Monthly Archives: August 2020

How Leaders Can Regain Trust in Untrusting Times

By Gregory P. Shea – Google employees protest an attempt to silence their activism. Facebook employees stage a virtual walkout. Amazon employees protest over workplace safety, and a company vice president resigns over their firings. Employees at Target and Walmart protest as well. Print and broadcast media struggle with various policies, and prominent journalists resign at the The Philadelphia Inquirer and The New York Times. The Washington Post reports on research findings that the COVID-19 pandemic will undermine trust in government for decades.

Isolated data points? Maybe. A sign of the times? Perhaps. Regardless, leaders should take note.

First, leadership is a relationship. No relationship, no leadership. One or more people allow another person to influence their behavior in a manner or direction that the other wishes. That influence can and does come from a wide variety of sources. But regardless of source, no such relationship means no followers, and no followers means no leaders and no leadership. As one Wharton Executive Education participant put it: “We refer to a person who sets the direction for our travel as a ‘leader.’ We refer to a person traveling without followers as ‘a bloke out for a walk.’”

Second, societal and organizational elites have, for decades, chiseled away at their relationship with followers. Systematic shredding of long-standing “do your job, keep your job” cultures in the last 20 to 30 years of the 20th century eviscerated the psychological contract between employer and employee, even as employers complained about the remarkable demise of employee loyalty. Since 1978, CEO pay has increased 1,000%, compared with 11.9% for average workers. CEOs now make 278 times as much as the average worker, up from 20 times in 1965. Trust in government has fallen from about 70% to under 50% over the same period.

Few visible elites paid any appreciable price in the wake of the financial crisis (unlike after the S&L crisis of the 1980s and 1990s), and those who did were frequently seen loading up their wagons with gold before heading out of town and into “retirement.” more>

Updates from McKinsey

india’s turning point: An economic agenda to spur growth and jobs
A clarion call is sounding for India to put growth on a sustainably faster track and meet the aspirations of its growing workforce.
By Shirish Sankhe, Anu Madgavkar, Gautam Kumra, Jonathan Woetzel, Sven Smit, and Kanmani Chockalingam – India is at a decisive point in its journey toward prosperity. The economic crisis sparked by COVID-19 could spur reforms that return the economy to a high-growth track and create gainful jobs for 90 million workers to 2030; letting go of this opportunity could risk a decade of economic stagnation. A new report from the McKinsey Global Institute identifies a reform agenda that could be implemented in the next 12 to 18 months. It aims to raise productivity and incomes for workers, small and midsize firms, and large businesses, keeping India in the ranks of the world’s outperforming emerging economies.

A clarion call is sounding for India to put growth on a sustainably faster track and meet the aspirations of its growing workforce. Over the decade to 2030, India needs to create at least 90 million new nonfarm jobs to absorb the 60 million new workers who will enter the workforce based on current demographics, and an additional 30 million workers who could move from farm work to more productive nonfarm sectors. If an additional 55 million women enter the labor force, at least partially correcting historical underrepresentation, India’s job creation imperative would be even greater.

For gainful and productive employment growth of this magnitude , India’s GDP will need to grow by 8.0 to 8.5 percent annually over the next decade, or about double the 4.2 percent rate of growth in fiscal year 2020. Given the uncertainties about economic outcomes during the COVID-19 pandemic, our analysis looks at scenarios beginning in fiscal year 2023, although many of our proposed actions would start well before then, and in fact be implemented in the next 12 to 18 months.

Net employment would need to grow by 1.5 percent per year from 2023 to 2030, similar to the average rate that India achieved from 2000 to 2012, but much higher than the flat net employment experienced from 2013 to 2018. At the same time, India will need to maintain productivity growth at 6.5 to 7.0 percent per year, the same as it achieved from 2013 to 2018. The two objectives are not contradictory; indeed, employment cannot grow sustainably without high productivity growth, and vice versa.

If India fails to introduce measures to address prepandemic trends of flat employment and slowing economic growth, and does not manage the shock of the crisis adequately, its economy could expand by just 5.5 to 6.0 percent from 2023 to 2030, with a decadal growth of just 5 percent and absorb only about six million new workers, marking a decade of lost opportunity. more>


The World’s Top Automakers, Ranked by Revenue

There have been some changes in the rankings of the world’s longtime auto leaders and you won’t believe the revenue per second.
By Dan Carney – Business data aggregation and analysis site sifted through the annual results of the world’s car companies and ranked them by total revenues. For novelty, they’ve also included the total revenue per second of each company, with some eye-opening numbers at the top of the list. Even small-fry Tesla brings in $780 every second of the day! This list is based on last year’s sales numbers and represents the carmakers’ corporate entities as they existed last year. Since then, Fiat-Chrysler Automobiles has merged with Peugeot to form the head-scratchingly named Stellantis. So next year we should see some shuffling of the rankings.

