Tag Archives: Economy

The Changing Way we Work & Live – part 3

English: Miniature turbine 3D print from Rapid...

English: Miniature turbine 3D print from Rapid 2006 in Chicago, Illinois. (Photo credit: Wikipedia)

The first in this series of posts looked at how technology advances are enabling location independence for people at work, and the second looked at some of the socio-economic impacts of this move. In fact, the changes are potentially even more widespread further into the future, as a recent MindBullets post discussed.

Essentially, what this post suggests is that in the next decade or so, a combination of 3D printing – that technology is already available, albeit in a somewhat rudimentary form still – and cheap robotics will render manufacturing as we know it obsolete.

What’s more, this combination of technologies will make the production lines of old irrelevant as we move to true user choice in every product. We all remember the early days of the mass produced car, when Henry Ford suggested that customers could have the Model T in any colour they liked, so long as it was black. Contrast that with today where the buyer has, literally thousands of combinations of colour, internal and external finish, engine and accessories available to make a vehicle unique, or at least highly individualized. In the future, there will be no limit to the choices available as each product will be built/printed to your exact specification.

The impacts of this are, of course, dramatic – imagine the impact on China if its low-cost manufacturing prowess is no longer needed as it is faster and cheaper to make items at/near the customer. What will the effect be on the economies of countries like China, Mexico and others where a largely unskilled labour force has provided economic growth through mass manufacturing? And what will the consequent ripple effects around the world be as a result?

What, too, will be the impact on the logistics and transportation industries if there is no longer the need for transporting all the freshly-made products around the world? Shipping, air, road and rail transport, and warehousing will all undergo massive changes and many companies that are household names will have to adapt radically or disappear.

The Amazon of the future, for example, instead of having huge warehouses filled with a multiplicity of product and a logistics operation predicting demand and ensuring, so far as is possible, just-in-time delivery from its vast range of suppliers, will have a series of printing/manufacturing modules and will create products to order in a matter of minutes – and the only transport needed is to the consumer. As prices of 3D printers continue to fall, imagine a world where these are in every home, negating even this ‘last mile’ transportation.

There will, of course, still be the need for some level of transportation – the raw materials for the 3D printers and robotic manufacturing operations, but this will be much less onerous than the transportation of today.

There is, of course, still one area that 3D printing and robotic manufacturing has not solved – organic material. This means that food – fruit, vegetables, meat, eggs, fish and so on – will still, for the foreseeable future at least, need to be transported from the farms to consumers in some way. Here, too, we’re seeing huge change today as increasing numbers of consumers buy this online, bypassing the need for physical supermarkets and shops, and we’ll look at the effects of all this online shopping in the next part of this series.

There’s no question that the current advances in 3D printing and robotics will dramatically change the way products are made and delivered and the effects of this on companies and countries will be massive. Technology is really causing the pace of change to accelerate more and more quickly – the future just gets more and more interesting.

Note: I first posted this on the Business Connexion blog on 8 April.

The Changing Way We Work & Live – part 2

Urban Decay

Urban Decay (Photo credit: pmorgan)

The previous post showed how technology is enabling location independence for the workforce for the first time since the Industrial Revolution created the need for urbanisation.

Smart devices, such as smartphones and powerful tablets, are providing people with the ability to be fully productive at customer sites, from home or wherever else the demands of the role take them, with sales of these devices outstripping those of PCs for the first time in 2011.

Estimates vary widely, but it seems that at least 10% of the workforce today works from home rather than in an office, and estimates are that this could reach as much as 60% in a decade. What’s more, contrary to what many employers feared, it seems that working from home increases productivity noticeably – some 10-15%, in fact – due to people working longer with fewer breaks and having less interruption.

