Why every company needs a foreign policy

This was the thought provoking phrase posited by the World Economic Forum[i]. In an age where 40 years of British-European integration can be unravelled in a couple of years, or 70 years of U.S foreign and trade policy undone in a few tweets, this would seem sage advice. The international rules of trade are being rewritten, and at times, without the consultation of business. Many companies remain outwardly apolitical and whilst disruption brings opportunity, destruction of business as usual could necessitate a greater depth of political understanding. With various forms of ‘national branding’ under various forms of assault, those wishing to protect their own will need to actively project their own values.

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Geopolitics has a very real business imprint; consider for example that global logistics spending is forecast to reach $10.6 trillion in 2020, with transport accounting for the majority of this[ii]. Also consider that some 65 percent of the total value of a company’s products and services comes directly from suppliers[iii]. It hardly needs noting that supply chains are increasingly international, which perhaps in part explains why 60 percent say their organisation faces more crises today than 10 years ago[iv]. Only 17 percent test their crisis planning

At present companies do not only lack a foreign policy, but rather any meaningful insight into their own operations. Just 6 percent of CPOs have full transparency of their entire supply chain, while 65 percent have limited visibility or none. Supply chain risks are therefore mostly unknown[v]. Such opacity does not bode well for those looking to maximize value, predict disruption and adapt with agility.

Another aspect that a practiced and principled foreign policy could address lies with consumers. Thanks to blockchain, RFID, the IoT and the media in general, consumer awareness of product history and origin is increasing. This collides with a more demanding Millennial cohort. 88 percent of Millennials believe employers should play a vital role in alleviating social concerns[vi]. Since, social concerns often travel beyond political borders, supply chains would seem an apt place to start crafting foreign policies – not just to build resilience in a world adjusting to the ending of the American century but to a new demand from consumers for sustainability, justice and fairness. Indeed, 86 percent of Millennials agree that ‘…the success of a business should be measured in terms of more than just its financial performance[vii].’

[i] bit.ly/2JmaOnx

[ii] bit.ly/2GoAcre

[iii] bit.ly/2F1YvOB

[iv] on.wsj.com/2MdZBq8

[v] bit.ly/2HbVZTb

[vi] bit.ly/2lHzP2s

[vii] bit.ly/2BCZ0glw

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The future of competition: a network of networks

‘The top-down model of innovative change is impossible for today’s fast-moving industries[i],’ notes INSEAD professor Henrik Bresman. Networking effects ‘…are driving the winner-take-all economic shift[ii],’’ exemplified by Amazon. The winner, with a dominant market position is emerging as the hub, or integrator, of the economic system. This role is born bout more from how things are done as opposed to any notion of market boundary. For example, Rakuten Ichiba is ‘Japan’s single largest online retail marketplace. It also provides loyalty points and e-money usable at hundreds of thousands of stores, virtual and real. It issues credit cards to tens of millions of members. It offers financial products and services that range from mortgages to securities brokerage. And the company runs one of Japan’s largest online travel portals—plus an instant-messaging app, Viber, which has some 800 million users worldwide[iii].’

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Tomorrow’s organisations will increasingly inhabit a network of networks, whether they orchestrate, facilitate or contribute to such networks. It is likely that ‘…the network will help companies understand the dynamics of their business and whether their operational metrics are where they should be[iv].’ People, sensors, and devices are increasingly interconnected, in many cases beyond traditional organisational boundaries. The future network, comprising company, supply chain, sub-contractors, markets, investors and more will all exist within a single network yet constituent parts will inevitably be enmeshed in other networks. Whether owned or not, networks are becoming increasingly embedded within organisations. Network-centric businesses would appear to be the way forward for many industries as is demonstrated in the construction industry; each project sees a reconfiguring of constituent parts based on what is needed. Long term, this may lead to networks competing with one another and the necessary development of network-centric capabilities.

 

Adjusting to this changing business environment will require organisational renewal. Everyone on the leadership team has a role to play in adjusting successfully to a network of networks. The CIO needs to articulate and demonstrate how IT can work across silos and businesses to help units meet their goals and collaborations succeed. CIOs need to help align business strategy cohesively to the network in question Networking customers and partners could become a key feature of the future CMOs remit. Common forms of dataflow will be necessary if partners are able to work collaboratively on a given issue or project. Common third-party security standards will need to be established in conjunction with the CIO and others. Security and privacy controls will need to be built at the edge and intrinsically part of every device and network.