BMW and PSA Peugeot Citroen have entered into a 50:50 venture to produce components for hybrids and electric vehicles, says a story in the Financial Times.

The two companies, which will launch the new operation in the second quarter of this year, will team up on the development of battery packs, electric motors, power electronics, generators, chargers and software to run the new breed of vehicles.

The German and French carmakers said that the components would be used in their own vehicles, and will also be sold to other automakers. The joint operation will begin equipping vehicles in 2014, the newspaper said. more>

Systemic Racism Is a Cybersecurity Threat

By Camille Stewart – For years there have been well documented discussions about the need to expand gender and racial diversity in cybersecurity. People have argued that if we address social and systemic issues separately, we will get the technology right. However, the social and the technological are mutually constitutive. Bringing in new points of view is crucial to cybersecurity, but we also have to change the systems in which technology is embedded and review technology against the backdrop of larger systemic issues to reduce vulnerabilities.

Technical and policy mitigations in cybersecurity need to account for the weaknesses of our society, systems, and institutions in their implementations. The places where democracy breaks down and the ugliness of our past sins are laid bare and unaddressed are where we are most vulnerable. Technical and policy mitigations to cybersecurity challenges will never reach their full potential until systemic racism is addressed and diverse voices are reflected among our ranks at all levels.

The spread of disinformation that capitalizes on racial tensions in the United States, by both foreign and domestic actors, is an important but classic reminder of the need to address race. The narratives of the disenfranchised are the best tool and target for disinformation operations designed to incite the majority and further alienate minority groups. Crucially, exploiting the narratives of disenfranchised groups, especially Black Americans [PDF], is a powerful tactic used to radicalize minorities, one we have seen Iran and other countries use. Addressing inequality and systemic racism reduces if not eliminates the efficacy of this tactic. more>

Why 5G is the first stage of a tech war between the U.S. and China

By Prabir Purkayastha – The U.S. tech war on China continues, banning Chinese equipment from its network, and asking its Five Eyes partners and NATO allies to follow suit. It is a market and a technology denial regime that seeks to win back manufacturing that the U.S. and European countries have lost to China.

International trade assumed that goods and equipment could be sourced from any part of the world. The first breach in this scheme was the earlier round of U.S. sanctions on Huawei last year, that any company that used 25 percent or more of U.S. content had to play by the U.S. sanction rules. This meant U.S. software, or chips based on U.S. designs, could not be exported to Huawei. The latest round of U.S. sanctions in May this year stretched the reach of U.S. sanctions to cover any goods produced with U.S. equipment, extending its sovereignty well beyond its borders.

In the last three decades of trade globalization, the U.S. has increasingly outsourced manufacturing to other countries, but still retained control over the global economy through its control over global finance—banks, payment systems, insurance, investment funds. With the fresh slew of sanctions, another layer of U.S. control over the global economy has been revealed: its control over technology, both in terms of intellectual property and critical manufacturing equipment in chip making.

The new trade sanction that the U.S. has imposed is in violation of the World Trade Organization’s rules. It invokes national security, the nuclear option in the WTO, on matters that are clearly trade-related. Why the U.S. has gutted the WTO, refusing to agree to any new nominations to the dispute settlement tribunal, has now become clear. China cannot bring the illegal U.S. sanctions to the WTO for a dispute settlement, as the dispute settlement body itself has been made virtually defunct by the United States.

The battle over 5G and Huawei has become the ground on which the U.S.-China tech war is being fought. The 5G market (including installation and network equipment) is expected to reach $48 billion by 2027, but more importantly, it is expected to drive trillions of dollars of economic output over the installed 5G networks. Any company or country that controls the 5G technology will then have an advantage over others in this economic and technological space. more>

Updates from McKinsey

The present-focused, future-ready R&D organization
There’s no one right way to organize R&D. But a set of core design principles can provide the flexibility R&D organizations need to outpace competitors.
By Anne Hidma, Sebastian Küchler, and Vendla Sandström – Across engineered industries, the explosion in software has increased product complexity by an order of magnitude. Along with rapidly evolving technologies, fast-changing consumer preferences, accelerated product cycles, and the practical realities of globalized operations and markets, R&D departments are under unprecedented strain. As product variation grows and product portfolios expand, updating existing products compounds the already heavy load R&D organizations bear.

Yet amid these 21st-century challenges, R&D units are still following 20th-century models of organization—models not designed for today’s need for speed and the expanding web of interdependencies among all of the moving parts. The traditional component-based approach to R&D is no longer sensible in an era when digital and electronic systems are so thoroughly integrated with hardware. Still many companies struggle to shift toward an approach that focuses more on the function the customer wants, rather than the components that make the desired function work.