But this location independence has far wider implications, too:

  • Equipment purchases – concomitant with location independence, people want to have their own choice of devices: the Bring Your Own Device (BYOD) phenomenon.  Initially concerned about the security implications of people using their own devices, companies have realised that the cost savings more than compensate for the additional security/monitoring required, and the employee is happier, too. Of course, this has ripple effects on the supply chain as companies no longer need to buy large volumes of end-user equipment due to the users purchasing their own, normally from the retail channel. This is exacerbated by a move into the cloud and companies consequently no longer needing as many servers and storage systems as they simply use these “as a service” from the cloud providers – again impacting the supply chain for such equipment.
  • Pervasive communications – of course, for location independence to work, people need access to fast communications links wherever they are. This is continuing to drive the roll-out of faster, cheaper mobile and fixed-line communications throughout the country. This trend will continue – more bandwidth, cheaper, driving the need for even more as applications increasingly take advantage of whatever is available. Inexpensive, or even free, video conferencing is quite normal now – replacing meetings in offices – and the use of vide for demonstrations, sales tools and so on fuels an ongoing demand for even more.
  • Housing prices – one issue that’s seldom mentioned when talking about location independence is the impact on house prices. As people need to cluster less around major metropolitan areas to work, so this must impact prices in areas that were in very high demand for the reason of convenient access to work. Could this be the catalyst that finally bursts the London property bubble? Could it also cause prices to increase in more remote, cheaper areas as people opt for quieter spots? And then what about the impact on transport – less commuting means fewer passengers on the trains and tube. Not only might this mean people actually getting seats when commuting, but it may force the operating companies to reduce prices to try and attract people to use the services.  The socio-economic impact of this location independence could be huge.
  • Holidays / Leave – another interesting result of the increasing move to people working from home is the effect on holidays and leave. Not only is it increasingly difficult to monitor when people are “at work” or not, the lines are also blurring between work and leisure time. All of this creates headaches for companies when it comes to such things as people taking time off. A number of companies, particularly in the USA, are now moving away from formal leave allowances and the administration that goes with this, opting instead for employees being able to determine their own leave requirements, provided they get their work done. Not only does this further improve motivation and morale but improves company balance sheets as they no longer have to provide for paying out against untaken leave – and for large companies, these amount can be substantial.

Just as the Industrial Revolution led to urbanisation in the 18th and 19th centuries, could technology and location independence lead to the reduction of these large conurbations in the 21st century?

One thing’s certain – work will never be the same again.

Note: I first posted this on the Business Connexion blog on 4 Mar.

The Changing Way We Work & Live – part 1

Laptop on beach


Laptop on beach (Photo credit: Wikipedia)

There’s a revolution under way that is gaining momentum, and yet doing so in a way that although we scarcely notice the changes from day-to-day, when we look back a few years we can see they’re enormous.

This revolution is in the way we work and live.

Ten years ago, working from 9 to 5 in an office was overwhelmingly the norm, and when we left the office at 5 we effectively switched off from work until we arrived back at our desks the next morning.

Today, this is very different and the lines between work and leisure are increasingly blurred, impacting almost every aspect of life from where we work, to how, when and even to our holidays, and yet we’re really still in the early stages of this revolution.

It all came together with the convergence of the Internet, smartphones and notebook PCs in the mid-late 90s – the Internet becoming increasingly pervasive once a user-friendly browser, Netscape, was released in 1994, the term “Smart Phone” first being used in 1997 and, of course, the increasing power and affordability of notebook PCs throughout the 90s.

By 2000, this convergence of technologies was enabling people to become properly location-independent – accessing email at any time, from anywhere, and moving from this to being able to run an increasingly wider list of applications on these portable devices: initially the notebook PCs, but increasingly on smart phones as the performance of these devices improved. For the first half of the decade, though, such location independence was still the preserve of the ‘early adopters’ as the technologies continued to evolve and the cost and availability of bandwidth improved, with such ‘early adopters’ being equipped by the companies for which they worked.

The introduction of the iPhone in 2007 brought about the next significant jump in working practice – or rather, the introduction of the Apple App Store a few months after the iPhone brought about this jump.  The iPhone and App Store enabled people to choose from a wide range of applications that enabled their smartphones to be so much more functional than had been the case to date.

Suddenly, Apple moved into the mainstream of intelligent device use, and people started demanding that they be allowed to use their own smartphone (the iPhone, in this case) rather than the company-supplied one, (most often a Blackberry at that time). People liked the new applications that were available, and wanted to use these at work as well as in their leisure time.

