The second economy – McKinsey Quarterly – Strategy – Growth.
Here is a thought provoking article on the emergence of a digital economy to support the physical one of goods and services produced and delivered all around the globe. Unfortunately, this second economy does not supplement the existing physical one, it cannibalizes it by automating the manual tasks and activities previously taken care of by human beings. Net net, this new economy kills more jobs than it creates exacerbating the unemployment problem globally. Looking one step further, the real question becomes: when all workers of the physical economy will have lost their job because their tasks have been automated, will there still be enough consumers on the planet to sustain and support not only the physical economy but also the digital one? As a matter of fact, the digital economy is worth almost nothing if there is no need any longer to move goods and services around because their consumers have vanished at the same time they lost their income.
All economic transformations so far have resulted in a net compression of the total number of job opportunities. How much longer can we sustain such a trend before the system as a whole breaks apart? First, we moved jobs from the country side (farming) to manufacturing plants (industrial age), then we moved job overseas (labor arbitrage: off-shore, near-shore, right-shore… etc) to focus on a services economy. Now that services will no longer be delivered by human beings but by computer grids instead (services “commoditization”), how will we earn our living in the future? What will come next? We may actually see a resurgence of Proximity services or Community services because these are “High-touch” and “trust-based”, hence still very difficult (at this point in time at least) to delegate to a machine.
“Progress” in its largest sense is expected to benefit mankind. Funnily enough, we very often struggle to keep up with it and accommodate it in our daily lives. Finally can Progress be truly Progress if we are always running behind it?!?!?
We see them all over the place these days: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), Software as a Service (SaaS), Everything as a Service but GaaS, this was the first time I saw it in a paper and while reading it, it really started to make sense. GaaS or Government as a Service is the public sector implementation of “big data” on one side and “Everything as a Service” on the other side or IT innovation at the service of Citizens of all nations. This is a very ambitious and impressive public sector project where emerging countries like Kenya and Georgia are showing the way.
Interested? Read on…
Innovation in government: Kenya and Georgia – McKinsey Quarterly – Public Sector – Management.
Posted in Change, Innovation, IT trends to watch, Leadership, Management
Tagged change, economy, innovation, leadership, management, vision, web 2.0
It has been a while since the last time I read a courageous article about what the private sector shall do to support economic growth again. I finally found one on McKinsey: What businesses can do to restart growth
Economy is often believed to be a boring topic to teach or to present. In OWP2011 (Yearly Orchestrating Winning Performance event by Lauzanne School of Management IMD), IMD Professor of Economy, Stephane Garelli is making a brilliant demonstration to an enthusiastic crowd that Economy can also be fun even if the challenges ahead of us are immense.
The session has been cut into 4 individual segments all available on YouTube.
If you would like to take one step back from your daily work and understand the macroeconomic trends that will shape the world of tomorrow, then this presentation is for you. Enjoy!
I found this amazing news on an RSS feed earlier today. This is from TechCrunch and the full details can be consulted here.
Last week I came across this and had a hard time to believe what I read:
Firm: Apple surpasses HP as largest buyer of chips
Associated Press, Also appeared in Forbes, CNBC, San Jose Mercury News, Austin-American Statesman, 06/8 , Peter Svensson
NEW YORK — Driven by the success of the iPhone and iPad, Apple has become the world’s largest buyer of chips for computers and phones.
A research firm IHS iSuppli said Wednesday that Apple bought $17.5 billion worth of chips last year, surpassing computer maker Hewlett-Packard Co. as the largest consumer. That was an increase of 80 percent from the year before, reflecting Apple’s continuing sales surge.
According to iSuppli, an iPhone contains about $80 worth of chips. The chips include the central processor that acts as the brains of the device, radio chips that let it talk to cell towers and the audio chip that converts the owner’s voice into a stream of data.
Looking at this from a distance, it is amazing to see that a company that almost went bankrupt a few years back was able to reinvent and turn itself upside down so successfully that they have become a trend setter and a Leader entering into the XXI century.
It would actually be interesting to understand from the inside how such a rebirth was made possible as large corporations usually struggle to reinvent themselves with only a very few exceptions…
What Matters: Has the US passed peak productivity growth?.