There is no one right way to organize R&D. But there are certain fundamentals that can help R&D organizations, regardless of industry, act more responsively and meet the burgeoning challenges they face today. From our work with clients and our extensive research, we’ve distilled a set of core design principles for R&D organizations and identified the important ones. By following these principles, companies can help their R&D organization serve as engines of innovation for outpacing competitors. And they can foster the agility organizations need in supporting collaboration among remote, distributed teams—as has become more important than ever in response to unpredictable external events.

Determining the right structure for the R&D organization has never been easy. The division of responsibility is a balancing act between the project-management organization and the R&D line organization, with inevitable trade–offs. Today’s R&D teams don’t have the luxury of following a sequential, piece-by-piece approach in which finished, designed components are handed off to testing at the end. Moreover, the teams need to be insulated from the external and internal the disruptions that the broader organization experiences, which today come with greater frequency.

As they’ve grown organically, many R&D organizations continue to operate with the same structures and processes they’ve used for years. Despite (or perhaps because of) the increasing inadequacy of those structures and processes, organizations don’t follow them consistently. Pet projects are often hard to kill, even long after their diminished promise becomes apparent. And because research effectiveness is hard to measure—and companies often don’t understand R&D costs or ways of working—the black-box image persists without challenge. more>


Updates from ITU

Smartphone on wheels: What Android’s dominance could mean for carmakers
By Roger Lanctot – Casual observers of the automobile industry are quick to compare connected cars to “smartphones on wheels.” It’s a simple way of looking at things that makes some sense now that half of all cars produced in the world are made with a built-in cellular modem…or two. It belies the complexity of connecting cars, but maybe it’s an accurate way to look at things now that Google’s Android operating system is on its way to dominating in-dash infotainment systems.

Strategy Analytics estimates Android’s share of the global smartphone market at 86%. Android is a long way from that kind of dominance in the world of the connected car, but the die is cast. Android is steadily muscling aside Blackberry’s QNX operating system, legacy Microsoft offerings, various Linux distributions, and a handful of other bespoke systems.

Cars are different. Winning the infotainment system OS race is not a zero sum game. Unlike smartphones, cars have multiple operating systems, multiple networks, and multiple microprocessors. Still, Android’s arrival and impending hegemony in the automotive industry has massive implications.

Car makers are attracted to Android because it promises lower development costs. There are many more app developers working in Android, thanks in large part to that smartphone market dominance, which means they are both readily available and less expensive to hire.

Just like those smartphones, though, cars will require frequent software updates – and that’s a trick that is relatively foreign to the average auto maker. Only Tesla Motors has managed to make automotive software updates look easy – and Tesla isn’t even using Android…yet.

Android arrives at a point in time when creating and managing millions of lines of code is beginning to dominate the design process at most auto makers. The emerging and growing mountain of software code is driving massive hiring and pushing auto makers to seek out sources of savings.

In shifting to Android the industry is looking for development savings of 30%-40%, but there’s a catch. Not only will all that “relatively” inexpensive code require updates – it is also likely to demand greater processing power, memory, and storage capacity – in anticipation of dozens of software updates likely to occur over the estimated decade-long life of any given vehicle.

That’s a pretty big fly in the ointment. Under-resourced infotainment systems are a sore point that continues to plague the automotive industry. Cars are being sold and driven today that lack sufficient processing or memory resources to support their Android and, yes, non-Android systems.

In essence, the onset of Android is opening the automotive industry to a veritable ocean of clever code and related applications. It is also contributing to the auto industry’s pivot toward the rapid adoption of over-the-air (OTA) software update technology. That, in turn, is broadening the deployment of cloud-based services and applications including everything from hybrid navigation to digital assistants and edge computing.

It’s also introducing a wider range of failure points, cyber security vulnerabilities, and plain old software bugs. But a properly configured system, equipped with OTA update capability, can enable a car maker to maintain or extend the value of a vehicle or even avoid expensive in-person recalls.

Software-related recalls are a growing challenge for auto makers. more>


Updates from Chicago Booth

How effective were stimulus checks in the US?
By Áine Doris – As the United States was hit with COVID-19, Congress passed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act in an attempt to soften the blow from widespread lockdowns and business closures that led to soaring joblessness.

The CARES Act—which included one-time cash payments of $1,200 or more to households starting in April—bolstered incomes and spurred spending as promised, although the effect was uneven, suggests research by Northwestern’s Scott R. Baker, Columbia’s R. A. Farrokhnia, University of Southern Denmark’s Steffen Meyer, Columbia’s Michaela Pagel, and Chicago Booth’s Constantine Yannelis. The researchers conducted an almost real-time review of how a significant slice of the population used the direct payments.

The stimulus prompted an immediate, general uptick in household spending, the researchers find, but households with cash on hand tended to save their stimulus checks, while those without cash on hand spent almost half their checks within 10 days.

