Five basic steps for big improvements

ORGANISATION LEVEL:

Managers, whatever their level, need to take just five basic steps to make big productivity improvements – click on the link below for outline details

http://www.productivityknowhow.com/?page_id=378

BUT:

1. Corporate plans – If they exist, they’re not seen or understood by most managers

2. Performance measures – Most lack 80% of the measures they need

3. Analysis of potential – Most managers don’t know how to assess their % scope on offer to improve

4. Special improvement projects – Most have not been taught how to manage special improvement projects

5. Continuous improvement – Most in the West ignore the huge benefits possible from taking such action on a daily basis

No wonder national productivity improvement is slow at best, whatever the organisation

 

NATIONAL LEVEL:

The same five steps also apply to the action required of government ministers for they have a significant role to play in productivity improvement

Click on the following link

http://www.productivityknowhow.com/?page_id=1331

The same problems as above arise with each step

Hence, despite well-intended speeches and media headlines about the need to improve productivity and ‘close gaps’, little effective change happens

Nov 20

Knowledge ladders

All animals, humans included, are born with a brain within which resides an instinctive control system, ticking away 24/ 7 much like a Microsoft operating system

This subconscious system controls most of what we need to survive and protect ourselves, procreate, feel pain and pleasure

It also stores knowledge acquired by learning by rote and practice enabling people to be better at mental arithmetic or playing the piano or golf

And, over time, it stores the experience of what works or not enabling more mature reactions to situations and better decision-making, often credited as sixth-sense or gut-feel

If in any doubt about the power of the subconscious, ask how a humming bird is able to build its delicate and complex nest without any training from its parents or attendance at its local technical college – and without any Google website to help either

Then there’s the conscious side of the brain – a side many think is unique to we human animals – I’m not so sure

Watch the obvious shame of a dog when caught stealing food from the kitchen cupboard or the playfulness of rooks dive-bombing each other whilst enjoying the up-currents from wind colliding with cliffs – such emotions are conscious experiences, not unconscious ones

However, we humans have been able to develop this conscious side of the brain – it’s what got us to the front of the pack in Charles Darwin’s evolution stakes – and we now go to great lengths to develop it further

As well as feeling emotions, our consciousness enables us to think, make connections, sort out correlations, discern patterns, select priorities, solve complex problems, come up with new ideas, create great music, art and designs

Other animals can demonstrate basic logic skills, usually in order to obtain more food – lionesses hunting together to isolate a wilderbeest, rooks picking up cockles on the beach then dropping them from some 30′ above onto stones below to crack them open, apes using sticks as tools to dig deeper into tree trunks for the goodies inside – but none can compare with the mental skills developed by humans

However, man appears limited in his capacity to know everything about everything – there comes a point for us all when our conscious side seems to become full and will absorb little more

Even at school, in the UK at least, most 15-16 year-olds have to choose between arts and science subjects before taking their ‘A’ level examinations because they cannot cope with both

And at work we have to specialise to become good in any field if we are to progress

It’s a rare beast that’s able to master two quite different subjects – and mastery of just one takes us much time, study and experience

Conclusion – There’s a multitude of knowledge ladders for us to climb, and no short cuts for climbing any of them

 

Nov 20

Employee engagement drives productivity?

Employee engagement is nowadays seen as essential if an organisation is to perform well

Gallup report that business units in the top quartile of employee engagement outperform bottom units with 17% higher productivity, 20% higher sales and 21% higher profitability – all big performance differences

MGI – McKinsey Global Institute – report that productivity increases by 20 to 25% when employees are connected with effective internal communication channels

Ross Rowbury, CEO of Edelman Japan, a PR company, thus asks: “What makes for good employee engagement?” – is it:

  • A great company newsletter?

  • A regular town hall meeting?

  • Use of chatbots to allow employees to access company information?

