Staying Ahead of Disruption with Workforce Sensing

Learned a lot lending an editorial hand here:

Workforce Magazine, August, 2019

By Daniel Roddy and Chris Havrilla

Plug the word “disruption” into Google Trends and you’ll get a jagged line tracking 15 years of peaks and plunges in search frequency. But for all the shortterm variation in the chart, the long-term trend is steadily rising: there are nearly three times as many “disruption” searches today as there were in 2004. 

The steady rise in searches reflects a reality that won’t surprise most leaders. They face a host of disruptions—social, demographic, environmental, economic, technological, and geopolitical. Not only is it their job to make sure that their companies don’t get blindsided by these breakpoints in the status quo, but they also must be able to respond to them quickly and agilely in order to transform these disruptions into competitive advantage.

Sensing is the foundation on which an organization’s ability to identify, pace, and respond to disruption is built. In hindsight, disruptions seem obvious. By the mid-2000s, it was clear that streaming movies would decimate the video rental industry. But to have realized that a decade earlier, when the MP3 format first emerged for audio, and acted upon it is another matter entirely.

The ability to sense disruptions in their nascent stages and predict how they are likely to affect a company and its stakeholders is crucial to success in business today. This is especially true when it comes to sensing disruptions in the workforce. Read the rest here.

Transformation in energy, utilities and resources

Learned a lot lending an editorial hand here:

PwC, June 13, 2019


The world is at the midpoint of a massive energy-related transformation. By 2040, the global demand for all forms of fuel and power will be four times what it was in 1990. During the same 50 years, the issue of global climate change will have moved from the margins to the centre. Institutions everywhere will be striving to address climate-related problems by dramatically decreasing and mitigating carbon use.

In the energy, utilities and resources (EU&R) industries, the relationship between these two dynamics — the rise in demand and the recognition of carbon use as a climate threat — is already determining basic strategic choices. And it will continue to do so for years to come. This development will profoundly affect a wide range of companies: producers of all forms of energy; disseminators and sellers of electric power, gas and oil; energybased process industries such as chemicals and steel; and producers of other extracted commodities. Leaders in all those businesses will need the acumen to make and execute decisions that combine growth with environmental sustainability, often in novel ways.

The ability to take this new approach to management, especially for companies that have been successful in the past, is not guaranteed. Thus, transformation — the ability to make fundamental shifts in strategy, operating model and day-to-day activity — is on the agenda for EU&R companies this year, with a stronger sense of urgency than before. Fortunately, because of the rise of digital technology, the growing use of interoperable platforms and an emerging consensus about the value of renewable energy, EU&R companies have more tools and opportunities than ever before for thriving through this disruption. 

The urgency became clear in the results of a number of surveys conducted recently by PwC — including those of chemical company CEOs, oil and gas company CEOs, and power and utilities companies — and it is especially pressing in the utilities sector. For instance, when we surveyed senior executives in Germany’s energy sector in 2018, 77% said that the bulk of their company’s revenues would continue to come from their core businesses over the next five years, yet 57% of them expected those revenues to fall over the same period. Likewise, in chemicals, according to our 22nd Annual Global CEO Survey trends series, the next decade is likely to see the sector come under increasing pressure on a range of sustainability measures. In short, although the demand for EU&R’s elemental commodities will grow and its essentially extractive, capital-intensive nature will not change, business as usual will not be a viable alternative for many companies. Read the rest here.

Wait-and-See Could Be a Costly AI Strategy

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, June 15, 2018

by Jacques Bughin

From the dexterity of Amazon’s Kiva robots to the facial recognition in Apple’s iPhone X, artificial intelligence is increasingly sophisticated and accessible. It also promises to be a rich source of profit uplift — up to 10% of revenue, depending on your industry.

Nevertheless, more than 95% of companies have not embraced AI technology to reinvent how they do business. Even though there are many unknowns regarding AI’s capabilities and uses, our research at the McKinsey Global Institute suggests that following a wait-and-see strategy for too much longer could be a costly mistake.

How costly? When we collected more than 400 use cases in 19 industries and simulated the dynamics of AI diffusion (based on current corporate intent to adopt, the technology’s impact on cash flow, and the profit growth linked to adoption), we found significant divergences in the patterns of economic growth between early adopters of AI at scale and non-adopters. In the simulation, early diffusers — that is, companies that will use a full suite of AI technologies in the next five years — doubled their normal profits by 2030, bringing in an additional 4% of gross profit growth annually at the expense of their competitors. When we extrapolated this on a global basis, it equated to a shift in corporate profit to early AI diffusers of approximately $1 trillion by 2030, or 10% of the current profit pool. Read the rest here.