And then, in 2010, came the iPad…

This combined sufficient power and screen size to effectively run most business-level applications that people needed to access when on the move, with battery life than enable all-day working – a major limitation of notebook PCs that typically could only run for a few hours.

For the first time, people could work remotely from their offices all day without worrying about power source availability – true location-independence had become feasible.

Of course, things continue to evolve. PC makers, seeing massive market share being taken by these portable smart devices (phones and tablets), which outsold PCs for the first time in 2011, have countered with Ultrabooks – full-power notebooks that utilise solid state disks and great battery life to provide full PC performance with all-day power. Tablets, too, get more powerful and functional, while bandwidth continues to become more pervasive and cheaper.

The “Bring Your Own Device” movement is now taking off – users insisting on being able to work with their own choice of devices and companies recognising the cost savings, and motivational advantages of allowing this.

Today, it’s entirely commonplace for employees to have no real office address: their contact details show a mobile number alone, and they work from home, from client sites and from wherever else is most convenient. They come together over video conference calls from multiple places, and share knowledge using a multiplicity of internet-based tools.

And this trend will keep accelerating, with interesting social consequences likely to emerge as society increasingly reverses the location-dependence introduced with the Industrial Revolution.

I’ll explore some of these, together with the technology issues driving them, in future posts.

Note: I first posted this on the Business Connexion blog on 11 Feb.

Can the Olympics Boost British Business?

Olympic Judo London 2012 (2 of 98)

London 2012  (Photo credit: Martin Hesketh)

An interesting phenomenon has hit Britain over the past 2 weeks – the traditional British reserve has been replaced with enthusiasm and a sense of national pride I’ve not seen here before. What’s more – the normally omnipresent negativity about almost everything (not just the weather!) has been quietened to a large extent.

This gives me great hope. Can we draw on this new-found upbeat attitude and start to pull the country out of its recession?

After all, markets are driven at least as much by sentiment as anything else, and a positive sentiment among the people here will inevitably lead to a strong upturn.

So, what lessons have we learnt this month?

Firstly, and very importantly for the future, that competition is healthy after all. For far too long here, and in some other countries, governments have discouraged competition on the basis that it is unfair to those less able. Hence the ludicrous situation of school children, for example, progressing through school regardless of whether they pass or fail their exams, and exam pass marks being lowered, too – the reason we have such huge numbers of school leavers who are functionally illiterate and innumerate. And then wonder why they cannot find, or keep, a job.

Secondly, celebrate success. It seems to me that the news services focus on the negative, and ignore the positive. With the Olympics they were even starting to be accused of jingoism, such was the positive tone of the UK TV services! I realise that disasters sell more newspapers and TV viewship of news channels increases, but it really is not necessary to focus on the negative / bad news about everything all the time. Hopefully, the record viewership and readership during the Olympics will show that good news also sells… And there is good news on the business front – not just bad. There are many success stories, large and small, from Jaguar-LandRover’s expansion to over 300 000 new businesses starting this year – some of which will become the market-leaders of the future (there’s an interesting correlation with market-leaders having more often than not started in periods of recession/downturn).

Thirdly, sport is good for everyone. Britain is already one of the most obese nations on earth and the costs of this in both human and monetary terms are massive. By making sports compulsory for school children – a minimum of three afternoons a week would be good – they develop habits that will stand them in good stead throughout life. It not only reduces the issues associated with obesity, but encourages both team spirit and competition – two things that are critical for overall success in life.

Fourthly, a sense of national identity and community, and pride in this, is good – look at the great work done by the army of volunteers! It really is time for the “Great” to be put back into Britain in the minds of its people. It turns out that not only is Britain third overall in the medals table, but has the best ratio of the all-important Gold medals to GDP of any country (50% better than the next closest) and one of the best ratios in terms of population size, too.

We’ve a unique opportunity to take these lessons and move forward strongly. To move away from a grey society where competition is bad, winning isn’t important and there’s no pride as a consequence. The results will be not only good for business, but a stronger, healthier and happier society, too.