Such tactics can indeed be useful – but the big performance improvements arise when organisational culture changes – when employees:

  • Understand and then focus on delivery of the corporate strategy – when they feel an emotional connection with it and are inspired to deliver their best

  • Are empowered to support each other, share ideas and tackle performance problems

  • Understand what customers want, are keen to deliver great service and are proud of what they do

To bring this about, Rowbury says top management must:

  • First understand and then act this way themselves, all hours of the day, to ensure employees see they not only ‘mean what they say’ but ‘do as they say’

  • Clearly explain what the corporate strategy is and why it is exciting

  • Regularly update them on what customers overall are saying about what is being offered them – especially what they’re complaining about, which often comes as a surprise, and the likely impact on sales

  • Instal performance measures for all to measure their performance progress

  • Introduce training programmes to support empowered employees with ways and means to help them improve performance by themselves

  • Design incentive schemes to encourage employees to seek to improve performance and then reward them if successful

  • Continually remind them all of what’s in it for them, what’s expected of them, and why it matters

Clearly, regular communication between managers and their teams is a vital ingredient here, with face-to-face talks being far more effective than occasional dry memos hoping some employees will read them – ‘over-communication is impossible’

But if a major culture change is needed, and quickly, one way is to employ an event likef the PPF – Putting People First – programme we first delivered back in the 80s for British Airways using upmarket venues such as the Rose Room at Twickenham rugby football ground

Essentially, PPF comprised:

  • A member of BA’s top management first explaining the company’s aims and strategy – ‘To be the world’s favourite airline’ – BA became so back then – sadly, 30 years later, they can no longer make this claim

  • An audience at each event of some 150 plus employees, carefully selected from different areas of the company, being encouraged to ask all sorts of questions of the top manager on the stage, the more awkward the better to show the honesty of the day – however, to avoid any career terminating results, an outside facilitator for the day collects all their questions and puts them to the top manager anonymously

  • External and internal customers’ wants of the company are then discussed, including a series of complaint letters being read out – many are found to be ‘news’ to the audience

  • After a good lunch at the upmarket venue – as the event is partly to demonstrate how the company values its employees, it must never go cheap – the audience is split up into several small groups, mixing people from different departments – they’re asked to list the most important problems facing them and produce ideas for solving them

  • The result can be thousands of good ideas collected – a treasure trove which can be used to generate huge financial and motivational benefits in both the short and longer term

Sadly, at BA, little was done with these ideas which obviously lessened the initial employee enthusiasm for the whole exercise

However, at the time, the objective of Colin Marshall, CEO, and Lord King, Chairman, was to change attitudes and make all their employees understand the importance of meeting what their customers wanted, both internal as well as external

To that extent, the programme was judged to be a great success, and credited with being a significant driver of BA’s success for many years after

 

Nov 19

AI to spark a new productivity boom?

A new productivity boom could be sparked by AI – Artificial Intelligence?

Who says so?

No less than two UK government ministers

Culture Secretary Karen Bradley says: “AI has the potential to improve our every day lives” – precisely what productivity improvement is all about

And Business Secretary Greg Clark claims: “Huge social and economic benefits AI can bring”

Apparently, they and the government want to make Britain the world leader in AI and so add £630 billion to the UK economy

Grand aims but how will this happen – and who will make it happen?

HOW?

According to an article by Darren Roos of SAP:

  • Change in the digital world is happening rapidly:

    • “We generate more data in a day than we used to produce in a decade”

    • AI already helps reduce operational costs by automating manual tasks

    • Only a decade ago, smartphones were a rarity – now most people have one

    • Google CEO Sundar Pichai says instant language translation could be available in a few years

  • AI makes a difference by making sense of and connections between data sets, finding patterns within them, and enabling us to learn and achieve things much faster and better than we can alone

  • The Economist says: “Data is giving rise to a whole new economy – it’s as important to this century as oil was to the last one, creating new infrastructure, new businesses, new monopolies and new politics”

  • AI is already recognised as being the most effective way to gain an edge over competitors

  • At the same time, another positive, according to Gartner, is that AI will be a ‘net job creator’ in the long run, freeing people from repetitive tasks to do more interesting work which adds more value to them and their employers

WHO will make this happen?