Lessons From China’s Digital Battleground

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, June 12, 2018

by Shu Li, François Candelon, and Martin Reeves


The explosive growth of the digital market in China, a country with more than 700 million internet users, constitutes a rich prize to companies that can exploit its opportunities. Five of the 10 largest public internet companies in the world — Tencent Holdings Ltd., Alibaba Group Holding Ltd., Baidu Inc., JD.com Inc. (aka Jingdong), and NetEase Inc. — have emerged from this $1 trillion market. And, by February 2018, Chinese companies accounted for 33% of the world’s unicorns (privately held startups valued at $1 billion or more), with almost three-quarters of them targeting digital or online markets.

So why have so few of the leading Western players succeeded in holding a winning share in China’s digital market? They know well the winner-takes-all stakes in digital business, and they have successfully dominated international markets in the past — after rolling out their digital products, platforms, and business models in other countries, without significant resistance. But in China, they have struggled:

In 2002, eBay Inc. entered China and quickly captured a 70% market share. Five years later, its market share had dropped to below 10%.

In 2004, Amazon.com Inc. acquired Chinese online book retailer Joyo.com, heralding its high-profile march into China. In 2008, Amazon’s share was 15%; now, it’s below 1%.

In 2005, Microsoft Corp.’s MSN China went live and gained a 53% market share among Chinese business users. But its market share decreased to less than 5% before it quit the Chinese market in October 2014 under strong attack by Tencent’s QQ and WeChat.

In 2014, Uber Technologies Inc. formally entered China and spent billions in fierce competitive battles to gain market share from its Chinese competitors. In 2016, it sold its Chinese subsidiary to Didi Chuxing Technology Co. and exited the country.

In 2015, Airbnb Inc., the world’s largest online marketplace for short-term lodging, landed in China. As of today, it lags far behind its Chinese peers. In 2017, Airbnb had 150,000 rooms for rent; market leader Tujia.com had 650,000 rooms.

Why have so many powerful Western players hit a wall in China? Protectionism is a convenient excuse, but we believe that it is an exaggerated one. Worse, it oversimplifies and obscures some important competitive realities in China that many Western players have missed.

These factors arise from the very different starting point at which China entered the digital era. Unlike many Western economies, China’s economy was not yet mature when the digital tsunami broke on its shores. In many of the industries most affected by digital technologies, offline offerings were limited, physical infrastructure was lacking, and other essential market components, such as payment systems, were missing. Thus, in China, digital technologies offered a solution to fundamental bottlenecks in consumption, rather than a disruptive alternative to existing solutions.

Against this backdrop, China’s digital market developed in an exceptionally rapid and dynamic manner, one based on need rather than preference. Furthermore, the winning game plan for dominating digital markets turned out to have some unique characteristics with regards to localization, speed, online and offline integration, and local ecosystem development.

It is important for Western players to recognize and understand these characteristics. They are not only key to winning in China but also in other countries that share a similar profile, such as India and Indonesia. In addition, they provide valuable insight into how China’s digital giants may compete as they go global. Read the rest here.

How to Compete Against the New Breed of National Champions

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, May 30, 2018

by Sharon Poczter, Aldo Musacchio, and Sergio G. Lazzarini

On March 12, 2018, the U.S. government blocked Broadcom Inc.’s proposed merger with Qualcomm Inc. on the grounds of national security. The presumption was that the merger of the two chipmakers would have resulted in a third company, China’s Huawei Technologies Co. Ltd., gaining a dominant position in the market for 5G mobile network technologies. Huawei is a “national champion” — a company that is heavily subsidized (either implicitly or explicitly) or, in some cases, owned by a government — and the U.S. government is concerned that its growth could provide the Chinese government with undue access to and control over U.S. communication networks.

While the threat posed by national champions is nothing new, their essential character has substantially changed, and the competitive advantage of national champions in the global marketplace has become more pronounced. Today’s national champions are much more sophisticated, competing in more industries, and harder to spot than ever before. As a result, Western companies need a new strategic guide for competing against them.
A New Breed of Competitor

Traditionally, national champions have been large industrial companies, subject to a high degree of direct governmental oversight and intervention. Typically, they are unresponsive to global competitive forces, depending instead on explicit government subsidizes and protection. For instance, Indonesia’s state-owned electricity provider, Perusahaan Listrik Negara, enjoys a government-created monopoly, but its inability to satisfy growing domestic demand has resulted in a costly and unreliable energy supply in the world’s fourth most populous country.

