considered a model of how strategy, vision, commitment and changefocused mindset can steer an organisation through a crisis. We are leading change. We act proactively, challenge all assumptions and continuously innovate. We operate in a responsible, ethical manner, ensuring sustainability. We are the enabler of growth for Greece. Through technology and innovation, we build a better world for all. n Michael Tsamaz has been head of OTE Group since November 2010. Prior to this, he held managerial positions within the group and in other multinational companies, including Vodafone and Philip Morris. He holds a bachelor's degree in business administration from the University of New Brunswick in Canada. EUROPEANCEO
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Mike Britch Managing Director, Norse Group
Partnership principle
Joint ventures and collaborative projects can yield better end products and mutual benefits for all parties In 2010, the International Civil Aviation Organisation (ICAO) announced training rates in the global aviation sector were dramatically lower than they needed to be. By predicting how many engineers and aviation professionals would be needed in 2030, the ICAO concluded total global training capacity was falling short by some 18,000 places every year. This trend was particularly pronounced in the UK, with a growing perception among young people that the industry was simply out of reach. The shortfall prompted organisations like the Aviation Skills Partnership (ASP) to push back. As part of its campaign to make the industry more identifiable and accessible for British youngsters, the ASP reached out to Norse Group, a company that offers services in property consultancy, care and facilities management. The result of this joint venture is the UK-based International Aviation Academy – Norwich, a cutting-edge learning facility opening in 2017 with the goal of producing the next generation of aviation engineers, flight crews and pilots.
Building the future “The project was ambitious. It sought to lift aspirations and link education, training and employment for children as young as eight”, said Mike Britch, Managing Director of Norse Group. “Converting the vision into reality required a number of partners willing to overcome barriers and make timely decisions in a business-like manner.”
This was demonstrated when the partnership tried to get hold of the site itself. By working with local authorities, Norse Group ensured the existing tenants could be relocated quickly and with minimal disruption to their business operations. “The next link in the chain was to secure capital funding for the project”, said Britch. For this, Norse sought public sector involvement from the New Anglia Local Enterprise Partnership (NALEP), an investment agency backed by the UK Government. NALEP provided a £3m grant, which added to a £6.25m commercial loan from Norfolk County Council. Finally, Norse needed a skilled delivery team to get the project airborne. Here, its property consultancy unit stepped in, working collaboratively with WT Partnership, as well as ASP and RG Carter, the main contractor. The project was boosted when City College Norwich, the University of East Anglia and KLM UK Engineering confirmed they would jointly provide expert training to the facility’s 240 students. KLM Engineering provided the 737 training aircraft. Throughout this process, Norse was the asset-owning vehicle and recipient of grant and loan funding. It was responsible for the leases on the building and its aircraft, which include a full-size Boeing 737. The group also ensured all grant funding conditions were fully discharged. “The final building will reflect a very industrial environment, yet provide a smart educational facility”, said Britch. “Norse Group is proud to have been the leading
International Aviation Academy - Norwich
agency in the academy, which is the first of its kind in the UK.”
Joint ventures The academy project illustrates the power of specialisation within ambitious partnerships. Norse has shown its aptitude for collaborations, particularly as it was committed to others at the same time, including working with Broadland District Council for local house building schemes. “We are not just constructing houses”, said Britch about the project. “We are delivering high-quality homes that create a sense of place and respond to the needs of the local community.” Norse has spearheaded this effort through a company called Broadland Growth, whose first development was Carrowbreck Meadow in Hellesdon, a 14-dwelling housing development within a mature woodland setting. In keeping with its ethos of collaboration, joint venture and openness, Norse gave tours
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and creating comfortable, healthy, affordable homes”, Britch said. Most importantly, it highlights the mutual financial benefits joint ventures can bring as Norse establishes attractive profit-share agreements with its partners, so a percentage of earnings can be invested back into public funds. The sale of the Carrowbreck homes ultimately surpassed expected values, returning over £1.2m to the public purse.
of the site to practitioners from Passivhaus, the leading international low energy design standard, so its methods of construction could be observed and understood. Moreover, Hamson Barron Smith, Norse Group’s design company that includes specialists in housing design and sustainability, provided a technical site tour for delegates of the East of England’s first certified Passivhaus designer training programme. “The Carrowbreck project achieved full Passivhaus certification thanks to its thermal bridge and draught-free building envelope, which exceeds regulations for air tightness five times over”, said Britch. “It has successfully demonstrated that our positive intervention in the market can reap benefits for all, not to mention its social value and boost for the local economy.” Carrowbreck also allowed Norse to demonstrate its commitment to environmental-
When joint ventures are successful, it is always possible other public sector bodies could duplicate the business model
ism, which is an integral part of quality living standards across Broadland Growth’s projects. In order to keep the company at the cutting edge of low-energy design, architectural flair has been combined with the highest standards of sustainability throughout the construction process. “Carrowbreck provides an important case study in terms of both partnership working
Social responsibility The popularity of Norse’s unique services has allowed it to grow rapidly in recent years. Today, the company employs 10,000 staff, realises £321m in annual turnover, and has a forward order book of £3bn. Over the past five years, its joint venture partnerships with 24 local authorities to provide FM, waste and care services across the UK have helped to generate public sector savings of more than £50m. While collaborative projects such as the Aviation Academy and Carrowbreck are effective in releasing the entrepreneurial potential of the public sector and speeding up the delivery of public services, they also carry risks. For example, since joint ventures are so successful, it is always possible other public sector bodies could duplicate Norse Group’s business model and thereby reduce its opportunities to grow. “Flexibility is the key to mitigating such risks and responding to the changing trading environment in a positive way”, Britch explained. In this vein, Norse has recently introduced a corporate social responsibility strategy called ‘the Norse Way’, which allows it to generate profits for its local authority partners, while at the same time continuing to invest heavily in the communities in which it operates. “The Norse Way represents our positive and determined ethical stance”, said Britch. “It guides our principles and behaviours and it applies to everyone in the organisation, regardless of where we work.” The future for the Norse Group looks exciting as the company is continuing to expand its service offering. Its ambitious growth plans will require new investments in technology and staff training, which should help Norse to expand beyond its traditional markets and diversify its customer base further. “The squeeze on local government spending in the UK during these tough financial times is not going to be relaxed, but our business model offers exciting opportunities for the future”, Britch said. “We hope to continue generating new business opportunities by delivering services in efficient and novel ways moving forward.” n EUROPEANCEO
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Company Culture
Move your body
Humans have evolved to be attuned to the body language of those around them. Leaders often know how to use this to their advantage, but even the greatest can slip up, causing embarrassment and damage, writes Kim Darrah The spotlight of leadership is often accompanied by a reminder of the powerful impact of body language. In today’s world, both political and business leaders are increasingly finding themselves on display. Modern leaders will frequently find themselves the focal figure in video interviews, news broadcasts, and conferences, as well as endless face-to-face meetings. In all such scenarios, their use of body language will inevitably be carefully – if unconsciously – scrutinised. Signals conveyed through the body can change the way someone is perceived, alter the balance of power in a room, or even reveal what is on someone’s mind. In the realm of body language, much is purely instinctual. Angela Merkel, for example, doesn’t logically mull it over before scratching her eye when faced with an exasperating 68 | EUROPEANCEO
remark from another leader. Individuals don’t make a conscious decision to commit more to memory when someone’s speech is accompanied with hand gestures, or choose to perceive someone as better informed if they are standing in a more dominant pose. Neither do we logically resolve to feel particularly trusting of people with broad, slow hand gestures. What’s more, few people are aware of smiling excessively or tilting their head when they’re the submissive party in an interaction.
Dominant and submissive Those in leadership positions must, in particular, grapple with the subtleties of body language that go hand in hand with dominance and authority. In addition to being an age-old way of establishing social hierarchies, the nature
of someone’s body language can also influence how often they get interrupted and how long people will allow them to speak. Giving an impression of being in control can raise someone’s influence and increase the impact of their words and ideas on an audience, or alter the power dynamic in a negotiation. Authority and dominance can be conveyed in a number of ways. “You need to look confident and in control”, said Peter Bull, professor of psychology at the University of Salford. “Twitchy and nervous gestures will make you look as if you’re not in control.” It is generally accepted the key to conveying dominance is to adopt a stance that opens up the body and takes up a large amount of space. Holding one’s head straight and keeping someone’s gaze can also signal authority.
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In a recent study by Richard Newman Research, published in the journal Psychology, respondents were shown videos of various actors presenting a speech, and were then asked to rate the speakers on how confident, inspiring and convincing they were. While the speech itself was always the same, the actors shifted their body language from video to video. Newman found that, when the speakers took on a more dominant stance – with their feet apart and their palms facing downward – they were rated higher on all three attributes than those that didn’t. Notably, those employing a confident stance were also judged to be more knowledgeable, demonstrating how body language can influence the way people process a verbal message.
In evolutionary terms, the spoken voice is a relatively recent addition to the human communication toolkit
Evolutionary background “We are a species that cares about dominance and position, and we are a species that conveys that through non-verbal language”, said Geoffrey Beattie, academic psychologist and author of Rethinking Body Language. This dates back to our evolutionary beginnings, and the fact our ancestors once relied on the intricacies of body language to make survival decisions. It is not surprising, therefore, that the standing positions or ‘power poses’ people adopt today to signify authority often mirror those used by primates. Indeed, in evolutionary terms, the spoken voice is a relatively recent addition to the human communication toolkit. The result is people have an intricate system of receptors that allow us to make snap decisions and subliminal judgments based solely on non-verbal cues. So, when leaders employ dominance cues, they are utilising an ancient language of authority and power that taps into our very biology. Displays of dominance employed to convey authority can be observed throughout history. Holbein’s famous painting of King Henry VIII displays many of the same body signals that psychologists explore in leaders today. According to Bull: “The painting is a classic display of dominance: Henry’s arms are akimbo, his fists are clenched, and his legs are pitched wide apart. The whole picture is of a man that wants to look really dominant. He is also occupying a lot of space because this makes him look bigger, and he comes over as very large. All those are signs of dominance.” Interestingly, this process doesn’t just influence how others perceive us; it also actively intervenes in our own brain chemistry. A study by Amy Cuddy from Harvard University revealed a direct link between the poses people hold and the levels of various hormones in the
body. She conducted an experiment that put one group in ‘power poses’, including leaning forwards against a desk with arms wide, or sitting with feet perched on a desk. A separate group was placed in constrictive positions, with shoulders rolled forwards and face pointing downwards. After holding the pose for just two minutes, participants in the dominant position saw raised levels of testosterone – a hormone linked to risk-taking and aggression – while those in submissive positions saw elevated levels of cortisol, which is a hormone associated with stress. Notably, the combination of low cortisol and high testosterone is linked to grace under pressure and confidence. This implies that, by simply adopting a dominant pose, people can trigger a feedback loop that boosts their leadership qualities.
Donald’s luck Of course, leaders must achieve a much more delicate balance with their body language than simply presenting themselves as dominant. Authority and power is just one aspect of the body language of good leaders, and it can certainly be taken too far. This is what lets down Donald Trump in his now-infamous approach to handshakes. While the US President has clearly acknowledged the power of body language, his efforts to appear dominant have tipped the balance much closer to embarrassing caricature than authoritative leader. Watching Trump’s handshakes, in which he employs what Bull describes as a “clasp-and-yank technique”, it is difficult not to feel uncomfortable. “His power signals have gone so badly wrong. What he does with his handshake is to literally pull people around – he pulls them into his bodily zone”, said Beattie. Trump’s mistake is failing to realise body language must be subtle to have an effect. “Once you get to the stage where people comment on your power signals and are consciously aware of them, they cease to work”, said Beattie. A good leader will be flexible with their body language, striking the right balance between establishing dominance on the one hand, and conveying empathy and openness on the other. Indeed, when looking to a leader, people are unconsciously looking out for this full range of nonverbal cues. While dominance can inspire confidence, approachability is also crucial. A good example of this was recently demonstrated by Oscar Munoz, CEO of United Airlines. In April, United fell into crisis mode when a video went viral depicting a customer being brutally forced off one of their planes. Faced with a drop in the company’s share value and repeated calls for his resignation, the » EUROPEANCEO
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Company Culture
US President Donald Trump shakes hands with Japanese Prime Minister Shinzo Abe
pressure was on Munoz. Joe Navarro, former FBI agent and author of What Every Body is Saying, said: “I saw the video of Munoz apologising by first playing it with no sound. What stands out is that he is in the mode where he is supposed to be: he expresses that this is an emotional event. One of the great traits of leadership is when you can convey strength with kindness and empathy, and they are not mutually exclusive.” In this instance, Munoz was convincing as a result of his ability to appear sincere; his body matched his words. In stark contrast, Trump noticeably struggled to appear authentic in the awkward apology he issued following his own video scandal, in which he was caught making obscene remarks about women.
Emotional leak Another crucial dimension to body language for leaders is what they might accidentally be giving away. Indeed, even the most skilful can slip up and allow their bodies to display something they would rather be kept secret. “If you watch President Obama in the early years, any time Vice President Biden said something that he shouldn’t have said, you would immediately see Obama compress his lips together. That was his way of showing displeasure”, said Navarro. The shapes people pull with their lips are among the most telling giveaways to
The most interesting leakage tell is when there’s a mismatch between what someone is saying and what they are doing with their hands
their state of mind. Notice, for instance, that in the infamous footage in which George Bush is surreptitiously informed of the 9/11 attacks, his reaction is to purse his lips and twist them to one side before carrying on as if nothing had happened. Another classic example of emotional leakage is Angela Merkel’s aforementioned unconscious habit of reaching to touch around her eye when she disapproves of something that has been said. Navarro noted: “It’s called a blocking gesture. It is just something that we do that helps us to either distance ourselves or psychologically block what we just saw or heard.” According to Navarro, Merkel had a particular penchant for this tell when she spent time around former French President Nicolas Sarkozy. “Any time he says something really stupid – which he often did – watch how she
would immediately cover her eye. That was an immediate tell that he had just said something he shouldn’t have”, said Navarro. Often, it is the quick flash of emotion that can give away people’s true thoughts. “There is evidence that suggests that people can leak through the face through very brief expressions”, said Bull. For instance, in a scenario where someone attempts to suppress a reaction of anger or surprise, it will often leak out through a momentary lapse in composure. Yet, according to Beattie, the most interesting leakage tell is when there is a mismatch between what someone is saying in their speech and what they are doing with their hand gestures. “When you are saying one thing verbally and your gestures don’t match, your gestures are always a better indicator of your underlying thinking”, he said. When this kind of mismatch occurs, people often intuitively distrust the speaker, as they instinctively react to the non-verbal communication rather than what is being said. Leaders, like everyone else, are good at editing and being aware of their voice, but are often unaware of their accompanying bodily movements. While many understand how influential body language can be, and so have an intuitive grasp on what works best, we all give away a little more than we might like to. n
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BUSINESS & MANAGEMENT
Company Culture
Johan Brinkenberg CEO, Nordic Guarantee
Culture shock Company culture is not something that can be enforced. You need to listen to employees and create an environment in which they enjoy working
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When I took over as CEO of Nordic Guarantee in 2013, I got the chance to explore the field in which I thrive: working with organisational behaviour. I strongly believe that working in teams rather than individually is the solution to the challenges of a highly competitive environment. I had developed my views of Nordic Guarantee and its problems over the years as CFO, and I thought I knew where the problems were. The company had been fairly small and it was easy to get an overlook, even though we were, and still are, active in four countries and had personnel spread throughout the Nordic countries. However, I couldn’t have been more wrong! When I was appointed CEO, the resigning Chairman said: “Just keep control of the underwriting and you will do good.” I was lucky to have our previous CEO take over as Chairman, and our cooperation was open and sincere. I wanted to become a CEO who was close to the personnel, and to be seen as a doer with focus on tangible results. But for each stone I overturned, new problems appeared.
A CEO’s job is to get teams to perform better, and to create a workplace that people enjoy. I had always thrived on creating tangible results, though it was now about company culture, which is fundamentally intangible. For me, the reward is now the feeling we get when we have reached a goal, and when I see the reaction from my colleagues. That rush of reaching a goal for the first time – that is what makes me try over and over again, and what makes me continue to work hard to reach new goals.
Out of a rut At the time I took over as CEO, Nordic Guarantee had a company culture that was hard to define. We had different views in our minds as to what we were and what we wanted to become, but the previous year’s tough financial results had made us focus all our efforts on day-to-day business, and we had no time left to look ahead. In late 2013, I started to form my own view of how we should work, and what structure was needed to make responsibility clear. I
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back day after day to see not just colleagues, but friends. We were now entering 2016 and our financial results were showing we were on our way to becoming what we all wanted to be – a profitable company where people thrive and have a lot of fun. Working hard and generating profits for the shareholders should also give something back to the employees. Therefore, we set a number of really tough goals for the period from July 2015 to June 2016 in addition to our annual goals. This really put everyone’s focus on building the company and burning the midnight oil. All our teams could see our goal of growing the number of premiums written – based on careful and skilled underwriting that kept our claims ratio on a very low level – was possible to achieve if we worked together and focused on delivering quality to our customers and partners.
I remember being in a café with one of my oldest colleagues, and we drew a new structure on a napkin
remember being in a café with one of my oldest colleagues, and we drew a new structure on a napkin. This was to become our new organisational structure, with clear responsibilities between teams and team members. At this time, our close partner South African Lombard Insurance had the same ideas as us, and the transformation started. At the beginning of 2014, I started working with an external HR consultant who interviewed all staff working within our core processes, i.e. underwriting, sales and claims. The findings revealed we lacked a clear recruitment strategy in the past, and many of our staff didn’t fit the culture I wanted to build. The result was we had to lay off 25 percent of our personnel. During this period sales were also going down. Not a good starting point, but, with a clearer picture of what we wanted to build, we managed to drag ourselves out of the gloom. During the spring of 2015, we started to see evidence we were on the right track. At a company conference, I asked the whole organi-
sation what we needed to change, what we needed to build on, and what we lacked. This made it clearer to me what I needed to focus on. Three things came out of the consultation: information and communication, knowledge sharing, and team spirit.
Growing strong One success led to another and we were in a positive spiral. We had monthly video meetings where all offices participated, and we celebrated victories both large and small. Getting these meetings to become relaxed and personal was important, and it still is – I want Nordic Guarantee to be a company where people can relax and have fun. This became the topic of the next company conference, which was held in the end of 2015. The theme for the conference was ‘what makes it fun to be at work?’, and once again we had group-wide discussions and involved all employees. I strongly believe having fun, laughter, jokes and an open atmosphere inspires commitment, with personnel who want to come
Continuous development Many colleagues now tell me we have changed so much and become a different company. This is very touching for me, and I feel it’s proof of our success – proof of us becoming an organisation where we enjoy each other’s company and develop together. We have worked a lot with our culture over the past few years, and we are still working on it. We will continue to build on our culture to become even stronger. It is my firm belief that an inspiring environment where people can relax and be themselves will create a more profitable company. I would say Nordic Guarantee is proof of that. If you cannot have fun and laugh, people will not enjoy working together. The best people will soon take what is of value to you and go to your biggest competitor. So, see to it that you understand what makes it fun to be at work, and guard it. Nothing beats a great time with friends and laughter, and that cannot be stolen by your competitors. In a turnaround like the one we have done, it is important everyone buys into the plan. Not just your personnel, but also your board. A culture will not be true and strong if it does not come from within. Start here and you will soon have a culture that is felt by your staff, clients and customers alike. n EUROPEANCEO
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Leadership
Rival schools A severe isolationist turn has quickly weakened the US’ position as world leader in business schools. Much like its playground homophone, the Trump effect is driving people away, writes Mansoor Iqbal
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International MBA students, according to GMAC – the body responsible for administering the GMAT MBA entrance examination – revealed in an annual survey of prospective business school candidates that the US may be losing its appeal as a study destination for international graduate-level business students. In February, 43 percent of non-US registrants on GMAC’s MBA.com portal said they would be less likely to study in the US after Donald Trump’s shock win, up from 35 percent in the immediate aftermath of the election. The US remains the most popular destination for internationally mobile MBA applicants, and, for many, the birthplace of the MBA remains it spiritual home – where you will find the highest salaries, the greatest number of opportunities and the best schools. None of this, however, makes it untouchable; the US’ brand has clearly been damaged by Trump. European nations could certainly come to profit from this. Indeed, interest in Europe had already increased from 30 to 34 percent between 2009 and 2016, according to the aforementioned GMAC research.
Progressive policies The US will not lose its reputation overnight, according to Bruno Lanvin, Director of Global Indices at INSEAD, the world’s best business school according to the Financial Times. “It is undeniable, however, that a significant part of US successes in technology, innovation and talent competitiveness has been the result of the country’s ability to attract bright minds from all parts of the world, and give them the opportunity to thrive in a high-potential market. In the short term, Europe and Asia could be the economic beneficiaries of some of the decisions made by the US administration.” He warned, however, that Europe must make its own way, and not simply rely on perceived shortcomings across the Atlantic. A lot of this comes down to practical questions: namely a graduate’s ability to find a job and to remain in the country in which they have chosen to study. Two thirds of non-US applicants scoring over 700 in the GMAT exam – considered the ‘magic’ score required for admittance into the elite top-tier of US schools – said they would reconsider their study destination if they were not able to get a work visa following their studies. With a good deal of
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What’s the message? France is a key example of a nation we can obviously pitch against the US, with its own high-profile new president – something of an anti-Trump. “Macron has this vision of innovation and entrepreneurship”, said Symonds. “He’s in his late 30s, he’s smart, he’s got that sort of international aura – we might look to his open call for US climate change scientists to come ply their trade in France. Universities and business schools in France will enjoy a wave of popularity on the back of that international message that he sends.” The message is important. Beyond simply looking at visa policies, international students will be looking for a warm welcome and openness from their host nation. While Asian business schools have made progress in this respect, European nations are clearly in pole position. Norway was this year found to be the happiest
Beyond simply looking at visa policies, international students will be looking for a warm welcome and openness from their host nation tough talk from Trump on rethinking the H1-B visa, which is the main route through which MBA graduates are permitted to work in the US, nations with more open visa policies will certainly come to feature highly on the radars of these talented students. Matt Symonds, Director of Fortuna Admissions, believes this may well be the case. “Those policies clearly impact on people’s thinking – you’re looking for job security when you invest in an MBA. The US is struggling with that, beyond the top schools. A Harvard or Wharton MBA can still open doors, but second-tier schools will be hit hard.” Symonds also cited the case of the UK, where changes to the highly skilled migrant visa switched off Indian students – a powerful group in the world of business education not only in terms of talent, but sheer volume. This can be easily contrasted with the rest of the EU, where visa policies are often more open. “Even within the EU, each country sort of has its own interpretation”, said Symonds. “The Netherlands is one to which we might look for a progressive visa system. The dean of HEC Paris told me that 70 percent of non-EU students find jobs in France. These things matter.”
nation on Earth by a UN agency report, while Sweden won awards for the ‘Swedish Number’, a telephone number that connected callers to a random Swede to talk about, well, anything at all, to mark 250 years of free speech. These things may not be profoundly serious, but, as Symonds noted, perhaps it would also be wrong to discount them, because who doesn’t want to be happy and enjoy the benefits of free speech? On the more serious side of things, Symonds suggested candidates will also consider nations’ professional reputations, being attracted by, for example: sophisticated Swiss efficiency, very much embodied by its leading business school, IMD, which thrives on connections to multinational giants; Berlin’s entrepreneurial culture, of which ESMT very much lies at the heart; or Politecnico di Milano and SDA Bocconi for those with an interest in the world of fashion and luxury brands. Latin American students might also look to Spain for obvious reasons, which boasts in IESE, ESADE and IE a trio of world-class business schools. And, of course, there is London and the City for those targeting the finance sector. The reputations of these nations and their schools will play no small role in the decision-making of
those looking for alternatives to the strengths of various regions of the US.
Measuring innovation Perceptions based on our knowledge of the world and even our gut feelings are undeniably important when choosing a study destination. For those looking for something more objective and rigorous, however, we might look to Lanvin’s work at INSEAD, producing a range of indices measuring different nations in terms of innovation and talent competitiveness. “Each of these indices is ‘holistic’ in its architecture and philosophy”, Lanvin explained. “This means that we try to track not just what is ‘innovation-specific’, like investment in R&D, or patents filed, or ‘talent-specific’, like university enrolment or levels of unemployment, but also the ‘enabling factors’ such as business climate, corruption, and quality of life. Some of these elements can be directly influenced by government policy, with effects visible in the short term – fiscal policies, immigration laws – others will only have measurable effects in the longer term, like changes in education policies.” Europe dominates the field here, taking seven of the top 10, and 14 of the 20 places in the last Global Innovation Index. It is small and open nations, according to Lanvin, that can really make strides in such measures: “It took less than 50 years for Singapore to move from an outpost of the Malaysian peninsula to an admired champion in education, talent competitiveness and government efficiency. It took just a couple of decades for Finland to move from being largely a satellite of the Soviet Union to a leader in electronics, telecommunications and education. We should expect more surprises of the same kind as younger generations start to offer and pursue new modes of production and distribution, and make globalisation an engine of inclusive prosperity.” Business schools in these small nations can certainly profit. It is, however, a two-way street; we should also look for the contributions business schools make. Lanvin concluded: “Education generally plays a key role in the performances that the global indices attempt to measure. Business schools play an increasingly important part in this phenomenon because they are generally closer than most other educational entities to what education will be in the future; they are demand-driven and generate ‘employable skills’, they focus on ‘global knowledge skills’ which will grow with the continued globalisation of human activities, and they provide multiple opportunities for lifelong learning, especially through executive education.” n EUROPEANCEO
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Mark A Langley President and CEO, Project Management Institute
Improving project success European businesses are improving their project management approach. For those still lagging, Project Management Institute research has revealed the five areas on which to focus
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As European organisations face increasingly complex challenges resulting from the demands of a rapidly changing business environment, staying competitive calls for effective management of projects and programmes. Successful organisations understand the benefits of disciplined project delivery: lower costs, greater efficiencies, improved customer and stakeholder satisfaction, and greater competitive advantage. We have always called for organisations to shift their thinking with regard to projects and programmes, and have urged organisations to embrace project management as a strategic competency for success. It appears through our latest research that organisations are listening. Research unveiled earlier this year demonstrates that organisations in Europe and around the world are making meaningful improvements when it comes to the amount of money they waste on projects and programmes. For the first time in five years, we are seeing an increase in the number of projects meeting goals and being completed within budget. We first reported these findings earlier this year in our 2017 Pulse of the Profession report: Success rates rise:
transforming the high cost of low performance, an annual survey that has tracked the major trends for project management around the globe since 2006. It is encouraging that organisations worldwide are making significant progress with success in implementing projects – the strategic initiatives that drive change. This year’s data specifically showed that organisations in Europe wasted an average of €131m for every €1bn invested in projects and programmes due to poor project performance. This represents a significant improvement over the previous year, when organisations in Europe wasted an average of €141m for every €1bn invested in projects and programmes. While progress is still needed, these results compare favourably to the improvement seen around the globe. The study found that, globally, organisations wasted an average of €97m for every €1bn invested in projects and programmes in 2016, compared to an average of €122m per €1bn in the year prior. Compared with last year, there was also a 20 percent decline in money lost due to poor project performance. Furthermore, organisations that invest in proven project management practices
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For the first time in five years, we are seeing an increase in the number of projects meeting goals and being completed within budget
waste 28 times less money because more of their strategic initiatives are completed success- Amount wasted per €1bn invested fully. Our research showed that organisations in projects and programmes are following five practices that are leading to Europe Global improved project performance. 2015 €141m €122m
Developing talent Projects and programmes are the core of any organisation’s strategic initiatives – they are how change happens. Having the talent to implement those initiatives successfully is the critical capability that gives organisations a competitive advantage to navigate through necessary change. This means developing the technical, leadership, and business management skills of project professionals. When organisations focus on all three areas, 32 percent more projects meet original goals.
2016
€131m
€97m
value, and a powerful way to align projects, programmes, and portfolios to an organisation’s overarching strategy. Success is too often defined strictly in terms of whether projects are completed on time or on budget. Successful organisations are taking steps to establish procedures for identifying benefits and monitoring progress toward achieving them throughout the project life cycle and beyond. One in three organisations (31 percent) reports high benefits realisation maturity. In Europe, 30 percent of organisations reported high benefits realisation maturity compared Realising benefits Benefits realisation management – the col- to the previous year’s 16 percent. lective process of identifying benefits at the outset of a project and ensuring those benefits Leveraging delivery capability are realised and sustained once the project Organisations are bridging the gap between ends – is key to ensuring that projects deliver high-level strategic vision and implementation
by establishing project management offices (PMOs) and strategic enterprise project management offices (EPMOs) as a central delivery authority. PMOs are well-placed to be the conduit for executing an organisation’s portfolio of projects and strategic initiatives. The strategic role of a PMO is vital, often including the alignment of the project’s portfolio to strategy, monitoring progress and optimising delivery of strategy, navigating risk, driving benefits realisation, enhancing governance and accountability, and managing talent. The percentage of organisations with a PMO continues to trend upward – from 61 percent in 2007 to 71 percent today. Among organisations in our survey that have a PMO, half report having an EPMO. And those that have a strategic EPMO report 38 percent more projects meet original goals and 33 percent fewer projects are deemed failures.
Strategic use of executive sponsors Our research consistently shows that an actively engaged executive sponsor is the top driver of projects meeting their original goals and business intent. The best executive sponsors have detailed knowledge of a project and how it connects to business strategy, use their position and authority to clear roadblocks, make quick and effective decisions, and ensure appropriate resource allocation. This year, organisations reported more of their projects have active sponsors – 62 percent, compared to 59 percent in the year prior. Increasing agility In order to retain flexibility to respond quickly to changing market conditions, more organisations are embracing a mix of value delivery approaches, including agile methods. 71 percent of organisations report they use agile approaches as part of their project management practice portfolio more frequently than in the past. The most forward-thinking organisations are embracing a continuum of practices that range from predictive to agile, well-defined to iterative, and from more to less controlled. About a quarter of organisations are using hybrid or customised approaches that match techniques to the specific needs of the project and stakeholder group. While it is promising that organisations are making improvements with the implementation of projects, there is still work to be done. As the global business climate continues to change at a rapid pace, any organisation looking for greater success with projects would be well served by focusing on these five key areas of project management. n EUROPEANCEO
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Racing uphill
When faced with challenges, companies destined for success will always find the willpower and resources to compete, writes Bartłomiej Piekarski, Investor Relations Manager at CCC Group It all began in the early 90s, when the promising career of young professional cyclist Dariusz Miłek was derailed by a serious injury. Though his sporting career was abruptly stopped, the thrill of competition would continue to have a significant influence on the rest of Miłek’s life. The character traits forged in years of training and contests, such as iron self-discipline and the determination to fight for success, have shaped Miłek’s professional career to the present day. It didn’t take long for him to switch from sports to commerce – first at an open air bazaar, then through his own shop and wholesale service, and finally by way of building the biggest footwear store network in Central Europe, setting new standards for modern retail and becoming European CEO’s Best CEO in the Sustainable Apparel Industry for 2017. At the end of the 90s, when Miłek was just starting to lay the foundations for today’s CCC Group, the Polish footwear market was already fairly well developed, with experienced domestic and international players dominating the industry. The young entrepreneur had more than enough rivals to race against, often cycling uphill. Fuelled by his energy and self-belief, the CCC network kept on growing. Market turbulence didn’t just fail to slow him down, but actually seemed to empower the young businessman, who soon became an undisputed leader in the footwear industry in Poland. When the time came for serious investment, CCC established the platform on which it rests today: a logistics centre and shoe factory in Polkowice, south-west Poland. 78 | EUROPEANCEO
On trend This rapid rise was the result of tapping into a nascent trend that has continued to this day – the growing popularity of natural leather footwear over synthetic materials. This trend is gaining momentum, and CCC’s Polkowicebased factory is now the biggest leather shoe factory in Europe. Another groundbreaking moment in the company’s history was the addition of a fully automatic mini-load logistics centre in 2011 – the biggest and most modern facility of its kind in Europe. It’s also worth mentioning that all these investments have been made with care for the natural environment at the forefront. For example, wherever it’s possible, CCC employees use daylight to maximum effect, and the company’s logistics operations are largely powered by green energy produced by photovoltaic cells placed on the buildings. Having conquered the Polish market, and armed with state-of-the-art production and logistics facilities and a proven business model, Miłek turned his attention to neighbouring countries. The next five years brought rapid international expansion – today you can buy CCC products from stores in 16 European countries, from Estonia in the north to Bulgaria in the south, and from Germany in the west to Russia in the east. In a short space of time, CCC has become the regional footwear retail leader, leaving behind players that have been on the market for decades. Today, the network consists of almost 900 stores and sells over 40 million
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Above Dariusz Miłek, CEO, CCC Group Left The CCC professional cycling team
“Omnichannel integration is required to meet market expectations and provide customers with the service they now demand”
pairs of shoes a year. However, this doesn’t mean there are no challenges left; competition is in Miłek’s DNA, so the company will always push forward to reach greater heights.
