Climate saving behaviour is binary and it’s global. We’re either all in, or all out. You cannot get off the bus or sit this one out.
As a species we have been very good at creating multiple view points on many topics. Each side convinced that they are right. History being written by the victors and the untrodden path left shrouded in what-ifs.
With the Internet we have “culture wars” where no choice is made but factions live side by side (with various degrees of friction) and multiple opinions matter.
While there are a few points of view on climate change, the science seems to be clear. But then not everyone believes in science. Most engineers believe in science. But not all the ones I know choose to believe climate scientists. They explain to me (with no data) that forces bigger than us must be doing it (volcanoes, solar weather etc.).
Many don’t believe in religion. Whether they see the irony in being scientific, rejecting religion as hocus pocus but then assigning climate change to a “force bigger than us that we can’t understand” I’m not sure.
We cannot have co-existing points of view on climate and succeed. We, as a species are either for cleaning up our act, or we are not. There can be no compromise. To be successful with a path of modifying the atmosphere the vast majority of the world will need to act. It is not a personal choice, it is a collective one.
The world seems to be increasingly insisting that we need to clean up our act. Whether “right” or “wrong” does not matter, it looks like it is happening. There will be a battle for public opinion but will not be national. It will be global.
Will Peace Keeping Forces, may become environmental enforcers working at the behest of the UN, the World Bank, the IMF, WHO or goodness knows? Perhaps the IPCC will mobilise an army to takeover polluting plants and shut them down.
I’ve been a banging the drum for a technology led 4th industrial revolution for years, but I now feel we will have a technologically enabled, climate led one.
The implications of technologies such as AI, Autonomous Vehicles, Remote Sensing, Big Data etc. means that the outcomes will be similar to those I’ve written about before but they will be a by-product. I’ve realised the optimisation function has changed, or it was always this and I’ve just woken up to it.
I’ve been working with my clients while we’ve been under covid lockdown, and one theme has emerged more than anything else. That is the requirement for organising the activity of groups. My clients have been seeking ways to enable individual unsupervised action towards a joint outcome.
My clients want: independent action; visibility of progress; and accurate outcome. They have lost the ability the office environment gave for short-cycle intervention and guidance. They need structured ways to work remotely that replace it.
In industries that employ large numbers of people all doing sections of a task over a period of time – think of a building site, telephone maintenance crews or even an army – there are defined, co-ordinated systems of work. The modern office with it’s semi-senior knowledge workers has, in contrast, succeeded through flexibility, creatiing adhoc creative solutions and short-cycle leadership intervention.
My clients, faced with the pandemic and new ways to work and communicate, have found a new need for structured ways to co-ordinate creative work. Through my consulting company, Klynetic Innovation, I’ve been helping companies re-configure products and services and quickly commercialise them, a task that requires precisely this combination of structure, creativity, direction and focus.
One of the approaches I’ve taken is to emphasise personal responsibility and progress-without-permission at lower levels in an organisation. Then to moderate this with the checks-and-balances of good governance provided by systems and oversight provided by graphics and shared language. I’ve coached people to recognise the differences between the competence displayed by an individual and the ability of management to co-ordinate work and form organisational capabilities.
It struck me that in the last thirty years we’ve been honing our ability to encourage leadership and peronal development while, perhaps, not paying enough attention to management. I use the diagram below as as a tool to discuss this topic with senior teams and help identify what’s missing.
I’d like to know your thoughts, please reach out and email me (or comment here).
Today the FT ran a story about food inflation. They said:
“Global food prices surged by the biggest margin in a decade in May as one closely-watched index jumped 40 per cent in the latest sign of rising food inflation.”
15 months ago we flagged that possibility. Mark, Ken and I sat down to collate the findings from our network and to analyse it through our innovation and transformation frameworks. We not only had some sound advice on what approaches could be considered, but also we threw in some “wild-cards”.
Corporate debt overhang will need to be erased before growth emerges – that may be through default, forgiveness or increased inflation. The availability, cost and impact of capital may be unlike anything experienced by today’s finance professionals. Long term mass-unemployment may result from the disruption to our daily lives and lead to political pressure to change the order of beneficiaries from the production of wealth from the application of capital.
It wasn’t universal of course – we also suggested that house prices might crash. I think the government thought that too, because they suspended property purchase tax to stimulate the market. We were wrong, we didn’t expect that thousands of people would want to leave cities and drive up the price of properties with outside space. Though it’s not over yet…..