  • Roos says: “It has to be a joint effort between businesses, academia and government”

  • The UK government has said it will focus on four key areas:

    • Developing AI skills

    • Increasing AI uptake

    • Improving data use and availability

    • Building on AI research

Roos applauds these target areas – as long as they are acted on NOW and not some vague moment in the future – otherwise Britain risks being left behind as other developed nations race ahead

He concludes: “AI or machine learning has the potential to directly support the success and growth of UK businesses – the future of our economy depends on us getting this right and the time to embrace it is NOW”

Nov 18

Lifestyle changes are on the move

The UK’s CEBR – Centre for Economic and Business Research – claim an important change in preferences towards work is now on the move

Many people are choosing jobs which offer less pay but more attractive lifestyles or ways to help others

This change in attitude is already ‘a key element in around a third of the UK economy’ and is now affecting the attitude to and nature of work in the other two-thirds

Importantly, it’s having an impact on national productivity levels, GDP and thus public finances

The CEBR believes this change in job preferences – this new ‘lifestyle economy’ – has reduced GDP growth by 0.4% per annum which ‘could explain’ around a quarter of the measured productivity shortfall

They also believe it ‘could explain’ the persistent public sector deficit – ‘without it, the deficit of £46 billion last year would have been only £10 billion’

They conclude that, if this lifestyle economy trend continues, productivity growth will be held back so either taxes will have to rise or growth in public spending be further constrained

They concede, however, that there are compensating welfare gains too: “It is much better for people to be doing what they want to do than doing jobs they don’t like, even if those jobs are better remunerated”

Conclusion – Undoubtedly, we don’t live to work but work to live so, on balance, we must support the above trend if ongoing – but, yet again, we have to question the numbers offered here, and the significance claimed, when based on the ‘dangerously misleading’ GDP statistic

 

 

 

Altruism

Nov 07

Financial data can be ‘dangerously misleading’

 

Transcript of a second broadcast where the UK’s Ed Smythe is interviewed by the USA’s Real News Network

_______________________________________________________________________________________

GREGORY WILPERT: Welcome to the Real News Network. I’m Gregory Wilpert, joining you from Quito, Ecuador. The Bank of England has raised interest rates in the UK for the first time in a decade. The official bank rate has been lifted from 0.25% to 0.5%, representing the first increase since July 2007. Bank of England governor, Mark Carney, defended the move as necessary to respond to rising inflation.

MARK CARNEY: Effectively, what the bank has decided is to take our foot a little off the accelerator. The economy is growing a little faster than its speed limit. That speed limit has come down over the years since the crisis, for a variety of reasons. We’ve got unemployment at a 42 year low. More people in work than ever before. We’re seeing the first signs of waging starting to pick up, but most importantly for those watching, that real income squeeze, which has been hitting households over the course of this year, the worst is ending. It’s starting to turn now.Still, even with this rate move, we’re still providing a lot of support to the economy.

GREGORY WILPERT: Joining us today to discuss what all this means for everyday British residents is Ed Smythe. Ed is an economist and researcher at the financial research organization, Positive Money. He worked for nine years in asset management, and as an equity analyst and micro economist. Welcome back to the Real News, Ed.

ED SMYTHE: Thank you for having me back.

GREGORY WILPERT: Can you briefly describe to us what this decision to raise interest rates will mean, and who we can expect the winners and losers to be as a result of the rate rise?

ED SMYTHE: Okay. Well it’s worth understanding this is a very small .25% interest change, which will benefit, to some extent those people who have deposit accounts if the banks pass this through. It’s quite likely that they won’t do so. The people who will lose will obviously be those people on variable rate mortgages, who will see them reset, or also people who are on fixed rate mortgages, who will see them reset over the next couple of years. There’s certainly winners and there’s losers. And there’s also a case of taking a step back to think about, well what’s gonna be the effect on the micro economic conditions, in terms of the ability for consumers to take on debt, and also for businesses to invest. It’s worth thinking about this effect, not just in terms of winners and losers, but effect on how it will drive the economy going forward.