Future retail The next five years will bring significant changes to the nature of the retail market – potentially more changes than were seen in the whole of the last century. And the CCC Group has ambitions to be at the forefront of this revolution, to set its direction. With this in mind, last year the group added Eobuwie to the fold. Eobuwie is a local market leader in multi-brand footwear e-commerce, with an online network that has been growing as dynamically as CCC’s brick-and-mortar store network. This was a shrewd move, as traditional stores can’t allow themselves to be left behind by the march of progress. Full omnichannel integration is required to meet market expectations and provide customers with the level of service they now demand. When not remodelling the footwear market, Miłek continues to invest in state-of-the-art shopping malls and in revitalising historical palaces in the region. What’s more, he hasn’t forgotten about his roots; he’s one of the biggest sponsors of the Polish Cycling Federation, his CCC professional cycling team regularly competes with the world’s elite at the Giro d’Italia, and the CCC-sponsored women’s basketball team competes in the Euroleague competition. None of this would have been possible without a strict adherence to the basic tenets that have characterised Miłek’s approach from the very beginning of his journey: fairness in his relations with others, and constant improvement efforts in every aspect of his activities. If you stop pushing forward, even when the hill is steep, the world will leave you behind in a heartbeat. n EUROPEANCEO
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CEOPROFILE Daniel Ek C E O | S P O T IF Y
Streaming dream
Developed to bridge the gap between illegal file sharing innovation and a behind-the-times record industry, Spotify is conducting a delicate balancing act. CEO Daniel Ek needs to keep all parties happy ahead of the company’s anticipated IPO Sweden has a dark past when it comes to digital music. The country has been home to some of the biggest illegal media sharing networks in the world, including Pirate Bay. A report compiled by Sweden’s Film and TV Industry Cooperation Committee suggested 280 million films or TV shows were illegally viewed in the country during 2014. This content was valued at approximately $100m; around a quarter of the total value of the country’s entire TV and film industry. Sweden’s early adoption of broadband internet gave the average person enough bandwidth to upload and download whatever they wanted. By the time file sharing eventually spread worldwide, piracy had already become entrenched in Sweden. However, the country is also home to a force that might just save the music industry. Spotify has struck a balance between give and take; by giving people the minimum functionality of their service for free, the company won over millions of paying subscribers,
willing to shell out for the complete package. For only €9.99 a month, unlimited music streaming across a range of devices makes for a compelling alternative to digging through virus-ridden file sharing sites. What’s more, Spotify’s success has propelled CEO and founder Daniel Ek into the highest sphere of tech champions, standing shoulder to shoulder with Silicon Valley’s biggest names of the last few decades. As the company stands at the brink of going public, Spotify and Ek are in the process of finalising a number of details before taking the plunge. At the same time, with competitors emerging and a still-unproven business model in terms of generating profit, Spotify does face a number of challenges on its path to becoming the world’s dominant music streaming service.
business making commercial websites in his school’s computer lab. Charging far less than the average web design agency, he quickly amassed a small fortune. Unable to keep up with the workload, he trained his friends to code and quickly built a business taking in $15,000 every month. At 16, he applied to be an engineer at Google, but was told to come back after earning a degree. Following this advice, Ek enrolled at Sweden’s Royal Institute of Technology to study engineering, but then dropped out after just eight weeks when he realised his first year would focus solely on theoretical mathematics. After leaving school, Ek worked for Stockholm-based advertising network Tradedoubler, building a tool that could analyse the company’s contracted sites. Ek’s solution was so effective he was paid $1m for the rights to it. He earned even more selling patents, becoming a self-made millionaire by the age of 23. Plugged in However, this success did not result in hapEk’s experience in the tech industry goes back to the age of 14, when he started his own small piness. “I was deeply uncertain of who I was and »
CV BORN: 1983, SWEDEN
SPOTIFY |
EDUCATION: ENGINEERING, KTH ROYAL INSTITUTE OF TECHNOLOGY
IN NUMBERS
1997
2001
2006
2017
Daniel Ek started his entrepreneurial career at the age of 14, making websites for friends. At 16, he was turned down by Google as he didn’t have a degree
Ek tried university, but found his engineering course too theoretical. He dropped out and joined an ad agency, then sold his employers an analytical tool for $1m
Despite being a millionaire at 23, Ek was drifting. In 2006, he convinced a colleague to join him in creating Spotify, aiming to disrupt both the tech and music industries
Having become a household name, Spotify is planning an IPO this year, despite having never made a profit. Ek is working hard to bring the music industry on-side
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2006
50 MILLION
$2.12BN
$188.7M
FOUNDED
REVENUE 2015
PAID USERS 2017
LOSS 2015
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CEOPROFILE
Should it come to an all-out price war, Apple could afford to burn much more cash than Spotify
who I wanted to be”, Ek said in a 2012 interview with Forbes. “I really thought I wanted to be a much cooler guy than what I was.” Dissatisfied with the lifestyle his fortune had bought him, Ek moved to a cabin near the Stockholm suburb of Ragsved and contemplated a career in music. Around the same time he started socialising with Tradedoubler CEO and Silicon Valley veteran Martin Lorentzon. As their friendship developed, the two came up with the idea of going into business together. By 2006, Ek had convinced Lorentzon to leave his job at Tradedoubler and invest in a new business, aimed at disrupting both the tech and music industries. The idea, Spotify, was meant to make paying for music an easier option than piracy. With both a paid and free tier, Spotify aimed to lure people in and convert them to paid subscriptions through the extra functionality offered by the higher tier membership. But for the idea to work, Ek and Lorentzon would need access to a vast catalogue of music.
Industry blues For a long time, Spotify was not much more than a cobbled together prototype. In order for the service to start strong, Ek primarily focused on securing rights from a significant number of record labels, rather than just one or two. An incomplete catalogue would almost certainly prevent the service taking off. As a result, the company spent years burning through cash while trying to secure licences. Rather than acquire global rights, which proved impossibly expensive, Spotify 82 | EUROPEANCEO
focused on Europe. It took a custom build of the program loaded with pirated tracks to finally convince record labels to sign up. The service went live on an invitation-only membership basis in Scandinavia, France, Spain and the UK in 2008. The service expanded quickly, but music licence negotiations slowed its pace; Spotify only made its way to the US in 2011. The service emerged at a time when the industry was undergoing a shocking decline in revenues due to significant changes in the way people listened to music. With the advent of portable MP3 players, digital tracks became the primary audio format. Such radical changes had been experienced before, but this time the record labels missed out on the cash injection that usually followed. When people made the jump from vinyl to tape, and tape to CD, they often found themselves replacing a significant portion of their collections; converting a cassette tape to a CD was far harder than just buying another copy of a record. Where these past changes bolstered the revenues of the music industry, digital tracks had the opposite effect; people could easily transfer their music collections from CD to computer, which had the added effect of opening up a number of new ways to share collections. Piracy emerged as a result of this facility, with services such as
Napster and Limewire making it trivially easy to share tracks and albums online. On the back of this shift, the iTunes Store launched in 2003 as a way of encouraging people to pay for digital music. However, iTunes allowed people to purchase individual tracks, meaning record labels were unable to rely upon the more lucrative whole-album sales on which they had previously relied. This all had a profound effect on the industry. According to the Recording Industry Association of America, music sales sank from $14.6bn in 1999 to just $6.3bn in 2009. Not only were people not updating their formats, but whatever purchases were made were far smaller than before. While a resurgence in vinyl sales has helped the industry a little, the highs of previous decades will never again be reached. Spotify’s intention was to bridge this gap between consumers and artists, effectively filling the hole piracy and digital album sales had created. “Napster, as a service, worked for the consumer. What eventually killed it was that it didn’t work for the people participating with the content. The challenge here is about solving both of those things”, Ek said in an interview with Bloomberg in 2011. Despite these good intentions, however, Spotify remains a contentious service among artists.
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If you’re the smallest, strangest musician in the world, doing something only 20 people in the world will dig, Spotify can find those 20 people
launch of Apple Music in 2015, a competitor that comes built into the world’s most popular smartphone. Should it come to an all-out price war, Apple could afford to burn much more cash than Spotify.
Wiz Khalifa performing at the Spotify Best New Artist event at Belasco Theatre in Los Angeles, California
Impoverished artists Spotify’s future hinges on whether it can reach a balanced agreement with record labels and the artists it hosts. The service is fast, efficient and effective, but without a large catalogue that means nothing. Because of this, Spotify has received severe criticism from many artists. In a 2013 interview, Thom Yorke of Radiohead and Atoms for Peace described Spotify as “the last desperate fart of a dying corpse”. Atoms for Peace’s 2013 album Amok is still not available on the service. Jay Z, owner of rival streaming service Tidal, has pulled a significant portion of his discography from Spotify, and Taylor Swift famously removed her catalogue in 2014. Since Spotify is reliant on having a large selection, the loss of each big artist comes as a heavy blow. The core of many of these artists’ criticisms is the relatively low amount Spotify pays them. While extremely variable, this year artists’ rights blog the Trichordist calculated Spotify pays out approximately $0.00437 per stream. Pressure from artists and record labels has been taken on board by Spotify, and ultimately prompted a significant change in the company’s policies. In April, Spotify reached an agreement with Universal Music Group (UMG) that allowed new albums to be restricted to
premium subscribers for up to two weeks after release. In exchange for this compromise, UMG agreed to slightly lower royalties. “We know that not every album by every artist should be released the same way, and we’ve worked hard with UMG to develop a new, flexible release policy”, said Ek in a statement released at the time. These compromises are paying off; Taylor Swift has since allowed her music back on the service. Another challenge for Spotify is maintaining the lead it currently holds in the streaming market as more and more competitors emerge. The aforementioned Tidal asks for a larger monthly subscription but promises a fairer deal for artists and better sound quality. Amazon and Google have competing services, and Berlin-based Soundcloud now also boasts a paid tier. In terms of ad-supported music streaming, YouTube has Spotify well and truly beat, with music video streams well outstripping Spotify’s market share. However, perhaps most worrying for Spotify was the
$0.00437 Alleged amount Spotify pays artists per stream
Future sounds An area where Spotify does have a distinct advantage over its rivals is its discovery tools. By looking at playlists created by the Spotify community and analysing the music tastes of an individual user, Spotify has created a range of complex algorithms to find tracks a user might like. “We now have more technology than ever before to ensure that, if you’re the smallest, strangest musician in the world, doing something that only 20 people in the world will dig, we can now find those 20 people and connect the dots between the artist and listeners”, said Matthew Ogle, the man in charge of Spotify’s Discover Weekly feature, in a 2015 interview with Quartz. Spotify will need to find more differentiating factors like this in order to win over subscribers. The next big step for Spotify is a highly anticipated IPO, and ahead of this the company has to show its funding model works. The challenge for every streaming service has been finding the right balance for licensing agreements; how much to pay out versus how much comes in. While Spotify generated revenues of $2.12bn in 2015, the company’s losses totalled $188.7m. While these compromise deals will help, Spotify will need to add a lot more customers in order to reach profitability. The history of tech is littered with examples of companies that were the first to an idea, but not the most successful at executing it. This is the danger Spotify faces. That said, the company has shown a willingness to adapt and make its model work. Ek is clearly focusing on putting the company in the best possible position to be profitable ahead of its IPO. Whether successful or not, Spotify has forever left its mark on the music industry. n EUROPEANCEO
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Back-office revolution
As digitalisation sweeps the business world, e-invoicing is set to be the cornerstone of a corporate revolution, writes Richard Hurwitz, CEO of Tungsten Network Firms of all sizes are taking advantage of new technology, from large corporations that are using the power of digital technology to rewire markets and empower customers, to small start-ups targeting speedy growth. Companies that are agile, collaborative and data-driven – in both their customer interactions and backoffice processes – are edging ahead of their competitors. This trend is only set to continue as the age of digital connectivity and artificial intelligence gathers pace. Characterised by a fusion of technologies and attitudes, the rise of digitalisation is blurring the lines between the physical and digital spheres. As this effect spreads across all areas of business, it is giving rise to changes in behaviour and a new environment in which companies will need to operate in order to compete. We are, in fact, living in the middle of a new industrial revolution; one which is reshuffling our system and challenging the status quo. 84 | EUROPEANCEO
Teething pains This digital transformation brings immense opportunities, but also a new set of challenges as businesses and communities learn how to adapt and reap the benefits. There are many examples of new challenges thrown up by businesses attempting to navigate this new landscape. One currently in the spotlight revolves around the idea of the digital workforce. Uber is a business often cited as a star of the digital model, but last year the company faced heavy scrutiny in the UK after a legal battle started by current and former drivers. The case was brought largely to address Uber’s decision not to pay the national minimum wage or holiday pay, but it also related to whistleblowing claims. Uber, however, insisted it is merely a service platform, so could not be held accountable as an employer. In the judgment handed down last October, the employment tribu-
nal ruling on the case found in favour of the drivers, ruling they are workers and not selfemployed contractors, and that Uber is in fact a transport operator. The Uber example demonstrates the digital revolution is bringing with it complexities in labour relations that must be carefully handled. After all, the digital model is disruptive in its very nature, which in itself creates challenges. In the UK, Uber’s operations are under scrutiny, but it continues to operate: in Italy, however, the service has been banned in its entirety. Despite the teething pains, this fourth industrial revolution powered by digital transformation does bring with it a more efficient and effective way of doing business that should not be ignored. Besides the benefits of online banking, next day delivery and streaming content, day-to-day business processes are also becoming smoother and simpler.
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whether an electronic invoice is legal in a particular jurisdiction. The answer varies widely, as do the conditions that must be met. In the EU, the European Commission has issued a directive to mandate the use of electronic invoicing by the public sector by 2018. Elsewhere, however, the status is different. In India, the question of whether e-invoicing could be compliant at all has, in the past, been far from clear-cut. As a business we have been able to ensure compliance in terms of tax and regulatory requirements in 47 countries, and our members have been requesting for some time that we add India to our network to become the 48th. Business opportunities abound in the fast-developing market of the subcontinent, so it made sense for us to delve deeper.
European endeavours Europe is ideally placed to lead the growth in digital business. Writing for the World Economic Forum, European Commission Vice President Maros Sefcovic espoused this very view: “All around us we can see how a new economic paradigm is emerging. Europe is well set to embrace it and to create a smart, green, digital economy based on sustainability and high profitability, benefiting society as a whole.” So, what impact does all this change have on running a business? With the onset of a digital-first approach, compliance in business processes needs to be watertight, from ordering to cash processes. All digital transactions leave a footprint, so businesses will need to have more checks and measures than ever before on the where, when and how of doing business. Take the digital invoice as an example. As an e-invoicing specialist, one question we frequently encounter at Tungsten Network is
electronically is a much faster and more accurate process than performing manual reviews. In addition, pulling historical documents from a digital archive is also much simpler. This aspect of e-invoicing can be very appealing to governments in particular, as fraudulent invoices can be identified more effectively. The prospect of a stronger economy with less money leaking out illicitly makes digitalisation appealing, which is why Europe is moving towards increased adoption. Germany is currently preparing to join Austria, Spain and Italy in making e-invoices mandatory for public sector processing of accounts. A draft law currently working its way through the Bundestag states invoices will have to be transmitted and received electronically, and contain structured data (which means emails of PDF files will not be sufficient) in a format that enables electronic processing. Understanding the motivation behind this The digital revolution trend in Europe is important. The goal is less is about improving the to tackle the VAT gap and more about tackling running of a business, by the barriers to pan-European trade that result taking manual processes from varying invoicing systems and standards. According to figures from the European Comand making them better mission, e-invoices could mean annual benefits of up to €40bn as they are easy to process, reach the customer faster, and can be stored The main obstacle we discovered was centrally at very low cost. around whether digital signatures were legally permitted to prove the authenticity of invoices. Maintaining momentum By attaching an encrypted code to any elec- Using the example of digitalising the invoictronically transmitted document, it is possible ing process, one can see the benefits of the to verify its contents and the sender’s identity. broader shift towards a digital back office. The This acts as a way of ensuring important infor- most important thing to remember, however, mation and documentation has not been tam- is that going digital is a marathon, not a sprint. pered with and is secure. Working closely with Some businesses may be dashing ahead with the regional governments of eight key states revolutionary ideas and big budgets, but the in India, Tungsten was able to demonstrate purpose of digitalisation isn’t to make a splash the benefits of e-invoicing and help establish or grab a headline. its legal validity in India. The digital revolution is ultimately about Keeping up to date with global compli- improving the day to day running of a business, ance issues is important, especially in the by taking manual processes and making them digital age. This is something Tungsten better. It’s about greater speed and accuracy, spends considerable time and resources on, and a reduction in cost. Given this, it’s not which is why we created our introduction to about when you embrace digital automation, compliance document that explains the com- but about how you do it. plexities of invoice requirements in countries The change will enable businesses to be around the world. far more agile in response to opportunities and challenges on the horizon. To ensure continued success within a changing business Digital footprint If you have the proper controls and checks in landscape, however, a strategy that focuses place, e-invoicing is an exceptionally efficient on resilience as well as responsiveness is vital. way for a business to keep on top of legal and For this reason, high standards of compliance tax requirements, because checking documents are as important as ever. n EUROPEANCEO
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Jóhannes Ingi Kolbeinsson CEO, KORTA Pay
Down the middle
Payment technology is changing so quickly that businesses are struggling to keep pace. Identifying when to move, however, can be more important than staying at the cutting edge We’ve come a long way in the two decades that have passed since the dawn of e-commerce. In that almost-forgotten time, we bought goods and services in person, either in a store or by phone. Since then, we’ve gradually moved to online shopping, and while we still use phones, their most common purpose is as an internet device for online shopping, or as a payment device at a point-of-sale (POS) terminal. On top of this, our use of cash has gradually decreased, with card and NFC payments now clear favourites. What’s more, the speed of development is constantly increasing. Who could have imagined a few years ago that we could transfer money to friends just by bumping two phones together? Or that we would be able to pay for public transport fare by simply touching a debit card at a turnstile? The upside for consumers is obvious: they are free from the hassle of carrying cash. This has, however, led to increased pressure on merchants, who have to be ready to accept a growing range of payment options, or risk losing out on business.
Payment panic Whether you run a coffee shop in Prague, a design furniture outlet in Copenhagen, or an airline in the UK, you need to be able to keep up with the latest developments in your field of business. The challenges are different for every industry. The coffee shop will, for example, need to cater to tourists wanting to pay with contactless cards or even their phones. The furniture shop will be asked for instalment and finance options. And the airline will look to provide a user-friendly interface for booking and check-in, with active integration of inventory and accounting solutions. These are only a few of the challenges facing merchants in today’s business environment. While these are ample for each of the specific industries discussed, consider the pressure on payment providers who have to provide solutions for all of these situations – and thousands more – while maintaining the integrity and security of their core transaction systems. The truth is, this has caused an immense struggle for major global players in the payment
services market, who have not been able to keep their legacy systems up to speed with the latest developments in financial technology. They are slow to react, and each upgrade of their systems is complicated, time-consuming and expensive. This also means customised solutions for individual merchants cannot be catered to, and merchants are often forced to adapt to the major players’ complicated and restrictive solutions, while paying premium rates for technical support and post-processing work in their accounting departments. In some instances, this has led to frustrated merchants developing their own bespoke interfaces and solutions when racing to provide their customers with the latest fads in financial technology. This obviously creates all sorts of challenges and costs, as well as an increased security risk inherent in fragmented, hastily produced solutions.
Disruption distraction The result of these developments has been a tremendous amount of waste in the global
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You should watch out for when your parents and children start using a new payment solution. That should be your cue to move
payment processing market, which could easily be avoided. The constant flow of new solutions and technologies leads everyone – be they merchants, financial institutions or payment providers – to believe they are missing the boat. Every new development on the market is described as a business disruptor, predicted to have the same effect on the payment industry as Apple had on the mobile phone market or Uber on the taxi industry. The vast majority of such ‘disruptors’, however, turn out to be distractions, causing unnecessary costs and consuming too much time for those trying to keep up with every single one of them. Yes, you have to be on top of the latest developments and be ready when major shifts occur in the market, but you really shouldn’t spend too much catering to the earliest adopters. After all, they will most likely be ready with plan B when they find out they can’t pay with their latest contactless smartphone app at the till. What you really should watch out for is when your parents and children start using a new payment solution. That should
be your cue to move, but when that happens, odds are the manufacturers of POS systems and online payment solutions will already have integrated that particular solution into their core systems, saving those who don’t jump the gun precious time and money.
New perspective So, if developing bespoke solutions has too many pitfalls for merchants, and the major players in the payment market are too slow and inflexible, what is the right way to go for merchants who seek to offer their customers the most appropriate and up-to-date payment options? Thankfully, the ever-developing market, with its challenges to both the traditional major global payment solution providers and merchants, has created a new breed of nimble, technologically oriented, customer-focused players. My company, KORTA Pay, happens to be one of them, and I have seen first-hand how the right blend of enthusiastic implementation of cutting-edge solutions and customerorientated service can help merchants provide
their customers with the best ways to purchase goods and services while also saving costs in implementation and accounting. When founding the company 15 years ago, in a stagnated Icelandic market that was split between two dominant players, we knew doing things differently would be the key to surviving. Viewing our solutions from the standpoint of the merchant and developing them free from legacy systems and structures provided us with that competitive edge. Our online solution, for example, gave small websites the opportunity to handle online payments with first-class PCI-DSS security for a fraction of the cost of other options on the market at the time. And, realising integration of payment solutions with accounting infrastructure was a real pain point for merchants, we made automatic synchronisation of data between these systems one of our top priorities, which led to significant cuts in accounting costs for our clients.
Learn to see Having secured a significant market share in Iceland in the first 10 years of our operation, we realised merchants all over Europe were dealing with the same problems we had been solving domestically. And, since they were dealing with slow-moving major providers in a constantly evolving market, the problems they faced were expanding rather than being solved. That is why KORTA Pay, as a small, innovative payment provider, has been able to help international companies take on huge challenges at a cost no other provider could match. Our success stories include: Collector Bank in Sweden, where we built an easy-to-use checkout system for online payments; Radisson Blu hotels, which are now using our payment integration for the mainstream hotel and restaurant solution Oracle Micros; and airlines like Wow Air and Monarch Air, where our systems handle vast amounts of international online payments with deep system integration. These, and other similar international deals, were a significant reason for KORTA Pay being listed number 106 on Inc. magazine’s list of Europe’s fastest growing companies in 2016. Merchants who are increasingly frustrated by today’s challenges to their existing payment structures need not despair. The success of KORTA Pay and other techorientated payment start-ups clearly shows merchants no longer have to choose between being left behind, or spending huge amounts to keep pace with an ever-changing market. There’s a middle path, offering all the benefits at a fraction of the price. n EUROPEANCEO
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Local heroes
Hyper-local currencies have traditionally been shortlived responses to economic collapse. Now, however, a new generation of tech savvy micro-currencies looks like it’s here to stay, writes Nash Riggins Periods of recession generally force states to reel in spending. Budgets are cut, infrastructure goes unsupported, and regional economies suffer a depressive domino effect. Yet, while central bankers look to reinvigorate their economies with tools such as quantitative easing or rate reductions, aspiring entrepreneurs and community organisers often shun the macroeconomic long game in favour of their own instant, hyper-local financial solutions. Community focused currencies are by far the most popular of those solutions. Community currencies are currently enjoying a renaissance in terms of media exposure and consumer popularity, but they actually predate most of the state-backed currencies in circulation today. Community currencies typically appear and disappear in tandem with the state of correlating national economies. The Great Crash of 1929 pushed hundreds of municipalities on both sides of the Atlantic into issuing their own alternative currencies to salvage local finances, from the WIR system in Switzerland to corporate scrips in the US northeast. Elsewhere, the Spanish Civil War and subsequent socioeconomic instability led to the creation of nearly 400 different types of community currency across Spain, while Greece’s colossal economic crash in 2009 inspired the cashless Local Alternative Units system. There are thousands of contemporary examples, but all community currencies tend to have one thing in common: they’re born out of economic strife, and usually fizzle out as a country’s wider economic health improves. In 88 | EUROPEANCEO
a few cases, poor structure or a lack of financial trust kill the schemes off. The Augusta in Göttingen, Germany was forced to liquidate after a four-year run in 2011 because participating businesses defaulted on their debts. The Time Bank of Lerapetra in Crete folded after just two years due to waning participation, the UK’s Stroud Pound went defunct within three years, and the Por in Thailand shut down after six years in 2012. Clearly, sustainability has been an insurmountable hurdle for community currencies in the past. Now, however, a few schemes are starting to buck the trend.
Communal power Community currencies vary wildly by type. Loyalty schemes, reputation points, volunteering credits and money transfer systems are all popular among contemporary markets. Yet over the course of the last decade, a fresh crop of convertible and mutual currencies has demonstrated the long-term possibilities of these schemes. Unlike some other schemes, convertible currencies are exchanged for and backed by national currencies, which means they’re guaranteed up to a certain value. Local businesses subscribe, and then consumers purchase the currency with a percentage discount that’s subsidised by a fee participating businesses pay to redeem the currency for real cash. In turn, area businesses enjoy a local multiplier effect, and small credit unions can use the scheme’s pool of national currency to extend cheap loans to local businesses. It’s a win-win for locals, and
so long as organisers are able to perpetuate engagement through backed incentives, the net benefits are difficult to ignore. One success story over the last decade has been the SOL-Violette in Toulouse. The currency exists primarily in paper form, and its rate value is benchmarked against the euro. When the scheme launched as part of France’s wider community currency movement in 2011, municipal support and a range of grants encouraged 150 consumers and 30 businesses to adopt the currency. Within 12 months, 63,000 SOL-Violette had changed hands between 800 consumers and 110 businesses – and the scheme’s numbers have grown annually since then. According to researchers at the University of Lyon, this success largely boils down to the scheme’s partnership with local authorities and positive social impact. Consumers purchase the SOL with euros at a five percent discount, which goes on to bolster a group savings fund that participating cooperative banks use to extend over €30,000 per year in micro loans to local social initiatives. For their part, subscribed businesses enjoy an average four percent annual profit rise post-enrolment. Meanwhile, organisers have teamed up with municipal authorities to add 30 SOL-Violette onto the monthly benefits
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freeriding behaviour and speculative bubbles. The Sardex also enjoys a financial backing 20 times its own circulation, which is one reason co-founder Giuseppe Littera believes the Sardex has continued to grow in leaps and bounds. In its first year, 237 businesses traded just over €300,000 in Sardex. As of this year, more than 3,500 businesses and 2,000 individuals had exchanged €140m worth of transactions.
Above The Sardex was launched to help small businesses and traders reduce their reliance on an ailing and unpredictable euro
allowance of the poorest families in Toulouse. Those net benefits are all admittedly reliant upon the financial backing of city taxpayers, who subsidise 80 percent of the project with an annual €100,000 to cover management costs – a safety net most community currencies don’t have. Further south, a team of enterprising childhood friends with little financial experience have kick-started an even bigger success in the Sardex. Launched in Sardinia in 2010, the Sardex was developed to alleviate the island’s reliance on an ailing euro. Inspired by Switzerland’s WIR system, the founders of Sardex believed a new, area-specific mutual currency scheme could help reverse Sardinia’s fortunes by creating a vibrant, regional, business-tobusiness, commercial credit circuit across the island. They were right. There are no Sardex notes or digital coins. Instead, the scheme works by enabling registered companies to do business by extending credit to one another through a bespoke trading platform. This effectively closes any credit loops, and seamlessly connects supply and demand. More important still, the platform itself has developed a fairly sophisticated active brokering method and a conservative credit line strategy that protects participants from
Future now Scores of local communities have followed the examples of the Sardex and SOL-Violette. From the Bristol Pound in the UK to the Eco-Pesa in Kenya and BerkShares in the US, it’s now estimated well over 5,000 community currencies have been established across the globe. Before getting excited, however, it’s worth pointing out historical context dictates many of those currencies will fail. Indeed, recent technological innovations have begun to expose the pitfalls of kick-starting a physical, cash-based local currency in the 21st century. Yet by capitalising upon Bitcoin’s blockchain ledger, enterprising start-ups are now looking to circumnavigate those issues of sustainability by rolling out a new generation of digital-only local currencies. Israeli entrepreneur Amos Meiri is spearheading that movement through Colu, an app that benefits from the transparency, security and sustainability of the blockchain in order SARDEX IN to create the digital equivalent of cash. Colu’s NUMBERS open-source protocol allows direct exchangFounded 2010 es of digital currency in finite geographical 3,500 registered catchments, creating localised peer-to-peer companies economies powered entirely via mobile. The 2,000 personal app has already launched in Tel Aviv, Haifa and accounts Liverpool, and as the start-up begins to develop €3m commited from currencies across new markets, Meiri reckons investors in most other successful schemes will ultimately live or recent funding round die based upon their ability to utilise the sort €140m credit of technology Colu has harnessed. transactions facilitated “Cash-based local currencies are very since 2010 expensive to produce, distribute and maintain”, Source: Sardex he said. “Today, with digital currencies and the resources that have become available, we can do a better job with distribution and adoption.” Advocates are already responding to that call. Successful cash-based schemes like the Bristol Pound have introduced new mobile payment methods, and the organisers of Toulouse’s SOL-Violette have announced they are exploring development options to go digital. That’s not easy to do in practice, and it’s not always cheap. Yet so long as these schemes can prove they are able to innovate and evolve, it’s no stretch of the imagination to say community currencies are finally taking a tangible first step towards a major paradigm shift in local economics. n EUROPEANCEO
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From spend visibility to profit guidance Procurement organisations are not merely a support function. CPOs must be aligned to customer needs, writes Vesa Tykkyläinen, CEO of Basware Data is changing the face of business. There may be no greater advantage for the modern enterprise than visibility, and the source-to-pay (S2P) process is no exception. Good, clean data can drastically improve an organisation’s return on purchasing goods and services by generating a more strategic view of procurement, and supporting informed decision-making earlier in the procurement lifecycle. Spend visibility means having timely, accurate and complete data to provide insight into spending patterns, compliance and performance. So, if the CPO is only able to view the organisation’s total spend in silos, they will never gain a true picture of the scale of the cost-saving opportunities up for grabs, through price variance, consolidation, contract terms or payment discounts. And how can CPOs accurately advise the board on the financial and strategic implications of purchasing decisions if they’re flying blind?