Interesting debate where the authors have contrasting opinions on the measurable benefits of the last few decade innovations including but not limited to the internet on productivity growth.
This debate will be nicely complemented by the following McKinsey articles:
- In the first one entitled “Measuring the Net’s growth dividend“, the authors present the results of a survey aiming at measuring the net’s growth dividend. According to the article, the contribution of the Net to the GDP growth in the surveyed countries is clearly measurable,
- In the second one entitled “Translating innovation into US growth: an advanced-industries perspective“, we see that a lot of multinational companies headquartered in the US have become complacent and risk averse for the sake of achieving their short-term financial targets and Wall Street expectations.
Everything being considered, if there is still GDP as well as productivity growth in our mature economies like Western Europe and the US, we can actually wonder what are the direct benefits on our standards of living. Our salaries have been frozen for years now even though we see the prices of many raw materials increase year after year (energy, cereals…). At the same time, the unemployment rate seems to be on the same growth curve as GDP and Productivity. So would that be an indication that GDP and productivity growth actually comes to the detriment of the workers that contributed to generate it? Said differently, would we be shooting ourselves a bullet in the foot or would it be time to rethink the model completely when supposedly positive economic indicators actually result in decreasing net incomes for many? I have no magic recipe but I clearly see a disconnect between what I read and what I live… Sorry
Posted in Economy
Sustaining top-line growth: The real picture – McKinsey Quarterly – Corporate Finance – Performance.
Finally an honest and factual article that shows the disconnect between the target growth rates of most public companies and what they can realistically achieve on the long run. For long I have been wondering whether I was the only one to find such growth performance objectives disconnected from the market reality and old good common sense. Ever-increasing top line growth rates are illusion: all businesses follow a development cycle, which will ultimately gets to maturity and decline if no actions are taken to diversify the portfolio through M&A or internal innovation. In that context, ever-increasing top line growth rates means that management boards have become Masters at anticipating business maturity and decline by proactively managing on an ongoing basis a portfolio of internal innovation and M&A that will be used to more than offset the stagnation and/or decline of mature businesses. I’m sorry but it sounds too good to be true, I’m afraid that no matter how high an opinion they have of themselves, they are not that good despite their laughable attempts to make us believe that success was long planned through a linear process… I’m a strong believer that success is like many other things in this world based on entropy. It is not based on continuous improvements and linear evolution, it is based on collisions and disruptions. It shows up at a time when you did not expect it any longer and through paths that you did not know where they will take you when you started them because at the time the outcome was simply not predictable. Unfortunately, with success a lot of people lose humility and a sense from where they started and what they had and what they truly knew when they were there… Way too often, I have seen people justifying and planning success after the facts. It certainly makes a nice cover story but does not qualify as a methodology…
Paying back your shareholders – McKinsey Quarterly – Corporate Finance – Performance.
Interesting article in which we will discover that management boards pay dividends or buy back shares because their company cash flows are too strong and they have no better idea to generate business value to shareholders than either paying dividends to them or buying back shares.
Looking at this from a slightly different angle, it would be lovely if the people, who were actively involved in generating such strong cash flows in the first place, i.e. the company employees, would get their fair share of the business value they contributed to create.
Way too often people seem to forget that investors of any kind do not generate business value as such, they solely provided the initial cash or the initial capital that made it possible for other people, the company employees, to generate business value. Too much focus on the shareholder (capital owner) to the detriment of the employee (business value creator), this article is symptomatic in my humble opinion of the imbalance that our economic system suffers from today…
We are all used to all kind of activists in favor of replacing the current system, whatever it is: economical, political… whatever.
However, when a renowned organization like Harvard Business Review (HBR) invites someone to talk about reinventing Capitalism. This may be an early sign that a wave of change may be coming and it may be bigger than we currently think.
No matter what happens next, well, it is not harmful to dream of a better tomorrow 😉
Capitalism for the Long Term – Harvard Business Review.
Is there an oxymoron right in the title or has the capital market slowly diverted the attention of the capitalistic system from long term value to quarterly earnings?If you are interested in the answers to such questions and what we shall do about it, this HBR article is for you !