GREGORY WILPERT: So the Bank of England governor, Mark Carney, said during the interview, “What we have been doing since the Brexit referendum is doing our utmost to support jobs and activity in this economy.” But is it true that the only options were to either keep interest rates where they were or to raise them? Were there other options, in other words?

ED SMYTHE: Well as it stands, the Bank of England is sticking very much within its conventional thought-set, to the extent it’s used quantitative easing to push down interest rates at the long end of the curve. We argued that effectively it’s risen itself into a situation where it’s facing these incredibly tough choices. If it leaves interest rates where they are, you’ll continue to drive the economy on rising debt or rising asset prices, feeding into a household deficit, which is the highest it’s been in over 100 years, or if you raise them, you risk bringing the whole deck of cards down, to the extent that that debt then becomes vulnerable or asset prices come down. So what we’re saying is that you need a radically new tool, a tool which is overt monetary financing to enable banks, the central bank, to create money, a certain amount of creditably constrained money, which goes directly to government, so that they can boost spending in a sustainable and fair fashion.

GREGORY WILPERT: I mean, what kind of tool are we talking about? Can you give us a little bit more detail?

ED SMYTHE: Over at M4, we sometimes call it QE for people. Is the policy whereby imagine the central bank could produce 60 to 70 billion pounds worth every year to purchase zero interest perpetual bonds from the government, and it would enable the government to then deliver that spending into the economy to deliver jobs, etc., and to spend it on the things that we actually need, like health care, education, and infrastructure. And boost the productive capacity of the economy.

GREGORY WILPERT: Let’s take a look now at the issue of inequality because that’s been one of the major issues that you’ve also been concerned with. Last year, Mark Carney argued that inequality in the UK was actually declining and that the poorest people in Britain saw the greatest gains and wealth as a result of the other kind of quantitative easing that they had been implementing. However, recently you wrote an article entitled The Bank of England’s Depiction of Inequality Data is Dangerously Misleading. Explain to us what your concerns are, with regard to how the Bank of England is speaking about inequality in the UK.

ED SMYTHE: This was the 2016 speech by Mark Carney where the governor set out to talk some hard truths, to talk about some of the issues that people have been talking about, inequality and relation to the policies of QE. Now he presented a chart in this, which talked about the fact that the lowest quintile in terms of those who own wealth, the lowest 20% had gained the most over the period from 2006 to 2008, to 2012 to 2014. On a percentage change basis, they’d seen their wealth go up 43% and all quintiles have benefited. What we did was we looked at the underlying data to see, well what were the absolute numbers for each of the different quintiles. What we found was quite disturbing because actually the lowest quintile, although they had the highest percentage increase, actually had an absolute increase of only 1,600 pounds, so they went from minus 3,800 pounds to minus 2,200 pounds. They were still in debt at the end of this period. If you said the top quintile, the top 20%, they saw their assets go from 980,000 pounds to 1.3 million pounds, so an increase of 320,000 pounds, or 189 times that of the poorest quintile in society. The idea that this can be presented as a chart in which the poorest have gained most, we do think is dangerously misleading. And the real consequences of this is that when Mark Carney says it’s important that the government takes fiscal steps to offset the effects on monetary policy and how it has affected wealth inequalities, it’s very difficult to do so if the government isn’t being presented with its data in an accurate fashion. And also, Mark Carney would do well to perhaps come out with some suggestions about what sort of fiscal policy he would have in mind to help redress such big swings between the top quintile and the bottom quintile of wealth.

GREGORY WILPERT: Let’s just quickly take this back again to the issue of the interest rate rise. What effect would the interest rate rise have on inequality in this context?

ED SMYTHE: Obviously the danger is, if the interest rate does trigger a reduction in investment at a time when actually business uncertainty’s already rising with the negotiations in Brussels. If it does have an impact on the ability for consumers and students to take on extra debt going forward, it does mean that it will put the brakes on the economy at a time when actually the economy and real wages are already struggling. And it potentially creates the conditions for the next financial crisis, or at least front-loads the timing of that crisis. Then the implications to inequality are very significant indeed. If that doesn’t happen, we’re back to the original starting conversation, in terms of there are some people who will be highly leveraged with variable rate mortgages, who will suffer, and in fact it’s more likely that the banks will not pass this on. So few depositors will actually see their interest rates rise to see a benefit here.