Leveraging insight The core driver behind spend analysis – the process of collecting, cleansing, classifying and analysing expenditure data – is profitability. It helps companies identify untapped areas of savings, as well as hold onto areas of savings they have already negotiated through past sourcing efforts. Spend analysis provides the CPO with a reliable indication of which levers to pull to increase profitability. Identifying savings is one of these levers. Most CPOs are tasked to do more with less, which means finding savings from somewhere while still providing the same goods and services. There’s only so much an organisation can haggle with suppliers to get the best deal. Spend visibility helps identify savings opportunities, drive compliance and develop crucial sourcing and 90 | EUROPEANCEO
purchasing strategies which reduce cost. Fact-based spend data can also arm CPOs with the information required to both secure budgets and transform supplier performance. In the process, they may also uncover erroneous transactions, allowing their team to substantiate and recover overpayments and duplicate payments, or even detect fraudulent activity. Clamping down on maverick spend is the second lever. In too many enterprises, once a contract is signed, it tends to get relegated to a physical or virtual filing cabinet, and may not see the light of day until a problem crops up or the contract is about to renew. Rogue spending can go beyond fiscal costs to operational inefficiencies, due to unfocused, non-strategic purchasing, which circumvents much of the original value negotiated. Visibility into non-PO spend can help CPOs spot various forms of non-contracted and non-compliant spend within the organisation. Better negotiations are the third lever. If pushed, many CPOs will admit that their suppliers know more about how much they spend, and on what, than their own procurement team. Yet studies indicate enterprises that are prepared for contract negotiations can walk away from the table 15-25 percent better off than those that aren’t. Spend visibility can help put procurement on the front foot and considerably improve the organisation’s negotiating position at contract renewal time, armed with a complete picture of enterprise-wide spend with a given vendor, as well as with their competitors within the same spend category. Finally, the last lever involves streamlining S2P processes. Spend visibility allows the CPO to make informed decisions about how an organisation’s processes can be improved by removing bottlenecks. These findings can also provide valuable direction when
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Profitability is the core driver behind spend analysis
implementing a new system, both in terms of configuring the software to specific business requirements, and identifying the people and departments within the organisation whose adoption and use of the system will generate ROI from the deployment. S2P automation is not just a solution for the overworked and overwhelmed – it creates a strategic foundation for visibility across the enterprise. That’s why 100 percent spend visibility starts with capturing 100 percent of invoices and feeding them into an accounts-payable (AP) automation solution. In recognition of this, we uniquely designed the Basware solution to capture 100 percent of all purchase invoice data from incoming invoices – even paper ones. Whether purchase orders for direct purchases from ERP systems or indirect purchases through the S2P platform, or even service subscriptions and other contracts, the AP automation solution can apply touchless processing rules and get invoices paid on time. Providing visibility into the remaining invoices without matching purchase orders or contracts will complete the picture, and allow procurement teams to easily address the last mile of spend that is not yet managed.
Insight to intelligence To create strategic value, CPOs and their teams need to go beyond analysing transaction data and dig deeper into the realms of sourcing, supplier performance and supply risk information. The path to procurement performance enhancement will no doubt be illuminated by technologies such as AI, machine learning and cognitive computing. Spend analysis is no longer confined to gaining historical insights to justify past decisions. Instead, predictive analytics are increasingly being applied to data to help make informed assumptions about the future and better, more confident buying decisions. That requires procurement teams to step out of their organisational comfort zone and mash up enterprise data with a variety of external information sources – market trends, supplier performance, warranties,
risk data and more – before applying machine learning to create insights, guidance and proactive recommendations. Robotic process automation (RPA) has existed for some time in S2P solutions to streamline workflows. At Basware, we are looking to expand AI and machine learning functionality to help businesses incorporate smart capabilities into financial processes. This would allow for intelligent use of the data on buyers and suppliers generated from the millions of transactions conducted on the Basware network. This intelligence could take the form of an early warning system, with profit-driving guidance such as, for example: a potentially cheaper supplier has been found in category X; fraud risk has been identified with supplier X; or supplier X had 20 percent more late deliveries compared to last month. Cognitive procurement builds on this premise a step further, using data mining, pattern recognition and natural language processing to mimic human activity and automate repetitive tasks. Within the next few years, we will start to see numerous processes targeted for the adoption of RPA, such as identifying relevant suppliers, maintaining and approving catalogues, evaluating supplier performance, and even setting up and conducting requests for proposals.
First steps to change CPOs who have picked most of the low-hanging cost reduction fruit in recent years are now being urged to reach for additional savings and benefits. As such, spend visibility will no longer be limited to improving the organisation’s internal spend and supplier management and sourcing capabilities, but will incorporate a range of new internal and external data sources to inform decisions. As procurement organisations evolve from spend analysis into the extended realm of procurement analytics, they will no longer be focused on a single opportunity or set of capabilities, but instead must approach data with curiosity, exploring linkages between spend analysis and accounts payable automation within their end-to-end S2P suite. However, as long as organisations have yet to master 100 percent spend visibility, CPOs must learn to walk before they run in pursuit of cognitive procurement. It’s vital to invest time in achieving basic visibility into as close to 100 percent of spend as possible before evaluating advanced capabilities, techniques and integration approaches. n EUROPEANCEO
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FINANCE
Ports
Erich Staake CEO, duisport Group
The new Silk Road
China’s push to connect east and west has found its perfect partner in duisport, the logistics hub of Europe Since 2011, a rail network spanning more than 10,000km has linked Chongqing, the world’s largest industrial metropolis, with almost 30 million inhabitants, and Duisburg, the world’s largest inland port in the heart of central Europe. This route has proven itself to be a precursor for long-term growth in the exchange of goods between Asia and Europe. In China, the land bridge is celebrated as ‘the new Silk Road’. Behind this concept lies a comprehensive strategy with the name of ‘One Belt, One Road’. It has been connecting destinations for the establishment of an intercontinental infrastructure network between Europe and China since 2013, and refers to the geographic area of the historic Silk Road. The project comprises both land and sea routes, and outlines six corridors that are to be developed gradually. Financing is provided through the Silk Road Fund and the Asian Infrastructure Investment Bank. The total cost of the project is estimated at $1.1trn, making it is the world’s most ambi-
tious and expensive infrastructure project since that should set out new terms of trade in conthe US Marshall Plan following the end of the nection with the Silk Road project. The general Second World War. conditions are now being negotiated, but everyone understands that China, the rising superpower, intends to turn its One Belt, One Road Early stages An unusual state visit first focused attention strategy into reality. Not long ago, in 2013, only three container in both east and west on this development. On March 29, 2014, Chinese President Xi Jinping trains a week travelled between Chongqing, visited the Port of Duisburg; the only industry Kazakhstan and the European logistics hub destination on his European tour. The purpose of Duisburg. At the time, the trip took 16 days. of the visit was to emphasise the importance of Now, 25 Far East trains are processed in Duisthe rail connection that promises faster deliv- burg every week. The travel time has been eries than the sea route and cheaper deliv- reduced to 11-12 days as a result of technical eries than air freight, and which is supposed improvements. And, of course, this is not the to open up new trade dimensions between end of the development. On the one hand, the operators currently China and Europe. The world’s attention was fully focused use the traditional Trans-Siberian route for during the second visit. On May 13, 2017, Presi- transports to and from north-eastern China. dent Xi Jinping invited high-ranking political The new Silk Road, on the other hand, goes representatives from more than 100 coun- from Lodz and Brest in a south-easterly directries to Beijing to inform them of the gigantic tion, and now reaches another six destinations infrastructure project. At the same time, he deep in China’s central region. Overall, more requested the creation of a joint agreement than a dozen Chinese industrial centres were
92 | EUROPEANCEO
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C17AS_093_F09_04410.pdf
FINANCE
Ports
Logport I – the beginning and end of the line for trains to and from China – at the port of Duisburg in Germany Image: Hans Blossey
Chinese President Xi Jinping meets duisport Group CEO Erich Staake Image: Rolf Köppen/duisport
connected to the land bridge. In this way, rail traffic covers a wide corridor of the eastern and far eastern economic region. The Pacific Coast can also be reached in this way; from there, companies from Japan and South Korea also use the time-saving and more cost-effective transport route.
Practical perfection The capacities of the trains that reach Duisburg (central Europe’s logistics hub) from China are well utilised. They transport mainly computers and electronic components into the middle of the EU, to 150 million potential customers. There is still some empty container space on the way to China, with its approximately 1.5 billion consumers. But here too the signs point towards growth: automotive companies, not least the German premium manufacturers Audi, VW and Mercedes-Benz, use the route, as do machine and equipment builders. And other industries – including the consumer goods industry and pharmaceutical manufacturers
China, the rising superpower, intends to turn its One Belt, One Road strategy into reality from central Europe – are booking ever larger contingents. Additional transport options were created for German medium-sized companies after logistics experts at DHL managed to find a way to consolidate smaller shipments in Duisburg – another opportunity to utilise improved access to the east. Meanwhile, duisport Group is also working on additional improvements on-site. They include tailored services, such as interim storage or the consolidation and packing of container contents prior to delivery to end customers. Entire systems are securely packed by specialists at duisport’s packaging logistics centre. What’s more, in the background, completely planned-through delivery chains are held available, particularly ship and train connections to 80 important European trading and industrial metropolitan areas. At the same time, the offering on the new Silk Road is continuously improved. The use of refrigerated containers on the route is attracting new customers, as are additional safety
concepts. The prospect of saving costs through additional investments by partner countries in the rail infrastructure makes the new Silk Road particularly attractive. The Chinese partners are already planning further into the future. The ‘south Silk Road’ is supposed to extend to Urumqi on China’s western border. There, it meets the already proven route towards the north-west. An unusually large logistics hub is also built there over an area of 700 hectares, with the support of duisport Group’s know-how, so rail cars and containers from the two train routes can be combined or diverted as required. The south Silk Road continues through Georgia and Iran to the Bosphorus. There, it meets up with the southern European railway network near Istanbul. Similar to Urumqi and a large new logistics hub near Istanbul, duisport is also pursuing strategic cooperation for the large Silk Road project. Recently, duisport and Italy’s largest Adriatic port of Trieste entered into a cooperation agreement. As a result, Duisburg obtains better access to the maritime Silk Road, including markets in Greece and Turkey, while Trieste is even better connected to the railway connections of the northern Silk Road through its connection with duisport. The new transcontinental land bridges strengthen and underline duisport’s position as central Europe’s number-one logistics hub. Industry and trade in the region, and in all of Europe, will benefit from this development. n EUROPEANCEO
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C17AS_094_A09_95210.pdf
FINANCE
Ports
Isabelle Ryckbost Secretary General, European Sea Ports Organisation
Sea change A shifting political tide looks set to change the business of Europe’s ports, while environmental concerns are forcing the need for infrastructure investment. They’ll need all the help they can get to ride out this storm The world is changing, with disruption the watchword of the new era. Even longestablished industries can’t escape the winds of change sweeping across all industries and jurisdictions, and this includes the age-old ports sector. In the modern world, ports must be capable of providing the infrastructure needed to meet changing technological and business demands, and they must be assured of a flexible policy framework supporting them. This is where the European Sea Ports Organisation (ESPO) comes in, working with various European institutions to facilitate infrastructure planning and influence regulatory change – two areas characterised by slow decision-making processes. The issues facing European ports include increasing vessel sizes, growing market power through alliances, carbon reduction, ‘greening’ of vessels, digitalisation, national budgetary austerity, increased security challenges, geopolitical developments, rising economic nationalism, and Brexit. Faced with these challenges, ESPO has put forward three major priorities for this year. 94 | EUROPEANCEO
Open waters The first priority is infrastructure investment. In the context of the aforementioned challenges, building or adapting port infrastructure means more than increasing capacity. Some of these investments, however, are not bankable in the short term. As such, the grant component of Europe’s transport infrastructure policy needs to be safeguarded, if not increased. In this respect, we are also looking with interest at China’s ‘One Belt, One Road’ initiative. It is good to see Europe is attracting foreign investment, but we should be careful not to let the quest for development funding lead to ceding control over essential or critical European port infrastructure. Our second priority is facilitating maritime trade. European ports frequently raise the need for administrative simplification and the removal of customs obstacles when it comes to EU goods being transported between European ports. However, at a time when every effort is being made to reduce formalities in maritime transport, the protectionist bent to recent geopolitical developments risks radically changing trade patterns and creating new barriers. We are concerned about the impact this
Ports are part of their local communities, with a hand in their societal and environmental concerns
might have on the free flow of goods and justin-time logistics. Solutions should be developed so as to avoid unnecessary red tape. Every effort should be made to ensure European ports can remain efficient, seamless, entry and exit points for trade.
Green waves Last but not least, ESPO and its members put a strong emphasis on sustainability. Around 90 percent of European ports are situated in or near urban areas. This means ports are very much part of their local communities, with a hand in those communities’ societal and environmental concerns. Ports in Europe thus have a duty to reassure the people living around the port – and society as a whole – that their operations and investments are sustainable. We feel it is time to establish a CO2 target, as well as measures to reduce emissions from shipping in line with the Paris Agreement. We strongly believe the level of ambition should be set at a global level. But ports are not just places to accommodate ships; they are nodes of energy and increasingly important clusters of industry and maritime economy. Besides developing plans to cut emissions and increase energy efficiency, port authorities are beginning to reflect on how to turn the path towards decarbonisation into a successful business case. Over the last few decades, European ports have faced many important economic swings. Even though political decisions and burdensome procedures often prevent ports from moving fast, they have proven themselves to be resilient and dynamic. Let’s now hope they can further build on this resilience to face the coming waves of change. ■
C17AS_001_001_58132.pdf
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C17AS_096_B04_71437.pdf
FINANCE
Ports
Modal logic
80 percent and passenger activity by 51 percent. To keep up, the EU will need to spend at least €550bn before 2020, €215bn of which will go towards fixing bottlenecks. “The debate about future EU budgets from 2020-2027 has begun”, said van den Bosch. “EFIP will join forces with 30 other European transport organisations to emphasise that investing in transport is the best plan for Europe. The EU’s tendency to develop projects strategies for developing ‘logistics 4.0’, which through multi-fund approaches and blending encapsulates cutting-edge supply chain tech- should not be considered a silver bullet. The nologies such as IoT devices. “As facilitators, sector needs continuous, dedicated funding.” intermodal ports can support the development of a port digital layer, and can initiate Sustain the future the development of independent IT platforms. In the private sector, transport and waste manThis would enable shippers and forwarders to agement companies will need to keep working bundle their freight flows and integrate real- towards a circular economy that emphasises time data”, said van den Bosch. waste reduction and utilises vast supplies of raw materials. Port authorities such as Strasbourg already host industries that collect, treat and Stakeholder states To make digitalisation smooth and effective, ship waste materials. If these materials were public and private entities need to collaborate. incinerated and used to generate power, they The collection of big data by an independent could reduce fossil fuel use and create jobs. “Inland ports are attractive for the recygovernmental body would allow containers and cargo to be monitored in real time. This cling industry, due to their proximity to cities, could lead to better economic forecasting as industries and terminals”, van den Bosch said. an array of different parameters, including “Intelligent transport systems bring additional water levels in ports and fuel consumption opportunities to reduce carbon emissions and in vehicles, could be combined. It would also to support EU objectives on climate change help public bodies to gauge when and where to towards 2030.” In future, these will be key areas of growth, as will the more interlinked develop physical infrastructure. The EU’s 2011 white paper – Roadmap to a networks between inland ports and seaports. “As economies shift their emphasis towards Single European Transport Area – stated that over €1.5trn will be needed between 2010 and services, logistical hubs will need digitalisation 2030 to develop transport infrastructure in and automation to stay afloat. As new technololine with demand. By 2050, the demand for gies emerge to support this, they will change freight transport activity is expected to rise by the industry in dramatic yet positive ways.” n
As digitalisation enters new territories, EU port authorities must invest in both hard and soft infrastructure to stay competitive, according to Alexander van den Bosch, Director of the European Federation of Inland Ports For many years, digital technologies have been transforming logistics across a range of industrial sectors. Today, the rise of big data and the Internet of Things (IoT) are continuing to make digital devices more complex and widespread. The pace of change has been particularly rapid in the transportation sector as both suppliers and their customers demand quicker, cheaper and simpler services to connect them. At the frontline of this innovation push are intermodal hubs, where cargo is transferred between different modes of transport. The European Federation of Inland Ports (EFIP), which represents inland ports in Europe, believes their future competitiveness will hinge on the quality of their hard physical infrastructure and their adoption of soft digital solutions.
Intermodal ports “As trade and cargo volumes are expected to grow on a global level, the integration of intelligent transport systems within port communities will have huge potential to increase the efficiency and cost effectiveness of logistics”, said Alexander van den Bosch, Director of EFIP. Since they are not directly involved in the supply chain, intermodal ports can play a neutral role in bringing parties together to discuss 96 | EUROPEANCEO
C17AS_001_Y03_98888.pdf
the interchange of business
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C17AS_098_A08_37166.pdf
FINANCE
Ports
Björn Boström CEO, Port of Ystad
Crucial corridor The Ystad-Poland corridor is a vital connection between burgeoning eastern European markets and their key Nordic investors. Strengthening the link should be a continental priority Today’s globalised world requires new approaches from managers to keep up with an ever-changing business environment and to embrace new opportunities. Change is the only constant, and the Port of Ystad constantly endeavours to stay ahead of developments in the maritime transport business to ensure the current growth in the port continues in the long term. The Port of Ystad in southern Sweden serves as a perfect example of how the success and future development of ports relies on a combination of proactive management, cooperation across business sectors, and governmental support on a regional, national and European level. “It is of utmost importance that national governments prioritise infrastructural projects, especially waterways, and focus on securing 98 | EUROPEANCEO
easy access to and from ports”, said Björn Boström, CEO of the Port of Ystad. “However, investment from national governments alone is not sufficient. To achieve proper infrastructural coherence and efficient transportation flows, cooperation across borders and regions is crucial to support future growth.”
Making preparations Ystad is an important hub, connecting Scandinavia with eastern Europe. Since the beginning of the 70s, Ystad has been the leading port for ferry traffic to Poland. Although Swedish-Polish tourism is increasing, the largest amount of traffic continues to be goods from eastern and central Europe to Scandinavia. Over time, volumes have increased, even during the financial crisis, and in recent years traffic volumes between Ystad and Poland have increased significantly. In 2016, new records were set in the volume of cargo, trucks, cars and passengers transported. The volume of trucks increased by 13 percent and volumes of goods by 16 percent. The port also connects the Danish island of Bornholm in the Baltic with the rest of Scandinavia, through high-speed ferries and a highway by the fixed link to Copenhagen. The island is highly dependent on fast and stable ferry traffic, and the Port of Ystad delivers this essential service. “Our partners – the ferry companies Polferries and Molslinjen – have already ordered new, larger ferries to meet future demand, and we have to be ahead of this development”, said
Boström. “The Port of Ystad is preparing to invest in two new ferry berths where larger vessels can call. We know hinterland connections will be affected by traffic volumes and we are doing everything we can to raise this question on a regional, national and European level.”
EU recognition Eastern European economies are growing rapidly, and the Nordic countries are important investors and trade partners for them. This creates a growing need for fast and flexible transport between the two. The intense traffic on the corridor between Ystad and Poland is not just a regional matter – it is a European matter, and the Port of Ystad is working proactively for the route to gain recognition and become a higher priority for the EU. “We are positive that Europe will benefit from prioritising the Port of Ystad and the Ystad-Poland corridor. With European investments in this corridor, the whole Baltic Sea would be better connected and efficient infrastructure would bring growth to the region”, said Boström. The Port of Ystad will continue to do what it takes to stay ahead of regional and industrial developments. A combination of proactive management, cooperation across business sectors, and ongoing communication with influential decision-makers is time-consuming, and not part of the core business of a port, but it is nevertheless key to success in an increasingly interconnected business world. ■
C17AS_001_001_20170.pdf
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FINANCE
Ports
Barbara Scheel Agersnap Acting CEO, Copenhagen Malmö Port
Straight to the core Designated European ‘core ports’, the expansion of operations in Copenhagen and Malmö will provide an economic boost for the whole continent Copenhagen Malmö Port (CMP) is investing heavily for the future. We are planning to open a new, modern container terminal in Copenhagen, by 2021 at the latest, securing growth for one of Scandinavia’s largest port operators in one of Europe’s most exciting markets. What’s more, the new container terminal is just one of several new projects for CMP. Since 2010, the company has invested in new roll-on/roll-off, train and container terminals in Malmö, and a new cruise terminal in Copenhagen, which opened in 2013. With the new location for the container terminal, CMP will be able to receive even larger ships in the future. It is essential for customers that they have as much flexibility as possible when designing their services and optimising their shipping fleets. Establishing container operations in Ydre Nordhavn in Copenhagen is the best solution, in terms of both economic and nautical aspects. The terminal will be more automated, which will enable more containers to be handled per hour and better use to be made of the area.
Full-service port CMP is a port operator based in two countries, offering logistics services to 8,000 ships every year, and it is a full-service port. In both Copenhagen and Malmö, the company receives all kinds of goods, and offers berths and specially tailored infrastructure to all types of vessel, including roll-on/roll-off and container traffic, car imports, and wet and dry bulk shipping. We focus on creating new business and volumes to drive our growth. The major potential is not necessarily in chasing market share, but rather in establishing offerings that can attract new customers and lead to more business with existing customers. CMP’s geographical location has enabled the development of a successful hub concept, which means that freight arrives at the terminals in Copenhagen and Malmö by ship. Once there, it is reloaded and proceeds onwards – by train, lorry or smaller ships – to its final destination throughout northern Europe, primarily Scandinavia and the Baltic Region and the roughly 100 million consumers in those areas. This setup gives our customers an advantage
Copenhagen has long been one of Europe’s biggest cruise destinations, receiving 850,000 passengers in 2017
in their freight handling, and it also contributes to increased sustainability as freight is transported as far as possible by ship, which has a comparatively low environmental impact. Additionally, CMP handles extensive cruise traffic. Copenhagen has long been one of northern Europe’s biggest and most popular cruise destinations, receiving 850,000 passengers in 2017.
Expanding operations The EU has designated CMP’s facilities in Copenhagen and Malmö as ‘core ports’. The designation established the ports’ geographical location and modern infrastructure give them extra importance in terms of future investment to improve Europe’s transport network. This makes it easier to receive co-financing for investments and development projects, e.g. for merging rail and road connections or other infrastructure initiatives that will need to be implemented in our facilities in the future. CMP’s new container terminal will open in 2021. Hand-in-hand with the investment in new port facilities, CMP is also focusing on developing new, intelligent business solutions. These are services that make us more effective, and which, above all, give customers added benefit. Intelligent solutions also mean we develop collaborations with other industry players who handle the customer products throughout the logistics chain. Together with these companies, it is possible to develop solutions that are more comprehensive for the customer. ■
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C16ND_001_Z06_96753.pdf
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C17AS_102_A06_70795.pdf
FINANCE
Ports
Sustainable shipping Digital processes and smart solutions are steering the maritime industry into a new age. The pace of change might be too fast for some, but those who embrace the future stand to reap significant profits, writes Valdo Kalm, CEO of the Port of Tallinn able to have trucks stop on the outskirts of the city centre, to be directed onto vessels at exactly the right time. What’s more, a smart solution not only shortens waiting times at the port, but also reduces traffic loads and thus minimises air pollution. For the industry as a whole, smart solutions at customer endpoints are a must-have tool, but for real efficiency gains the keyword is digitalisation. All our communication channels are, of course, digital already, and the logistics sector already utilises in-house digital platforms and solutions. But for a value chain that extends across borders and includes dozens of different companies, the most common bottleneck is the interconnection of IT systems between different actors. A tool designed specifically for the logistics sector would allow seamless connection between different databases, allowing firms to work together for maximum efficiency and impact. Security is paramount in such a system, Be smart The Port of Tallinn has, together with its part- and has been considered – all outgoing data is ners, started testing a pilot project for a smart digitally signed and encrypted, while incoming port application, which also addresses truck data is authenticated and logged. congestion. Currently, vehicles bound on ships usually have to park in the port, with simulta- Sustainable care neous boarding inevitably resulting in traffic Underpinning daily operations and corporate jams. With the implementation of a real-time planning, the watchword for the maritime waiting line system, however, we will soon be industry is sustainability. It is not only a quesAs a field of business that has remained constant throughout almost the entire history of humankind, shipping and port operations are often considered by the wider public as representing the good old days: an idyllic past when the pace of change was slow and new ideas less constant. While this may have been true a decade ago, things have since changed dramatically. As an example, for a company servicing more than 10 million passengers per year, ensuring smooth traffic for both people and vehicles is now as natural a requirement as secure premises. Meeting this need requires simple check-in processes, short waiting times, and efficient management of waiting lines for vehicles and trucks. In the past, this entailed a mammoth feat of complex organisation, but now it can all be achieved with a modern ‘smart port’ application.
102 | EUROPEANCEO
tion of external regulations, but also a matter of operating in a modern business environment that puts the concerns of the environment on an equal footing with the financial bottom line – being green is no longer an option, but a requirement of good business. Being green means valuing sustainability and, for any business entity, sustainability is the key to future development and success. Therefore, being green is a business goal in itself, as the combination of smart and sustainable solutions fosters competitive advantages, and has a direct impact on the bottom line. In 2017, the first LNG-powered ferry was commissioned on the Tallinn-Helsinki route. A ferry that produces 25 percent less CO2 , 85 percent fewer nitrogen compounds, and practically no sulphuric compounds or soot particles on the route with heaviest traffic in the world marks the beginning of a new era in marine traffic. In all sectors, the prerequisite of success is the fast adoption of the opportunities that technological innovation offers us. Focusing on smart technology and digital solutions, with a keen eye on sustainability, is today’s way forward in terms of serving customers and reducing needless bottlenecks. This not only has a direct impact on profits, but also benefits society as a whole. n
C17AS_001_001_43339.pdf
C17AS_104_A05_44580.pdf
FINANCE
Ports
Still waters run deep With deepwater access, abundant connectivity and ambitious expansion plans, the Port of Kalundborg offers a complete package for any modern company with shipping needs, writes Tina Altenburg, Senior Consultant at the port The Port of Kalundborg is one of the few deepwater ports in Denmark. It’s situated at the western end of Zealand, a convenient distance from Copenhagen. In recent years, the port has undergone a range of positive developments, culminating in an expansion of the overall area. Kalundborg also has an industrial cluster, which is dominated by companies in the medical and chemical industries. Novo Nordisk has, for instance, based the world’s largest insulin factory in Kalundborg, and Novozymes produces enzymes for, among other things, detergents in the area. Furthermore, as well as the industrial cluster and a location with an hour’s drive of Copenhagen, Kalundborg is perfectly suited to recent developments in shipbuilding. As new ships become bigger and bigger, they need a port with greater water depth – that goes for container ships as well as cruise ships and yachts. With a water depth of 15 metres, the 104 | EUROPEANCEO
Port of Kalundborg can accommodate even hope to attract yet another manufacturing the most up-to-date models. company to the New West Port, possibly within the medical or chemical industries with which Kalundborg already has such strong links. Baltic access Today, the port encompasses approximately 800,000 sq metres, all of which is occupied. For Tank terminal this reason, authorities have decided to expand Back in 2008, the Port of Kalundborg started the overall port area by 330,000 sq metres. The work in a whole new business area, which has new area, which is called the New West Port, since attracted a lot of activity. In connection will have a 500 metre quay, and the water depth with the construction of Pronova BioPharma’s will remain at the aforementioned 15 metres. new factory, the port began to establish a tank “We want to invest in the future, but we terminal, where the company could store the have run out of free space in which companies fish oil needed for its products. Today, we rent that need direct port access can be established”, out tank capacity for chemical companies such said Bent Rasmussen, Director at the Port of as BASF, Haldor Topsoe and Avista Oil. The Kalundborg. “To fulfil the port’s development tank terminal has grown continually since it and growth potential, we are now enhancing was established, and has become one of the our position with more square metres, helping port’s main business areas. We expect to install the port and the surrounding business cluster further tank capacity at the New West Port. to continue contributing actively to business Another business area at the New West and employment development.” Port will be our container terminal, which The port has the advantage of being the only also needs more space to grow. The container port in Zealand to offer a 15 metre water depth. terminal has connections to the main conMoreover, it is located right by the T-route, tainer hubs in northern Europe – Hamburg which is the deepwater route connecting the and Bremerhaven – as well as connections to Baltic and North Seas. With this in mind, we the UK, Poland, Finland and the Baltic states. There is, however, still a lot of space at the New West Port for companies that need production or storage facilities with deepwater access. The Port of Kalundborg is prepared for the Kalundborg has the advantage future, and construction is due to begin later of being the only port in Zealand this year, to be finished by February 2019. n
to offer a 15m water depth
F OR F UR T HE R INF OR M AT ION
www.portofkalundborg.dk
C17AS_001_001_47166.pdf
C17AS_106_A07_75713.pdf
FINANCE
Ports
How to move a port While pollution gets most attention, community impact is an equally important environmental concern. The Port of Trelleborg is working for the benefit of customers and local residents, writes Managing Director Tommy Halén The Port of Trelleborg is the largest roll-on/rolloff port in Scandinavia. It handles a significant share of Swedish foreign export and import volumes. Today, 12 RoPax ferries operate regularly in the four transport corridors between Trelleborg and the European mainland, with efficient, regular links to Travemünde, Rostock, Sassnitz and Swinoujscie. The geographic location of Trelleborg as Sweden’s most southerly port – only 85km from the German border – is perfect for a high-frequency timetable. Now, however, to cope with growing traffic and customer needs, an extensive project is underway to move the port. In a complex playing field of intermodal competition, regulatory requirements and the port’s own aspiration to become a sustainable entity, the move is an integral part of the port’s strategy to ensure competitiveness and to sustain wealth and growth in the region.
Clear vision The Vision 2010/2015 plan for the port, based on the sustainable development of a leading Baltic seaport, with special focus on environmental improvements and port capacity upgrades, is now on the way to being completed. In the first 106 | EUROPEANCEO
stage of the port’s expansion, new breakwaters with a cumulative length of 3km have been built, the port basin has been enlarged, and the water depth has been increased. A new, modern ferry berth has also been built, as well as a new intermodal terminal area and the relocation of the port 500m south-east using new land claimed through dredging. These investments have been made to accommodate increasing traffic, customer requirements for larger vessels up to 240m, and environmental regulations. The next stage of development will involve the installation of a new check-in, another three ferry berths, a quay, larger yards, two more 750m tracks in the new area of the port, and a new entrance from the eastside. All infrastructure investments are planned to be finalised when a new ring road around the city is
Moving vessel traffic from inner ferry berths will improve air quality and reduce noise in central Trelleborg
completed in 2025. The ring road will enable smooth goods transports to and from the port, an improvement on the current route which runs through central Trelleborg.