The researchers tapped newly accessible data from SaverLife, a nonprofit organization that helps families develop long-term saving habits. The SaverLife data provided detailed, high-frequency information including day-to-day inflows, outflows, and balances of anonymized individual bank accounts. This enabled the researchers to analyze the impact of the CARES payments on households, taking into account changes in overall income level, cash flow, and existing liquidity.

Using data on more than 6,000 US households for April, the researchers calculated households’ marginal propensity to consume―the proportion of every dollar received that they spent from the moment they received the CARES payments.

“We wanted to understand the multiplier effect of CARES payments―how when the government gives you a dollar, you spend it and effectively give someone else a dollar, who then goes on to spend it, giving someone else a dollar, and so on,” Yannelis says. “This is how fiscal stimulus works, so you have to look at people’s marginal propensity to consume to assess the multiplier effect.”

The researchers find a sharp and immediate response as payments started hitting bank accounts. Within the first 10 days, households spent an average of 29 cents from every dollar received. The bulk of this spending was on food, rent, and bills, most likely in response to the shelter-in-place directives and supply-chain restrictions. The spending couldn’t significantly benefit the restaurant, services, and hospitality industries because they were largely shut down to slow the spread of the pandemic. more>


Why the Armed Forces of Europe isn’t possible

By Timothy Ogden – In many ways, it sounds like a wonderful idea – one army, one continent, one unified command structure. But like most things which are advertised as all-encompassing solutions to a many-faceted beast, implementing the creation of a European Army would be complicated, expensive, time-consuming, and ultimately pointless.

To begin with, there is the fact that collective defence in Europe already exists, since the majority of countries on the continent are NATO members. Interoperability between the armies of different member states is achieved through frequent joint exercises and cross-training; in recent years these activities have mostly taken place in the Baltic countries and Poland, to the continued ire of Moscow.

Should Russian aggression take on a tangible military form against any of NATO’s eastern members, it is, of course, debatable whether Western European countries would be willing to go to war on their behalf – obligated to defend Latvia, Lithuania, and Estonia though they are, if the choice was between quietly letting the Kremlin occupy its former Soviet satellites or risk a potentially nuclear conflict, it is by no means certain that the West would stand firm on its NATO commitments and gamble on Paris, Rome, and Berlin not going the way of Hiroshima and Nagasaki.

The creation of a European Army would do nothing to alleviate any possible hesitancy over protecting all European territory against outside aggression. Whether or not a collective defense is (on paper) guaranteed by NATO or a hypothetical European Army, a reluctance to defend territory that only ceased to be controlled by Moscow in 1991 would remain. As long as there are national interests and divergent political objectives, there can be no European Army. In other words, before there can be a European Army, there would have to be a supranational European state.

This, of course, looks to be unlikely – nationalist sentiment has risen in recent years rather than fallen, particularly in the wake of the UK’s Brexit vote and Donald Trump’s election in the US. Then there is the fact that Europe’s differing political objectives come with different military commitments and differing levels of willingness to fight. The aforementioned scenario of Western European countries being reluctant to defend former Soviet states is equally applicable to ongoing post-colonial deployments. For instance, it is questionable whether the governments of other European countries would be glad to send their soldiers to help France fight its running conflicts in Africa. more>

Updates from McKinsey

Delighting in the possible
In an unpredictable world, executives should stretch beyond managing the probable.
By Zafer Achi and Jennifer Garvey Berger – It’s only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn’t matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands. Nowadays, late nights of number crunching, feasts of modeling, and the familiar rituals of presentations have replaced the rain dances of old. But often, the odds of generating reliable insights are not much better

Perhaps that’s because our approach to the hardest problems—and the anxiety those problems create—is fundamentally misdirected. When most of us face a challenge, we typically fall back on our standard operating procedures. Call this “managing the probable.” In much of our education, and in many of our formative experiences, we’ve learned that some simple problems have one right answer. For more complicated problems, accepted algorithms can help us work out the best answer from among available options. We respond to uncertainty with analysis or leave that analysis to the experienced hands of others. We look for leaders who know the way forward and offer some assurance of predictability.

This way of approaching situations involves a whole suite of routines grounded in a mind-set of clarity if not outright certainty. To that end, they are characterized by sharp-edged questions intended to narrow our focus: What is the expected return on this investment? What is the three-year plan for this venture? At what cost are they willing to settle? But asking these kinds of questions, very often legitimate in business-as-usual settings, may constrain management teams in atypical, complex situations, such as responding to a quickly changing market or revitalizing a privatized utility’s culture. Our tendency to place one perspective above all others—the proverbial “fact-based view” or “maximizing key stakeholders’ alignment”—can be dangerous. All too often, we operate with an excessively simple model in enormously messy circumstances. We fail to perceive how different pieces of reality interact and how to foster better outcomes.

Moving from “managing the probable” to “leading the possible” requires us to address challenges in a fundamentally different way. more>