Communication in the Information Age

Note: the plate says - "The quick brown f...

Image via Wikipedia

Johannes Gutenberg’s invention of the printing press in 1440 heralded the start of mass communication – for the first time, text could be reproduced quickly and inexpensively for a large audience. Of course, very few people could read in those days and many authorities were against it, fearing the impact of mass uncontrolled communication on their rule, so it took a few hundred years for this to spread.

The introduction of broadcast radio from 1920 started to spread information even more quickly and widely, marking a significant jump in the speed of communication.

But it was the Information Age which has really accelerated global communication.  Widely accepted to have started in the 1970s with the advent of the microprocessor, it took the introduction of the Internet Browser in the early 1990s for the Information Age to really become as integral to life as it is today.

And yet, it seems, the Information Age is just a quicker way to spread the same sort of information as before. Certainly our main sources of news seemed to have missed the point – news bulletins rely on “sound bites” or their video equivalents to relay information with the result that this is often inaccurate or, at best, unbalanced. Newspapers, too, have not really worked out how to embrace the digital age fully – you either get print (almost as in 1440, albeit more quickly), or the same articles available online, missing the opportunity to have summaries of stories and the ability to drill down for more information.

This is the key – we’re bombarded with information from multiple channels but have not developed the tools to effectively sift it. Long messages are often ignored as we don’t have time for them, while short messages are frequently taken out of context missing the real point that was being made. What’s needed is the ability to capture the essence of a point in a short burst and then enable people to get more information as they require it – almost an inside-out onion, with successive layers giving more and more detail.

Twitter is a great example of the modern communication paradigm – 140 characters to get the basic message across, including a link to more detail, which you can access if you wish. That more detailed message, in turn, could have links to other sources for even more information, and so on…

Nowhere, perhaps, is this communication problem more evident than in politics. There’s no argument with the fact that the UK, like many other countries globally, has woefully overspent and has to completely revisit its bloated public sector spending (how can a majority of the workforce be civil servants – effectively paid for by the minority?).  And yet it, like so many others, is facing widespread revolt at the prospect – look at the pension reform issue, for example…

Why?

Primarily because the government is incapable of effective communication. White papers, government statements and debates are far too long and not suitable for the news media or the viewing/listening/reading public, so people simply don’t understand the issues. I absolutely believe that the vast majority of people are decent, willing to work hard to get ahead and happy to help those less fortunate (but NOT those that are not prepared to help themselves).

But, for as long as governments cannot get the message out in a way that the media can carry without distortion and people can understand in just seconds, they will be unable to implement the changes that are needed, worsening the financial state of their countries, prolonging the agony and the economic downturn.

It’s time to turn traditional communication on its head and embrace “the 140 character world.”

When Will Interest Rates Rise?

The Bank of England in Threadneedle Street, Lo...

Image via Wikipedia

With the Bank of England having revised the growth rate down to 2.7% this year (from a previous forecast of 2.9%) and inflation rate up to peak at 5% in the fourth quarter (previously 4.5%), expectations are again growing for an interest rate rise in the near-term.

Of course, the classic economic theory is that a rise in interest rates reduces inflation as spend decreases and so demand-driven price rises are no longer a factor.

However, we’re not living in classical times. This economic slowdown – it can’t be called a recession as we’ve not had a further 2 quarters of negative growth – is persisting and there’s no real expectation of a marked change to lacklustre growth rates throughout the developed world. So it’s not demand that’s driving inflation but rather a number of external forces, including climatic conditions and wars, that have pushed up commodity prices. These won’t respond to a rise in interest rates.

So, given this, let’s understand who benefits from the current scenario and what this means for interest rates.