Measuring impact Significant improvement of the port’s environmental and business performance will have a positive spillover effect for the city and community of Trelleborg. Societal integration is an important cornerstone of the Port of Trelleborg’s development strategy. That means major investments and improvements are checked against social aspects and expected impacts. A long-term objective of the community and the port is to develop the city towards the seaside, based on the port’s expansion to the east and into the open water. For vessels, this means increased safety when manoeuvring at the port and increased efficiency as they save both time and bunker space. Traffic and freight flows will also rationalise, creating a safer and more flexible port that meets the stricter environmental requirements imposed on shipping. Moving vessel traffic from the present inner ferry berths, closest to the centre of Trelleborg, to new ferry berths south of the existing ones will have significant environmental benefits, including improved air quality and reduced noise in central Trelleborg. When all inner ferry berths are taken out of operation, parts of the former port area will be released for development, for example as urban residential spaces in an attractive part of Trelleborg. n
C17AS_001_001_03712.pdf
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C17AS_108_G03_03978.pdf
Hanging on every word In the digital age, delivering a live, in-person message is more powerful than ever before. But, while the art of rhetoric still carries historical weight, a modern approach is the only way to reach a contemporary audience, writes Elizabeth Matsangou Âť
108 | EuropeanCEO
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OPEN YOUR CAKE HOLE
Above Nelson Mandela addressing crowds in Cape Town upon his release from prison in 1990 Left Martin Luther King’s iconic speech during the March On Washington civil rights protest Right Winston Churchill addressing the UK in 1939, at the onset of the Second World War
There are certain traits that set leaders apart. The ability to maintain a clear, forward-thinking vision, swift adaptability, proactivity and reliability are the most commonly touted for CEOs, but there is also another. This additional skill may not be essential to the job itself, but it is what turns a good leader into a fantastic one. “A good speaker should inspire. You can be a great person with an amazing experience, but a very boring speaker because you don’t move or motivate the audience. To touch people and make an impact, you need to be authentic, humble, and have a lot of charisma”, said Richard Attias, founder of the Clinton Global Initiative and Nobel Laureates Conference, and producer of the World Economic Forum between 1993 and 2006. Being an excellent speaker can motivate an entire workforce, unleash a wealth of new possibilities, and even rouse a generation. Yet, as beneficial as public speaking and participating in seminars, events and conferences can be for one’s profile and organisation, there are those who attempt these things with precious little success, or avoid them altogether. Though oratory is a skill that comes naturally to few, it is one that can be learnt and mastered by the rest. 110 | EUROPEANCEO
Feel the nerves Several famous speeches deserve a mention when it comes to the topic of public speaking. Of course, Martin Luther King, Nelson Mandela and Winston Churchill come to mind, and yet, while their speeches will never be forgotten, the art of public speaking has changed significantly since their time. “Most people haven’t caught up”, noted Cam Barber, professional speaker, speaking coach and author of the book What’s Your Message? Public Speaking with Twice the Impact, Using Half the Effort. “The old mechanical performance mentality needs to change so people can connect with listeners. “Donald Trump is an example of this evolution. By the old approach, Donald Trump would be considered a terrible speaker, but he is able to make a powerful connection with his core audience, and he delivers vivid messages that even his opponents repeat. Richard Branson and Bill Gates are also examples of this change; neither of them have the stage gravitas of Churchill, JFK or Martin Luther King, but they seem genuine and deliver vivid messages that change people’s minds.” When asked what makes a good public speaker, Barber responded with three key
points: “The ability to deliver a vivid message that can be recalled and hopefully repeated; the ability to connect with an audience and be believable; and the ability to bring an idea to life.” Naturally, confidence is essential in public speaking. While it is normal to be nervous when speaking in front of a large crowd, as Mark Twain once said: “There are only two types of speakers in the world: the nervous and the liars.” Experts recommend speakers, particularly those new to the game, use their nerves to their benefit. It is also worth noting that being nervous discourages complacency, which in turn pushes speakers towards preparation and practice. Of course, some speakers will always profess that winging it works best when aiming to sound natural, but leaving things to chance, especially for a make-or-break presentation, is far too risky a strategy. A speech must be prepared as far in advance as possible to ensure there is enough time to practice, practice, practice. Going over a speech repeatedly and watching playbacks leaves less room for error on stage. That said, accepting a speech cannot be repeated word for word is equally important. Understanding slight changes can
C17AS_111_G03_49533.pdf
OPEN YOUR CAKE HOLE
Above and right Microsoft founder Bill Gates and Virgin Group founder Richard Branson, both relatively unassuming men who have inspired others through their genuine passion Far right US President Donald Trump, a poor public speaker by traditional standards, but able to connect with his audiences and supporters on an emotional level
“AN EXCELLENT SPEAKER CAN MOTIVATE AN ENTIRE WORKFORCE, UNLEASH A WEALTH OF NEW POSSIBILITIES, AND EVEN ROUSE A GENERATION”
be made when speaking allows for flexibility and flow, so that, when a sentence is not spoken precisely in accordance with the notes, it does not stop the speaker in their tracks and cause them to fumble. Barber argues a big myth that causes nerves is the importance placed on body language, with many believing the misunderstood ‘fact’ that 90 percent of the impact one makes is nonverbal. Indeed, in his book Barber explains his discussion with the author who first shared this statistic, who went on to tell him that it actually relates to contradictory messages. “Put simply, if your visual signals and/or vocal tone contradict the words you are saying, the visual signals will be given more weight by your listener”, Barber wrote. “The biggest mistakes are trying to orchestrate body language and worrying too much about a perfect performance. This creates an environment for more anxiety. The association of public speaking with acting and stage performance must be cut. Why? Because if you believe you need the skills of a Shakespearean actor to be an effective speaker or CEO, you’ll perceive public speaking as a Herculean task. It puts ridiculous pressure on the typical businessperson to change who they are just to explain an idea or bring an idea
to life in front of an audience. Yet this association is so stuck in some people’s minds that they use 10 times more effort and energy preparing and delivering a speech than they need to.”
From the heart Another way to use fear is to channel it into excitement. When a speaker is truly passionate about their subject, this will be detected by the audience, who will, in turn, be enthused. Passion goes hand in hand with authenticity. Essentially, it is crucial speakers are themselves when on stage if they are to have any chance of connecting with their audience. Trying to put on a better version of oneself can often come across as insincere, or even calculated. To avoid doing so, it is advised the individual speaks in a natural tone, and even imagines they are having a one-on-one conversation. This allows a more natural discussion, as monotony is the enemy of any speech. In terms of connecting with the audience, one effective tool many successful speakers use is storytelling. Starting a speech with a story, preferably one that is personal to the speaker, is a sure way to capture interest and get listeners engaged. Indeed, storytelling is far more effective than simply proffering facts and figures, » EUROPEANCEO
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TRICKS OF THE TRADE Embrace the fear Rather than fighting to quell nerves, use them as a driver to prepare thoroughly and practice hard. Winging it is only an option for the most naturally gifted speakers; a calm performance is more often the result of solid preparation.
Forget about Hollywood Ignore the myth that public speaking is akin to acting. If you try to make yourself a different person, you’ll both add to your own pressure and lose the trust of the audience. People can sense duplicity – it’s better to be yourself and be honest.
which not only create a dull atmosphere, but are also very unlikely to be retained by audience members. Giving your own personal experience can also help to impart your own personality and provide a certain level of familiarity, which again helps a speaker to connect with their audience. Being genuine does, however, require plain speaking. Many novice speakers believe they must demonstrate how intelligent and qualified they are to justify speaking in front of an audience about a particular subject, and so feel the need to use technical and complicated vocabulary. Speakers must remember the fact they are giving a speech in the first place demonstrates they are qualified to do so, and that they possess information and advice not known by their entire audience. Thus, speaking clearly so you are completely understood is essential, while using grandiose and technical words can distance audience members, lose their interest, and give off a disingenuous persona. 112 | EUROPEANCEO
Stick to your message Make sure your presentation has a clear, on-message thread that can easily be followed. It only takes one non-sequitur for your audience to feel lost and disengage, so structure your arguments clearly and be sure to avoid extended digressions.
The past is powerful Humans have evolved to respond positively to stories, so consider kicking off with one. You can also use stories much more effectively than figures to illustrate a point. Numbers don’t tend to be retained by audience members in any case.
Modern symposia Though it has always been important for business leaders to be proficient public speakers, it is now arguably more important than ever, given the ubiquity of social media and the ease of sharing information. What’s more, choosing the right arena in which to speak is equally critical. In the digital age, conferences and events have become a key platform for delivering a message in a more direct and personal way than a screen can ever achieve. It is perhaps for this reason that such events have grown in popularity in recent years. In the US alone, the market for conferences is predicted to grow 44 percent between 2010 and 2020, according to the US Bureau of Labour Statistics, far surpassing the expected growth of numerous other industries. “Not all conferences are important, to be honest. It is critical to identify those that are purely a vehicle for the organisers to make a profit by selling tickets and offering sponsorships, while resulting in no direct outcomes or
Aspire to inspire The goal of a good speech should be to inspire trust and likemindedness through the strength of the message. Don’t think of it as begging or convincing the audience to agree; let your passion shine and others will follow.
“IT HAS BECOME EASY FOR EVENT ORGANISERS, AND EVEN SPEAKERS THEMSELVES, TO FALL INTO THE TRAP OF REPETITION AND DUPLICATION”
OPEN YOUR CAKE HOLE
TALKING TERROR
7%
of people suffer from a fear of public speaking Fear of public speaking reduces wages by
10% 8%
of people who fear public speaking seek professional help Fear of public speaking reduces promotion chances by
15%
Source: Magnetic Speaking
calls to action”, Attias said. “The conferences that matter to business are those that generate productive debate and collaboration for solving pressing business and global issues, and result in deliverables and commitments that will make a real and lasting impact.” Media organisations seeking new sources of revenue are part of the reason for the rising number of conferences. Attias, however, argues that, in order for such events to be effective, they cannot simply be about making a profit. “They must be developed as a communications and strategic tool for achieving goals that can range from raising the profile and brand of a host nation or city, to addressing challenges that the global economy is facing.” Providing a space for communication is essentially the core goal of seminars and conventions. They provide a rare and valuable opportunity for people in an industry to meet face to face, discuss recent innovations and new ideas, and strike up collaborations. Those who attend do so with the hope of learning something new, something that can be used for the benefit of their own business. While the internet is at hand as an indispensable research tool, there is nothing quite like personal interaction or attending an inspiring talk. “They also provide a powerful platform for discovering and understanding other cultures, connecting generations, and meeting and building relationships with potential partners, investors and clients”, Attias added. Obviously, due to the rising number of conventions now taking place across the globe, it has become easy for event organisers, and even speakers themselves, to fall into the trap of repetition and duplication. To do so, however, can have a profoundly detrimental impact on the desired outcomes of an event, with attendees leaving feeling uninspired, bored and having learned nothing new. “The two most important takeaways from my experience of producing major events like the World Economic Forum are content and inclusivity”, claimed Attias. “The moment your content is a ‘copy and paste’ of other events and you exclude communities which are fundamental for the future of our societies, especially young people, you fail.” Aside from the trap of mundanity, the rising popularity of conferences and seminars has seen them rapidly evolve in terms of form,
with technology playing a central role in the transition. Tools such as virtual and augmented reality, for example, are adding a new dimension to events and providing further engagement for attendees. New apps are also helping the whole process to run more smoothly, making conferences much easier to navigate. Social media, meanwhile, can ensure debates begin prior to the event itself, and continue long after it has finished. Amid all these changes, however, the essence of what makes a great conference remains. “Technology will never replace the power of interacting and engaging with people face-to-face”, said Attias. “That is why we are always focused on creating conferences that offer the best of both digital and real worlds. It is essential that people be able to differentiate between conferences which are purely business opportunities versus those that have a real raison d’être, with clear, strong, sincere commitments and outcomes.”
Make it personal With so many screens everywhere we look – computers at work, televisions at home, tablets and smartphones wherever we go – the power of human interaction has never been as strong as it is today. People nowadays crave intimacy and human contact. So used are we to being bombarded with information from a plethora of different sources, having it delivered in a way that is personal and direct is a breath a fresh air. It communicates with us at the most basic of levels, and so can motivate and inspire more effectively than any other approach or medium. As such, public speaking is essential for those wishing to climb to the highest echelons of business. To lead is to inspire, and there is perhaps no more effective way of leading than through words. Mastering the skill of public speaking has become an indispensable skill in business leadership. It is vital for anyone wishing to make waves, disrupt industries, rouse teams, and convince others of the message they seek to spread. As daunting as it may seem to some, there is no escaping it. Individuals can at least seek comfort in the abundant lessons and pieces of advice that make it so much easier. And, in doing so, they can open up a new world of possibilities for their careers and organisations alike. n EUROPEANCEO
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FINANCE
US Destinations
Beachside business
and IMS Gear are just a few of the household names that call Virginia Beach home. As a business destination, Virginia Beach has many benefits. Chief among these is the Port of Virginia, a key gateway for global commerce. Others include no machinery and tool tax, and a highly skilled workforce. More than 100,000 students are enrolled in our local colleges and universities, and innovative apprentice programmes provide trained employees who are ready to work on the world’s most Coast, Virginia Beach boasts a robust broad- advanced equipment. band infrastructure that will support the next generation of telecommunication systems. Lifestyle factors A regional backbone will connect the area’s The living is easy in Virginia Beach, and the major government and education facilities, and city works hard to make life and business easy will enable greatly expanded commercial and for our international arrivals. Thanks to the residential access to ultra-high-speed networks. heavy volume of global trade that takes place here, companies have access to some of the best international business law and immigraManufacturing boom The Virginia Beach boom, especially in the tion attorneys in the US. Also, most Virginia international market, did not happen by acci- Beach banks are experienced in conducting dent. For years, we have focused on making international financial transactions. Whether it’s life-changing advances in the city attractive by creating an outstanding workforce development infrastructure, by the biosciences or breakthrough discoveries keeping taxes and regulations low, by providing in tech, much of the country’s most exciting creative incentives based on companies’ needs, work is being done in Virginia, and in Virginia and by promoting Virginia Beach as a wonderful Beach in particular. New initiatives and innoplace to live and work. Today, there are more vative partnerships between local universities, than 200 foreign businesses located in the government and private industry mean the Virginia Beach area, and more than 20 inter- momentum has only just begun. n national firms have located their US or North American headquarters here. STIHL, Kettler, F OR F UR T HE R INF OR M AT ION Busch, Hermes, Haulotte, SANJO Corte Fino www.yesvirginiabeach.com
Foreign and US companies alike are flocking to Virginia Beach to take advantage of the area’s futuristic connectivity and business environment, writes Warren Harris, Director of Virginia Beach Economic Development Virginia Beach attracts millions of visitors from around the world each year thanks to its strategic location at the heart of the US East Coast. The world’s leading technology companies recognise Virginia Beach as more than a vacation resort, though, and are eager develop a presence in the area after announcements that Telefónica, Microsoft and Facebook are planning to bring the world’s fastest transatlantic fibre cables to Virginia Beach in 2017 and 2018. MAREA, owned by the three tech giants, will bring the first ultra-high-speed data cable from Bilbao, Spain to Virginia Beach in the fourth quarter of 2017. BRUSA, owned by Telefónica, will bring the second cable from Rio de Janeiro, Brazil to Virginia Beach in the first quarter of 2018. Additional cables are being planned, as are major data centre developments. Virginia Beach is plugged-in and ready to go, with a world-class telecommunications system, complete with existing data centres and development sites. In addition to being the newest cable-landing site on the US East 114 | EUROPEANCEO
C17AS_001_001_93519.pdf
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C17AS_116_C04_68936.pdf
FINANCE
US Destinations
A real peach When a US company was looking for new growing space, a Canadian developer and a Dutch developer and builder joined forces to find their ideal home in Peach County, writes BJ Walker, Executive Director of the Development Authority of Peach County Located in the heart of Georgia, Peach County is a rural community close to the I-75, one of the nation’s longest interstates, running from Miami, Florida to the Canadian border, near Detroit. This land of opportunity is where Canadian consultancy Blueforest Environmental Development and Dutch greenhouse engineering and construction firm Havecon Projects have advised their client Pure Hothouse Foods (a division of Pure Flavor) to locate their new 75 acre hydroponic greenhouse facility. Pure Flavor is a grower and marketer of over 650 acres of greenhouse vegetables, with operations across North America. Blueforest and Havecon began working with Pure Hothouse in 2015 to help identify and develop a location that would support their greenhouse expansion needs. Using their extensive internal databases, Havecon and Blueforest were able to focus on two states in the south-eastern US that provided the necessary incentives to appeal to the operator.
Working together The companies evaluated over 300 sites in each state that met initial criteria, before narrowing it down and focusing on 50 sites. In the process, the Blueforest team of Susan and Sarah van de 116 | EUROPEANCEO
Merwe contacted the Georgia Department of Economic Development, where they discovered Peach County potentially possessed many of the critical greenhouse development features their client needed. “Working with state project manager Nikki Yu and her utility partner Lonnie Smallwood from Electric Cities of Georgia, Blueforest narrowed in on Peach County because of its abundance of flat land and great access to interstates and highways”, they said. “Within a couple weeks, Peach County was able to provide us with four sites that met our parameters.”
Pure attraction When asked what it was about Peach County that stood out to them and their client, Susan and Sarah agreed. “Peach County was extremely supportive from the very beginning. Most communities in Georgia were support-
Most communities in Georgia were supportive, but Peach County was at a different level
ive, but Peach County was at a different level. They were responsive to questions, delivered on time, and were willing to adapt to fit our needs”, they said. “There were three different power providers that were vying for our business, which created options and competition. In the end, we decided to work with the Fort Valley Utility Commission, since they were willing to provide the necessary infrastructure we needed to meet our demands, which, among other things, included an on-site electric substation. “Finally, the logistical location was ideal. Being located within a couple miles from the I-75 allows our client to transport produce to retailers within 24 hours. Pure Flavor’s corporate office is in Leamington, Ontario, and being able to fly into Atlanta’s Hartsfield Jackson Airport from Canada and the Netherlands on direct flights made it easy to access Peach County.” Peach County is located 90 minutes south of Atlanta and three hours west of the fastest growing port on the US East Coast in Savannah, Georgia. With access to the I-75, locations in Peach County can serve customers from Miami, Florida to central Ohio in an eight-hour driving time. With a regional population of over 500,000, the Peach regional area is home to Blue Bird Bus Company, Construction Specialties, Robins Air Force Base (the largest industrial complex in the state of Georgia), Kumho Tire, Sandler and YKK, to name just a few. n F OR F UR T HE R INF OR M AT ION
www.wegrowitsweeter.com
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C17AS_118_B05_85968.pdf
FINANCE
US Destinations
Sean Walters COO, Sunbelt Holdings
REI’s distribution centre in the PV303 business park
Arizona calling
Home to international corporations and recognised as one of the fastest growing development zones in the US, Arizona is aiming to become the perfect destination for European firms A key feature attracting major international companies to PV303 – a 1,600 acre business park – is the approved foreign trade zone (FTZ) status on portions of the master plan. This allows foreign material to be sent to the site without being subject to US customs duties. FTZ status is a powerful tool for companies looking to expand their operations into the US. And, what’s more, FTZ users receive significant financial and operational benefits, including discounted processing fees, reduced tax assessments of 75 percent, reduced real and property taxes up to 72 percent, shorter supply chain time, and improved cash flow.
Arizona’s modern infrastructure enables the efficient national and international flow of goods and services, and offers almost 130,000 miles of highways, 40 public transit systems, two Class I railroads and more than 80 airports.
Most recently, United Parcel Service (UPS) announced plans to join the prestigious roster of corporate tenants, and leased a 618,350 sq ft distribution centre from First Industrial Realty Trust on 140 acres at PV303. At completion, UPS will expand the facility to showcase over 970,000 sq ft of advanced operational technology and sortation equipment, and will bring more than 1,500 jobs to Goodyear, Arizona. A talented workforce lives in the immediate metropolitan area, while surrounding freeways put PV303 within an hour of 3.8 million workers. The city of Goodyear, where PV303 resides, is ranked the second best workforce market in the US and boasts a diverse population. More than 85 percent of heads of households are college-educated, while 56 percent have degrees. And the workforce is growing: with approximately 4.6 million people, Greater Phoenix’s population is expected to nearly double in the next two decades. Goodyear also provides a high quality of life, including master-planned residential communities, excellent schools and healthcare, trail systems, and entertainment and lifestyle options including major-league sports venues. At final build-out, PV303 will include over 20 million sq ft of office, retail and industrial space. ■
Good company PV303 is already home to global leaders in logistics and distribution, including Sub-Zero (which operates a 705,000 sq ft manufacturing and distribution facility), Dicks Sporting Goods’ western US distribution centre (spanning 720,000 sq ft) and REI (an internationally recognised recreation retailer that opened a 400,000 sq ft omnichannel facility last year). The distribution centre recently achieved LEED Transport choices PV303 is designed to meet corporate users’ Platinum certification, making it the first disunique needs. The FTZ site designation is a tribution centre in the US to achieve both this compelling draw that enables companies to and Net Zero Energy certification. be cost-competitive in the US marketplace, but there’s far more on offer as well. In addition to the FTZ, PV303 distinguishes itself from other US markets by offering strategic access to major ports and rail systems, The city of Goodyear, such as the ports of Long Beach, Los Angeles, where PV303 resides, San Diego, El Paso and Las Vegas. Added to this is a highly visible location along two major is ranked the second transportation corridors that provide a high- best workforce market speed route into and out of the market area, in the nation shovel-ready sites, spec buildings, unmatched F OR F UR T HE R INF OR M AT ION amenities, and business-friendly policies. www.PV303.com 118 | EUROPEANCEO
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BUSINESS & MANAGEMENT
US Destinations
Misdirected attention A lot has been written about President Trump’s first few months in charge, but little of it dwells on matters of substance, writes Max Kichniawy, CEO of gatc On January 20, the inauguration of Donald Trump as the 45th President of the US took place in Washington, DC. Due to the mainly negative press about the new president, his actual time in charge feels considerably longer than just a few months. Since January, daily news has been dominated by Trump, his campaign team and, in particular, his tweets. It seems a neverending cycle about possibilities, interpretations, assumptions and loose talk has started, replacing any analysis of actions and effects. Popular topics include the size of his inauguration crowd, Russia’s alleged interference in the election process, the rise of fake news, the firing of FBI Director James Comey, awkward handshakes, and barging through crowds of European leaders. Of course, this public debate and publicity is primarily instigated by the president himself, doing his best to stay in the media spotlight. Still, the dominant discussion topics might seem odd to some, as there is little discussion about anything that could directly impact the business community and the economy. 120 | EUROPEANCEO
Glacial change After the first few months, it might be worth asking what has really changed so far. Immigration policies and the Muslim ban have been among the major topics in this regard. Trump’s executive order prohibited citizens from seven Muslim-majority nations entering the US for 90 days, while also suspending the country’s refugee intake for a period of 120 days. This caused an immediate response from business leaders, who publicly criticised the president’s actions. The CEOs of Apple, Amazon, Google, Facebook and Tesla were among those voicing their dissent. Thankfully, shortly after the order was announced, the Ninth Circuit Court of Appeals panel ruled against the Trump administration, saying the ban was discriminatory and unconstitutional. Regarding the topic of visas and immigration, it is worth mentioning travellers who previously used the visa waiver programme (VWP) and then visited one of the seven aforementioned countries now have to apply for a B-visa to enter the US, as their previously issued VWP exemption will become invalid. Interestingly, the cancellation of the possibility of entering the US through the VWP after visiting one of the listed countries was first raised in March 2011.
Summarising the Trump administration’s record from a business perspective, it has been business as usual
Although the majority of the media reported the results of the G7 summit were below average, the president tweeted he had great meetings, especially on trade. While this statement would be worth discussing, especially in regard to the fear of punitive tariffs and trade barriers among the international business community, it got nowhere near the same attention as the First Lady declining to hold hands with the president during his first foreign trip. Summarising the Trump administration’s record from a first-hand business perspective, as a BPO provider managing more than 30 US subsidiaries for international clients, so far it has been business as usual for the most part. In fact, there has even recently been a significant increase in requests from European companies trying to expand their business to the US market. The ‘buy American’ trend is nothing new at all, and was first set up as the Buy American Act in 1933 by President Hoover. It certainly is as important as ever to act as a US company with a Vacation blues A topic that came up during and after the presi- professional and operational US identity when dent’s recent attendance at the G7 summit in doing business in the country – a service gatc Sicily is the Paris Agreement on climate change, has been providing to its clients since 1983. n from which Trump has withdrawn the US. In a direct response to this, Tesla CEO Elon F OR F UR T HE R INF OR M AT ION Musk left Trump’s Business Advisory Council. www.gatclp.com
C17AS_001_Y01_70739.pdf
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17AIR021 - Advertentie European CEO-2.indd 1
23-05-17 16:57
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FINANCE
US Destinations
Ivy Owen Executive Director, Fort Chaffee Redevelopment Authority
Constructing a community Arkansas’ second-largest city has drawn $1.5bn in capital investments thanks to a perfect mix of lifestyle options, transport links and business-friendly infrastructure The award-winning formula for Arkansas’ premier economic development project in Fort Smith, also known as Chaffee Crossing, includes solid business ingredients: 7,000 acres of former military land strategically located in the centre of the US; a professionally designed master land use plan for a mixed-use, walkable, sustainable community overseen by the Fort Chaffee Redevelopment Authority (FCRA); a healthy portfolio of federal, state, regional and local partners; and a small, nimble team of professionals who share the vision of building a community within the existing wider community. However, the secret organic elements that really make this project unique are transportation related. All forms of transportation converge in Fort Smith: two US interstates, the Arkansas River, multiple Class I rail lines, and commercial air services.
at Fort Smith, bringing goods and people from coast to coast. Two existing ports and a proposed $25m intermodal facility on the Arkansas River are 10 minutes away. Three Class I rail lines and four short lines also serve the region. Fort Smith Regional Airport and Northwest Arkansas Regional Airport provide comprehensive air services for freight and travellers. Combined with a skilled, trainable workforce, the region is prime for manufacturing, intermodal warehousing and distribution centres. Over the past 10 years, Chaffee Crossing has been chosen as the headquarters site for 15 companies, including Graphic Packaging International, Mars PetCare, Walther Arms, Umarex, Glatfelter, and Phoenix Metals. Industrial investments of more than $600m have helped generate over 3,500 jobs. Approximately 1,600 acres remain available for sale and development. All of this growth would not be possible without Arkansas’ federal and state legislators, city and county governments, and other agencies in the mix. State economic development incentives, political partnerships and cost sharing for streets and utilities have kept infrastructure ahead of developers. Multiple universities in the region offer bachelors and masters degrees in traditional academic subjects, as well as customised workforce training for business and industry.
Access permitted A new 6.5 mile section of the Interstate 49 highway (I-49) is now open through the heart of Chaffee Crossing, providing a direct route to Winnipeg, Canada. The I-49 intersects the I-40
Easy living Surrounding Chaffee Crossing’s quiet and ecofriendly industrial neighbourhood is a healthy mix of traditional developments, such as a new $42m headquarters for transportation
122 | EUROPEANCEO
and logistics giant ArcBest, which will create 1,000 new administrative and IT jobs when it opens this autumn. The new privately developed Arkansas Colleges of Heath Education (ACHE) will open a $32m Arkansas College of Osteopathic Medicine to 150 students in August on a 200-acre site donated by FCRA. ACHE has also designed a traditional neighbourhood surrounding the college campus, with restaurants, retail and commercial space, residential neighbourhoods, parks, and other amenities within walking distance of academic buildings. College administrators project the school will have a $100m annual economic impact and they plan to announce additional healthcare degrees in the near future. People are naturally drawn to the Chaffee Crossing lifestyle of living near work and amenities in an inviting environment. The Chaffee Crossing master land use plan has integrated 24 residential neighbourhoods into the beautiful rolling landscape, with lifestyles to meet any household budget. Over 2,200 units are on offer, ranging from apartments and town homes to modest or luxury single-family homes. These neighbourhoods are skilfully blended together with a plethora of amenities. A military historic district, museums, microbreweries, restaurants, places of worship, schools and recreation attractions are minutes from front doors. By maintaining a balanced mix of industry, commerce, lifestyle, education and recreation, Chaffee Crossing is combining all the right ingredients to create a healthy economy for western Arkansas and the entire state. ■
C16MJ_001_Y03_05199.pdf
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C17AS_124_E09_11124.pdf
FINANCE
US Destinations
Motiva Oil Refinery in Port Arthur, Texas
Bigger in Texas
By investing heavily in local infrastructure and moving away from a reliance on oil, Port Arthur, Texas is working to develop an environment conducive to international business investment Now boasting an international port, three major rail carriers, a regional airport and a highly skilled workforce, Port Arthur has overcome decades of economic hardship in an effort to create a welcoming environment for commercial business. Through a series of investments into infrastructure, education and local industry, the Port Arthur Economic Development Corporation says it has created a holistic business environment, laying the foundations for international success and spurring growth in the domestic economy. European CEO spoke to RaNoda McClainLee, Marketing Manager at the Port Arthur Economic Development Corporation, to find out more about Port Arthur’s business hub, and how local authorities plan to build on the town’s recent success.
thousands of people throughout Port Arthur and south-east Texas, while also generating the majority of the region’s tax revenue”, said McClain-Lee. As part of Valero’s $2.4bn development of the Port Arthur refinery, Motiva is slated to create 2,000 new jobs in the next few years. The project, which represents Valero’s largest capital investment to date, is based on the construction of a 50,000-barrel-per-day hydrocracker unit, as well as a 45,000-barrelper-day coker. The development will also seek to improve and expand the refinery’s existing units. However, despite the historic success of Motiva, a decline in the price of oil has forced the Port Arthur Economic Development Corporation to diversify its investment strategy.
Refined business Home to the US’ largest oil refinery, Motiva, Port Arthur has long been synonymous with the petrochemical industry. Founded in 1902, Motiva has continued to act as the financial nucleus of the Texas-based port, stimulating the local economy and creating jobs. “The petrochemical industry is extremely important to the economy because it employs
The shift in demand towards highly skilled and specialised labour has created a surplus of workers who are ill-equipped to perform the jobs available
124 | EUROPEANCEO
Road to success In order to drive economic growth, the Port Arthur Economic Development Corporation has invested heavily in local infrastructure. “The aim is to create an attractive, businessfriendly location for commercial companies”, said McClain-Lee. “To this end, we have shown a willingness to expedite land development applications, foster the growth of an already exceptional transportation network, and improve the port’s utility infrastructure.” As part of the strategy, the Port Arthur Economic Development Corporation has created an industrial business park to support existing interests and diversify the area’s economic base. Designed to attract investment from all over the country, the Port Arthur Business Park is accessible from the I-10 interstate highway, which connects all the major interstate trucking routes, and the regional airport, which serves most major cities in the US and, by extension, the wider world. “We believe the highly accessible nature of Port Arthur gives it the upper hand when it comes to competing for new business”, said McClain-Lee. Tricks of the trade While the development of local infrastructure has attracted business from all around the world, the Port Arthur Economic Development Corporation has also invested in the local workforce. This has become particularly important in recent years, with the shift in demand towards highly skilled and specialised labour creating a surplus of workers who are ill-equipped to perform the jobs available. “There is a high demand for metalworkers and welders in Port Arthur, but there are simply not enough skilled workers to fill these roles”, said McClain-Lee. “That is why the Port Arthur Independent School District is actively creating a curriculum that ensures students are ready to join an innovative, 21st century workforce when they graduate. Further, our community college, Lamar State College, has implemented a workforce training department which partners with local businesses to give students real-world experience.” By investing in people as well as infrastructure, the Port Arthur Economic Development Corporation has created an environment it hopes will be conducive to success. That said, further investment is still required, and this is reflected in the corporation’s ambition: “Our goal is to continue tackling these challenges in ways that achieve long-term, sustainable economic growth, as well as creating new jobs and attracting capital investment”, concluded McClain-Lee. n
C17AS_001_001_65557.pdf
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C17AS_126_B02_32053.pdf
FINANCE
US Destinations
Dry delivery Inland Port Dillon is revolutionising logistics in the east of the US, writes Ronald Carter, Director of Operations at the North Eastern Strategic Alliance Nobody could dispute that South Carolina’s Inland Port Dillon is perfectly located. Just a mile from the I-95 interstate highway, there is also direct access to the Port of Charleston via rail, which in turn opens up an abundance of opportunities for international markets. Additionally, the port is located near the junction of mainline north-south and westbound rail lines servicing markets in north-eastern and mid-western centres, including Chicago, and is a mere 30 minutes’ drive from the I-20, serving markets as far west as Dallas. Inland Port Dillon will serve as a point on the CSX intermodal network. The facility will ground containers, have an adjacent chassis yard, and will be a point for termination and origination of empty containers. Rail cars will be double-stacked with containers and sent to and from the inland port on a daily basis, resulting in a reduction of transportation costs for companies located in the vicinity of the inland port facility. 126 | EUROPEANCEO
Inland convenience Shippers to the inland port will enjoy the convenience of scheduling shipping to and from the port in the same manner they already schedule shipping to and from major seaports. Empty containers and full containers for import or export may be received at the inland port terminal as well. This facility will utilise the latest available technology to securely track and move cargo, ensuring cargo security and on-time shipments. For international companies seeking to establish a US presence, but who refuse to pay the high costs of land near a seaport, Carolina’s I-95 Super Park adjacent to the port is an opportunity to have the same luxuries at a lower cost. The site, offering over 3,400 acres, is an ideal location for trans-load, cross-dock, distribution and manufacturing facilities that require a near-port location. It offers an average land cost of $15,000 per acre, and a site that is fully equipped with transmission and distribution grade electricity, transmis-
sion grade natural gas, an excess of water and wastewater infrastructure capacity, and a telecommunications infrastructure.