Today, however, there is a new breed of national champions. They differ from traditional champions in two principal ways: the form and degree of their government connections, and their basis of competition.

Modern national champions can be hard to identify. Their connections to government take a variety of forms, both corporate and noncorporate (via sovereign and other investment funds). The degree of government ownership and intervention in these national champions also varies widely. Sometimes governments hold explicit majority or minority ownership stakes in these companies, but increasingly, government involvement is more implicit...Read the rest here.

Seven Technologies Remaking the World

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, March 9, 2108

by Albert H. Segars

Once upon a time, business leaders could leave technology to the technologists. But today, we are at the starting line of a universal technological revolution — one that is fundamentally altering four key realms of our world: commerce, health care, learning, and the environment. Given the pervasive and diverse nature of this revolution, business leaders must understand the technologies that are driving it, the capabilities they offer, and their potential impacts.

This report provides executives with a lexicon to the revolution. It identifies seven core technologies — pervasive computing, wireless mesh networks, biotechnology, 3D printing, machine learning, nanotechnology, and robotics — and describes their implications for commerce, health care, learning, and the environment. Use it as a guide and a basis for strategic discussion as you and your team seek to understand today’s business frontiers and the opportunities that lie ahead.

Seven Technological Sparks

“You’re only given one little spark of madness,” said the late actor and comedian Robin Williams. “You mustn’t lose it.” Williams used his spark to ignite his comedic rocket and blast past the established boundaries of his craft. Technology provides a similar spark: It enables us to push beyond the established boundaries of our world.

The mechanized spinning of textiles, large-scale manufacturing of chemicals, steam power, and efficiencies in iron-making sparked the first Industrial Revolution (1760-1840). Railroads, the telegraph and telephone, and electricity and other utilities sparked the second Industrial Revolution (1870-1940). Radio, aviation, and nuclear fission sparked the Scientific/Technical Revolution (1940-1970). The internet and digital media and devices sparked the Information Revolution (1985-present). In each instance, the inflection point that marked the new revolution was the appearance of new technologies that fundamentally reshaped key aspects of the world, such as commerce, health care, learning, and the environment.

Today, we see technological sparks everywhere. They are emerging from the digital, chemical, material, and biological sciences, and they are precipitating a revolution that is altering nearly every dimension of our lives.

But what are the dominant technologies driving this revolution? And how will they shape and reshape the world of commerce — and the world at large? These are critical questions for executives, and the answers will determine how value will be defined in the future, how businesses will be structured and managed, and where new opportunities for profitable growth may lie.

To help executives answer these questions, I conducted two surveys of veteran technology entrepreneurs working in companies in a variety of sectors, analyzed the results, and then developed and assessed the validity of the findings in a series of individual interviews and field visits. The study revealed seven classes of technology that are driving today’s universal revolution: pervasive computing, wireless mesh networks, biotechnology, 3D printing, machine learning, nanotechnology, and robotics.

Each of these technology classes exhibits three distinctive and rapidly evolving capabilities that are significantly different, more advanced, and larger in scope than the technologies of past revolutions. Read the rest here.

The End of Scale

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, Feb. 9, 2018

by Hemant Taneja with Kevin Maney


For more than a century, economies of scale made the corporation an ideal engine of business. But now, a flurry of important new technologies, accelerated by artificial intelligence (AI), is turning economies of scale inside out. Business in the century ahead will be driven by economies of unscale, in which the traditional competitive advantages of size are turned on their head.

Economies of unscale are enabled by two complementary market forces: the emergence of platforms and technologies that can be rented as needed. These developments have eroded the powerful inverse relationship between fixed costs and output that defined economies of scale. Now, small, unscaled companies can pursue niche markets and successfully challenge large companies that are weighed down by decades of investment in scale — in mass production, distribution, and marketing.

Investments in scale used to make a lot of sense. Around the beginning of the 20th century, the world was treated to a technological surge unlike any in history. That was when inventors and entrepreneurs developed cars, airplanes, radio, and television, and built out the electric grid and telephone system.

