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Economics

Book review: Supertrends

January 29, 2020

It’s hard to imagine and take into account changes that happen slowly but surely. Their overall impact can be radical for our lifestyle yet we tend to either ignore or underestimate the signals along the way.

Supertrends reminds us to look into those lingering things that barely move when you focus on them but are huge when compared to the already happened historical changes.

The book covers large topics and introduces 50 rule of thumbs to crystallise their impact on us. Probably the biggest message is that the world is overall a way better place than general population and even experts believe. Hans Rosling used to quiz various audiences, and pure chance deals better odds (more optimistic) than his sample audience ever achieved with their knowledge of the facts.

One of the change factors is productivity that is moving from manual work to mechanical and finally to digital. The latter enables exponential growth compared to previous linear and static. When we include the fact that the still growing (but slowing) global population has more resources available to each person it is no wonder that there is no limit to the innovation potential we can achieve (provided that the laws of physics allow them).

Accenture has predicted that AI can double the economic growth rate in rich countries. This is huge, and it results large societal changes in all aspects of our life. The lower levels of Maslow’s hierarchy will be occupied by automatised machines that carry out commodity production, administration and distribution tasks.

Experience economy and labour-of-love type of work will increase and shift the focus of people’s work and consumption preferences.

The nature of work will also transcend from permanent one employer type of relationship towards continuous learning and flexible work arrangements. Last decade was the rise of social media. Individual voices have become so strong that showing your full identity will become acceptable in comparison to the still prevalent work-life separation (see also Category creation where Anthony Kennada talks about human-centric approach to business).

Frederic Laloux divides organisations into five category types ranging from impulsive, conformist, achievement to pluralistic and evolutionary. Public services are mainly based on the conformist management style: hierarchical, fixed roles and processes, authoritarian and formality/status driven.

Many companies have moved towards the pluralistic management that is culture and value driven with inclusive, fair and broad impact focused. Yet, the future seems to move into direction where self-organisation, -management, -motivation and decentralised planning are the norm. This decentralisation provides greater flexibility but required more trust and individual responsibility.

The drift between last century top-down rigid structures and requirements for more dynamic and customised solutions become very apparent in the public sector. It continues to hoard more resources without increasing productivity and efficiency to justify the ever-larger societal tax burdens. This results that the future winners will be countries that adapt to the pluralistic and evolutionary managerial styles in their provision of public services for their residents. Government as a platform is something that some leading countries in this field are already experimenting with (e.g. Estonia). The main challenge is to institutionalise agility and innovation.

It’s humbling to consider that our scientific activity increases 100-fold in 100 years. How much has the world changed since the 1920’s? The challenges of the future are rarely solved with the technologies of today (rule #4). Our current non-sustainable practices will become non-issues and replaced with something new and different.

Future is non-linear, often exponential in change and based on continuous human innovation and productivity.

Book review: Kellogg on Branding in a Hyper-connected World

August 25, 2019

Not all the names are the same. Some of them are brands. The difference is that only the latter have associations related to it. They can be positive, negative or mixed and they are the sum of all the things we think when hearing or seeing a brand.

Brands shape perceptions. They set expectations and give different meanings to their targets. A good quality brand sets the bar higher and may also yield more good will than a low-cost brand.

Marketing is full of lists and branding is no exception. Three challenges of branding are cash, consistency and clutter.

Cash is king in the short-term but the brand is a long-term asset. These two objectives are not always aligned and often the short-term results win at the cost of the overall brand image.

Branding down loop is an example of this where short-term financial objectives have negative consequences either by competitor actions or shifted consumer price expectations.

Consistency is a similar pitfall if the organisation does not believe in, own or understand the brand. How to ensure that every encounter with the brand is in sync through out the organisation in real-time?

Creativity and tactical excellence are ways to cut through the clutter and make the brand stand out among thousands of messages we receive every day.

Brand positioning strategy consists of four different components: a target, a frame of reference, a point of difference and a reason to believe. A brand positioning sets the brand in respect to other brands in the market. A brand purpose gives the reason why the brand exists. A brand positioning is the foundation for all brand-building activities.

Revenue growth seems to go hand-in-hand with brands that link all their activities to purpose. Strong purpose helps also in recruitment and employee engagement. It might not be a far-fetched idea to start to consider standards and reporting for a purpose audit in addition to the financial one in the future.

Pioneering has a high mortality rate. But the last 30 years of research shows that successful pioneers outsell later entrants across industries: the second entrant has in average 71 per cent and the third 58 per cent of the pioneer’s market share.

Market research shows that consumers systematically prefer pioneers, and this forces later entrants to spend more on differentiation or charge less in order to counter-balance the pioneer’s edge.