Abundant options The North Eastern Strategic Alliance (NESA) region, in which the port resides, also offers an average land price of $17,000 per acre at nearly 100 different industrial sites throughout the region. There are also more than 30 industrial buildings available throughout the region with an average price of $16.76 per sq ft. With a population of nearly 2.2 million and an available workforce of nearly a million within 60 miles of the region’s geographical centre, NESA has a very robust labour pool to draw from. Employers use the region’s productive workforce to churn out all-terrain vehicles, pharmaceuticals, food additives, frozen meals, steel, packaging products, and much more. The region is home to companies that engage in worldwide distribution, and are on the cutting edge of their highly specialised fields. n F OR F UR T HE R INF OR M AT ION
rcarter@nesasc.org
C17AS_001_Y05_60890.pdf
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C17AS_128_A02_95106.pdf
FINANCE
US Destinations
Greg Canfield Alabama Secretary of Commerce
Mercedes-Benz assembly in Tuscaloosa County, Alabama
Alabamian attraction
Forged by their automotive industries, Alabama and Europe have always enjoyed close links. Now, continental firms in a broad range of industries are making a home in the Heart of Dixie The economic bonds between Europe and the south-eastern US state of Alabama are solid and growing stronger every year. Mercedes-Benz is undertaking another large-scale expansion at its Alabama assembly plant, pushing its total investment in the state to $5.8bn. Airbus’ new manufacturing facility in Alabama has delivered around two dozen A321 aircraft to customers, and, with production ramping up, the facility will support 1,000 jobs by the end of next year. Two Austrian companies – Kronospan, a maker of laminate flooring, and Lenzig, which produces eco-friendly fibres for clothing – announced plans to invest a combined $666m in expansions at their Alabama plants last year. Exports of Alabama-made goods to Europe topped $5bn last year, with motor vehicles, aircraft parts, industrial machinery, and chemicals leading the way. Located in the heart of a fast-growing region, Alabama has provided a welcoming environment for scores of European companies, and a fertile ground for their investment. Over the past two decades, companies from 14 European countries have invested more than $14bn in Alabama business operations. Alabama’s partnership with Germany has proved particularly fruitful. Led by MercedesBenz, German companies have invested $8.4bn 128 | EUROPEANCEO
in Alabama operations, creating 15,500 direct jobs. Altogether, more than 70 German companies call Alabama home.
a million vehicles are assembled in the state each year, as well as 1.7 million engines. Many of the companies in the Alabama automotive supply chain are European.
Diversity attracts However, the growth of the automotive industry is hardly the only important development going on in Alabama’s diverse economy. Not surprisingly, Airbus’ production launch has positioned Alabama’s aviation manufacturing sector for significant growth. European aerospace companies including Safran, Hutchinson and MAAS Aviation have already set up operations in close proximity to the Airbus production facility. More will join them. Alabama, though, is not just about manufacturing. The state’s bioscience industry is thriving, with key strengths in segments such as medical research, drug discovery, genomic medicine, and medical devices. Alabama is also home to more than 800 bioscience establishments, including companies with European roots. One of them is Germany’s Evonik, which has opened a Global Innovation Centre for medical technology in Alabama. Over the years, Alabama has provided a business-friendly environment for a roster of well-known European companies. Besides those already mentioned, the list includes Siemens, BASF, BP, Michelin, BAE Systems, GKN Aerospace, Gestamp and many more. The success of these companies demonstrates Alabama can provide the ideal US home for European companies. ■
Home from home Why are so many European companies, particularly manufacturers, selecting Alabama as their base in North America? The state’s skilled workforce is a primary reason. Alabama workers have proved they can produce luxury automobiles, sophisticated passenger jets, innovative warships, powerful rockets, and much more. A February 2017 Gallup poll found Alabama has the highest percentage of highly involved and enthusiastic workers in the US. The state also has a heavy concentration of manufacturing workers, who comprise nearly 13 percent of the total workforce. Alabama has a business-friendly environment, top-ranked worker training programmes, low taxes, and a low overall cost of doing business. Alabama also offers a first-class infrastructure system, with a deepwater port, an extensive interstate system, and airports capable of handling international cargo. Thanks in large degree to Mercedes, Alabama has become a top five US state for automotive production. Just 20 years ago, Alabama F OR F UR T HE R INF OR M AT ION didn’t produce a single vehicle; today, more than www.madeinalabama.com
C15MJ_001_Z01_60799.pdf
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CEOPROFILE Lars Fruergaard Jørgensen C E O | N O V O N OR D I S K
Company cure
Ramped-up competition in the pharmaceutical sector has seen Novo Nordisk’s position look increasingly shaky. New CEO Lars Fruergaard Jørgensen is seeking to steady the ship with a mix of innovation and expansion Very few companies can claim to have enjoyed a period of success as long as Novo Nordisk’s: the world’s largest producer of insulin has seen its share price grow by almost 900 percent over the last 16 years, and it has achieved this without resorting to aggressive acquisitions or massive expansions beyond its core focus of diabetes treatment. Novo Nordisk’s success as a focused, quiet achiever is a refreshing story in the pharmaceuticals industry, which is characterised by sprawling, combative multinationals with overwhelming scope. Overseeing the company through this remarkable period of success was CEO Lars Rebien Sørensen, who ended his 16 years at the helm at the end of 2016. While leading Novo Nordisk, Sørensen received the honour of being named the best performing CEO in the world by Harvard Business Review in 2015. Following this weighty departure, company veteran Lars Fruergaard Jørgensen was selected as the company’s new CEO, taking up the position at the start of 2017.
Jørgensen comes into the top job at a challenging time; Novo Nordisk has recently been forced to lower several of its targets as increased competition has put pressure on its core insulin market. After an abrupt fall in the company’s share price, the coming months will be filled with substantial hurdles. However, Novo Nordisk has an outstanding track record and laser focus on the markets it excels in. While in the short term the pressure will be on, Jørgensen looks set to continue the company’s ongoing focus on long-term, sustainable success.
Trade secrets Novo Nordisk’s origins go as far back as insulin therapy itself. The company began over 90 years ago, with the creation of Nordisk Insulinlaboratorium, established in 1923, and Novo Terapeutisk Laboratorium, founded in 1925. The founders of Nordisk Insulinlaboratorium were August and Marie Kroghm. In 1922, after August won the Nobel Prize in Physiology
CV BORN: 1966, DENMARK
two years earlier, they were visiting the US on a lecture tour. It was here they learned of Frederick Banting and Charles Best, the Canadian researchers who had recently discovered insulin and were using it to treat diabetics. The news particularly interested Marie, the fourth Danish woman to receive a doctorate in medicine, as she cared for several patients with type 1 diabetes, while also suffering from type 2 diabetes herself. After a successful trip to the University of Toronto, the couple returned to Denmark with permission to manufacture and sell insulin across Scandinavia. In 1923, Nordisk Insulinlaboratorium began marketing the first Scandinavian insulin. Two early hires by Nordisk Insulinlaboratorium were brothers Harald and Thorvald Pedersen, a machinist and pharmacist respectively, to oversee the insulin production process. Very quickly, Thorvald clashed with Hans Christian Hagedorn, the lab’s head, and both brothers left the company in 1924. By February 1925, the »
NOVO NORDISK |
EDUCATION: BUSINESS ADMINISTRATION, AARHUS UNIVERSITY
IN NUMBERS
1991
2001
2004
2017
Lars Fruergaard Jørgensen joined Novo Nordisk straight after he graduated, working as an economist in the healthcare, economy and planning department
Following stints in the Netherlands, Japan and the US, he returned to Denmark to take up the role of Vice President for Regional Finance and IT
Jørgensen’s performance in management impressed his superiors and, after three years, he was promoted to Senior Vice President for Corporate Development
Having rapidly risen through the executive ranks, he was finally announced as CEO in January this year, replacing long-serving company legend Lars Rebien Sørensen
1923
41,571
¤6.5BN
¤5.1BN
FOUNDED
OPERATING PROFIT 2016
EMPLOYEES
NET PROFIT 2016
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CEOPROFILE
brothers’ new firm, Novo Terapeutisk Laboratorium, had its own insulin on sale. While the Pedersens offered to cooperate with Nordisk, their approaches were refused. Naturally, the two companies were fierce competitors for many years, particularly during a tense legal case regarding patent rights that ran from 1938 to 1941. However, the rivalry cooled over the years, and in 1989 the companies merged to form Novo Nordisk. Apart from the economic logic of combining two insulin giants located mere kilometres from one another, the promise of the European single market opening in 1993, as well as the ongoing liberalisation of economic trade, made the merger a particularly logical step. While Novo Nordisk also operates in the fields of obesity care, haemophilia care, growth hormone therapy and hormone replacement therapy, diabetes is still by far its largest market, and is responsible for approximately 80 percent of the company’s revenue. Over the years, this focus has paid off, with sales steadily increasing. This can at least partly be attributed to the global rise in diabetes diagnoses. According to the World Health Organisation, the number of people who have been diagnosed with diabetes worldwide rose from 108 million in 1980 to 422 million in 2014. Over the same period, the percentage of people over the age of 18 suffering from the disease rose from 4.7 percent to 8.5 percent. Offering products running the gamut from cheaper generics to more expensive premium products, Novo Nordisk has remained the dominant force in the treatment of the disease. 132 | EUROPEANCEO
8.5%
of adults suffer from diabetes
Number one Overseeing the most recent period of growth was Sørensen, who was appointed CEO in 2000. Throughout his tenure at the company, Sørensen saw an 11-fold increase in profits, alongside the aforementioned 900 percent growth in share price. As well as the increase of diabetes in the global population, this success can be attributed to a string of management decisions that championed both core products and social responsibility over aggressive tactics. Novo Nordisk is primarily owned by the Novo Nordisk Foundation. The parent company works to ensure there is a stable foundation for the company’s operations, while also contributing a number of grants towards diabetes research. Novo Nordisk was also behind the establishment of the World Diabetes Foundation in 2002, a global independent champion for diabetes prevention and care. In a 2015 interview with Harvard Business Review, Sørensen said the decision to fund the group’s establishment was prompted by a public relations disaster in South Africa over the price of HIV/AIDS drugs. While Novo Nordisk was not involved, Sørensen wondered how his company would have responded in the same situation. This prompted the creation of the World Diabetes Foundation as a way for the company to give back to the world.
“After its creation, criticisms that NGOs had been directing at us completely vanished”, Sørensen noted. Despite these achievements, however, the end of 2016 heralded a change for Novo Nordisk. As recently as April of the same year, the company had expected Sørensen to serve out his contract (which ran to 2019) but in September it was announced Jørgensen would be taking over in 2017. “On the one hand, Novo Nordisk has never had a stronger portfolio and organisation; on the other hand, we are facing an unprecedented level of payer pressure and competition”, Jøregensen said in a statement at the time. Between December 2015 and September 2016, Novo Nordisk’s share price fell approximately 22 percent as the insulin market faced growing pressure. Despite dominating the market, pressure on prices, particularly in the US, hit outlooks for the company. The US generates approximately half of Novo Nordisk’s revenues, and cheaper competing products have forced the company to offer greater rebates. In emerging markets like China and India, cheaper generics may prove to be more popular than more expensive premium products. While Novo Nordisk has generic products, they post a far slimmer profit margin than its premium offerings.
C17AS_133_G04_36238.pdf
CEOPROFILE
New Lars Jørgensen grew up in rural Jutland, in a small town near Viborg, and worked on the family farm before studying finance and business administration at Aarhus University. He joined Novo Nordisk straight from school, working for the company in the Netherlands, Japan and the US. In 2004, he returned to the company’s offices in Denmark to lead corporate and IT development. With over 25 years of experience at Novo Nordisk, Jørgensen plans to lead the company with the same consistency and stability that has defined its past. Speaking to European CEO, Jørgensen said the company’s history and precise focus are the foundations for future success. “Our focus on insulin has resulted in a leading product portfolio and some innovative leads in research. However, we have also established a leading position in the glucagon-like peptide-1 segment, which is a very fast growing market, with Victoza bringing significant growth.” A therapy for type 2 diabetes patients, Victoza has grown to outsell Novo Nordisk’s biggest insulin product, Levemir. “This is the only product in its class shown in clinical trials to reduce the risk of cardiovascular disease in type 2 diabetes”, Jørgensen said. “If we have learned anything, it is that sustained growth requires continued innovation that truly benefits patients.” While competition in the market continues, finding these differentiating factors could be imperative for Novo Nordisk’s future success. “We face increasing competition from a growing number of products in both diabetes and haemophilia”, Jørgensen explained. “With
The US generates half of Novo Nordisk’s revenues, and cheaper competing products have forced the company to offer greater rebates
increased competition comes increased price pressure, meaning that, more than ever, we require sharp commercial execution and the ability to differentiate our products. In this sense, we are very fortunate to have strong data released for our key brands, which will bring significant benefits for patients, including reducing the risk of cardiovascular disease or severe hypoglycaemia in diabetes.” As well as identifying the differentiating benefits of its current products, Novo Nordisk will also place a greater priority on the future products. In order to do this, Jørgensen said new products will have to be more innovative than those of the past. “In rising to the challenge of increased competition, we have fine-tuned our R&D efforts to ensure an innovation agenda that includes more disruptive therapies. This is the case within our existing therapy areas such as diabetes and obesity, but also within new spaces such as non-alcoholic steatohepatitis. Put simply, we’ve raised the innovation bar that our future portfolio must clear if the products are to be commercially viable.”
Future proof Despite these efforts, Novo Nordisk is not out of the woods yet. The company announced cuts of 1,000 jobs during late 2016 to reign in costs. However, while challenges remain, Jørgensen said he is confident for the future. “Fortunately, I was able to spend the last four months of 2016 preparing to take up the position of CEO of Novo Nordisk. Although this was a challenging time for an organisation with a changed growth outlook, it gave me an opportunity to meet with patient representatives, key opinion leaders, policymakers and payers to understand their expectations of Novo Nordisk. Likewise, I travelled to a number of our sites around the world to meet the people that make Novo Nordisk the great company that I am proud to lead”, he explained. “Based on this, I had a clear view of our position and my priorities when taking office. Specifically, these were: strengthening our commercialisation approach; finetuning our research and development; and embedding the principles of simplicity and agility into our company culture.” For many other companies in the pharmaceutical sector, a streamlined and agile portfolio of products sounds impossible. However, Novo Nordisk has established itself as a company capable of maintaining a focus that leads to long-term success. With logical expansion at the forefront of its priorities, Jørgensen looks set to navigate a challenging time towards a stable future. Given the many years of success the company already has behind it, there’s no reason to believe it can’t continue to go from strength to strength. n EUROPEANCEO
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C17AS_134_C06_23447.pdf
FINANCE
Investment
Banishing Brexit blues
Though it threw markets into turmoil, firms and investors willing to ride out the Brexit panic found the challenges hid a range of lucrative opportunities, writes Hannah Tufts, Digital Content Manager at OctaFX The global economy is paying close attention to negotiations between the UK and the EU for a new relationship as the two parties navigate the unknown path to Brexit. Fears this move would immediately destabilise the UK economy and bring a lasting recession could be unfounded, however. In the wake of this historical political event, OctaFX, the market-leading ECN/STP broker known for offering the lowest spreads in the forex industry, is maintaining an ironically British stance with its decision to keep calm and carry on, despite daily evidence of the instability that has promised to ensue as a result of the UK referendum. As the global political environment fluctuates and continues to shock, the industry is seeing remarkably predictable behaviour. In the wake of the vote, players big and small rushed to reassure clients they would provide a safe and stable environment whichever way the market moved. This message has been echoed in each corner of the financial sector: times are tough, but we’ll get through them together.
Stay the course OctaFX recognises the political and economic uncertainty in the UK, and has no doubt there is plenty more to come throughout the next two years and beyond. But the company also firmly believes that unlimited opportunities will present themselves during this period of uncertainty and change. The only guarantee is two more years of announcements, two years of debates in Parliament, regulation, and commentary from European governments. The rest is yet to fully reveal itself. 134 | EUROPEANCEO
Fleeing London as a financial centre has become the latest trend. In January, it was reported HSBC and UBS will look to move around a fifth of their current London operations out of the UK in preparation for the anticipated disruption caused by the country’s exit from the EU. Meanwhile, Goldman Sachs considered moving half its workforce to New York and continental Europe, particularly Frankfurt. It remains a hot topic, as employees contemplate warmer climes and more stable systems, but they could be fleeing in the wrong direction. Financial services in the UK will always need to be compliant with EU regulation, but Brexit could in fact empower London as the strongest financial capital in the world without the bureaucracy of the EU standing in the way. UK authorities will be free to implement their own financial policies, which could start to attract higher investment and decrease taxes. Whatever the outcome, OctaFX shares the same belief: living and operating in these times is a good thing, and the team of international talent will face the challenges that will undoubtedly cause markets to fluctuate headon. Brexit presents a risk, but where there is risk there is also opportunity. Many events have shaken the industry in recent years, from the January 2015 Swiss franc collapse to the 2016 Turkish coup attempt, and each one has given OctaFX the chance to demonstrate its resilience during periods of political and economic volatility. As with every market crash, after Brexit things really took off for those clients who were brave enough to ignore the common belief.
Brexit could empower London as the strongest financial capital in the world
C17AS_135_C06_58577.pdf
FINANCE
Investment
Positive negatives OctaFX is in the middle of an exciting period of growth, having celebrated its fifth anniversary earlier this year, as well as five consecutive years of growth. A major milestone, most would agree. Providing personalised forex brokerage services to customers in over 100 countries worldwide, and known for offering the lowest spreads in the industry, OctaFX underpins its operating model with the belief transparency creates a better trading environment, and the company’s 2016 Q4 results confirmed customers are experiencing higher confidence levels and trading more frequently and for longer periods with OctaFX than ever before. The broker is continuously developing, testing and improving to deliver a top-notch customer experience, new services, and attractive promotions designed to nurture an increasingly loyal customer base. Since the very beginning, OctaFX has offered negative balance protection, a factor
that recently made headlines as brokers were urged to implement this policy before summer 2017, when it’s set to become the industry standard. Put simply, negative balance protection means that, whatever happens, traders can’t lose more than they’ve initially invested. Other brokers must be regulated to enforce this type of client protection, something OctaFX has always considered critical to providing a service traders can trust. After careful consideration, OctaFX made the decision earlier this year to focus on pan-European licensing based out of Cyprus, and will utilise the reputation of the Cyprus Securities and Exchange Commission (CYSEC) as a solid EU regulatory authority to maintain and guarantee passporting within the EU. Operating under CYSEC regulation will enable OctaFX clients to benefit from the security offered by the firm’s investor compensation fund and robust complaints and resolutions procedures.
Temporary retreat OctaFX is extremely pleased to be able to offer its growing number of loyal customers the transparency and trust expected of a regulated broker under CYSEC licensing. The company is also capitalising on the wealth of vibrant forex industry talent residing in Cyprus as it continues to establish a strong operation there. OctaFX promises to continue to closely monitor what happens within the UK over the next two years and, subject to the outcome of Brexit, will decide whether to return to local licensing with the UK Financial Conduct Authority. The broker prides itself on offering the most robust and affordable trading conditions on the market. OctaFX does not charge trading commissions at all, enabling clients to keep trading costs low. Most other brokers charging commissions immediately increase the cost of trading by up to 300 percent. OctaFX was thrilled to be named Most Transparent Broker 2016 by European CEO, reaffirming its industry-leading trading conditions, transparency and customer service. OctaFX promotes and delivers on transparency across the board, providing a comprehensive set of educational tools to enable all types of traders to get the most out of their trading experience, irrespective of whether they are beginners or advanced traders. OctaFX advises consumers to be aware of potential hidden costs and make savvy choices when it comes to choosing a broker. The company has spent years minimising trading costs and developing the most lucrative and affordable service. More and more people are switching to trade with OctaFX as the broker embraces a new chapter for the EU, for the forex market and for business. Brexit will continue to drive change and expansion for OctaFX, and that’s no bad thing. It’s clear the company is thriving in a volatile market, and, remarkably, offering clients one of the most reliable services out there – one of the key differentiators traders are looking for in a crowded and competitive arena. n EUROPEANCEO
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United we stand Socially responsible investment and Islamic finance share significant common ground. SEDCO Capital is working to bring them together in an innovative financial product, writes Hassan Al-Jabri, the firm’s CEO
In the last two decades, Islamic finance and socially responsible investment (SRI) have been among the fastest growing areas within finance. The two not only showed resilience, but also marked growth during the global fiscal turbulence, especially when compared to the near-collapse of other investment categories. Furthermore, the growth of both Islamic finance and SRI is mostly demand-driven. Both approaches are sparking avid interest across global financial markets, and institutions are devoting increasing resources to these areas in response to demand from investors. The two areas share certain features and commonalities; their continuing success will be based on the fact they will feed off and into one another.
Common ground Starting with John Wesley (founder of the Methodist Church) in 1760, and strengthened thereafter by the Quakers, the Federal Council of Churches, the Swedish Temperance Society, the Anglican Church, and Éthique et Investissement (founded by a group of nuns), the Christian origins of SRI can help us to understand 136 | EUROPEANCEO
how religious beliefs became incorporated into finance. Although SRI has grown into a full-fledged strategy, it stems from a desire to render the religious beliefs of investors into financial practices – using money in a manner that conforms to values and morals. Meanwhile, the purpose of Islamic finance is to improve living conditions and wellbeing, establish social equity, and prevent injustice in trade relations. The environment is also considered under the tenet of Islam that says man has to play the role of steward over divine creation. In its application, waste and useless or superfluous consumption are deemed unacceptable. These elements closely resemble those of SRI: a keen focus on sustainable development, creation of wealth for society, and improvement of overall quality of life. Both spheres of investment demand the businesses chosen for investment are socially useful, not detrimental to humanity, and compliant with humanitarian ethics. Both practice ethical exclusions as part of their investment rules, and their common list of forbidden sectors include alcohol, gambling, tobacco and
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Impact investors look to fund specific and measurable change, and do not rely on marketing or public relations propaganda.
weapons – businesses that are often deemed harmful to humanity and society. While traditional finance has always been driven by an effort to maximise risk-adjusted returns, investors in Islamic finance and SRI have the additional goal of ensuring financial market activity is compatible with investors’ ethics, and that they promote social welfare. Both sets of investors seek not only financial returns, but also societal returns. Although the principles of Islamic finance date back several centuries, its role in modern financial markets only began to receive recognition in the 1980s, and it took until the start of this century for it to gain a meaningful share of global financial activity. By most estimates, the total volume of Islamic financial assets has grown by 15 to 20 percent annually over the last two decades, and now exceeds $1trn according to an IMF study. Similarly, SRI coalesced as a recognised investment strategy in the 80s, and has grown significantly over the past two decades. Some commentators estimate the total volume of assets held by explicitly SRI investors has increased by more than 30 percent since
2005, and now exceeds $3trn according to the aforementioned IMF report. In another parallel, both SRI and Islamic finance have hitherto focused more on equity than on fixed-income investments. The fundamental principles behind Islamic finance – emphasis on equitable risk sharing and the prohibition of interest-based financing – are complementary to investing in equities. Likewise, SRI has been applied largely to equity investing, and mostly through screening. As a result, financial intermediaries have found it easier to create SRI and Islamic equity products than fixed-income ones. SEDCO Capital has incorporated its Sharia-compliant investment approach with its responsible investment strategy and created a concept referred to as prudent ethical investing (PEI). PEI is seen as the evolution of responsible investment, as it highlights the importance of due diligence and transparency of investment structures, processes and reporting, and has clear understanding of the underlying risks, structures and cash flows. PEI also is designed in a way that ensures the quality of its portfolios through its prudent elements, to avoid high and undue risks.
Embrace the positive Now, with established equity products, practitioners of both Islamic finance and PEI are beginning to look into the fixed-income side of capital markets, and this conjunction of interest creates several interesting opportunities. Given their similar histories and strong focus on ethics, it should be possible to create income products that meet the needs and demands of both types of investors and the resulting products could become a useful bridge to connect them. Often called ‘negative screening’, the most common strategy of SRI is the simple avoidance of businesses that fail to meet the investors’ ethical and moral standards. In the last decade, though, SRI investors have actively explored positive ‘impact screening’ techniques – an active search for businesses that have proven their beneficial social or environmental impacts. This proactive approach also negates criticism directed towards ‘greenwashing’, as impact investors are looking to fund efforts that achieve specific and measurable change, and do not rely on marketing or public relations propaganda. Negative screening ensures Sharia-compliant investors do not invest in activities or structures prohibited by Islam, but these investors do not necessarily have an opportunity to support activities they believe in. The concept
of development in Islam has three dimensions – self, Earth and society – and all three dimensions assign heavy responsibility on individuals and society. If balanced development is defined as progress, positive or impact screening could open up many new doors for the Islamic investor by uniting investments that generate measurable positive social impacts. On a related note, when environmental, social and governance criteria (ESG) are integrated into financial analyses, this hybrid strategy ushers various ethical criteria into the mainstream financial industry, and helps close the gaps between conventional, Islamic and SRI investments. This is at the heart of PEI as it integrates the analysis of ESG criteria with the investment process to incorporate non-financial aspects. Based on a confluence of research, performance and demand in this area, SEDCO Capital is not only Sharia-compliant but also evaluates ESG aspects as part of its investment process. In 2014, SEDCO Capital joined the UN Principles for Responsible Investment, and became the first Sharia-compliant and first Saudi Arabian signatory to do so. To illustrate this, in public equity, the company launched four ESG/Sharia-compliant funds with AUM of more than $410m. In private equity, SEDCO Capital is the Sharia advisory to BTG Pactual Brazil Timberland Fund I (a fund that emphasises the sustainable development of commercially managed timberland in Brazil). In real estate, it has invested in India’s first sustainable green building research park in Bangalore. Moving forwards, SEDCO Capital aspires to deploy Sharia/ESG investment platforms across all asset classes and investment strategies.
Bright idea As the global economy continues to face the challenges of a high-risk environment, SEDCO Capital’s PEI concept promises a bright future and represents a compelling proposition. Relative to strategies that involve traditional SRI only, PEI not only avoids high financial risks but has the potential to deliver and enhance long-term risk-adjusted returns, which is a key factor for investors. And relative to traditional Sharia-compliant strategies, PEI applies positive ESG screening, which also tends to incrementally improve expected returns. With SRI and Islamic finance taking centre stage in the financial industry, PEI is merging these two forces to embrace a more sustainable economic development model that is expected to attract non-Muslim SRI investors into the Islamic finance market – truly the beginning of a new, unified age. n EUROPEANCEO
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Tarek Abdelmotaal CEO, Ziegert Capital
Getting in on the ground floor
Early-stage property investments focused on forward sales can yield reliable, marketbeating returns if partnership is embraced Professional investors know the chance to earn tidy returns is at its greatest at the start of a given project, as new schemes – including revitalisation projects – require large initial investments that tend to be fronted by the developer. Accordingly, developers need well-heeled partners who use their financial wherewithal to buy property or to underwrite the costs of the planning phase. It is here that Ziegert Capital’s ambition to create a win-win situation for both parties comes into play. Only if capital and real estate know-how combine in a productive working relationship will your investment meet with success. To make sure all parties see eye-to-eye, we focus on one-to-one arrangements. For example, we help an investor committed in a given project to directly interact with the developer to stay up to date and to play an active part in planning. But, principally speaking, we rely not so much on platforms as we do on collaborative ventures where we bring our own money to the table.
Teaming up A recent example of this strategy would be our private equity partnership. In this model, we approach developers of condominium projects with the offer to buy out their forward sales ratio. We tend to use a joint venture to do so; bringing in a family office, for instance. Underwriting banks usually want to see forward commitments for roughly 30 percent of the planned condominiums before they release their building loans. This funding prerequisite can be a particularly high hurdle for projects that cannot actually be partitioned. Our solution to this issue is to buy up the residential package for individual freehold ownership. It is something not commonly done in the German market because it comes with certain drawbacks for the buyer. When buying condominiums in individual freehold ownership, for instance, you become a member of the condominium owners’ association (COA), and thus have less influence on the decisions of the COA if you retain the flats in your portfolio
longer than originally planned. We, however, are willing to embrace these risks, not least because doing so lets us pick up residential packages at reasonably discounted prices and at an early time of investment. Importantly, when it comes to such investments, we will acquire exactly as many residential units as the developer needs to sell to meet the forward sales ratio, thereby clearing the way for construction to begin immediately. And that isn’t all: we will not put the apartments on the market until all the other units have been sold, preventing a competitive situation between the various sales schemes. Actual construction tends to take between 18 and 30 months nowadays, not including the time it takes to retail the condominiums. The marketing of a smaller property development can be concluded after six to 12 months, whereas larger projects can take up to four years before the last unit is sold. During this time, both we and our partners participate in the appreciation of the flats,
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We only select projects for our partners that promise an exit that is both profitable and demonstrably uncomplicated
which can realistically be five to 35 percent, depending on the concept, the pricing model and the market cycle. Given this, you can actually achieve triple-digit rates of return on the equity capital invested. After all, purchasing through a private equity partnership ties up very little liquid capital – often just 10 percent of the purchase price toward the incidental acquisition costs and the guarantee costs. The actual acquisition does not take place until after completion, and tends be done using debt capital, unless a partner wishes to commit liquid assets. While this will not diminish the equity yield rate, it will boost the absolute return on investment.