These new technologies ushered in the age of scale by enabling mass production and offering access to mass markets. Electricity drove automation, allowing companies to build huge factories to churn out a product in massive quantities. Radio and TV reached huge audiences, which companies tapped through mass marketing. The economies of scale governed business success.

Scale conferred an enormous competitive advantage. It not only lowered fixed costs — it also created a forbidding barrier to entry for competitors. Organizations of all kinds spent the 20th century seeking scale. That’s how we ended up with giant corporations, and universities with 50,000 students, and multinational health care providers.

Today, we’re experiencing a new tech surge. This one started around 2007, when mobile, social, and cloud computing took off with the introduction of the iPhone, Facebook, and Amazon Web Services (AWS), respectively. Now, we’re adding AI to the mix. AI is this century’s electricity — the technology that will power everything.

AI has a particular property that supplants mass production and mass marketing as a basis of competitive advantage. It can learn about individuals and automatically tailor products for them at scale. This is how the GPS navigation app Waze gives you a route map tailored to your destination at a specific moment in time — a map that probably won’t work for anyone else or at any other time and doesn’t need to. AI enables mass customization for increasingly narrow markets. If a product is custom built specifically for you, you’ll probably prefer it to a product that’s built for millions of people who are only kind of like you.

This is the basis of economics of unscale. The winning companies in today’s tech surge are companies that profitably give each customer exactly what he or she wants, not companies that give everyone the same thing.

There is another, equally important way in which the current tech wave is propelling economies of unscale. Because companies can stay nimble and focused by easily and instantly renting scale, they can adjust more quickly to changing demand and conditions at much lower cost and with far less effort.

Thus, scaled companies find themselves beleaguered by unscaled competitors. Stripe is an unscaled financial services company based in San Francisco that is challenging the big banks. Airbnb, also based in San Francisco, is an unscaled hotel company that is taking customers away from the big chain hotels. Warby Parker is a New York City-based unscaled eyewear company that is threatening the big eyewear brands.

If economies of unscale will rule in this new world of business, how can a corporation, which, by definition is a large, scaled-up enterprise, compete and thrive? Read the rest here

Seeking Scale? Think Old

MIT Sloan Management Review, December 14, 2017

by Theodore Kinni

These days, scale is a top-of-mind issue among leaders of tech companies. Yet many of these leaders are missing the biggest and most obvious scaling opportunity they’ll ever encounter: old people.

The worldwide population of older adults — people age 65 and up — reached 617 million in 2015 (almost twice the total population of the United States); in the U.S. alone, older adults represent an $8 trillion consumer market. Thanks to longer life expectancies, there will be 1 billion people age 65+ by 2030, and 1.6 billion of them by 2050.

The problem — which Joseph F. Coughlin, director of MIT’s AgeLab and the author of The Longevity Economy, lays out in the excerpt below — is that most tech companies simply don’t get this deep-pocketed, growth market. Worse, because of the relative youthfulness of tech companies, their leaders are not only missing the biggest market they’re likely to see before they become old folks themselves, they’re also overlooking the job candidates who could help them tap it as well.

If your company is seeking scale, read the excerpt here.

Why Airbnb will always be a better business than Uber

Learned a lot about the nuances of platforms while editing this one by Jonathan Knee of Columbia Business School

MIT Sloan Management Review, Sept. 15, 2017

by Jonathan A. Knee

The dramatic influence of the internet on how businesses operate and the emergence of a handful of gigantic, digitally enabled corporations have led to breathless pronouncements regarding the importance of a peculiar new class of monopolies built on digital platforms. These platforms, it is argued, fuel network effects that lead inexorably to winner-take-all marketplaces. This perspective is invariably coupled with infectious optimism and investment euphoria regarding the extraordinary scale and strength of network-effects businesses.

In theory, the key attribute of a network-effects business is its momentum-driven flywheel. Every new participant increases the value of the network to existing participants, attracts more new users, and makes the prospect of a successful competitive attack ever more remote — thereby bolstering the relative attractiveness of the business. The imagined innate indomitability of network effects stems at least in part from the breathtaking strength of notable platform businesses, like Facebook’s social network or Microsoft’s Windows operating system.