[i] https://knowledge.insead.edu/leadership-organisations/preparing-teams-to-lead-innovative-change-7391

[ii] https://www.wsj.com/articles/investing-in-a-winner-takes-all-economy-1491790561

[iii] https://rakuten.today/blog/mckinsey-rakuten-ecosystem-challenging-banks.html

[iv] http://www.digitalistmag.com/executive-research/building-business-network-future

Education for the future

Education systems are already lagging in our emergent digital lives. Our schools remain stuck in the industrial age. One in four adults already report a mismatch between the skills they possess and the skills they need for their job[i]. This is set to increase since an estimated 85 percent of employment roles in 2030 do not currently exist[ii]. This suggests that organisations that want to stay ahead of the talent curve will need to develop new talent pathways and establish new skills for employees appropriate for their changing roles. Indeed, some 62 percent of execs believe they will need to retrain or replace more than a quarter of their workforce between now and 2023[iii]

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The impact on the education we provide for our children, how we teach, what we teach and where we teach will all need to change, but of equal import is the impact on the conception of education itself. It can no longer be a period that leads from childhood to workplace, since changes in the workplace are accelerating at such a rate that current workers will need to reskill, and often. Singapore is funding adult education in an attempt to induce voluntary, lifelong skills development in an attempt to address this.

Both disruption and innovation are imminent; whether it is perceived as an opportunity of threat will depend in part on just how strategic and digitally-savvy education and skills providers are. Since the half-life of skills is now reckoned to be around five years, and adults arguably less flexible than children when it comes to learning, an increasing focus on the individual is necessary. For example, 98 percent of students express a desire for more personalisation in the classroom, as opposed to automation, perhaps revealing a need for teachers’ time to be freed up[iv].

Automation of course, is one of the most obvious ways for achieving personalisation at scale. We can apply machine learning to neuroscience data we collect, or to more prosaic ‘…things such as logs of how many times students re-watch a portion of a video lecture or where they stumble or where they slow the lecture down to watch it more closely[v].’

New models will continue to appear – both in delivery and funding. The Minerva model of learning has attracted a lot of attention as has a Californian coding school that only charges students once they earn a $50,000 tech salary[vi]. This is likely just the start; futurist Thomas Frey suggests that the largest internet company of 2030 is likely to be an education based one. One thing is for sure; the longer core facets of education remain unchanged, the greater the disruption once it does.

[i] http://www.businessinsider.com/workers-of-the-future-need-different-skills-2018-1

[ii] https://www.iothub.com.au/news/what-jobs-and-skills-will-be-needed-in-the-machine-era-486983

[iii] https://www.mckinsey.com/featured-insights/future-of-organizations-and-work/retraining-and-reskilling-workers-in-the-age-of-automation

[iv] https://www.capitalfm.co.ke/business/2018/04/mckinsey-report-shows-40pc-of-jobs-require-soft-skills-and-emotional-intelligence/

[v] https://www.mckinsey.com/featured-insights/artificial-intelligence/the-role-of-education-in-ai-and-vice-versa

[vi] https://www.fastcompany.com/40524232/this-coding-school-doesnt-charge-students-unless-they-snag-a-50000-tech-salary

5G. Evolution or revolution?

The benefits and advantages of 5G technology are expected to be available sometime in 2019. Although the extent of its impacts are unlikely to be realised immediate, WEF suggests ‘…that it will be as revolutionary as electricity or the automobile[i].’ Both the lack of an immediate ‘wow factor,’ and 5G’s long term potential are based in the fact that it is a significant enabling technology. In and of itself, the obvious immediate impacts include higher speeds, low latencies, lower power consumption and greater reliability.

Smartphone, Technique, Appliances, Link, Internet

However, the global economic impact of 5G in new goods and services is forecast to reach $12 trillion by 2035[ii] as the technology allows us to do different things and move from simply connecting people to information towards connecting people to everything.

In the short term, augmented reality apps could proliferate on smartphones, shifting how we access and display information. In the medium term, the synergy of 5G with emerging industries such as the IoT will ‘…open up potentially new roles for intermediaries in the value chain, positioned downstream of network operators, offering to bundle and repackage connectivity for particular industries[iii].’ 5G will also prove a catalyst for connected healthcare, autonomous vehicles and virtual reality as a medium across multiple industries including education and various customer facing industries.

In the longer term, 5G could enable edge computing and analytics – shifting consumer journeys, data strategies ad fundamentally redrawing business and operating models decisively. Ironically, what is largely a plug and play technology will prove much more complex organisationally. Data architectures, talent needs, ecosystem partnerships and fundamental role in newly emerging spaces will all need analysing and all will impact business and organizational models. Perhaps one underappreciated source of disruption is the geographic source of many of these models.