Safe return Since we resell the apartments upon their completion rather than keeping them in our portfolio, everything depends on the final selling price, and on the time it takes to resell. But, no matter what, annual equity yield rates well into the double-digit percent-
age range are quite realistic, giving a rather unique risk-return profile. One must bear in mind that most investments with a serious chance at earning doubledigit returns on the capital employed come with a risk of losing all or at least a major part of the invested capital. Our private equity scheme, by contrast, lets you buy completed apartments. The worst-case scenario would be this: if the market suffered a trend reversal, we would lose out on the appreciation of the condominiums when selling them, even though we bought in at a discount and without estate agent fees. But even this situation would find us prepared, because we would simply retain the apartments in our portfolio and put them on the rental market. If nothing else, we would earn a rental yield of an estimated three to five percent. When you look at today’s market, this actually resembles the best-case scenario for many investors. The main advantage for developers is gaining financial room to manoeuvre. Develop-
ment can kick off immediately, and thereby generate substantial interest savings while also providing advanced security of investment. Moreover, the developer may be able to negotiate disproportionately high prices for the share of residential units yet to be sold, which tends to be about 70 percent. After all, roughly 30 percent of the units have already been sold on forward commitments (eliminating the risk they may have to be sold at lower prices). This is an aspect that will generally cause prospective buyers to be more favourably inclined towards buying.
Mezzanine capital The option to get the construction work off to a swift start presents significant opportunities for both property developers and investors. Since 2014, Ziegert Capital has made â‚Ź30m in mezzanine capital available to private developers, facilitating the construction of well over 1,000 flats. At the same time, the company has financed several commercial property projects. The figures illustrate the considerable leverage mezzanine financing can have. Even with minor amounts relative to the investment total, mezzanine loans can make a big difference for residential development projects. On the other hand, the approach is vindicated by persistently strong demand among returning developers. Indeed, we tend to work only with partners who are personally acquainted with us and easy for us to assess, so that we need not think twice about recommending their projects to our lenders after concluding our due diligence. This explains why, in recent years, only 10 of the projects that have been submitted to us at a rate of two or three per week were actually forwarded with a recommendation to finance. Along the same lines, we ultimately consider it our responsibility to only select projects for our partners that promise an exit that is both profitable and demonstrably uncomplicated. The one exception to this is for investors whose business depends on the availability of mezzanine capital to ensure early access to high quality development projects. In such cases, granting a junior loan can be tied to a right of first refusal in regard to property sales. Another important aspect is to check which partners complement each other on a personal and business level. It would be pointless to set up a deal when it is obvious from the start the parties will be mutually distrustful and suspicious because they simply do not understand each other. After all, you will generally not make good money unless all players speak the same language. n EUROPEANCEO
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Understated excellence Though not as famous as Abu Dhabi and Dubai, Sharjah offers investors a more affordable route to the same businessfriendly environment as its larger neighbours, writes Marwan bin Jassim Al Sarkal, CEO of the Sharjah Investment and Development Authority (Shurooq)
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As the investment promotion agency of Sharjah, we are dedicated to the continued transformation and economic diversification of the emirate, and we are committed to guiding foreign investors to the tremendous opportunity and potential that Sharjah offers. Working actively and collaboratively with private companies and public institutions, we leverage our superior market knowledge to guide foreign investors to the right opportunities in Sharjah. Sharjah is quickly becoming a preferred investment destination, offering competitive advantages to regional and international investors. At Invest in Sharjah, an initiative launched by Shurooq, we identify, promote and facilitate investment opportunities across all sectors of the economy. Our expert team takes great pride in discussing the abundant investment opportunities in the emirate of Sharjah. We offer a business-friendly environment and bespoke, step-by-step guidance to find opportunities that offer strong returns. Our areas of focus
include: travel and leisure, transport and logistics, healthcare, environment, education, and light manufacturing.
Sector choice With demand outpacing supply, the travel and leisure sector offers a range of investment choices. From increasing demand for luxury hotels and restaurants to rising arrivals at the emirate’s airport and cruise terminals, Sharjah offers tremendous opportunities for investment in this flourishing sector. As the centre of trade and commerce, and the industrial and manufacturing centre of the UAE, Sharjah also offers a wide range of investment opportunities in transport and logistics, a fast-growing sector in the emirate. What’s more, the emirate’s strategic location and affordable labour costs make it ideal for land and sea transport. In healthcare terms, Sharjah’s growing population, coupled with a rise in lifestyle dis-
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Over the past decade, Sharjah has implemented several initiatives to develop and diversify its economy, and to encourage foreign direct investment
eases, has increased demand for high-quality, specialised treatment and pharmaceutical services. As the emirate looks to increase its ratio of hospital beds to population in the next few years, there is ample room for growth and investment in the healthcare sector too. The Government of Sharjah has placed the environment at the heart of policymaking. New environmental legislation is creating the need for environmental products and services, and with its zero-waste strategy and strong carbon emissions regulation programmes, Sharjah is looking to attract local and international investments in this sector; investments that align with the strategic direction of the emirate. Sharjah is also regarded as a key centre of higher education, and is looking to attract more foreign students to its schools and universities. In 2016, education as a percentage of total budgeted expenditure across the UAE was 21.2 percent, and the strong growth of the sector presents significant investment opportunities.
Finally, as the industrial hub and manufacturing backbone of the UAE, Sharjah boasts a thriving manufacturing sector. The availability of land in industrial and free zones – including the Sharjah Airport International Free Zone and the Hamriyah Free Zone – is among the emirate’s key advantages with regard to development. “Sharjah is a natural place for manufacturers to locate at a time when industrial zones in neighbouring Dubai, Abu Dhabi and Ajman are filling up”, said Mohammed Al-Hazzaa, Director General of Emirates Industrial City, one of Sharjah’s industrial zones.
Smooth process Over the past decade, Sharjah has implemented several initiatives to further develop and diversify the emirate’s economy, and to encourage foreign direct investment. These include start-up schemes for small and medium-sized enterprises, and the establishment in 2009 of the investment and development authority
Shurooq. This is an independent body mandated to oversee the social, cultural, environmental and economic development of Sharjah, in line with its rich heritage and culture. Shurooq was named MENA FDI Agency of the Year in 2013 and 2014 at the European Global Banking and Finance Awards. In 2015, Shurooq was named the Top Investment Promotions Agency at Site Selection magazine’s Best to Invest Awards. Invest in Sharjah embraces the modern approach to governance, fostering close collaboration between the private and public sector by bringing investors and opportunities together to fuel growth and prosperity for all through the provision of an end-to-end solution to investing in the emirate. We believe our united efforts will help promote and position Sharjah in the global marketplace. Centrally located between Europe and east Asia, with convenient access to major international airports and ports on both the Arabian Gulf and Indian Ocean, Sharjah is a strategic investment destination. We are proud to be the most diversified economy in the GCC and the cultural capital, industrial hub and education hotspot of the UAE. With no single sector representing more than 20 percent of the emirate’s GDP, Sharjah has achieved a compound GDP growth rate of 11 percent over the past 10 years, proving its economy is sustainable and stable. Investors will benefit from Sharjah’s business potential. From its open-door policy and simple incorporation process, to special investment zones and a favourable regulatory environment, the emirate offers competitive advantages to regional and international investors. Its economic resilience is fuelled by over 55,000 SMEs that already benefit from the competitiveness of the supply chain. Over 13,000 companies, with investors from over 157 nationalities, are established in Sharjah’s free zones. Investors in Sharjah benefit from an attractive and continually improving national investment environment. In the World Bank’s 2017 Ease of Doing Business Index, the UAE ranked 26th out of 190 countries, up eight places from the previous year. In addition, the UAE ranked 11th out of 138 countries in the World Economic Forum’s Global Competitiveness report for 201617, while fDi Intelligence, a Financial Times publication, ranked Sharjah as one of the top 10 small and medium-sized cities of the future in 2015. Our expert team takes great pride in discussing the abundant investment opportunities in our emirate. We work with investors, companies and institutions from around the world to identify the right solutions to achieve individual investment needs and realise mutual success. n EUROPEANCEO
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Freddie Achom CEO of Rosemont Group
Brexit effect As Brexit sends start-ups to the continent, crowdfunding is overtaking venture capital funding in the UK. Investors may be looking for alternative routes, but the outcome may not be as bleak as it’s being portrayed
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Brexit, unsurprisingly, raised more questions than it answered. While it was made clear the UK would indeed leave the EU, the specific details of exactly what that means will take years to finalise. For businesses of all shapes and sizes, this means a long wait before they are able to plan with confidence. For start-ups in the UK, this environment is particularly difficult. Any plans to expand to the continent must be put on hold until negotiations are complete. Many entrepreneurs may also be worried about their funding, especially if it comes from an international source. For venture capital, Brexit presents a range of very different challenges and opportunities. While in the short term there may be some difficulties, there may also be promising developments in the longer term. European CEO spoke to Freddie Achom, CEO of Rosemont Group Capital Partners, an early-stage venture capital
investment firm, to find out what opportunities and challenges exist for both venture capital and start-ups in the future.
How is Brexit affecting the venture capital sector? At the moment, we haven’t seen a change in day-to-day operations as Rosemont Group’s portfolio is predominantly UK-based. More broadly, however, an obvious key change is that there will be fewer merger and acquisition transactions until we know more about the outcome of Brexit. There will also be less pan-European investment coming from the UK into Europe and vice versa. I am hoping there will not be too many heavy changes during the transition to Brexit. Ideally, I would like to see policies surrounding trade and taxation agreements remain the same. As much uniformity as possible is needed.
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How have key figures in venture capital responded to the Brexit vote? Thought leaders are trying to look at the positives, much like myself. The amount of general uncertainty in the UK, both now and in the near future during the Brexit process, is likely to make investors across the board a bit more cautious when opting to deploy investment capital. However, data from London & Partners, the Mayor of London’s promotional company, found that in 2016 the UK tech sector drew more investment than that of any other European country. Measuring activity across private equity and venture capital deals, more than £6.7bn [€7.6bn] was invested into UK tech firms over this period, with the good news extending to London. The capital city retained its status as the tech capital of Europe, accounting for more than a third of the total invested in UK tech firms, and attracted more money than any other European city. As Atomico CEO Niklas Zennstrom put it: “We should be making it easier, not harder, for companies to grow in every European hub. If we want London to stay competitive with cities like Berlin and Stockholm, it’s important the government does everything possible to preserve free, cross-border access to talent, capital and markets.” Accel partner Fred Destin echoed this sentiment: “Our simple message to entrepreneurs is: don’t panic, and keep operating. Brexit is unlikely to make our lives easier, but we remain incredibly excited about the unparalleled opportunity for European tech as a whole and we’re not going to let politics get in the way of building great companies or backing great start-ups.”
We are a consumer society, and this is the time for more small, unique companies to flourish
faith. We have seen an increase in momentum over the past few years now. The danger we face now is that the same will happen with Europe, as firms come to see the continent as a more attractive destination. Venture capital firms won’t want to invest across the water into what is effectively an island. The uncertainty of Brexit and new regulatory agreements will create ambiguity. At the moment, we see Lisbon cropping up as the new tech hub of Europe. Venture capital firms are also showing signs of going further afield to locations such as Israel, and there is a chance that the UK could start to see a diminution of activity in that respect.
What other trends are affecting the venture capital sector? The trends and factors currently affecting venture capital largely relate to the growing popularity of crowdfunding. Many investors look at the instantaneous benefits of crowdfunding and see the exciting opportunities it offers. However, in the long run, they are left with a lower amount than expected and originally predicted. Having said this, start-ups and existing companies alike have found it conducive to go to crowdfunding platforms at times. The main reason for this is that crowdfunding is evolving to offer more niche opportunities. Crowdfunding can offer individuals a platform to share their specific area of expertise and capitalise on it; we see a lot of gaming, tech and artisan food industries booming. Investors can finally put their money into macro sectors. We are a consumer society, and this is the time for more small, unique companies to flourish. In 2016, equity raised from crowdfunding surpassed that of venture capital for the first How do you see the UK’s venture time. Increasingly, the power of the masses is capital position changing relative to proving to be a worthy adversary for the venture other countries? Brexit will likely see more enterprise invest- capital community. ment schemes being introduced. More opportunities will become available, locally speaking. Do you think the climate for It will be a chain reaction: if venture capital entrepreneurs searching for capital gains more traction in Europe, what we are will improve or worsen? going to find is that most UK-originated start- I don’t see the situation worsening. I am hopeups will root themselves on the continent ful. With regards to Brexit, in the short term rather than in the UK. there will be a relatively high level of apprehenRight now, a lot of companies that are based sion until we know more about the economic in the UK that truly believe they have a disrup- climate and how it will pan out. The World tive product and require substantial capital Bank reports that an estimated $93bn will to launch will move their base to the US. This be invested by 2050, with entrepreneurs and is because capital is easier to come by over investors alike profiting. Essentially, looking there and the Americans better understand further into the future, we expect to see a posithe tech sector so, consequently, have a lot more tive and promising outcome. n EUROPEANCEO
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Sam Camilleri CEO, Natal Joint Municipal Pension & Provident Fund
Mutual benefits Encouraging saving and offering insurance is just the tip of the pension fund iceberg. To truly support members, financial literacy is key
The Natal Joint Municipal Pension and Provident Funds (NJMPF) is a provincial retirement fund that provides retirement funding benefits for municipal employees in the province of KwaZulu-Natal in South Africa. The NJMPF administers pension funds for employees and pensioners of the 55 municipalities in the province, and its vision is to provide superior retirement services and benefits to its 30,000 active members, pensioners and beneficiaries.
Hindsight and insight Several surveys have been published in South Africa on the state of the population’s attitudes and readiness for retirement. The results have been largely consistent. For example, a survey of South African households conducted some time back was performed on a representative sample of 65-year-olds, and the following startling facts were uncovered from respondents: 47 144 | EUROPEANCEO
percent were dependent on relatives, 31 percent were forced to continue working, 16 percent were dependent on a state pension, and only six percent were financially independent. In recent studies, this challenge has not shifted, perhaps due to inflation rates, taxation, and the cost of living increasing. Coupled with this challenge is the issue of low financial literacy levels. According to a study by the OECD, South Africa is at the bottom of the financial literacy table. The OECD/INFE International Survey of Adult Financial Literacy Competencies questioned 50,000 people aged between 18 and 79, and found that, on average, only 56 percent of adults across the 30 participating countries achieved a score of at least five out of seven, the minimum target score. South Africa barely reached 30 percent. That is why the NJMPF is fully focused on driving the financial literacy campaign.
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Financial literacy requires a shift in thinking and behaviour
At the NJMPF, retirement funding services are more than collecting contributions, investing responsibly and paying out benefits; it is about building a member who is aware of their current financial situation, who is able to forecast for the future and exceed or maintain their standard of living after retirement. This means retirement funds should position themselves strategically to be able to enhance value proposition for members, pensioners and beneficiaries (NJMPF stakeholders) in all aspects of retirement funding activities. This view of placing stakeholders at the core of retirement funding has resulted in the NJMPF being recognised by local and international industry institutions for its unwavering level of good governance. Recognition has also been given for top quartile investment returns, dedicated communication programmes, treating customers fairly, financial astuteness, and being the benchmark to which other funds aspire.
Innovation for the future The retirement industry in South Africa, similar to other countries in the world, is highly regulated by statute. Due to this regulatory environment, some funds strive to merely achieve the standard requirements and fail to view systems and stakeholders in their holistic makeup. The NJMPF, on the other hand, strives to go beyond the norm. A new election process is being introduced at the NJMPF. All members will now be able to vote directly for members of the board of trustees through modern and innovative methods. The new system will give each candidate a unique identifiable barcode which will assist in automating the scanning and counting process. In addition, a unique barcode will be generated for each member’s election form. The voting method has also been enhanced to include voting via the NJMPF webpage and mobile app. Members can sign in to the NJMPF web portal and click the voting tabs. The election data is then filtered back to the NJMPF for counting. The unique barcoding system will assist in preventing any duplicate ballots and assist in verifying each ballot. The system will generate validation reports and flag any potential inconsistencies. What’s more, a new mobile app has been introduced by the NJMPF. The app will allow members the ability to interact with the fund at any time. The objective of the application is twofold: to use technology as the primary means of communicating notices and news, while also helping stakeholders to become more financially literate. This, together with the improved NJMPF interactive webpage, will motivate members to improve their financial provision for retirement and encourage members to think about retirement planning daily.
Ever mindful of containing costs, the NJMPF is using its own balance sheet to create reserves to meet death and disability benefits for its members. Instead of an outflow of premiums to an outside insurance company, the NJMPF retains such amounts in a self-insured fund, which has proved to be most successful. In the NJMPF’s two defined-benefit funds (superannuation and retirement funds), members become pensioners of the NJMPF when they retire. Monthly pensions are paid by the NJMPF and annual inflationary increases and ad-hoc bonuses are awarded by the board of trustees. The increases and bonuses declared by the NJMPF to its pensioners surpass inflation significantly, reflecting an improved standard of living for pensioners. Provident fund members in South Africa, however, currently need to create a monthly income from their retirement benefit lump sums and approach an insurance company to purchase a pension or annuity. This can be a confusing and expensive exercise. For this reason, and due to imminent changes in legislation in South Africa, the NJMPF has investigated ways to assist provident fund members when they reach retirement age. The NJMPF will soon be offering an in-house annuity whereby monthly pensions will be offered at a significant discount for members.
Shifting mindset Engaging and interacting with the membership regularly and running the NJMPF financial literacy wellness programme is an important part of the fund’s communication strategy. The NJMPF has always believed financial literacy requires a shift in thinking and behaviour, which is why we are engaging members and pensioners through practical and efficient methods of communication and engagement to build their capacity to manage their financial world and achieve financial independence in their lifetimes. The fund visits members in its 55 municipalities all year, explaining the benefits of the fund and instilling financial literacy. The NJMPF’s success is driven by passion, strategic outlook, and creative thinking. Its philosophy is simple: look at what constitutes best practice and then try and surpass that. It is in the fund’s DNA that all its staff are constantly improving the way they do things. The NJMPF has made an impressive mark on the local and global stage, with a total of 21 local and 11 international awards, making it the most decorated pension fund in South Africa. n
Cost savings The South African National Treasury has estimated a cost saving of two percent over the savings life of a member will increase the member’s pension by around 40 to 50 percent. The NJMPF, however, is not only looking at reducing costs through member saving, but also at the time of retirement by way of in-house annuities with an approximate saving in annual F OR F UR T HE R INF OR M AT ION fees of three to five percent. www.njmpf.co.za
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Investment
Dmitry Alimov Managing Partner, Frontier Ventures
Becoming Goliath Harnessing network effects is the key to tech industry domination. However, giant killing is easier said than done – it takes a certain self-assured confidence to rise to the top As David and Goliath scenarios go, they rarely come crisper. Late in 2003, a young business school student stood up at the end of a lecture by legendary investor Jim Rogers and told him he didn’t know what he was talking about. True, the business school was Harvard Business School, and true, Rogers has always himself been something of a maverick, but the point still holds. It was big against small. The acrid and widely circulated email exchange that followed between the two briefly riveted the business world, receiving coverage in The New Yorker and other media. What was striking about the back and forth was not only the virulence of Rogers’ language, as, while putting his case that Russia was carcrash investment territory, he dismissed the other as a “chauvinistic know-nothing” who “should have kept his mouth shut”. It was also the student’s calm assurance as he pointed out factual errors in Rogers’ assessment.
Renegade logic The student’s name was Dmitry Alimov and, viewed retrospectively, that clash seems to 146 | EUROPEANCEO
beauty professionals, and doctors. Thanks to its first-mover advantage and network effects, the company became the market leader in Russia and one of the most recognised brands in consumer services. Another example is Expert360, a Sydneybased marketplace for high-end consulting services, which has also drawn backing from Alimov’s $50m fund. Founded by fearless former Bain consultants Bridget Loudon and Emily Yue, the marketplace challenges the dominance of the likes of Bain and McKinsey by connecting enterprise clients directly to the best consultants, while slashing the gargantuan margins that have traditionally supported the industry. As Alimov put it, Expert360 has “the potential to disrupt a massive global industry”. And, since consultancies themselves are paid to shake things up, you could say that Expert360 is disrupting the disruptors: a type of intervention that has been the template of Alimov’s career ever since his spat with Rogers 14 years ago. The twist in this type of narrative is that David eventually becomes Goliath, and then what? Alimov isn’t losing sleep over it. A softly spoken man with a gentle sense of humour, he outlines his four-point plan for mastery: “Point one: tech companies will dominate the world. Point two: companies with network effects already do and will continue to dominate the tech industry. Point three: our fund will be the leading backer of network effects Conquer the world One pertinent example is Frontier Ventures- companies. Point four: thus, we will domibacked Profi.ru, a Moscow-based online nate the world.” His hint of a smile suggests service marketplace for handymen, tutors, he’s only partly joking. ■ have set the pattern for his career to come. For one thing, the venture capital sector, which the Russian-born Harvard graduate has been focused on since the launch of his own venture firm Frontier Ventures, is inherently tilted towards the take-down of incumbent companies by start-ups. For another, his focus has been on the tech industry, which has been systematically ‘Daviding’ the sclerotic Goliaths of big business since at least the late 90s. Within the tech industry, most of the business success has accrued to companies with strong network effects. There’s nothing new about this concept. The telephone and telegraph were both instances of it – that’s to say, each new user increases the value of the product for other users. It’s a virtuous circle that collaterally tends towards the exclusion of competitors. What has changed is that the internet has facilitated a surge in the dominance of strong network effect companies (including titans such as Facebook and Airbnb). “Tech companies account for 63 percent of equity value of the top 10 S&P 500 companies, versus only 21 percent five years ago”, Alimov observed. “And globally, we estimate that companies with strong network effects account for over 90 percent of market capitalisation of the top publicly traded tech companies and the majority of equity value of the top 140 private companies.”
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TEXAS
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П O i t i s O P formula one's globetrotting cash carnival has a new owner, with fan appeal set to replace the pursuit of profit as the sport's raison d'être. however, this bold future will depend on how well the new administration's goal of american domination is balanced with formula one's european heritage, writes callum glennen ›
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ormula One does not do half measures. In terms of speed, spectacle and cost, motorsport’s premier competition is built around high challenge and little compromise. Bernie Ecclestone’s 40 years at the helm of the organisation led the series to both mainstream popularity and tremendous financial success. As drivers like Ayrton Senna, Michael Schumacher and Fernando Alonso became household names, revenues climbed into the billions. However, while still posting huge profits, Formula One’s viewership has been in decline for the past few years. From a global audience of 600 million in 2008, viewers shrunk to just 400 million in 2015. Ecclestone’s focus on locking down broadcast rights and soliciting large fees from wealthy race hosts may have kept the sport rich, but has gradually priced viewers out of an experience many felt was, in any case, now dull and predictable. With a sense of inevitability, Ecclestone’s reign came to an end at the beginning of 2017, with US mass
media corporation Liberty Media swooping in to purchase the platform. With Chase Carey appointed the sport’s new CEO, Formula One is now set for its biggest change in four decades. For the new owners, the challenge will be to rewire the sport for the modern age, while maintaining the significant profits investors expect. Balancing the sport’s distinctly European history while growing the US market will result in new races, new ways to watch and, with any luck, new viewers.
Race to the top Born in Suffolk in 1930, Ecclestone was himself a racer in his youth, but a series of accidents at Brands Hatch prompted him to leave the sport. After building a business empire from a single motorcycle dealership, he returned to motor racing in a management role. In 1957, he purchased Formula One team Connaught Engineering and began managing the career of driver Stuart Lewis-Evans. In 1958, after Con-
naught ended up without a driver, he attempted and failed to quality for both the Monaco British Grands Prix. He exited the sport again after Lewis-Evans was tragically killed competing in the Moroccan Grand Prix later that year. He returned a couple of years later, only for the death of his friend and management client Jochen Rindt in another racing accident to prompt him to leave once more in 1970. It was in 1972 that Ecclestone began his remarkable transformation of Formula One. He had purchased Brabham Formula One at the end of the previous year and led a period of moderate success for the team. In 1978, he became leader of the Formula One Constructor’s Association (FOCA), an alliance of smaller independent racing teams campaigning for their interests against the governing body of world motorsport, the Fédération Internationale de l’Automobile (FIA). Under Ecclestone’s stewardship, FOCA mounted a fierce legal campaign for a greater share of Formula One’s
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E N g i N E FA i lU R E FORMULA
ONE
2008
GLOBAL
VIEWING
FIGURES
2009
2010
2012
2013
2015
2016
[MILLIONS]
600 520 527 515 500 450 425 400 400 2011
2014
Source: Formula One Group
as Abu Dhabi, Bahrain and Singapore. “Business is secretive at the best of times, but he was hyper-secretive, so in terms of how he did those deals, and how they came about, I don’t think anybody would know”, Valentine said. Formula One is a spectacularly expensive to be competitive in, but Ecclestone always managed to encourage teams to join, however briefly. “It is a sport where we’ve had between 50 and 60 different teams coming and going over the last 35 to 40 years, so keeping the grid populated was always a tricky problem”, said Valentine. “But he always managed to squeeze a revenue from the growing television audience. minimum of 20 cars onto the grid. So in terms It took until 1987 for the battle to be over, with of financing, he was a master.” the establishment of the Formula One Promoters Association to manage commercial rights, Bernie model and Ecclestone was in charge. While overseeing incredible financial and view“He took it from what was essentially just ership growth over his time in charge of the a handful of teams with not very many house- sport, Ecclestone has also courted controversy. hold names and grew it into a kind of global In January 1997, he donated £1m to the UK circus, while obviously enjoying the revenues Labour Party, a contribution that was only behind that and paying back shareholders from revealed in December of that year and after [Formula One’s former parent company] CVC the Labour government announced Formula capital partners”, said Ed Valentine, a motor- One had been granted a temporary exemption sport analyst at Opta Sports. “When he took it from a ban on tobacco advertising – then a key over, it wasn’t really a world championship. It revenue source for teams. was mainly European races, and then maybe Ecclestone also faced a bribery trial, where one or two in South America. Now we have 19, he was accused of giving Bayern Landesbank 20, 21 events which are truly global.” executive Gerhard Gribkowsk $44m in 2006 Formula One’s business model was both to influence who the bank would sell a share of much envied and highly secretive under Eccle- Formula One to. In 2012, Gribkowsk was senstone. As well as broadcast rights, the sport took tenced to eight and a half years in prison, while in large fees from the cities and countries that Ecclestone avoided prosecution with a £60m hosted events, bringing in such wealthy states settlement. In 2009, Ecclestone was back in the
news after suggesting Adolf Hitler was a man able to “get things done” and that Saddam Hussein was “the only one who could control [Iraq]”. Around the latter end of those controversies, Formula One also began to suffer on the track. Between 2010 and 2016, either Red Bull Racing or Mercedes dominated entire seasons, often quickly building an insurmountable lead over rivals. Many races were criticised for being dull processions due to a lack of overtaking opportunities, and for being effectively decided by the halfway point. Attempts to improve the on-track action were frequently short sighted and ineffective. To make the last race more exciting, double points were introduced for the 2014 season finale. The decision was widely criticised by drivers and fans, and ultimately did not impact the final standings. Qualifying was changed for the 2016 season to incorporate a countdown knockout system, but this was scrapped after the first race due to fan confusion and cars ultimately spending less time on the track. “I think he started to focus more on the money than the on-track entertainment”, said Valentine. “He had no marketing department. It was basically him running the commercial side with the FIA Championship. He didn’t really put an onus on the theatre or circus of what was on the track.” Ecclestone also pursued broadcast deals that favoured subscription television networks and almost no digital presence. For a long time, teams were even unable to post videos on social media from the pits. » EUROPEANCEO
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Formula One ticket prices have been criticised for locking out the average fan, making races a playground for the rich
P R I C E O F A T H R E E - D AY G R A N D S TA N D T I C K E T I N 2 0 1 6
monaco
abu dhabi
belgium
mexico
us
$483 $397 $394 $300 $299 Source: F1 Destinations
Giving chase In September 2016, a deal was signed that saw Liberty Media take a controlling share of Formula One for the 2017 season, valuing the sport at $8bn. Alongside Formula One, Liberty Media also owns the Atlanta Braves baseball team and a third of music promoter Live Nation. Liberty Media quickly laid out its priorities for the sport, with CEO Greg Maffei saying Formula One would focus more on the US and new, untapped digital channels. Formula One's new CEO Chase Carey echoed Maffei’s sentiments at the time. “The Americas are an opportunity, and we are excited about developing them”, he said in an interview with the Financial Times. “But we also see Asia as an opportunity, and it’s very important we build on the foundation in Europe. This is a global sport.” Carey is a veteran of the entertainment industry with an eye for sports. During his time as CEO of Fox Television from 1994 to 2000, an aggressive bet on securing the rights to broadcast NFL games catapulted the network to success. Between 2003 and 2009, he was CEO of DirecTV, before returning to Fox as COO. 152 | EUROPEANCEO
The handover also saw Ecclestone’s role effectively being replaced by two additional people alongside Carey. Legendary Formula One technical director Ross Brawn was appointed to the newly created role of managing director of motor sports, tasked with leading the technical direction of the sport to encourage more exciting racing. Former ESPN sales executive Sean Bratches was appointed to the newly created role of managing director of commercial operations. Some changes were immediate, with teams allowed to post videos online from the pits. Valentine said Liberty Media has shown an interest in making Formula One less elitist. “In the Bernie Ecclestone era, you would have to pay something like €550 to €600 to get a reasonably good seat in the grandstands. For two adults and a couple of kids, you’d pay the best part of €1,300 to €1,500. It might take a family two or three years to save up for that, when they can go to an Arsenal or Chelsea football game and pay €150 to €200.” Other fan-friendly initiatives, such as free Wi-Fi in the grandstands, have also been introduced at races.
In terms of the on-track experience, a new agreement as to how finances are distributed is also on the cards. As it currently stands, while finishing higher in the championship determines a larger proportion of cash for teams, older and larger teams are awarded bonus payments that reach into in the tens of millions, leaving smaller teams unable to catch up. The current Concorde Agreement, the deal that sets out how money is distributed among teams, is set to expire in 2020. Valentine said he sees the renegotiated agreement as likely to be more equitable, in order to encourage a more level playing field and less predictable results. Another major change is likely to be where races are held. Right now, Formula One races fall into two categories: the traditional events hosted at historic circuits, and marquee events supported by national or state governments. For the marquee events, governments have been able to justify the substantial race fees since they provide global promotion and a cash injection to the local economy. Some traditional track owners, more reliant on ticket sales, have recently struggled to meet these fees,
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"Liberty Media seems to be shifting towards deals that are more favourable for event promoters, both small and large"
prompting frustration from fans who appreciate traditional racing heritage. Carey has expressed willingness to change the way the sport does business in this sense. “Nobody was tricked… [but] has F1 invested in the right way to support the events? It’s not that the deal is overpriced, it’s more, did we deliver where we should deliver?”, he said in the Financial Times interview. Ecclestone has himself questioned the longterm feasibility of the fee structure he built. “I charged [promoters] too much for what we provide”, he told reporters at the 2017 Bahrain Grand Prix. “I did some good deals commercially. They are paying a lot of money, and most of them, if not all of them, are not making any money. Quite the opposite. Sooner or later I’m frightened that the governments behind them will say enough is enough, and bye-bye.”