GREGORY WILPERT: Okay. Well we’ll continue to keep an eye on this situation with regard to the economy, and we’ll probably get back to you. We were speaking to Ed Smythe, an economist and researcher at the financial research organization, Positive Money. Thanks again, Ed, for having joined us today.

ED SMYTHE: Thanks for having me. Thanks.

GREGORY WILPERT: And thank you for watching the Real News Network.

Nov 07

UK economy depends on private debt!

N.B. This is a transcript of a broadcasted conversation between the USA’s ‘Real News Network’ and the UK’s Ed Smythe

____________________________________________________________________________________

G. Wilpert: Welcome to the Real News Network. I’m Gregory Wilpert joining you from Quito, Ecuador.

UK households are spending more than their income at an unprecedented rate. Record-busting levels of privately held debt are also accompanied with stagnant or even falling real wages in the UK. The situation is so bad that members of Parliament have started calling for a public inquiry into 200 billion pounds worth of privately held debt in the UK.

Perhaps even more disturbing is the argument of our next guest who says that the only thing keeping the UK out of recession is the growing and unsustainable levels of privately held debt.

Joining us today to discuss the growing private debt crisis in the UK is Ed Smythe. Ed is economist and researcher at the financial research organization Positive Money. He worked for nine years in asset management and as an equity analysts and macro economist. He recently wrote an article for Open Democracy called “The UK is Hooked on Rising Asset Prices: What Happens When the Bubble Bursts.” Thank you for joining us at the Real News, Ed.

E. Smythe: Thank you for having me.

G. Wilpert: So in your article you say that the British economy is being kept afloat by unsustainable levels of privately held debt. What is the basis of this observation of yours?

E. Smythe: So essentially and in fairness it’s not just debt, it’s also capital gains. So the way to think about this is we can look at the sectoral flow of funds in terms of how the UK economy is growing. At the moment we can see that the UK household sector is running an unprecedented deficit, more than it was before the last financial crisis. And in fact, more than it’s ever done in the 100 years of records that we have. Now the question is, how are they funding that? And in part, that’s coming through debt, but we argue that it’s also coming through massive capital gains over the last three decades or so as interest rates have come down. So it’s the combination of both the debt and capital gains that are funneling and funding that deficit.

G. Wilpert: Some such as David Graber recently also argued, and I think I mentioned in your article, compare the current private debt level to the private debt levels that led to the 2008 global financial crash. So are we in this territory now, and is it likely that the current private debt levels will repeat what happened back in 2008?

E. Smythe: Yes, so I think it’s interesting. We had Mark Carney on record recently in a speech that he made last week talking about the fact that household debt levels are actually down relative to where they were, relative to incomes, before the last crisis. But actually that’s focusing on a bigger metric which includes mortgages. If you just look at consumer and student loan debt, that’s actually rising at the fastest rate ever. So it’s rising at about 31 billion pounds per annum whereas before the crisis it was rising at about 25 billion. It’s also risen to the highest ever level at about 315 billion. So there’s a clear red flag that to the extent that private debt was the cause of the last crisis, it’s absolutely waving it today to suggest that this could be a factor in causing the next financial crisis.

G. Wilpert: I mean, back in 2008, one of the detonating factors was that investors were partly misled about the nature of the debt that they were taking on when they were buying the mortgages and so on. In other words, they were given AAA ratings in the United States when actually they were very questionable loans that had been given out. And when people couldn’t pay them off, then the investors were caught unawares of the type of loans that they had. Is there any chance that something like that would happen? Is there any misleading going on … Or what would trigger, in other words, a possible crisis this time around? Raising of interest rates, what would be so to speak the detonating factor if something were to happen?