According to CCS Insights, China will account for half of all 5G users in 2022, and 40 percent of 5G connections by 2025[iv]. Since emerging markets are an increasing source of innovative models and services seen in developed economies, this could increase over the coming years; new competitors, new partners and new models will almost certainly abound. The economic impact within China of building a significant 5G capability could be profound, it could ‘…account for 3.2 percent of China’s entire GDP in 2025, generate 8 million jobs, and add 2.9 trillion yuan ($454bn) in economic value by 2030[v].’ The impact in developed economies could be greater still, especially if businesses are unprepared for the raft of organizational and business model changes that will be required to get the most out of 5G.

[i] https://www.weforum.org/agenda/2018/01/the-world-is-about-to-become-even-more-interconnected-here-s-how/

[ii] https://www.weforum.org/agenda/2018/01/the-world-is-about-to-become-even-more-interconnected-here-s-how/

[iii] https://berec.europa.eu/eng/document_register/subject_matter/berec/reports/8008-study-on-implications-of-5g-deployment-on-future-business-models

[iv] https://www.sdxcentral.com/5g/definitions/china-5g/

[v] https://www.sdxcentral.com/5g/definitions/china-5g/

Could auto’s form the ultimate social network?

It is likely that ‘…in the next 30 years, we are likely to see more change in transportation technology than we’ve seen in the last 100 years[i].’ As the ultimate mobile device of the future, cars and the wider automotive industry are exposed to a wide range of technological developments; 5G, artificial intelligence, the IoT and blockchain. Another technology – 3D printing –  could reduce ‘…the cost of developing an entirely new vehicle from $600 million today to just $60 million[ii].’ Taken as a collective, these technologies will empower the 69 percent of industry executives who rate ‘…creating new services-based offerings,’ as a significant growth area for the industry[iii].

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The business models enabled by autonomous vehicles coupled with the evolution in the concept of personal transport and the increasing digitisation of cars mean the traditional industry boundaries are collapsing. This inevitably alters the skillsets, strategies and culture needed to compete. The car industry is becoming a real ecosystem featuring collaborating with hundreds of other companies to create a network of networks. Indeed, 73 percent of automotive executives say that collaboration with other industries will become the centre-piece to their growth strategies[iv]. The potential prize could be huge; the wider economic landscape created by autonomous cars is forecast to be worth some $800bn in 2035, before growing to $7Tn by 2050[v].

As value chains in the greater automotive ecosystem collide and merge, opportunities for interaction designers will emerge. In some ways, this could be beyond what we associate with current interaction since the prospect of screen-less communications presents new design and interaction issues. New approaches, skill sets and mindsets will be needed to compliment the requisite analytics experts that will underpin the future automotive market.

It is plausible that the future automotive ecosystem, will resemble modern technology ecosystems with their platform business models, permission-less innovation by developers, and domination of software-centric companies. The automotive industry, perhaps more so than some traditional tech companies, could become a blueprint for future ecosystems across a range of industries.

[i] http://www.businessinsider.com/6-predictions-about-the-future-of-transportation-2015-11

[ii] http://www.zdnet.com/article/vroom-how-3d-printing-is-revving-up-to-save-the-auto-industry-big-bucks/

[iii] https://public.dhe.ibm.com/common/ssi/ecm/gb/en/gbe03891usen/ei_blockchain-for-mobility-services.pdf

[iv] https://www.ibm.com/blogs/internet-of-things/automotive-future-iot/

[v] https://www.vision-systems.com/articles/2017/06/intel-autonomous-driving-will-create-7-trillion-passenger-economy.html

From supply chains to value chains

Only 38 percent of executives suggest they are extremely or very confident that their supply chain organisation has the competencies it needs today[i], let alone tomorrow. It would therefore seem only a matter of time before the economics, technological capability and desire to improve security merge to transform how this aspect of business is done – for both manufacturers and service based industries.

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An estimate 65 percent of the total value of a company’s products and services comes directly from its suppliers[ii]. Technologies from artificial intelligence and robotics to blockchain could all help boost the efficiency of supply chains, and especially with regards to blockchain, deliver transparency into generally opaque supply chains. Just 6 percent of execs have full transparency of their entire supply chain, while 65 percent have limited visibility or none[iii]. Current supply chain risks therefore remain generally unknown, although a couple of trends on the horizon could help elucidate these. The first lies with machine learning; McKinsey predicts it could reduce supply chain forecasting errors by 50 percent and even reduce lost sales by 65 percent with better product availability[iv].