Across the Atlantic Liberty Media has flagged the US as the biggest opportunity Formula One has for growth, with Carey stating he would like to see more races there. But, in order to do this,
he will have to overcome a tainted reputation, Formula One’s entrenched European foundations, and the many other sports competing for the average US viewer’s attention every weekend. While Formula One has held many races in the US, the 2005 event at Indianapolis stands out for only six cars having participated. Michelin’s tyres, the most popular on the grid, proved unable to handle the track’s high-speed banked corner. A compromise on swapping tyres or adding a chicane could not be reached, and all but six cars pulled into the pits after the warm-up lap. Fans were unimpressed, and the US did not host a race between 2008 and 2011. Valentine said the recent success of the Austin Grand Prix, first held in 2012, has done a lot to repair the sport’s reputation in the US, though the real challenge will be prying viewers away from other events. “They’re going to have a hard job stealing fans away from NFL and the many other sports that are going on.” Dan Jones, head of Deloitte’s Sports Business Group said that, currently, Formula One remains a niche sport in the saturated US
market. “Greater broadcast exposure for all races can play a part in raising awareness of the sport”, he said. “However, the ‘jewel in the crown’ for the sport would be to see an American driver compete and succeed in the modern championship. There are many examples that demonstrate the impact that a successful athlete can have on attracting new fans to a sport – the ‘local hero’ factor.” While Formula One did add a US-based team in 2016 – Haas F1 – a local hero may be some time away. Broadcasting rights, particularly in terms of digital offerings, have also changed in the sports market. Rather than go through a TV network, many leagues are now offering an ‘over the top’ (OTT) service consumers can directly subscribe to. “There is already evidence that sports leagues themselves are taking greater control of their digital rights; the English Football League has recently announced the launch of an OTT platform to broadcast rights to its competitions in international (non-UK) markets, and both the NFL and MLB have established digital platforms available in non-local markets”, Jones explained. Formula One’s new management will have to navigate its complicated licensing deals in order to offer its own service, but it’s a necessity for its US success. That said, consideration must also be given to appeasing the sport’s European heartland. “We do want to grow globally, particularly in some of the markets where there are opportunities, but the foundations of the sport is western Europe, and we want to make the races in western Europe as strong as they can be”, Carey said in a 2017 interview with Sky Sports. Valentine said Liberty Media seems to be shifting towards deals that are more favourable for event promoters, both small and large. “They see that it’s not all about extracting as much money as possible from doing a deal at a circuit like Bernie did. Once they see that it’s a fan-friendly environment, I think you will have promoters queuing up.” While the biggest changes will take some time to play out, Formula One’s new owners appear to be working towards a balance between mixing European heritage with the untapped potential of the US. Encouragingly, the small steps Liberty Media has taken are already paying off: the 2017 Monaco Grand Prix was reported by WTF1 to be the most viewed race since NBC secured US broadcast rights in 2013. If such a difference can be seen after just a few months, the next few years look very promising indeed. ■ EUROPEANCEO
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FINANCE
Tax
Data overload
In a quest to cut down on fraud, tax authorities are increasing the amount and complexity of the data they require, according to Rebecca Polley, Vice President of Business Development at Vertex Manual tax reporting raises no more significant difficulties for companies than getting to grips with different countries’ regimes. As digitalisation finds its way into every corner of business, however, this is changing. Tax reforms across the world are seeing authorities demand ever more specific and detailed data, to such an extent that old-fashioned human reporting systems will soon be unable to cope. For global firms reporting in multiple jurisdictions, this doesn’t just mean more work: the dangers of incorrect or inaccurate reporting can be extremely costly, in terms of time as much as money. This is where third-party tax specialists come into play, aiming to take the burden off businesses, providing technological solutions to ensure compliance. With this in mind, European CEO spoke to Rebecca Polley, Vice President of Business Development at Vertex, about the growing importance of tech in reporting, how businesses can do more to give their tax departments a better chance of avoiding mistakes, and how Vertex works to prepare clients for a world of changing demands.
What global trends have you observed in tax technology? One of the most interesting global developments is the introduction of a goods-andservices tax in India. The introduction comes as part of an overall attempt to consolidate tax processes, and brings with it new reporting requirements, which require taxpayers to 154 | EUROPEANCEO
submit transaction-level data to authorities. That will be matched with the opposite party on the transaction, and any data that doesn’t match will actually go back to the taxpayers. In the GCC, the new VAT regime due to come into force in 2018 is following a similar path; real-time, transaction-level data will be required by authorities. Though the new tax is based on the European VAT system, this additional technological element is an attempt to improve on what Europe has by reducing fraud potential. These developments have not been lost on Europe itself, with Spain due to bring in reporting requirements that will entail, once again, real-time transaction-level data for indirect taxes. Taken as a whole, for global multinationals, this trend is going to require the submission of millions, if not trillions, of lines of data to various tax authorities. Companies would be well advised to start thinking now about how to harness tax technology to tackle this impending challenge.
Is the only response for businesses to digitalise their tax departments? That’s the solution to the tax data management challenge. The amount of data that’s going to be required is not something any human being can sit down and analyse. Companies need tools and advanced analytics, so they can understand what tax authorities are looking for and make the necessary corrections before submitting data.
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Tax
That’s the ultimate objective: to submit data that is as clean as possible, to avoid lengthy interactions and an onerous process of feedback and resubmission. Thankfully, there’s a lot of good technology out there to help, and this is something we offer to our customers, as well as support through the whole process. The US is a useful example here: when major vendors began to roll out enterprise resource planning platforms in the 90s, the complexity of the various tax regimes in the US meant that providers quickly outsourced the whole compliance process to vendors such as Vertex. This allowed the development of a very robust solution that actually performs tax calculations as well as providing all the relevant rates and rules. In terms of the global picture, this is looking likely to be the best approach for all international firms going forwards, as reporting requirements become more complex.
Do companies need to use the same technology as tax authorities to ensure compliance? In an ideal world, yes, and there are technologies available today that are close to achieving this. When we talk to tax authorities, we find they’re looking at things like machine learning, and how they can use advanced analytics and robotics. IBM’s Watson AI system is a great example of this effect, with machines becoming proficient in understanding transactions, trends and patterns, and identifying where certain transactions may not be aligned with a trend. As a technology vendor, that’s something we’re looking into: how we can harness new technology to enhance customer compliance. Specifically, we want to incorporate advanced solutions because we want to ensure our customers are equipped to meet the new reporting requirements emerging around the world.
The amount of data that’s going to be required is not something any human being can sit down and analyse
the aforementioned trillions of lines of data on a regular basis. For that volume of data, a technology solution has to be in place, and it has to be something many, many times more powerful than Excel.
What is the business risk of unreliable or badly processed data? We recently spoke to a customer that has just gone through the process of transforming their tax department and bringing in new technology, both in terms of calculation and content. That customer told us about an example where they had sent out about 70,000 invoices to customers with the wrong tax rate on them. Obviously, from a branding and imaging perspective, this caused a huge headache, not to mention the work required to address the issue. In the social media age, word of mistakes spreads quickly, which is, of course, something companies really want to avoid. They want to be absolutely confident that the rates they’re charging customers are 100 percent correct. How do providers like Vertex give businesses this confidence? We’ve got a very large research team that actually covers the entire globe in terms of tax rates, rules and trends. We supply that information to our customers as part of our product. So, you not only get assurance regarding rules and calculations themselves, but also rate changes, which can happen very quickly. If you’re working in an environment where your tax professionals are potentially distributed around the world, you want to make sure you’ve got a consistent process, that everybody’s getting the same information at the same time, to ensure that consistency. This is the essence of what we offer, and this type of simplification is only going to become more valuable for businesses as tax rules and reporting requirements become more complex. n
How does data volume and variety increase the complexity of the task? A good example of data variety can seen in terms of standard audit file tax (SAFT) reporting. SAFT is a reporting standard that was designed by the OECD to encourage consistency across Europe in terms of how companies could give more detailed reports to tax authorities. Unsurprisingly, however, most countries decided to put their own twist on that implementation, which once again mean companies need to make sure they understand the different requirements for each country. In terms of volumes of transactions, take the example of a retail business. A global or even F OR F UR T HE R INF OR M AT ION large European retailer will be working with www.vertexinc.com/europe
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FINANCE
Tax
The age of transparency
The European economy is approaching a cliff edge, but it’s nothing to do with Brexit. Tax transparency is set to transform the wealth management industry, writes Leonardo Braune, Managing Director of Intercorp Group Governments and tax authorities around the world are ratifying the automatic exchange of information agreements. As a result, secrecy is no longer an asset; it’s a liability. This presents a renewed opportunity to seize control of tax affairs. Last month, the OECD announced the Bahamas was the latest state to make the decision to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. This is the strongest signal yet that the automatic exchange of information agreements between governments and tax authorities are inescapable. For many years, individuals and multinational enterprises have been developing increasingly complex global strategies in order to maximise profits. Most jurisdictions have domestic laws in place to curtail these wealth and income management strategies but, in consideration of the new mobility of assets and the wide variation of tax climates around the world, it has become clear this is not a problem that can be effectively addressed on a national level.
Common framework In this new world, there is an understandable desire for tax authorities and governments to ensure taxpayers pay the right amount of tax to the right jurisdiction. The pressure has been exacerbated in recent years by a highly politicised public discourse, tainted with distrust, which tends to conflate offshore tax planning and wealth management with tax evasion. The need to exchange relevant information on a bulk basis, freely and automatically, and to address the problem of offshore tax evasion and avoidance, has now been internationally acknowledged. 156 | EUROPEANCEO
The OECD’s Common Reporting Standard (CRS) was approved by the OECD Council in 2014, designed to facilitate global exchange of financial account data. It calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions. The Multilateral Competent Authority Agreement (MCAA) was developed to create a legally binding international framework in which these exchanges could take place. By signing the MCAA, the first signatory jurisdictions – including all EU member states – have pledged to work towards starting the exchanges of information by September this year, while others are to follow by September 2018. But there are others talking about pushing it back – concerns about misuse and mishandling of sensitive information remain. Thanks to the work of the OECD and the increasing number of nation states signing up to the CRS and MCAA, the number of bilateral relationships is predicted to reach 1,300 by 2018, schedule permitting. As highlighted above, such is the international pressure on jurisdictions, even those with favourable tax climates such as Luxembourg, the British Virgin Islands and Hong Kong have added their signatures and agreed to exchange information. Perhaps most surprisingly, even those with tainted reputations are eager to join the fray, possibly as absolution for past opacity – Panama being a notable example.
Who is affected? Although the system is based on the US Foreign Account Tax Compliance Act (FATCA) regulations, the CRS has a much broader scope in terms of its definition of the ‘financial institutions’ compelled to submit their
data to their resident jurisdictions. The UK Treasury estimates the CRS will bring an additional 1,000 financial institutions not previously affected by FATCA in scope. Alongside banks, custodial institutions (trusts) and certain insurance companies, as well as any investment entity whose gross income is primarily attributable to investing, reinvesting, or trading in financial assets if the entity is managed by another financial institution (to include asset management consultancies) are considered to be financial institutions under the CRS. There will also be an indirect impact on non-financial companies that will need to comply with additional requests for information from financial institutions. It’s difficult to gloss over the fact that it is those with offshore assets, most likely expatriates, who will come under the most scrutiny – exactly whom the system was designed to target. Whether it be in the form of foreign investments or property, if their jurisdiction
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worth individuals need to reinforce or, in some cases, develop a more stringent and far-reaching process for onboarding so all assets and investments overseas are disclosed upfront. Furthermore, a forensic audit of clients’ asset history should be conducted immediately where there is any uncertainty. In these circumstances, poor accuracy has the same potential as wilful noncompliance to detrimentally impact a client’s wealth and tax affairs. The first step is to ask the question: “Is the information held by my client’s financial institutions accurate?” Whether it’s careless reporting or reckless accounting, discrepancies in the exchanged data will raise red flags to the authorities.
has signed up to the CRA and MCAA, by 2018 information will be available to governments that will expose anything from undisclosed assets through to undisclosed income generated by those assets. The absence of punitive sanctions attached directly to the CRS and MCAA isn’t to be taken at face value: it means only further uncertainty for the asset holder. Non-compliance will likely be handled at a domestic level: some jurisdictions acknowledge fines already paid and some don’t, meaning an individual or enterprise could be liable for multiple sanctions from several jurisdictions at once.
Damage limitation The CRS and the repercussions for non-compliance provide a strong incentive for those with complicated tax affairs to take active responsibility. Further incentive is offered through voluntary disclosure programmes, available in 46 jurisdictions across the world. Notably, the UK
Poor accuracy has the same potential as wilful noncompliance to detrimentally impact a client’s affairs tax authority (HMRC) introduced a Worldwide Disclosure Facility in 2016 for individuals and companies to disclose undeclared UK taxes in relation to offshore assets. It offers no special terms; tax owing is still expected in full, with interest and a minimum fine of 30 percent on the tax due. But, with HMRC holding the power to fine a maximum of 200 percent of the tax outstanding, disclosure through this programme is certainly preferable. Tax and wealth management consultancies acting on behalf of expatriates and high-net-
Long-term change Like it or not, this level of due diligence must now become commonplace. It is always in the client’s interests to ensure documentation such as self-certification forms is returned fully completed; information can then be accurately matched to a client’s personal tax records. Remember also that the exchanged data will be retrospective, including information on accounts that have since been closed and encompassing outdated practices which left significant margin for error. The use of blank forms, for example, used to be standard practice in the industry, as convenience outweighed accuracy. For the first time in history, the promotion of and demand for transparency will ultimately yield a better result for the individual, so long as they are well prepared. Indeed, individuals and enterprises affected should approach the next few months as a chance to turn the obligations brought by the CRS into an opportunity. A universal change in reporting behaviour has become not only desirable, but mandatory. This means a mindset shift. It means reframing the set of questions, from “How do I protect my assets?” to “How do I retain control over the information that is being shared about my assets?”. The first step is always to ensure the data held by financial institutions is correct and accurate. The CRS undoubtedly marks a huge step forwards for the ongoing democratisation of wealth. Any policy so far-reaching and transformational is sure to upend many entrenched processes and procedures, right down to the minutiae of wealth management behaviour. Clearly, this has the potential to yield painful side effects in the short term, but these will soften over time if the change is navigated wisely. The best course for everyone is to be side-byside with those who understand the system and can anticipate trends and upcoming change. n EUROPEANCEO
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CEOPROFILE Francesca Bellettini CEO | SAINT L AURENT
Identity crisis
Renaming a world-famous brand is never advisable. However, under Francesca Bellettini’s guidance, the rebadged Saint Laurent has been remarkably successful in a slow luxury goods market During tumultuous economic periods, purse strings are naturally tightened and nonessential purchases are forgone, including luxuries. Over the last few years, this has hit high-end brands hard. But in spite of this natural reaction, one brand has defied the trend. Since 2012, Saint Laurent Paris, formerly known as Yves Saint Laurent, has boasted double-digit year-on-year growth. In fact, the Parisian fashion house is doing so well it has become the fastest growing major brand in the competitive luxury fashion space. The company’s enviable performance can, in large extent, be attributed to a drastic and unexpected rebranding. And though former Creative Director Hedi Slimane was very much a driving force for this transition, it was CEO Francesca Bellettini who ensured the success of such a risky strategy, while also overseeing a radical overhaul of the company from within. Indeed, Bellettini’s commit-
ment to a balanced approach has made Saint conference in 2016. “The biggest move to bring Laurent the star of parent company Kering’s clarity back was changing the brand name. Not vast portfolio of luxury brands. everybody understood, because we are not very talkative; the more you explain, the less sexy a concept becomes.” The change to Saint Laurent Sexy concepts In the summer of 2013, Slimane announced also reflected a decisive shift towards moderhis bold decision to rename a fashion house nity, helping the brand reach young people that had been a fixture of the luxury scene for who do not share the same connection to the over half a century. The news sent shockwaves original name as older generations. “Fashion has never been so competitive. through the industry, with many interpreting the change as a sign of disrespect to the com- It’s no longer about brand loyalty so much as pany’s founder and namesake. Indeed, such a in being at the forefront of people’s minds”, said drastic identity change is usually a big ‘no’ for Gail McInnes, fashion industry expert and CEO established brands, but the audacious move of Stylist Box. “The name Yves Saint Laurent came as part of a shake-up intended to give the is iconic within the fashion realm, and the client base is loyal, but having to stay relevant brand some much-needed clarity. “What was missing from Saint Laurent in and to attract the next generation of custom2012 was not the business or the foundation, ers is why the rebranding was so drastic and but the fashion authority and the clarity of the became so controversial. “It became modern and sleek, with an hombrand. A brand without clarity, at the end of the day, becomes just a commodity”, said Bellettini age to the brand’s history, while elevating it from at the Financial Times Business of Luxury the image Yves Saint Laurent called to mind at »
CV BORN: 1970, ITALY
SAINT LAURENT |
EDUCATION: ECONOMICS, UNIVERSITÀ BOCCONI
IN NUMBERS
1994
1999
2008
2013
After graduating in business economics from Italy’s Università Bocconi, Francesca Bellettini began her career as an investment banker with Goldman Sachs in London
She entered fashion with Prada, working in business development, before joining Kering in 2003 as Associate Worldwide Merchandising Director for Gucci
Following her impressive performance at Gucci, Bellettini switched brands for a promotion, becoming Worldwide Merchandising Director for Bottega Veneta
Shortly after Yves Saint FOUNDED EMPLOYEES Laurent controversially rebranded as Saint Laurent, Bellettini joined the company as CEO, replacing Paul Deneve PARENT COMPANY REVENUE 2016 PARENT COMPANY PROFIT 2016 to work with Hedi Slimane
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CEOPROFILE the time – it made everyone have an opinion. It was brilliant from a marketing standpoint. It got everyone talking about Saint Laurent again, and also increased brand awareness with a younger audience – those future loyal customers – the key to brand longevity.” As well as it eventually turned out for the brand, at the time few could have predicted the success Saint Laurent would enjoy as a result of the overhaul. “It was drastic”, said McInnes. “Some mourned the YSL moniker, while others embraced the freshness of the new name and new look. The rebranding brought with it a more refined, heightened sense of elegance and luxury, reaffirming Saint Laurent as one of the world’s preeminent luxury fashion brands.”
Inside out Not long after the name change, the company continued its transformation by appointing Bellettini as its new CEO, replacing Paul Deneuve, who changed industries to work under Apple CEO Tim Cook. Bellettini’s first major decision as CEO was to give Slimane more autonomy in deciding the label’s creative direction – a move that would firmly establish Saint Laurent as a refreshed brand, while also marking Bellettini’s preference for allowing people the freedom to do what they do best. Many observers credit Slimane for Saint Laurent’s recent success. Such praise is undoubtedly due, but Bellettini’s work behind the scenes has been just as instrumental. Her major renovation of the company’s organisation not only consolidated the brand’s new image, but also allowed Saint Laurent to reach a whole new audience. At the forefront of this strategy is balance. “Saint Laurent is never too skewed vis-à-vis anything – vis-à-vis a product category, visà-vis a channel – because we really believe in balance. It’s part of the DNA of the brand”, Bellettini told Business of Fashion (BoF) in an April 2016 interview. “We are the only French couture house to be relevant in both menswear and womenswear”. Indeed, this focus on gender parity has been a key element of the brand since the very start, with Saint Laurent himself believing men and women should wear the same clothes. Today, the collections may not be identical, but the fact equal importance is placed on menswear and womenswear is something quite uncommon in the world of high fashion. It is Bellettini’s commitment to balance in this regard, as much as the brand’s DNA, 160 | EUROPEANCEO
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Saint Laurent wanted to be a billion-dollar company. Bellettini took it to that level within a threeyear period
55%
of Saint Laurent’s customer base is in Asia
33.9%
Year-on-year increase in Saint Laurent’s revenue in 2016
that has pushed Saint Laurent to excel in both collections, achieving double-digit growth in a sluggish market. Balance is also evident in Saint Laurent’s approach to its clientele and distribution. The company has a remarkably even worldwide geographical coverage in terms of stores and customers. At present, 15 percent of Saint Laurent’s global customer base is in Europe, 20 percent is in China, 15 percent is in Japan, 20 percent is in the rest of Asia, and 17 percent is in the US, with the remainder spread throughout the rest of the world. Bellettini has achieved this global reach through a keen focus on developing local markets. Specifically, by handing greater autonomy and authority to local market chiefs, the brand has been able to connect far better with audiences in each region. This, Bellettini maintains, also translates to improved business from travellers – a key strategy given the huge potential of travel retail. “Nowadays, I see that the consumer approaches Saint Laurent from every product category depending on what they want”, said Bellettini to BoF. “Why? Because in each and every one of them, we offer a balanced collection, from entry level to higher price points, and from different occasions and views. You need to take a position sometimes, and you also need to give consumers things they don’t even know that they want.”
Enduring look Part of establishing Saint Laurent’s new image has been a focus on permanent collections. This business model is something Bellettini argues helps the brand to get back to its core essence as a fashion house. “Mr Saint Laurent himself said in the 70s: ‘Why should we change a product when it’s already perfect?’ So, those people who were criticising the fact that some of our products were recurring and that we had a permanent collection probably didn’t remember that it was actually part of the DNA of the brand”, Bellettini told BoF. Indeed, Bellettini believes having a permanent collection is vital in ensuring brand awareness and recruiting customers, particularly given around 70 percent of customers each year are new. “You need to be careful of not entering into this stress and anxiety of having to change and having to do everything new, every season, because half of the people haven’t even had the time to look at it and to experience it. It’s a cascade. First it’s for the people of the industry and then it’s for the
people that look at the industry. For me, this is a balance between creativity, merchandising and business”, added Bellettini. “It’s one thing to have a strong brand and brand messaging, but that is lost within itself if it isn’t carried throughout every level of the business”, McInnes explained. “Saint Laurent Paris is consistent throughout, from manufacturing to customer service, with every employee at every level aware of the brand identity and carrying on their jobs with a full understanding of the story they are telling.”
Continuity candidate In early 2016, Slimane shocked the fashion world by announcing his decision to leave Saint Laurent, in spite of the success and influence he enjoyed in his role. In his place, Bellettini appointed Anthony Vaccarello, a young designer who had previously been successful at Versus Versace. Such was Slimane’s influence that many industry analysts predicted his departure would lead to a reversal of Saint Laurent’s recent growth. The reality, however, has proven to be very different. Under Bellettini’s leadership and Vaccarello’s creative guidance, Saint Laurent has continued its unprecedented rise. Parent company Kering’s 2016 results, for example, revealed the brand’s comparable revenue surged by an astonishing 33.9 percent across all product categories and geographic regions. “Bellettini is the kind of person who is goal driven and focusing on pushing forward towards that goal”, said McInnes. “Saint Laurent wanted to be a billion-dollar company. She took it to that level within a three-year period.” With the brand’s new direction firmly established, Bellettini is now focused on the future. She is resolved to stay true to the brand’s DNA while pushing to capture new customers and enter new markets. This is made possible through a leadership style that is confident, but trusting. “She has that rare leadership quality which allows her team members to do the work they were hired to do with little or no interference. That, to me, has been what makes her such a wonderful CEO, especially in a creative field like fashion”, said McInnes. Indeed, it is this quality, together with a deep understanding of the importance of balance in all aspects of business, that has propelled Saint Laurent to remarkable heights in today’s turbulent economic landscape. Certainly, Bellettini deserves to be recognised as one of the most influential leaders in fashion today. n EUROPEANCEO
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LIFE IS ALL ABOUT EXPERIENCES AND CREATING MEMORIES THAT LAST A LIFETIME BEGIN YOUR LUXURY SUPERYACHT EXPERIENCE WITH FRASER YACHTS, THE SUPERYACHT EXPERTS
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“The cure for anything is salt water: sweat, tears, or the sea” Karen Blixen
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ABOUT TURN Bucking the downward trend in the luxury goods industry, Sunseeker International has risen to profitability on the back of innovative product development and a dedicated workforce, according to CEO Phil Popham Few in the UK could fail to be aware of the major political upheaval that dominated 2016. From manufacturing to professional services, almost all industries felt the pinch as currency rates became unpredictable and investors became increasingly cagey. The effect was perhaps most pronounced on the luxury goods market – an industry that lives and dies by fluctuations in global prosperity and positivity. Within this sector, there is perhaps no more iconic product than the luxury yacht. A true symbol of wealth and status, yachts serve as a bellwether for the financial mood within the rarefied stratum of ultra high-net-worth individuals. In times of plenty, competition is fierce over size, style and amenities, 164 | EUROPEANCEO
while slower economic periods can see major contractions. When the latter is the case, only those yacht manufacturers that can rely on the twin strengths of traditional heritage and agile modern management can hope to ride out the storm. Sunseeker International is one of the few brands that can claim such status; the company was founded by Robert Braithwaite in 1969 and is now owned by Chinese conglomerate Dalian Wanda Group. However, even the UK’s biggest luxury motor yacht manufacturer has sailed choppy seas in the past few years. Phil Popham joined Sunseeker as CEO in January 2015, after 26 years at Jaguar Land Rover. During his time at the latter, he was part of the executive team that helped to steer the
company to what was one of the most commercially successful periods in its history. When Popham joined Sunseeker, the company was not experiencing the same fortunes, having recorded various losses of up to £41m in the years since 2013, much of which was attributed to a downturn in the European markets. Since that time, however, Sunseeker has seen the successful deployment of a three-year turnaround plan which set the company back on course to return to profit in 2016. In light of this remarkable reversal of fortunes, European CEO spoke to Sunseeker CEO Phil Popham about how he and his team pulled the firm back from the brink, and what the future holds for both Sunseeker and the wider industry.
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The luxury goods market endured a tough 2016. How did this affect Sunseeker and the yacht market in general? The last 12 months have been defining for Sunseeker. During that time, we have delivered five new models across the size range, a record number for a single year, as well as increasing our forwardorder book by over 40 percent year-on-year. Most importantly, the company has returned to profit after several years of loss. That said, 2016 was not without its challenges, but overall Sunseeker weathered it well. Midway through the year, we enjoyed a short-term benefit from the weak sterling position. Furthermore, a very successful boat show season kicking off with London in January, followed by Dusseldorf, Miami, Cannes, Southampton, Monaco and Fort Lauderdale, served to bolster our performance with a substantial number of retail orders. The investment we made across the business in 2015, the range of exciting new models we launched in 2016, and the launches set for 2017 all give us great confidence for the future. We are focused on driving innovation to bring exciting new models to market as part of a long-term product plan over the next five years. We are very confident about the long-term opportunities for the business and for the industry.
It remains a highly competitive market, which makes it more important than ever to keep investing in new product development to ensure we continue to deliver the world’s best luxury performance motor yachts. What challenges did you face when you joined Sunseeker? It was clear that we needed to focus much of our attention on setting up the right infrastructure in terms of manufacturing operations and production – these were our immediate priorities. Our brand was strong and well known in the marketplace, but we needed even greater investment. We knew the quality of our luxury yachts was second to none, but we also knew we needed to drive a much heavier pipeline of new product development – the lifeblood of any luxury yacht manufacturer. As well as securing the working capital this would require, we needed to be quicker and more efficient, while operating at a lower cost, and all without impacting on the high quality that we are renowned for around the world. Efficiency is key to lowering costs in business, but this has to be aligned with the need to stay ahead of the game, replacing and expanding our product base, enticing new customers from competitors’ brands, and exciting our existing loyal customers.
How did you manage to return Sunseeker to profitability? My priorities revolved around restructuring, good governance, and formal development of existing and new processes, such as new product development, quality and representation. From the outset, it was evident that restructuring would play a fundamental role in the turnaround plan. I brought in some new people to work alongside long-standing Sunseeker professionals who know the industry inside-out. A new CFO, Hughes Jacquin, who also comes from a non-marine background, joined the business at the same time as
“UNDERSTANDING EARNINGS POTENTIAL IS VITAL IN MAINTAINING MORALE, BUT THE NON-MONETARY ASPECT IS JUST AS IMPORTANT”
myself. We also appointed new operations and procurement directors, as well as promoting an HR director from within the company. Continuing this trend, so far in 2017 we have seen a record intake of apprentices. These 40 new hires will maintain the total number of apprentices employed by Sunseeker at over 100, which is more than five percent of the total boat building workforce. This far exceeds recently introduced government targets. Our ongoing investment in developing skilled labour is an important part of our business plan for growth; the most cost-efficient way to ensure an ongoing stream of skilled labour is to invest in our apprenticeship programme with the support of Bournemouth and Poole College, and we’re incredibly proud of our achievement in this respect. On joining Sunseeker, one of the first things I did was to visit all of the company’s shipyards. It was important that I introduced myself to everyone across the business » EUROPEANCEO
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and communicated my plans for the company. Visibility of the CEO is extremely important in a business of our size, so we introduced cascade meetings for the entire workforce and executive team. Understanding earnings potential is vital in maintaining morale, but the non-monetary aspect is just as important; we need to make sure our shipyards are safe and clean, and ensure that the work environment is good. It is important that our teams feel they are part of the wider company and understand their role in creating and building these amazing luxury motor yachts. How has your experience at Jaguar Land Rover informed the turnaround at Sunseeker? My time at Jaguar Land Rover taught me several key disciplines which have proven to be as effective here as in any other large manufacturing business. These include process discipline (to drive quality, cost efficiency and repeatability), governance, datadriven decision making, and empowerment, particularly of the management team but increasingly through every employee delivering improvements to the business, however small.
I was very quickly able to develop a three-year turnaround plan and a five-year growth plan, which included launching a range of new products. To be ahead of this plan, and to have now returned to profit, is remarkable in such a short space of time. Much of this can be attributed to our strategy of investing in the key areas of the business, especially our people and in our product range, but also in our marketing. We are fortunate to have one of the most recognisable brands in our industry. However, this stands for little moving forward without a clear, differentiated positioning strategy which is relevant and aspirational to our audience. This has been a key focus, and will remain so going forward. What new products has Sunseeker introduced recently? In 2016, we launched five new models across our size range. These included three models from our yacht range, at 131, 116 and 95 feet in length, as well as the Predator 68 and our smallest flybridge yacht for over a decade, the Manhattan 52. We will continue this momentum in 2017, with four new models scheduled for launch, including the 68 Sport Yacht, Manhattan 66 and Predator 57.
In this market, both new and exciting products drive customer interest, and the response we have had to our latest models has been nothing short of incredible. We are optimistic this is going to continue, as we will be investing a further £50m across the business to support a bold product plan that will see many more new introductions over the next few years. Our new Manhattan 52, which won the highly coveted ‘best flybridge under 55ft’ award at the Motor Boat of the Year Awards in 2017, has achieved record sales since its launch last autumn, with £80m in retail forward orders. This makes the yacht our fastest selling model ever, and is testament to the skill and passion I see every day in our employees from across the business. How is Sunseeker investing in its future? Sunseeker is committed to investing in the future, and we have developed long-term product plans and mapped the lifecycle of each boat we produce. Creating the ‘why buys’ and investing in our dealer network is also something we consider very important. Our representation is very strong in Europe and the US, and we are looking to replicate this success globally.
After-sales service is also key. If a customer invests in one of our products, it’s imperative they receive the best after-sales service possible, as soon as they need it and wherever they are in the world, whether that be for boat maintenance or operational assistance. Finally, investment in our facilities and build processes will ensure we maintain our reputation for designing, engineering and building the world’s greatest luxury performance motor yachts. What do the next 18 months hold for Sunseeker? Over the next 18 months, our main focus is to invest in new product development, our shipyards and our people. We are already seeing the benefits of this investment, with a strong reward and development culture, improved factory systems and production facilities, and, of course, new products, with four models launching this year. Overall, 2016 has been a defining year for us, driven by the changes mentioned, but driven also by a great team, the secure financial backing of our parent company, and our exceptional representation worldwide. All this, underpinned by a strong forward-order book, means we are extremely excited about the future. n
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With a new wave of competitors sweeping the leisure industry, focusing on customer satisfaction is the best way to generate loyalty and goodwill, according to Dominic O’Reilly, CEO of EZE Group Over the course of the past two decades, the internet has dramatically transformed the way we plan and book our holidays. Today, high street travel agencies are struggling to stay relevant as travellers opt to book flights and accommodation online, cutting out the middleman and creating their own personalised getaways. With price comparison websites offering unbeatable deals for holidaymakers, it is now easier than ever to plan, manage and book trips online. Indeed, an estimated 80 percent of people now book their holidays using the internet, while approximately 90 percent of travellers research holiday destinations online prior to booking. Understandably, this trend has had a profound impact on the leisure and travel industries. While online booking has created some disruption within the industry, it has also provided leisure companies with new opportunities to innovate and engage with customers. Social media strategy and online marketing have become 168 | EUROPEANCEO
crucial tools in the leisure industry, allowing companies to promote their brand and grow their customer base. With a wealth of information and options available at just the click of a button, competition is fierce in the digital leisure marketplace. In order to stay ahead, leisure companies must focus on offering quality service over an ever-growing range of channels.