E. Smythe: Yeah, so strictly speaking, when we talk about consumer and student loan debt, that doesn’t include mortgages. So it doesn’t necessarily relate to what you talked about in terms of the mortgage coverage and that that occurred prior to the last crisis. But in answer to the question is there a risk that many of these consumer and student loan debts have created on the backs of people who might simply not have the ability to repay? Absolutely. We are seeing signs. Particularly in the PCP pending market for autos that the availability of credit is at an alarmingly high level. There’s essentially a complacency in the market which typically happens after many years of recovery where lenders reduce those checks that should be in place. And therefore, once you’ve done that, you create the condition by which even a small trigger might start to bring down the whole sort of cascade, if you see what I mean.

G. Wilpert: Uh-huh. And so what kind of proposals have you been suggesting to push the UK away from debt-based, consumer-driven economy?

E. Smythe: Well, in reference to the first argument that I made, it’s not just consumer and student loan debt, and also the mortgage debt market. It’s the fact that actually we’ve also been reliant on a massive, massive expansion of net wealth. And in fact, the UK’s net wealth disposable income ratio is now the highest for any developed economy ever, worse than Japan in 1989. So what we’re saying and what Positive Money is advocating is a fundamental shift in monetary policy and the mechanism by which money is being used to sustain economic growth. We want to shift from the policy whereby at the moment we need very low interest rates to boost the price of assets or to enable increased amounts of debt to generate a certain amount of household spending, the deficit which is currently driving the economy, and instead shift to a much more sustainable mechanism whereby money is created by the central bank using zero interest perpetual bonds, an incredibly constrained amount, which allows governments to then spend that directly into the economy to get the sustainable increase in demand that we need. And, in doing so, you could actually turn down some of these other dials of ultra-low interest rates in QE. You could have a reduction for example in asset prices, a reduction in the expansion of ever greater demand of credit. And instead, you’ve got a sustainable demand function. So it’s the policy of overt monetary financing, or QE for people is what we’d call it. And it seems to be the only mechanism by which we can move from the current status quo to something much better.

G. Wilpert: You recently spoke also at the Conservative party conference. What was the gist of your presentation and how was it received there?

E. Smythe: The presentation was cool after the crash, and I suppose our argument was actually when we look at many sort of metrics, it’s very difficult to suggest that the crash ever ended. So we’ve just experienced the worst decade of real wages since the 1860s and perhaps a long time more. We’ve got record low productivity levels, record low investments, record low interest rates, record high asset prices. So what we’re saying is, look, the situation as it stands is simply not a normalized scenario. Therefore we have to be thinking about slightly more radical options, both in terms of the way we hold the central bank accountable, but also think about these other tools of overt monetary financing because it’s the only mechanism this government can achieve its policy objective of achieving an economy that works for everyone, and particularly for the younger generation.

G. Wilpert: The proposal to me sounds a bit like you’re suggesting the government should essentially spend more and essentially steer away from the austerity policies of the past ten years or so. Is that correct? Is that a fair summary?

E. Smythe: It absolutely is, but it’s with a sort of modified agenda behind it as well because I suppose we are currently working within a paradigm whereby governments, when they spend, are necessarily imposing a sort of intergenerational tax on the next generation to pay that debt back off with interest. What we need, particularly given the intergenerational transfers that we’ve seen to date, we need a system whereby we can fundamentally deliver demand into the economy on the things we need, like infrastructure, education, and healthcare, but without saddling the next generation with huge interest costs on this debt. What we need is a policy whereby governments feel that they can spend a little bit more on those things without increasing the potential for interest costs down the line. And that’s why overt monetary financing is the only solution to deliver that step changing government spending and shift us back onto a sound fiscal footing.

G. Wilpert: And how do you think that the Labour Party is on this issue which also just recently wrapped up their party conference?

E. Smythe: Yeah, so we are having interesting conversations with members of both parties. We think, you would imagine, that the Labour Party should be more receptive to these arguments. At the moment they are focused to a large extent on a national investment bank which delivers some small benefits. But we would argue it’s not big enough thinking. If you think about for example the problem in the next 50 years, and I think it’s important that people do, the OBR predicts that the government deficit will increase to a primary deficit of 9% in 2065 just as dependency ratios etc., really kick in. And so what we’re saying is we need a fundamental solution that will stand the test of time. It can’t be gimmicks. It can’t be small tweaks around the edges. We need to be reframing the whole debate about monetary policy and how much governments can spend. And sort of confronting directly some of the misplaced arguments that have often been used to counter this type of proposal.