The main beneficiaries of the sustained low bank rate are:

  • The banks themselves – don’t confuse low bank rates with low interest rates for borrowing money. Certainly, the rates are lower than they were before the crash, but not as low as they should be, given the drop in the bank rate. In fact, looking at interest rates charged to companies and individuals for borrowings, the bank’s margins are extremely high. A margin of 3% to 3.5% (the difference between bank rate and lending rate) is normal – today it’s running somewhere between 5% and 7%, depending on your financial profile. The banks are, quite literally, “coining it” – just look at the new bonus rounds for evidence of this.
  • The government – the massive government debt attracts interest costs (they have to borrow the money). Historically, governments borrow money at, or extremely close to, the bank rate, so by keeping this low, the government reduces the amount of its budget spent on interest to service its massive debts.

Yes, homeowners can benefit to a degree, too – but the advantages tend to be a lot smaller in real terms for most people due to the structure of mortgages and the costs associated with moving between fixed and tracker rates, together with the fact that many people can’t change to take advantage of lower rates due to not having enough equity in their properties following the decline in values. And don’t forget that homeowners repaid a record additional £24 Billion on their mortgages last year – getting their mortgage values down ahead of any possible rise to cushion the impact.

So who benefits from higher inflation?

  • In a word: government. It comes back to the massive government debts that have been rung up in the past 10 years. One way to reduce the effective value of them is to allow moderate inflation into the system – simplistically, 5% inflation over 5 years reduces the effective size of the debt by 25%. Couple this with the increased tax receipts that come with inflation and you have a model to get government debt down much more quickly than would otherwise be the case.

So, given that inflation won’t respond to a rise in interest rates as this is not caused by high demand, and that the government and banks are the primary beneficiaries of having a slightly higher inflation rate and a sustained low bank rate, is it likely we’ll see an interest rate rise soon?

I think not – although I suspect the impact of a rise in bank rates may be felt less than generally expected. In fact, it might well lead to lending rates not going up at all as the banks would use this as a way to try to woo customers from each other, keeping lending rates where they were before – let’s face it, they have more than enough room in their margins to absorb a few modest rises in the bank rate.

Capitalism – What the Future Holds

Wall Street

Image by Mirka23 via Flickr

The world is in a state of flux.

With the economic downturn lingering far longer than most people expected, governments are under growing pressure to kick-start economies. However, a growing number of countries with looming debt crises and a consequent unwillingness or inability of governments to spend more money hampers this.  And, as the northern hemisphere weather warms up, we can expect to see growing numbers of demonstrations by people wanting jobs or, at least, a reduction in job cuts.

All of which leads to the question – is the capitalist system doomed?

I don’t believe for a moment that this is the case – history shows that capitalism is the most effective way for countries and people to grow their wealth – but I do think we’re going to see some far-reaching changes.

Back in September 2009, I suggested in my post, “The Perils of Quarteritis” that the short-term thinking so prevalent in recent years had contributed significantly to the crash, and that businesses would move to a longer-term, more strategic model.

The March 2011 edition of Harvard Business Review has a wonderful paper, “Capitalism for the Long Term,” by Dominic Barton, Global Managing Director of McKinsey & Company where documents his findings from 18 months of research and hundreds of meetings with business and government leaders. In this paper, Barton makes 3 points to support his conclusion that capitalism must survive, but that it needs to change, too:

  1. A return to longer-term thinking by companies, investors and politicians alike – he refers to this as “The Tyranny of Short-Termism” (my version was Quarteritis).
  2. That there is no difference between serving the interests of shareholders and of stakeholders – in spite of a more recent belief that serving stakeholders made shareholders poorer, managing for long-term value growth benefits not only stakeholders and society but shareholders, too.
  3. Company executives and boards need to act more like owners, not temporary care-takers – as by doing so they will naturally look to the long-term and so benefit the company, its shareholders, its stakeholders and society as a whole.

Basically, it all comes down to taking a longer-term view of business (as well as the economy, in the case of government) and a consequent change in leadership style, too – see my post of November 2009, “Leadership for the New Business World.”

This longer-term thinking and more inclusive leadership approach will ultimately be to the benefit of all – investors, executives, employees and society as a whole.

What do you think?

Update (31Mar11): Read the Leadership Interview with James Quigley of Deloittes, just out at N2growth.com – leadership is about trust and looking to long-term sustainability.