New kids on the block In recent years, the leisure industry has seen a significant spike in the number of membership-based lifestyle groups. Groups such as these organise luxury experiences for their members, offering a wide array of services including holidays, theatre tickets and sporting events. With its European branch founded in 2004, EZE Group is perhaps one of the world’s longestserving lifestyle platforms, offering access to exclusive benefits. EZE Group members can access a range of services, from adventure activities to luxury travel experiences. As a result, the company has
enjoyed impressive growth over a number of years. Just last year, the company saw sales rise by 120 percent, boosted by the opening of its newest flagship exhibition centre in Barcelona. “We look forward to extending an invitation to as many of our members as possible to visit our new premises”, said EZE Group CEO Dominic O’Reilly, European CEO’s Entrepreneur of the Year in the Hospitality & Leisure Industry. “Due to the success of EZE Group, we’ve become aware of many other companies springing up similarly overnight, purporting to offer similar services”, added O’Reilly. “In some cases, these companies have little or no experience in the industry, and levy high costs for services that they are ultimately unable to provide.” This sudden influx of novice companies has thus threatened to tarnish the lifestyle industry’s reputation, leaving genuine companies fighting to combat a certain amount of bad press. With copycat firms continuing to spring up, it is more important than ever that
companies strengthen their brand image and reassure clients of their reliable customer service. By focusing on customer experience and responding to members’ evolving tastes and demands, lifestyle brands can create a strong bond of trust between themselves and the customer. From customer interactions to the luxury experiences on offer, quality must come first. “In order to respond to these challenges, we went back to basics and looked at the needs of our members”, O’Reilly explained. “We spent time researching our industry, seeking professional advice, and removing some of the third-party partners we had previously worked with. By doing this, we have been able to establish exactly what our members want to achieve from their membership ad how they see themselves moving forward with EZE Group.” What’s more, in order to extend its customer service further and engage with a wider client base, EZE Group has also been ramping up its social media strategy.
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An active and efficient social media presence helps the brand to stand out from its competitors in the field, and enables direct interaction with both existing and prospective customers. “Most people incorporate some form of social media into their daily routine”, said O’Reilly. “Using social media as a marketing and advertising tool has helped us create more brand awareness, improve on existing products, and keep our members updated with new benefits.”
Beck and call Quality customer service is essential to all businesses, but it is perhaps most vital in the leisure and luxury industries. Whether customers are treating themselves to a stay in a boutique hotel or attending a wine-tasting tour, they are seeking a memorable and indulgent experience. Customers are primarily looking to switch off and de-stress, and want to feel safe in the knowledge that they can rely on a good customer service team.
In order to ensure customer satisfaction, lifestyle brands must go above and beyond what is expected of them, placing clients at the forefront of their operations. By going the extra mile, companies can expect to enjoy a high level of customer retention, along with a growth in membership as their good reputation spreads. “The growth of a company does not necessarily depend on the number of new members you attract”, said O’Reilly. “Instead, it’s reliant on the way you look after your existing customer base, asking the correct questions, establishing needs and providing services.” Understanding the power of word-of-mouth recommendations, EZE Group aims to work for to its clients’ benefit, ensuring they are happy and satisfied with every aspect of the service. One way in which the company attends to its customers’ needs is through its concierge service. Whenever a customer has a request or query, they can contact EZE’s team of lei-
sure specialists, who are always on hand to provide information, advice and round-the-clock support. The concierge team aims to satisfy any request, big or small, while the one-on-one service helps customers to feel personally taken care of. Whether customers are looking for help with exchanging travel money or simply want a bottle of wine delivered to their door, Eze Group’s aim is that all they have to do is call their nominated member of staff. “The internet does provide the ability to research and secure benefits and services, but we have found that our members still prefer a personal touch”, explained O’Reilly. “They value the ability
“THE SUDDEN INFLUX OF NOVICE COMPANIES HAS THUS THREATENED TO TARNISH THE LIFESTYLE INDUSTRY’S REPUTATION”
to pick up the phone and receive immediate advice and assistance from a dedicated team member.” In addition to this service, EZE Group says it is also making customer satisfaction a priority at its own branded UK travel agency, Everywhere Travel. With a growing team of specialists, Everywhere Travel partners with EZE’s concierge service to create luxury trips, with the aim of removing the hassle from travel. “Our online travel platform has been received with fantastic reviews from members”, said O’Reilly. “The additional services that we’ve brought online, and the amazing benefits we can offer our members, have made us one of the leaders in the leisure industry.” With impressive membership growth and a host of new, luxury services, the future certainly looks bright for EZE Group. Traditional travel agencies might be struggling to keep up with a rapidly changing travel and leisure industry, but EZE Group has shown innovation is the true key to success. n EUROPEANCEO
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Technology and social media have transformed the tourism industry. The luxury sector is no exception, and companies need to move fast to meet changing demand, according to Mazen Hamad, CEO of Alshamel Travel Over the past decade, technology has made travel easier than ever before. Between the falling cost of air travel and the rise of websites allowing customers to complete bookings in their own time, a quick trip to another country can now be organised in minutes. Social media has also added to travel’s appeal, making sharing holiday snaps and getting tips a breeze. Beyond everyday travel, these developments have also changed how the luxury sector operates. Discerning travellers now expect a bespoke and unique experience from every trip. They expect the best customer service at every second of the day, while enjoying events and locations that are exclusive and reserved for the elite. This is all prompting profound change for the many businesses that operate within the luxury travel service space. European CEO 170 | EUROPEANCEO
spoke to Mazen Hamad, CEO of Alshamel Travel, about how his company is navigating this changing market and how to meet the growing needs of discerning luxury travellers. How has Kuwait’s luxury travel industry changed in recent years? In Kuwait, high-net-worth clients are already experiencing sumptuous surroundings in the world’s most exclusive hotels. However, these travellers are also looking for more customised experiences such as private excursions, private jets or yacht charters, all while expecting end-to-end luxury service. They are looking for experiential travel, such as engaging with native cultures. Luxury wellness travel has also recently developed, which has resulted in an increased number of traditional vacations and
safari breaks that include fitness, yoga and spa services, to name just a few. A luxury traveller today looks for the most desirable destinations, magnificent accommodations, convenient transport facilities and authentic, exotic experiences. In what ways has tourism infrastructure in Kuwait improved as a result? Kuwait is an outbound destination. However, the country is preparing to increase the number of tourists it welcomes. The government is actively ramping up several billiondollar infrastructure projects that will attract new tourists, especially in the family tourism segment. This is all alongside many new cultural centres that are due to open at the end of this year. Also, Kuwait recently revealed an ambitious plan to diversify its economy beyond oil, so investment
in the tourism sector is expected to increase. The Kuwait Investment Authority will expand capacity and has also now allowed foreign corporations to open their own hotels. The Four Seasons will open its first Kuwaiti hotel this year, with the Mercure Kuwait, Hilton Olympia Kuwait and a Grand Hyatt expected to follow by 2020. Infrastructure will remain a top priority, with elaborate mega-projects included as part of the New Kuwait development plan. These include Silk City, an urban area in northern Kuwait, and the ongoing development of Boubiyan Island into a container harbour and gateway commercial seaport. Why have customer expectations grown so much? I believe, along with the continuous evolution of technology, social media has affected all levels of the travel experience. The amount of information that is now available makes everyone expect more. Social media has completely changed the definition of what is ‘fast’, and has empowered customers. The online
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What are the biggest opportunities in the travel industry at present? Online booking tools are the main way customers interact with travel agencies now. They help the travellers to plan their travel in their own time and in the comfort of their family home or office. We intend to invest seriously in online services to enhance our luxury travel offeran exceptional level of detail ings, along with concierge services. Alongside launching new in terms of each individual products, we are exploring the employee’s travel. current market and where we stand. We are working to underWhat are the biggest stand what is being done to attract challenges in catering for clients, and identify gaps that exist military clients, and how do that need addressing. you overcome them? The real challenge of managing military travel comes in the form of What else does Alshamel constantly changing travel policies, have in store for the future? government regulations, mandated We will expand our luxury online routes, pricing structures, report- business-to-consumer portal and ing, forms, line of authority, and our Luxuria luxury travel brand in the region. The latest trends in the general bureaucracy. Since our inception, Alshamel luxury travel industry demonstrate has historically kept its finger on how there has been a shift in what the pulse of trends in military and customers expect. As we enter the government travel. We regularly new era of luxury travel, we are discuss changes with our military facing increasing pressure to meet customers. Our M&G division our clients’ expectations. We need to offer a truly regularly attends professional government travel development bespoke, relevant, and niche serconferences in the US and in the vice, and be able to adapt this offerGCC. We also maintain relation- ing when necessary. Luxury travships through membership of US- ellers want advisors, not agents; based professional organisations they seek specialist experts who like the Association of the US Army cultivate relationships and have and the National Defence Travel a deep knowledge of individual Association, where top-level US needs, who can combine the Government travel officials discuss human element with innovative uses of technology. n the latest issues.
“DISCERNING TRAVELLERS NOW EXPECT A BESPOKE AND UNIQUE EXPERIENCE FROM EVERY TRIP”
world is well and truly changing expectations of efficiency. Demand for personalisation has also grown. The whole online experience is now personalised, from social media to Google search results. It only makes sense for the customer to expect other services to be personalised as well. What impact has this had on the luxury travel industry in general? Luxury travellers are constantly searching for new experiences, while also looking for unique access to destinations. They prefer completely customised holidays and demand high-end concierge services. With consumer behaviour changing so rapidly, we need to stay up to date with customer expectations and invest in technology. While the travel agency industry has experienced some growing pains when adapting to new technology, the industry is still sound. The primary focus for most agencies has been online sales, allowing clients to book their trips without the constraints of office hours. The traditional
travel agency will doubtless see further evolution as technology continues to advance, but as long as demand for luxury tailor-made travel remains, there will still be a place for travel agencies, both online and offline. Alshamel also caters to military clients; how does the company balance their needs with those of luxury travellers? They are two completely separate standalone subsidiaries with different models in terms of operation, management and focus. The service element of our luxury travel team is unique; we look into customers’ travel requirements in detail and provide them with personalised services. We constantly keep in touch with our customers before, during and after their travel, discussing their experience and looking for ways to enhance our service. Our military clients rely on professionalised service rather than personalised service. Our management information system reports provide clients with
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TUNED IN Over the course of the last century, radio has proven itself a resilient medium, capable of defying trends to consistently appeal to new generations, writes James Stannard Since the 1920s, ‘mass culture’ has developed at breakneck speed through new and innovative technologies: film, television, the internet. As entertainment has evolved, people have increased their rate of consumption to accommodate its new forms. Yet, in recent years, the continuing pace of change has also led consumers to become more selective about which formats they use. One important factor in this century-long process has been the rise of so-called ‘primary’ media such as websites and mobile apps, which require the attention of multiple senses including sight, sound and touch. Ultimately, this process has led people away from older, less engaging ‘secondary’ media, such as printed news, which has recently experienced a huge drop in advertising revenues as readers have migrated online. Despite the rapid advance of disruptive new formats, however, the humble, low-engagement 172 | EUROPEANCEO
radio has remained surprisingly resilient. In the first four months of 2013, US digital radio provider TuneIn reported a billion hours of listening worldwide and, in the second quarter of 2016, more US listeners tuned in to radio shows than in any other quarter beforehand. In the same year, UK industry watchdog Rajar reported the average British listener consumed a staggering 21.5 hours of radio every week, 61 percent of which was at home and 16 percent at work. “Radio has fought off challenges in the past and is continuing to do so now”, said Professor Guy Starkey, Associate Dean of Global Engagement at Bournemouth University’s Centre for Media History. “Newspaper circulation has more than halved in the past 20 years, but radio is listened to by 90 percent of adults in the UK. For comparison, television is 92 percent.” While there are many reasons for radio’s long-
term success, the secret ingredient has been its adaptability in the face of technological change. These days, such pioneering activity is changing radio to an unprecedented degree.
Survive and thrive In the 30s, radio became a mainstream consumer product, as loudspeaker models replaced older, headphone-based crystal units. Since then, one major reason for radio’s longevity has been its fundamentally appealing nature. “What radio does best is storytelling”, explained Professor David Hendy, a media historian from the University of Sussex. “That is a continuation of something that is intrinsically human and desirable; storytelling is a deep, almost primitive thing that radio supplies.” In the mid 20th century, as the new medium struck a chord with listeners, it branched out to broadcast everything from news
programmes to comedy shows and music. “In many ways, being a secondary medium, something that you listen to in the background rather than something that you attend to, is also durable because you’re listening to it as other things are happening”, explained Hendy. As time passed, innovation became the most important reason for radio’s continued success. The medium’s first major test came in the 50s, as television exploded into the post-war marketplace. By 1956, over half of all US homes had a television set, usually in the corner of the living room, and most cities were linked to AT&T’s burgeoning network. To avoid becoming obsolete, radio manufacturers adapted their product by latching on to a new and revolutionary technology: solid-state transistors. The first mass-market model to incorporate this circuitry, the Regency TR-1, was released in October 1954 and sold 100,000 units within its
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first year. Because transistors were smaller and lighter than old, hefty vacuum tubes, they allowed radios to become portable between rooms, outdoors, and even saw them installed in cars. Such adaptability gave radio huge growth potential, which was reflected by hefty investments from burgeoning players like NewsCorp and CBS. This eventually pushed radio from merely surviving to thriving once again. Between 1983 and 2016, the ownership of 90 percent of US media passed from 50 companies to just six, which boosted profitability in hundreds of outlets. With external sources of revenue provided by big corporations, small stations suddenly became far more competitive and were able to drive out local rivals by absorbing their audiences. In the process, popular, standardised radio formats such as call-in shows and music programmes were also introduced, which led many to conclude profitability had come at the expense of quality. “My view is skewed because I spent 21 years in public service broadcasting, but to me, commercial radio now is a big amorphous blob of inferior content”, said Marek Bekerman, a lecturer in radio at the University of Salford.
Digital era Recently, internet-enabled devices such as smartphones and laptops have given consumers new ways to access the kind of content that is conventionally broadcast on radio, such as spoken-word programming and music, in the form of news websites and apps. To retain listeners, radio has once again innovated technologically. For example, it has begun to move away from traditional FM and AM frequencies that are supported by broadcasting towers and towards satellite-catered digital signals. In
“INNOVATION HAS BECOME THE MOST IMPORTANT REASON FOR RADIO’S CONTINUED SUCCESS”
the UK, which is at the forefront of DAB service, over 45 percent of all radio listening is done via digital formats, including DAB and DTV, up from 29 percent in 2011. With this shift, radio’s coverage has expanded worldwide, no longer limited by factors such as finite bandwidth. Many new players have realised the potential of this process and are finding new ways to monetise it. For instance, TuneIn has designed an app with over 100,000 radio stations on it and has seen heavy investment from the venture capital wings of big companies including Google. It makes money through on-screen advertising that is personalised for each user via cookies, which would have been impossible on conventional broadcast frequencies. “Currently, depending on who you talk to within the radio industry, TuneIn is either a very good thing or a bunch of sharks who are
stealing their content”, said radio futurologist James Cridland. Since its founding in 2002, the company has faced controversies for illegally advertising to minors in Belgium and for dropping radio stations if they push back against its marketing methods. Given the rise of such dynamic yet controversial new companies, many radio stations have been spurred to innovate too. One example is LBC in London, which sells podcasts as premium offerings alongside its regular content, which is also circulated in video format on social media. “There are also aggregators like Radioplayer in Belgium, Germany and the UK that are owned by radio groups and are earning money for radio”, Cridland explained. “Radio stations are doing a number of things to monetise their content further.” Radio has remained hugely successful because manufacturers and broadcasters have recognised
the importance of cutting edge technological innovation. This adaptability has been pronounced at times when radio needed to fend-off new, popular entertainment media such as television and the internet. Meanwhile, because radio has never had one single owner, different interest groups have been locked in fierce competition with each other regarding the kind of content that gets broadcast. Once again, these struggles have unfolded on the cutting edges of technology, with competitors such as TuneIn, LBC and Radioplayer all rushing to present radio on the latest formats. Ultimately, the most recent changes and developments are turning radio into very much a primary medium, which is a new development in its centurylong process of transformation. Although radio purists will no doubt despair at this thought, others will embrace the new potential that it brings. n EUROPEANCEO
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LOU V R E I N T H E T I M E OF T E R ROR Following multiple terror attacks, Paris’ iconic museum is suffering from reduced visitor numbers. It is now looking to its first overseas branch – the Louvre Abu Dhabi – to bolster revenues and revive the brand, writes Emily Cashen
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With a rich history spanning over 800 years, the Louvre is perhaps the most important location in the art world as we know it. Situated on the Right Bank of the Seine, the Louvre Palace previously served as the official residence of the French monarchy, before opening its doors as a national museum in 1793. Home to Leonardo da Vinci’s Mona Lisa, the famous Venus de Milo, and the Nike of Samothrace, the Parisian institution is the world’s largest and most visited museum, attracting around 15,000 people each day. For many, the Louvre is not just a symbol of French history and culture, but also represents the very finest the global art world has to offer, spanning centuries and continents and inspiring the great artistic minds of the future. And yet, despite its status as a global cultural authority, 2017 is shaping up to be a testing year for the Louvre. The museum reported a significant drop in visitor numbers in 2016, with fears over terrorism keeping tourists away from the French capital. As the Louvre attempts to reverse these fortunes at home, it is also gearing up to unveil its first international offshoot in the United Arab Emirates. Rumoured to have cost over $108m (€97m) to build, the Louvre Abu Dhabi was originally scheduled to open in 2015, but its debut has been repeatedly delayed. “The same debates over legitimacy, purpose and impact that arose when the museum was announced in 2007 are bound to resurface in 2017”, said Maymanah Farhat, art historian and specialist in modern and contemporary Arabic art. Indeed, the project has attracted controversy, but it is also admirably ambitious in its aims, promising to highlight universal themes in eastern and western art, and to encourage dialogue between cultures. As its opening
date approaches, the Louvre Abu just 7.4 million guests in 2016, as Dhabi might mark a new chapter fears over terrorism weighed heavy for the iconic institution. on tourists’ minds. Such apprehension is understandable; 142 people lost their Cultural damage Boasting a uniquely elegant city- lives in Parisian terror attacks in scape and chic café culture, the city 2015 alone. In the wake of these of love has firmly established itself attacks, Jean-Luc Martinez, Direcas one of the world’s most popular tor of the Louvre, admitted the city destinations. However, a spate of faced “an enormous challenge” in tragic terror attacks in Paris has making the region attractive once dented the city’s popularity, with more to tourists. “The situation is the French capital reporting an worrying”, he told French newspa11.5 percent decline in foreign per Le Figaro. “Everything is being done to deal with this.” visitors in 2016. In spite of the museum’s efforts This slump in tourism has had a knock-on effect on the city’s cher- to allay foreign tourists’ fears, howished cultural institutions, which ever, public anxieties were exacrely on tourist visits for much of erbated once more in February their revenue. The Louvre itself saw a 15 percent drop in visitors in “THE LOUVRE SAW 2016, finishing the year with a loss A 15 PERCENT DROP of €9.7m. Instead of the 10 million IN VISITORS IN 2016, visitors the museum had hoped FINISHING THE YEAR to attract, the Louvre welcomed WITH A LOSS OF €9.7M”
this year, when a machete-wielding assailant attacked soldiers standing guard at the entrance to the Louvre itself. It is too soon to tell whether this attack has had an adverse effect on visitor numbers, but it does reflect the disturbing trend of attackers using rudimentary means to harm civilians, leaving many feeling totally defenceless. Speaking of the impact of terrorism on visitor numbers, Martinez said: “We already had a similar drop in 2001 after the September 11 attacks, when the number of visitors dropped by 36 percent. After that, it took three years for us to recover our previous number of visitors.” A further three years of decline would prove hugely detrimental to the Louvre, where foreign tourists make up over 70 percent of visitors. In a drastic effort to combat falling museum attendance, France has revealed the largest cultural budget in the nation’s history. The French Government will increase culture spending by 6.6 percent in 2017, taking the budget to an impressive €2.9bn. According to former French Minister of Culture Audrey Azoulay, a significant portion of this fund will be set aside to bolster museum security.
New beginnings The Louvre may be encountering significant challenges at home in France, but this has not stopped the museum setting ambitious goals overseas. This year marks the grand opening of the brand’s first permanent international affiliate, the long-awaited Louvre Abu Dhabi. The groundbreaking new building will be home to more than 620 fine artworks, including originals by da Vinci, Monet, Manet and Picasso. Spanning ancient masterpieces to modern installations, the museum is centred around a » EUROPEANCEO
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theme of universality, showcasing a cross-cultural, shared human experience. “Abu Dhabi has always been a centre of exchange between civilisations due to its history and geographical location,” said Lourve Abu Dhabi Director Manuel Rabaté. “Louvre Abu Dhabi is a universal museum, which will explore how interconnected the world has always been. The museum captures the messages of cultural exchange and tolerance in the UAE. The very nature of universalism resides in cross-cultural exchange.” This desire to encourage openness and dialogue between cultures is reflected in the museum’s sleek
rative of traditional museography and present the history of humanity in a universal narrative”, said Rabaté. “For instance, in the universal religions section, visitors will see the Bible, the Koran and the Torah together in one showcase.” As part of the Saadiyat Island cultural project, the Louvre Abu Dhabi hopes to transform the city into a global cultural capital, drawing international visitors from across the globe with its unique exhibitions and impressive permanent collections. For the Louvre as a brand, meanwhile, the multimillion dollar project strengthens the museum’s authority in the global art world, reaffirming its cross-
ade, the art world has collectively scrutinised the motives behind the deal, with several industry experts suggesting the French Government and the French arm of the Louvre stand to benefit far more from the project than their Emirati counterparts. In addition to shouldering construction costs, the UAE has agreed to pay $525m to be associated with the Louvre name for 30 years and six months. What’s more, it will also pay a cool $747m in exchange for art loans from French institutions, temporary exhibitions and management advice. Between 200 and 300 artworks will be rotated through the Louvre Abu Dhabi during the
design. Created by award-winning French architect Jean Nouvel, the museum combines modernity with traditional Arabic architecture, taking inspiration from the region’s souqs and low-lying settlements. Inside the museum, efforts have been made to allow visitors of all backgrounds to enjoy the artworks on display. Signs and labels will be written in Arabic, French and English, while sensory stations and braille textured panels will allow guests with visual impairments the opportunity to experience the collections on display. “This project gave us the opportunity to rethink the nar-
cultural appeal and introducing a more globalised outlook for the iconic French institution. “The museum will be a meeting place for all, and a meeting place for cultures, showcasing artworks and masterpieces from around the world”, said Rabaté. “The Louvre Abu Dhabi really will be a major new museum for the 21st century.”
first 10 years of its life, prompting pushback from critics who accuse the French Government of selling its cultural heritage. “The Louvre Abu Dhabi agreement was certainly very lucrative for France”, said Farhat. “Their motives seem to be largely financial. At the time of this agreement, France also finalised a significant sale of arms to the Emirates, which is not uncommon, as the worlds of politics and art often collide.” Indeed, just two years after the initial France-UAE cultural deal, the former opened a military base in Abu Dhabi, its first permanent base in the Gulf region.
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Museums for sale Since the plans for the Louvre Abu Dhabi were first revealed to the public in 2007, the project has been a subject of controversy. Over the course of the past dec-
Political agreements such as these have further fuelled anxieties France is exploiting its culture for economic gain, and have prompted wider debates over the commercialisation of heritage and artistic tradition. While the French Louvre has come under fire for its motives in this deal, the yet-to-open Louvre Abu Dhabi is also facing criticism for supposedly ‘importing’ culture. By bringing in works from famous French institutions, the museum has been accused of catering to a western audience, prioritising the tastes of tourists rather than looking to attract local visitors. Responding to this criticism, the Louvre Abu Dhabi has assured potential visitors that the UAE’s own culture and heritage will indeed be showcased and celebrated in the museum. “Abu Dhabi is full of culture and history, and is not just a meeting point between east and west, but a melting pot of cultures – the city is home to more than 200 nationalities”, said Rabaté. “The museum has a universal narrative, but is linked to the region through its architecture, its collections and the themes highlighted in its permanent galleries.” As such, the Louvre Abu Dhabi will also receive artworks and artefacts from established UAE cultural institutions in order to complement the works loaned from France. The museum has no intentions of being a direct replica of the original Louvre, nor is it exclusively focused on art from the Arab world. Here, the vision is cross-cultural, spanning histories and continents in order to weave a unified human story.
Teething trouble The Louvre Abu Dhabi has so far managed to successfully rebuff critics’ initial scrutiny of its motives and intentions, but the upcoming museum now has another PR problem to contend with. In December 2013, The Guardian published an in-depth exposé detailing alleged human
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rights abuses committed against migrant workers involved in the construction of the Saadiyat Island project. According to the reports, workers tasked with building the new Louvre and Guggenheim museums were being routinely exploited, forced to live in substandard conditions and charged extortionate recruitment fees in order to secure jobs at the project. The Guardian discovered construction companies were withholding the passports of migrant workers, many of whom had travelled from South Asia, effectively trapping them in the UAE. Under pressure from human rights campaigners, standards at the building sites have improved somewhat following the exposé’s initial publication, but worker welfare and safety still remain a concern, even at this late stage in the construction process. “Given that they have benefitted immensely from the agreement, France should take more responsibility in ensuring that the franchise is built according to fair labour practices, with the same standards that are put in place for the Louvre Paris”, said Farhat. “If they don’t take a stronger stance, this issue could tarnish France’s international standing.” Given the renting of the Louvre name is one of the central com-
ponents of the France-UAE deal, it is of utmost importance that the project enhances the museum’s international reputation. Any damage to the Louvre brand would prove extremely detrimental to both parties, showcasing the high risk factor of museum franchises. As such, the Louvre Abu Dhabi has been working to prioritise worker welfare as construction nears completion at the museum. “The welfare of workers is a matter of utmost importance to us”, Rabaté said. “From the start of the project, we have worked closely with the Tourism Development & Investment Company – the master developer of the Saadiyat Island project and developer of the Louvre Abu Dhabi – to ensure the safety and security of workers is protected.” Such brand image issues are a common feature in international artistic alliances, and one of the principal risks of launching and managing satellite museums. Simply put, what works in one location may not work on foreign soil, despite the employment of a reputable brand name. To make matters more complicated, the home nation and the selected overseas destination often struggle to reconcile their contrasting cultural priorities, resulting in the cancellation or postponement of
All images The proposed layout and structure of the Louvre Abu Dhabi, due to open to the public later this year
“THE LOUVRE ABU DHABI HAS BEEN ACCUSED OF PRIORITISING THE TASTES OF TOURISTS RATHER THAN LOOKING TO ATTRACT LOCAL VISITORS”
planned collaborative franchises. The never-realised Guggenheim offshoots in Guadalajara, Rio de Janeiro and Tokyo demonstrate the difficulty of achieving successful foreign franchises, even for established and well-regarded institutions. For many, these misadventures suggest museums enjoy greater success when they emerge organically and showcase the relevant cultural heritage of their home nations, in the spirit of Spain’s Reina Sofía or the Netherlands’ Rijksmuseum. Rather than basing their institutions around foreign collections, these popular destinations instead celebrate their countries’ own rich artistic heritage, routinely attracting hordes of local and international visitors keen to immerse themselves in a particular culture. And yet, as the art world grows accustomed to a pattern of failed franchises, the Louvre Abu Dhabi looks set to buck this trend. Unlike the fruitless franchises of years
past, the Louvre Abu Dhabi is the product of a strong shared vision between France and the UAE, and benefits from a coherent cultural identity. Far from attempting to replicate the Louvre Paris, the Louvre Abu Dhabi will instead serve as a meeting point, uniting artworks from different ages and cultures under a profound, universal narrative. “The Louvre Abu Dhabi will act as a catalyst for cultural interaction, and will offer the opportunity to gain a new perspective on the history of mankind”, said Rabaté. With its doors set to open later this year, art critics and analysts worldwide are now waiting with baited breath to see what the future holds for the Louvre. If the ambitious Abu Dhabi offshoot succeeds in its cross-cultural vision, then the Louvre brand could well emerge as a symbol of openness and inclusivity for the art world of the 21st century. n EUROPEANCEO
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THELASTPAGE SAUCY PASSION
500G The Italian city of Genoa, birthplace of pesto, has relaxed carry-on restrictions on flights departing from nearby Cristoforo Colombo Airport in order to boost sales of the sauce. While passengers will still only be able to take most liquids in 100ml containers, the pesto limit is now 500g, provided travellers make a small donation to a local charity. The airport claimed €500 was raised in the first 20 days of this policy being in effect.
DOWN WITH THE SHIP Following a sevenyear legal battle, the European Court of Justice has ruled that torrent site Pirate Bay is guilty of infringing copyright. The site unsuccessfully argued that, as it only hosted ‘trackers’ uploaded by users, it had no involvement in infringement itself. The ruling may well be the final nail in the coffin for torrent sites. Pirate Bay founder Peter Sunde served five months in prison in 2014, after a Swedish court found him guilty of copyright infringement.
NIGHTINGALE FLIGHT
96
%
Figures released by the Health Foundation, a UK-based NGO, have revealed the number of EU nurses registering to work in the UK has fallen by 96 percent since the Brexit vote. In July 2016, 1,304 EU nurses went to work in the UK. By April 27 this year, that had fallen to a mere 46. The UK has a shortage of over 30,000 nurses, and the country’s National Health Service is heavily reliant on overseas workers from the EU and beyond.
THINGS CAN ONLY GET BUTTER France, the land of delicately crumbly pastries and elegantly soft croissants, is facing a butter shortage that could put its world-famous patisserie industry in jeopardy. Over the past year, the price of butter has risen a staggering 92 percent, in response to increasing demand and lower milk yields. The problem has, in part, been attributed to a surplus of powdered milk available on the continent, which has hit alreadystruggling dairy farmers and further reduced their fragile margins.
TREVI TAX
¤240
Authorities in Rome are putting the screws to overheated tourists who bathe or dip their feet in the city’s historic fountains. Mayor Virginia Raggi announced in June that anyone entering the fountains would face a fine of up to €240. The policy has received criticism as the city has previously turned a blind eye to the more serious issue of gangs that dredge the fountains for money at night; coins thrown in by the public are supposed to go to charity.
FRITE TO THE CORE
120°C Anti-EU sentiment may be about to spike in Brussels, the bloc’s capital, as a new EU proposal threatens to alter the cooking process for Belgium’s iconic frites. Traditionally, frites are doublefried from raw, resulting in a crispy shell with creamy innards. The proposal suggests they should be blanched in water first to prevent the formation of acrylamide, a hazardous compound that forms during frying when foods are heated to over 120°C.
92%
ÜBER ALLES
361
%
In June, German immigration authorities revealed the number of UK nationals taking German citizenship rose 361 percent between 2015 and 2016, climbing to 2,865 in a clear response to the UK’s decision to leave the EU. What’s more, French newspaper Le Monde obtained figures showing a similar trend in France: in 2015, only 385 UK nationals requested French citizenship, rising to 1,363 in 2016. This represents an increase of 254 percent.
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