The problem is that not all platform businesses exhibit network effects. Moreover, even a cursory survey of the landscape does not support the oft-repeated assertion that such effects are “likely to strengthen a market’s winner-take-all tendency.” For every Facebook and Microsoft, there are literally hundreds of network-effects businesses operating in crowded sectors or in sectors where it is not clear that anyone will ever turn a profit. Take, for example, the once hot peer-to-peer lending space, which after more than a decade has attracted dozens of aspiring entrepreneurs and spawned a billion-dollar IPO but nevertheless has largely been a bust. The first mover in U.S. P2P lending, San Francisco-based Prosper Marketplace Inc., continues to struggle to achieve consistent profitability, and the billion-dollar IPO of San Francisco-based Lendingclub Corp. quickly ended in tears for investors.

Nor are digital platforms necessarily better businesses than the analog versions that they displace. Analog malls had the benefit of their shoppers being many miles away from competing malls, and the benefit of their retail tenants being committed to long-term leases. On the internet, platform competitors are only a click away and companies regularly and dynamically optimize their customer reach across competing platforms and directly via their own sites.

It is not that marketplace businesses built on e-commerce platforms do not have advantages or that they cannot thrive. Rather, it is that the mere existence of network effects tells entrepreneurs and investors relatively little about the attractiveness of a particular business. For example, there is almost no fundamental difference in the network effects enjoyed by Uber Technologies Inc. and Airbnb Inc., the global leaders in the ride-hailing and short-term lodging marketplaces, respectively. Yet, other characteristics of those industries ensure that Airbnb will enjoy dramatically stronger results than Uber will ever achieve. Read the rest here.

The Flare and Focus of Successful Futurists

Enjoyed editing Amy Webb's adaptation of her book, The Signals Are Talking, for MIT Sloan Management Review:

Futurists are skilled at listening to and interpreting signals, which are harbingers of what’s to come. They look for early patterns — pre-trends, if you will — as the scattered points on the fringe converge and begin moving toward the mainstream. The fringe is that place where hackers are experimenting, academics are testing their ideas, technologists are building new prototypes, and so on. Futurists know most patterns will come to nothing, so they watch and wait and test the patterns to find those few that will evolve into genuine trends. Each trend is a looking glass into the future, a way to see over time’s horizon. This is forecasting: simultaneously recognizing patterns in the present and thinking about how those changes will impact the future so that you can be actively engaged in building what happens next — or at least be less surprised by what others develop. Forecasting is a learnable skill, and a process any organization can master.

Joseph Voros, a theoretical physicist and professor at Swinburne University of Technology in Melbourne, Australia, offers my favorite explanation of future forecasting, saying it informs strategy making by enriching the “context within which strategy is developed, planned, and executed.” The advantage of forecasting the future in this way is obvious. Organizations that can see trends early enough to act can gain a first-mover advantage. They can also help shape the broader context, keenly understanding how developments in seemingly unconnected industries will affect them. Most organizations that track emerging trends are adept at conversing and collaborating with those in other fields to plan ahead.

While futures forecasting is a professional and academic discipline going back more than 100 years, few companies employ futurists. That’s starting to change as more leaders become familiar with the work futurists do. Accenture, Ford, Google, IBM, Intel, Samsung, and UNESCO all have futurists on staff, whose work is quite different from what happens within the traditional R&D function.

The futurists at these organizations know that their tools are best used within a group — and that the group’s composition matters tremendously to the outcomes they produce. Within every organization are people whose dominant characteristic is either creativity or logic. If you’ve been on a team that includes both groups and didn’t have a great facilitator during your meetings, you probably clashed. If it was an important project and there were strong personalities representing each side, the creative people felt as though their contributions were being discounted, while the logical thinkers — whose natural talents are in managing processes, projecting budgets, or mitigating risk — felt undervalued because they weren’t coming up with bold new ideas. You undoubtedly had a difficult time staying on track, or worse, you might have spent hours meeting about how to have your next meeting. This is what I call the “duality dilemma.”

The duality dilemma is responsible for a lack of forward thinking at many organizations. Read the rest here... 

TechSavvy: Is Your Company Winning the Race to Digital Transformation?

MIT Sloan Management Review, November 10, 2016

by Theodore Kinni


In some respects, the digitization of business is a pretty nebulous subject. It’s not like a company achieves digital transformation on some specific date — the darn target moves as new technologies and applications appear. That’s one reason why Jane McConnell’s 10th annual inquiry into “The Organization in the Digital Age” is worth a look.

McConnell frames digital transformation as an organizational imperative that manifests itself in three dimensions: people, workplace, and technology. Over the past decade, she has been gauging the progress that a broad, international group of 300+ companies and other institutions has been making toward this imperative in three stages.