G. Wilpert: Okay well we’ll probably come back to you again once we see a little bit clearer as to which way the UK is heading on this issue. But thanks so much Ed for having joined us for today.

E. Smythe: Thank you very much for having me. I enjoyed it.

G. Wilpert: I was speaking to Ed Smythe, economist and researcher at the financial research organization Positive Money. Thank you for watching the Real News Network.

Nov 07

Scanning the productivity horizon

First, productivity improvement transformed the agriculture sector providing millions more people with more and better quality of food and drink at more affordable prices

Then it was manufacturing’s turn, providing more and better clothes and shoes, white goods and cookers, bikes, cars or planes – all making lives easier and getting from A to B quicker

Construction improvements also provided more and better houses, energy and sewerage systems and infrastructure e.g. bridges, roads, railways and airports

As some companies grew, they outsourced many of their operations to smaller specialist outfits who could do specific tasks better and/ or cheaper – thus national economies grew

Private services also developed to provide specialist skills companies and individuals needed, often only on a part-time basis e.g. legal and accountancy support

Increased profits and so national tax-takes generated by these improvements in the private sector have enabled some countries to become welfare states by setting up basic public services, again to improve lives e.g. healthcare and education services for all, national police, fire and armed services, local rubbish collections

So far, so good – but we’re never satisfied with our lot and always want more and better positive things in life and less negatives viz:

  • More information – wider and faster broadband

  • More interesting jobs – less dull, dirty or dangerous work

  • More time at home, with the family and enjoying ourselves – less time at work doing things we’d choose not to do given the option

So what may be next around the corner?

Some say:

  • Working hours will be reduced from the current average of 35 to 15 hours per week by 2030, with zero being a strong possibility by 2050 – the great John Maynard K forecast we would already be working 15 by now

  • Automation, artificial intelligence and robots will do all the work we don’t like to do to produce all the goods and services we both ‘must have’ and would ‘like to have’ – and, at the same time, generate the profits needed to fund a social nirvana where 100% of the population do whatever they want to do that’s legal

  • This will require a UBI – Universal Basic Income – to be paid to everyone so none need to work and all can afford the same goods and services – this idea is not as reckless as it seems although there are many ramifications yet to be fully considered – indeed, it has been shown that if you give money to poor people, even petty criminals and drug addicts, they will use it sensibly, usefully and effectively – they don’t waste their own money, so a UBI is unlikely to be an incentive for idleness, laziness or worse 

However, such changes will not happen quickly, if ever, so patience is needed

According to Amara’s Law, named after Roy Amara, a Stanford University computer scientist and head of the Institute for the Future:

“We humans tend to overestimate the impact of a new technology in the short run, but underestimate it in the long run”

Matt Ridley in The Times quotes several technologies where this law has applied:

  • Steam locomotives

  • Electric light bulbs and motors

  • Computers

  • The internet

 

After some initial excitement about their potential, all these ideas were considered to be ‘nuts’ – yet all eventually became GPTs – widespread, hugely popular and effective General Purpose Technologies

So why does it take so long for such major new ideas to catch on – around 15 years according to Ridley?