Autonomous cars and shifting logistics models could blur with P2P transport and inevitably become cheaper, new markets could open with latent capacity making the transportation of smaller item goods very inexpensive[v]. One key implication is the coming end of linear supply chains; in their stead, digital supply networks not only have the advantage of shifting models from product-centric to service-centric but could allow for such eventualities as outcome-based pricing[vi].The sharing economy will ultimate integrate a network of players, and open up a whole new supply chain paradigm.

That said, a bigger source of potential disruption lurks within other technologies. ING cites calculations that suggest up to 50 percent of manufactured goods could be printed by 2060; some scenarios in which investment doubles every five years even show this threshold reached by 2040. The result could be a reduction of world trade by one quarter by 2060, or even two fifths by 2040 under the accelerated scenario[vii].

Central to many of these sources of change is a shift of control from producers to consumers and the wider business ecosystem, or network. The future network, comprising company, supply chain, sub-contractors, markets, investors and more will all exist within a single network, even if constituent parts will inevitably be enmeshed in other networks.

[i] http://www2.deloitte.com/us/en/pages/operations/articles/supply-chain-talent-of-the-future-survey.html

[ii] http://www.digitalistmag.com/finance/2018/02/21/unlock-future-of-procurement-with-cognitive-computing-05879984

[iii] http://www.supplychainbrain.com/single-article-page/article/six-percent-of-cpos-have-full-supply-chain-visibility-survey-says/

[iv] https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/louiscolumbus/2018/03/11/10-ways-machine-learning-is-revolutionizing-manufacturing-in-2018/&refURL=&referrer=#58961c5c23ac

[v] https://medium.com/startup-grind/mind-blowing-driverless-future-fcc5197d509

[vi] https://knowledge.insead.edu/blog/insead-blog/the-era-of-linear-supply-chains-may-soon-be-over-6296

[vii] https://think.ing.com/reports/3d-printing-a-threat-to-global-trade/

Why digital disruption could accelerate…

Asking one hundred or so CEOs for their definition of digital transformation would inevitably lead to more than one definition. Despite a probable proliferation of descriptions, an increasing number point to it as impacting their industries, with around half of executives confirming this, compared with only 15 percent in 2015[i].

Multiple technologies can be held up as transforming industries yet it is important to keep in mind that digital transformation is not just about adding new technologies or channels to existing organisations but rather about structural changes in the way an organisation operates. The two are related however; more than half of executives believe one of their biggest barriers to implementing digital technologies is their internal corporate culture.

A key component of this lies in skills and education. Some 70 percent of CEOs say they’re worried about the digital skills of their senior leadership team[ii]. In such instances delegating digital transformation to a CIO, for example, is unlikely to prove successful. It will take holistic executive planning and action that targets talent pathways, skills shortages and an aligned tech and overall strategy approach for digital transformation to succeed. This must include the entire workforce, not only are executives typically lacking in digital skills, nearly 6 in 10 of them believe their workforce isn’t ‘…sufficiently security savvy,’ enough to move forwards with digital transformation[iii].

Executives are often bombarded by the forecast of dire consequences of failing to digitally transform, and neither stalling out and irrelevance nor the efficiencies and new value propositions that can be unlocked by digital change should be ignored. Rushing blindly into digital transformation risks one of two unfortunate outcomes, however. The first remains the possibility of a lip-service grafting of new technologies onto old processes, structures and ways of thinking that does little to boost competitiveness or open new channels of business. The second is the lack of skills that mean that digital transformation without adequate cybersecurity could be a ‘…train wreck waiting to happen[iv].’ Some 1.5m cybersecurity positions are expected to go unfilled by 2020.

Organisations still to undertake digital transformation, or stalled part way on it, have a significant task awaiting. Attracting new talent now requires technologically savvy workplaces and ways of working, yet the implementation of such technologies requires a skill and talent base often lacking. This chicken and egg scenario necessitates the somewhat risky rebuilding of the organisation on the fly. Although a mainstay of strategic thinking and management articles for a while now, it is likely that the impacts from digital transformation are only just starting.

[i] https://connectedfutures.cisco.com/article/industries-in-the-cross-hairs-of-disruption/

[ii] https://www.strategy-business.com/blog/The-Need-for-Digital-Know-How-Starts-at-the-Top

[iii] http://www.eweek.com/enterprise-apps/dell-survey-suggests-how-automation-ai-will-change-workplaces-by-2030

[iv] https://www.linkedin.com/pulse/digital-without-cybersecurity-train-wreck-waiting-ralf-dreischmeier/?linkId=47157533