The Starting stage is defined by an individual (rather than organizational) digital awareness — digital initiatives are ad hoc and infrequent; senior leaders are minimally involved; most decisions are made by traditional hierarchy; work mainly takes place in established channels, with some virtual venues. The Developing stage is defined by mobilization — a compelling vision for digital transformation exists; senior managers are leading the charge; most functions, levels, and entities are involved in digital initiatives. The Maturing stage is defined by trust — digital is considered a strategic asset; it is embedded in work practices; much decision making is decentralized; information and collaboration is organization-wide and includes customers and external partners.

“The 2016 data shows 16% of the survey participants in the Maturing stage, 52% in the Developing stage, and 32% in the Starting stage,” McConnell reports. Where does your company place? Read the rest here.

TechSavvy: Delta’s Digital Black Swan

MIT Sloan Management Review, August 22, 2016

by Theodore Kinni

Condolences if you were flying — or more accurately, not flying — on Delta last week. As the tally of cancelled and delayed flights climbed into the thousands, Nick Taleb came to mind — you know, the Black Swan guy. Taleb wrote that black-swan events have three characteristics: “rarity, extreme impact, and retrospective (but not prospective) predictability.”

I don’t know if the power failure at Delta — and the chain of unexpected events that followed it — qualifies as a black swan by Taleb’s standards, but it must have felt that way to CEO Ed Bastian. The day after the failure, he apologized for the second time and ruefully explained that over the past three years, Delta has invested “hundreds of millions of dollars in technology infrastructure upgrades and systems, including back-up systems, to prevent what happened yesterday from occurring.”

Delta isn’t the only airline whose systems have crashed recently, and with more and more companies integrating their systems, it seems like a good bet that digital black swans may become more and more common. In an article for CIO Dive, associate editor Naomi Eide offers some lessons from Delta for companies hoping to avoid similar events. First, she says, beware centralized control points, because when they go down, everything goes down. Regionally dispersed control centers are more expensive, but more robust. Second, ensure redundancy measures are in place and test them regularly. Third, practice recovery plans and responses to worst-case scenarios.

All of this still may not be enough to save your company from a true black-swan event; Taleb made a pretty strong case that they will be with us always. But it may be enough to avoid the growing numbers of gray ones. Read the rest here.

Tech Savvy: February 26, 2016

by Theodore Kinni

MIT Sloan Management Review, February 26, 2016

When you talk business, starting with Peter Drucker is always a smart move. In Management: Tasks, Responsibilities, Practices, Drucker defined the work of business leaders by its three principal tasks: to deliver financial results, to make work and workers productive, and to manage a company’s social impacts and responsibilities. That’s all, and of course, that’s a lot.

There’s been a lot of change since Druckers’s magnum opus was published in 1974. Technological advances, especially digitization, have transformed — and continue to transform — the world in myriad ways large and small. But new technology hasn’t fundamentally changed Drucker’s tasks. Instead, it is giving rise to new and better ways and means of executing and achieving them. This new MIT SMR column aims to help you identify big ideas and new tactics at the intersection of technology and management.

The mobile method to uncovering abuse in the supply chain: The good news about global supply chains is that they offer competitive and cost advantages that were unthinkable when Ford built the first moving assembly line in 1913. The bad news is that the financial and reputational risks associated with such supply chains have increased exponentially. Ignorance is a flimsy defense when a garment factory collapse in Bangladesh kills and injures thousands of people or it is revealed that slave-workers are harvesting seafood in Thailand.

How can a company gain an unvarnished view of what’s happening in far-flung supply chains? One way is to connect with everyone working in the supply chain by tapping into the extraordinarily high penetration of mobile phones globally. That’s what a nonprofit named Good World Solutions is doing with a program that it calls Labor Link, reports associate editor Bouree Lam in The Atlantic. Labor Link allows companies to conduct surveys over the mobile phones of employees in their own and suppliers’ facilities. They can question employees about their workplaces and working conditions directly, and employees can respond without fear of reprisals...read the rest here

Will Chinese demand create global shortages in natural resources?

My no-always-weekly blog post on s+b is up:

Understanding China’s Resource Quest

Much has been written about China’s supersized demand for natural resources—oil and gas, metallic ores, and agricultural commodities—and the effects it could have on the global economy, politics, and the environment. Often these prognostications are suspect: It’s only natural to wonder whether self-interest is skewing a metal trader’s prediction that Chinese demand will drive copper’s price to stratospheric levels or a lobbyist’s prediction that a Chinese company’s acquisition of a U.S. oil company threatens national security.