Economist Erik Brynjolfson explains: “One needs waves of complementary innovations developed and implemented plus organisational changes plus new skills taught before such GPTs really take hold”

So any major new idea which creates major change will also take major time

Hence, we should not expect the above list of horizon ideas, or anything like them, to have universal effect in the near future

 

Nov 02

Great performers use CI

There’s a direct read-across between how the best in business emulate the best in sport

In an article in The Times, Matthew Syed asks ‘What separates greats from wasted talents?’:

  • “Great athletes are hyper-confident – they don’t believe they have any weaknesses – they cannot be beaten – they’re already perfect and so cannot continually improve” – e.g. Mohammed Ali, world heavyweight boxing champion

  • “Great athletes are humble – they’re forever conscious of their weaknesses and this drives self-improvement – they recognise perfection can never be reached” – e.g. Jonny Wilkinson, England rugby fly half

So he asks whether arrogance or humility is best

The answer is both – humility when in private, self-assurance when in public

Humility is needed off the field when evaluating and working on weaknesses, often driven by ‘the fear of failure’ – aka CI (Continuous Improvement) in order to compete more successfully and so win more games or business

And self-confidence is needed when on the field, about ‘to rumble’/ take action/ do the business

Eric Cantona and David Beckham from Manchester United’s football team are named as good examples of the mix

Syed’s main conclusion is that sportsmen and organisations cannot forever believe they know-it-all and are unbeatable – when off the field, they must always be reviewing whether and how they might improve – however, when on the field they must always believe they will win and not suffer self-doubt

According to Cristiano Ronaldo, footballer with Real Madrid: “You can always get better – everyone can improve”

The same applies to all businesses in all sectors, public as well as private

At present, like in sport, the best organisations, the champion 20% premier league players, employ various versions of this CI approach and so enjoy many of the huge benefits on offer

But the rest – the other 80% also-rans – do not and so seal their own fate

 

 

Oct 30

Free markets a ‘blatant failure’

Jacinda Arden, new Prime Minister of New Zealand and, at 37, the world’s youngest female leader, recently claimed that free markets are a ‘blatant failure’

In future, economic performance should not be measured by GDP growth and unemployment but by whether people’s lives ‘offered enjoyment and meaning’

“We need to make sure we are looking at people’s ability to actually have a meaningful life, an enjoyable life, where their work is enough to survive and support their families”

At present her countryfolk were “not feeling the benefits of any form of prosperity”

Hence her new government would address the failures of free markets through intervention

“Has the market failed our people in recent times?

Yes

How can you claim you’ve been successful when you have growth roughly 3% but you’ve got the worst homelessness in the developed world?”

Her short term agenda thus includes raising the minimum wage and banning foreign speculators from buying houses

P.S. Ms Ardern briefly worked in Britain’s Cabinet Office during the Blair years

Oct 23

Business lives getting shorter

In an article in the Sunday Times, Luke Johnson, chairman of Rick Capital Partners, says turnarounds need exceptional managers or ‘company doctors’ and a radical agenda – and not many are equipped for the job

First, why do many businesses fail in the short term, and virtually all in the longer term?

In 1950 the average life of a company in the S&P index was 47 years – according to McKinsey consultants, by 2020 it will fall to just 10 years

Reasons for this include:

  • Market share lost to new competitors or changing tastes

  • New technology making theirs outdated e.g. Kodak film versus digital cameras

  • Cash generation drying up

  • Diversification reducing focus on winning products

  • Fire, flood, fraud or customer bankruptcy hitting them

  • Lacking good controls

  • Building a grand office before a good business

Good managers avoid such problems becoming serious

Most, however, cannot do so – they bury their heads in the sand, many even deny the situation – they’re unwilling and/ or unable to do what’s needed – such managers ‘almost always have to be replaced’

So what do good company doctors do when brought in?

  1. Analyse the problems

  2. Produce a plan

  3. Execute the plan with vigour

Action could include:

  • Cutting loss-making products/ areas of the business

  • Cutting costs big-time

  • Eliminating unnecessary overheads

  • Reducing stock, especially slow-moving or overvalued

  • Raising cash for working capital

  • Renegotiating agreements with lenders and suppliers

  • Collecting debtors more vigorously

  • Increasing prices where feasible

  • Offloading and replacing ‘chaff’ management

  • Educating and energising remaining ‘wheat’ management

Such factors are within management’s control

However, there are others outside their control which could prevent any rescue efforts succeeding – new competition, technology or legislation for example

Overall, turnarounds are high-risk ventures – even the best company doctors fail with some of them at times

Better for existing managers to know how to avoid becoming yet another sad example

 

 

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