The first comer has the advantage of defining the category and benefits for the consumer. These stay over time and the positive attributes are associated with the brand the consumer learned about them first. A deeper learning curve and novelty drive concrete benefits for the pioneer. Later entrants need to adjust and respond to the pioneer’s definitions and expectations.

Fast copycatting can prevent the pioneer become an established and dominant player in the market. They also grow the fastest in the market compared to other players either earlier or later entering the market.

Brilliant strategies often stumble on implementation. Execution is a team effort across the organisation and involves many people. It’s less glamorous and therefore less credited as well as researched than strategy formulation.

The book consists of independent articles organised under different themes. The structure gives an updated overview to the topic.

The variety and quality of the content varies by the author but overall it’s a topical tome that can benefit both startup and established brand builders and managers alike as the above examples demonstrate.

Book review: The RegTech Book

August 22, 2019

FinTech has been around for ages and it is starting to shift its focus from digitalisation of money to monetisation of data in the financial sector.

After 2008, compliance has been a major issue for financial companies. Massive increase in regulation and reporting requirements have resulted in governance, risk and compliance (GRC) related costs racking up to 20-30 % of total costs in banks.

Nobody loves compliance. It’s horrible for customers and tedious for the financial institutions. If done in a wrong way it scares away existing and new customers.

Old legacy banking systems and isolated vertical data structures translate into manual labour intensive tasks and parsing of reporting data from multiple sources. This is the opportunity RegTech startups are starting to realise and materialise.

The old ways of doing things do not work anymore. Costs need to come down and productivity gains are expected. Yet, it is still early days and relatively little VC capital has been poured into the sector.

RegTech is a relatively new term that potentially can be used in respect to regulative processes in any sector, not just in the FinTech arena. Its earlier forms have been focused on streamlining compliance and reporting processes, often by means of digitalisation.

The latest trend is to start to see RegTech not just as a cost-centre but also as a means to provide business benefits and gains for the customer and revenue side of the business. Automation can provide valuable business data and improve customer experience if properly realised and understood.

Bank bashing is an easy target for politicians and public authorities since like compliance banks do not have many friends. Yet, even regulators have started to realise in some countries that they cannot just kill the financial companies with GRC without consequences to the overall economic activity and GDP growth.

Innovative companies have choices and they can move to more friendly business environments. For this reason some countries have started to introduce financial sandboxes where the full weight of regulations and compliance do not hit new ventures immediately.

UK, Singapore and Switzerland are examples of FinTech and RegTech sandboxing nations. The current $100 billion market of compliance spending is a good incentive for entrepreneurs to consider whether it’s worthwhile to enter the market despite its less than favourable appeal.

Book review: Transforming legacy organizations

August 19, 2019

When startups reach their unicorn status in a rapid pace and volume it puts incumbents in an uneasy position. The fastest startup to reach one billion dollar status might be Uptake who reached it in 236 days from its initial funding.

For established companies to survive in future they need to overcome innovation barriers. The easiest way to innovate is to optimise the existing, and therefore improve the past.

The second tier is to prepare for the future by augmenting innovation. Here the challenge is to mix the future to the existing structures and chores of the organisation.

The most radical and genuine form of transformation is inventing the future by mutating innovation. Amazon is good at this. They create and enter new markets amebae-like as they go along.

You have reached your end of the improvement line when marketing becomes the most significant thing about your product. Like Pine & Gilmore stated 20 years ago: “Marketing is the price you pay for being unremarkable.”

Roadblocks for innovation can be divided into three categories of immune systems: individual, organisation and society. The lack of general willingness to change is one aspect to consider but no individual is a match for a systemic resistance.

It is only a very few people who are actual innovators or first movers. This has been estimated to be around 2,5 % of people. The scope of the hill to overcome becomes evident also when considered that in most of the Western countries over 90% of companies are SMEs.

Their lack of resources, innovation power and awareness to change are among the biggest challenges for a long-term transformation. Just keeping up keeps their plates full. For majority the status quo and stability are more comfortable than the forthcoming changes and possibilities.

When considering what makes customers tick one way to look at the issue is dividing it into four parts where everyone wants to be better: Do, Look, Feel and Be. Some of these may be stronger for a particular product or service but for all it’s at least good not to be on the negative side of any of the four aspects.

Be and Feel are intrinsic but differ where Feel is reactive to the external stimuli and Be is proactive in nature focusing on values and morality. Similarly Do is proactive and extrinsic focusing on results, competences and skills where as Look is about social status, and as such reactive and extrinsic.

Millennials prefer to work for companies with a deeper meaning yet many organisations do not have distinctive transformational driver beyond being “industry leader” or within top x of a defined category.

How do you innovate outside of your category or industry if your company is defined to be the leader in the stated category?