That’s why I was quite interested in By All Means Necessary: How China’s Resource Quest is Changing the World (Oxford University Press, 2014), a new book written by Elizabeth C. Economy and Michael Levi, senior fellows at the Council on Foreign Relations (CFR). Economy is an expert on China and author of the seminal book on that nation’s environmental challenges. Levi is an expert in global politics and energy economics. They make for an authoritative team.

The faintly ominous ring of their book’s title notwithstanding, Economy and Levi are dispassionate and evenhanded. Contrary to many experts, they find that, by and large, China is not trying to secure the resources it needs by buying up ore deposits and oil fields—actions that could lead to a stranglehold on vital material. Instead, it is procuring natural resources mainly through trade. This has contributed to radical price increases and more competitive markets. But, according to the authors, further natural resource price shocks are unlikely because the markets have adjusted to Chinese demand.

In response to political fearmongering, Economy and Levi conclude that “the impact of China’s resource quest on international politics and security has been modest thus far.” They admit that China’s willingness to trade with nations like Iran has “helped blunt the impact of Western sanctions.” But they do not find that China has contributed to wars, like the one waged in the Sudan, where China’s state-owned oil company CNPC plays an instrumental role in extracting and refining oil and where 50 percent of the oil produced annually is exported to China.

The authors are less sanguine about the environmental effects of China’s resource needs, mainly because the same challenges that the nation faces domestically are present when it tries to obtain natural resources overseas. When Chinese companies seek to extract resources in nations with lax environmental regulation, a sort of double whammy can occur because neither party is policing the situation. There is a silver lining though: As Chinese companies interact with other more environmentally responsible multinationals, they are actually improving their practices—either because they’re feeling international pressure to do so, or because they’ve found that being responsible can also be profitable. And with corporate responsibility on the state agenda in China, the authors also expect to see better practices in the overseas ventures of Chinese firms.

The authors of By All Means Necessary also analyze the winners and losers among the main players affected by China’s quest for resources. Resource consumers who must buy in the marketplace will pay more, but the owners of those resources will profit from higher demand. Overseas investors have a major new competitor with which to contend and will need to avoid a “race to the bottom.” Governments, especially the U.S. government, will need to factor China’s resource needs into their actions to maintain their own stockpiles and to avoid igniting resource wars. National security is a two-way street.

None of these conclusions sound particularly dire, especially when you consider that China is simply assuming its place among the rest of world’s most resource-hungry nations. And if you dip back into history and examine the behavior of other nations in their quest for natural resources, such as Belgium in the Congo in the late 1800s and the U.S. and the U.K. in Iran in the 1950s, China looks like a shining exemplar…so far.

Zachary Shore on getting a sense of the enemy

My Q&A with professor Zach Shore for strategy+business was published today:

Zachary Shore on How to Predict the Future
A historian’s approach to strategic empathy can help you anticipate your rivals’ next moves.

If Komatsu decides to cut prices in a bid to grow its market share, will Caterpillar match the cuts? If Amazon makes a full-out run at the grocery business, will Kroger compete online? If Google refuses to censor Internet searches, will China’s government deny its citizens access to the search engine? Predicting the actions and reactions of competitors—and other stakeholders—is often an essential element in executive decision making, and getting those predictions wrong can have costly consequences.

Historian Zachary Shore believes leaders in all spheres can reduce decision risks and improve the accuracy of their predictions by developing a skill that he calls strategic empathy. In his fourth and latest book, A Sense of the Enemy: The High Stakes History of Reading Your Rival’s Mind (Oxford University Press, 2014), the professor at the Naval Postgraduate School, a research university operated by the U.S. Navy in Monterey, Calif., offers a new perspective on predicting the behavior of others. Shore discussed his findings and their applications with strategy+business.

S+B: What is strategic empathy, and why does it matter?
SHORE: Strategic empathy is the ability to step out of our own heads and into the minds of others. It’s the ability to discern someone else’s underlying drivers and constraints—to understand what makes someone tick.

The idea behind strategic empathy has been around for a long time in the military and politics. Two thousand years ago, Sun Tzu wrote about the importance of thinking like the enemy. What we don’t have is a reliable way of doing it... read the rest here