Why not read the report again (it’s short) it would be great to hear your take on our other advice – where did we nail it, and where did we miss? Alternatively you can also read the much more extensive book “Responding to Crisis, a Leader’s handbook” available from amazon here:
This is the second post in a little series considering the left-field consequences of the 4th Industrial revolution (4IR). There are several technology trends leading to breakthroughs in productivity across many industries, and I think these will have knock on implications. Guided by the insights from members of the Bestem Network, I am concerned to know if we are investigating along the right track more than demonstrating that we “are right”. As in the last post, I am only going to briefly touch the upside possibilities of 4IR because information on this is now widespread and easily found.
What a year 2020 was. It gave me both time to reflect on some angles of 4IR and showed samples of the types of situations and responses that might arise in the future. Rather than write a large piece covering every aspect, I am writing a small series, each post looking at aspects in isolation. This post deals with productivity, remote working, and the effect on public finances.
Increased productivity
One common definition of productivity is the amount of output for every unit of human activity put in. Traditionally this has been calculated as GDP added per hour worked. There are lots of reasons to argue that the measure is no longer appropriate and you can read some of my previous deliberations here [LINK]
If you subscribe to the belief that we’re consuming and exploiting too much of the planet’s resources, and combine this with the productivity arguments of 4IR then it seems that we will either end up drowning in a sea of products we don’t need while killing ourselves, or there will be a lot of idle labour capacity.
The positive argument resulting from this is that it will free our species from needless drudgery, will increase artisan production and lead to a life of increased leisure. Some people advocate the requirement for universal basic incomes, of which the UK Government furlough scheme could be an example. These arguments are not new as this letter to Personal Computer Weekly in 1978 demonstrates.
Autonomous vehicles reduce the requirement for physical presence of humans in dangerous or expensive locations (think of remote inspections or inside nuclear sites), it also reduced the need for drivers (commercial and private) while increasing the utilisation potential of vehicles. This will lead to reductions in labour in direct driving roles but also indirect such as driver training, motor insurance, parking lots, and staffing of road-side café. [LINK ]
Economy moves on-line
During the pandemic activity has migrated on-line. Online shops require less people in the supply chain than high-street retail, and with the rise of robotic pickers and packers perhaps will need even less in the future. This article talks about this in the context of Ocado. [LINK]
There are many arguments concluding that much economic activity will move on-line. There is, however, an imbalance between the numbers of producers and consumers. Between sellers and buyers. Here the productivity arguments become even stronger. For example, consider a video game like “Among Us” (which is now played by over 60m people daily). It only took 185 people 3 years to write, and far fewer to keep it running. There is not much employment created by this and a concentration of money from the many to the few. [LINK]
There are 350million players who use fortnite, that game is published by Epic games. The entire company employs a mere 700 people. Epic games are backed by KKR private equity. [LINK] [LINK] [LINK]
In a more professional sphere, after a massive growth spurt, Zoom still only has 2,500 employees (which is double what it had last year). It is used by 300 million meeting participants each day. [LINK] [LINK]
In a more traditional setting, on-line education has been a lifeline for schools and universities. However, if this type of delivery becomes normal – consider a class recorded for Physics 101 by (say) Richard Feynman. It would never need to be re-recorded. Maybe Khan Academy has this right, maybe a career in teaching is not what it used to be, maybe education will not be enough to differentiate you once many more people have access and get smart? [LINK] [LINK]
What about the other issues?
While the fourth industrial revolution will see technologies such as self-driving, self-analysing, remote working, remote control, and robotic automation become more prominent. We may see a rise in purely digital products and services – such as computer gaming – where the entire value chain exists only within computers, and consumption and delivery are not dependent on co-location.
If labour requirements are permanently reduced (and not replaced with new roles – there are arguments that this time it may be that way) then we are faced with issues of wealth distribution that free markets won’t be able to solve. There are arguments that 4IR requires a more interventionist central control to organise behaviour, set societal objectives and to distribute resources. The pandemic response may have revealed how this sort of thing may operate. [LINK]
This is all very good and well. I can envisage the upside of productivity as well as the potential problems it will engender. The arguments are well rehearsed and not yet solved. But what about second order consequences?
Central taxation reductions
All governments have endured a hit to their finances during the COVID-19 pandemic. Borrowing from future to fund today’s spending only works if governments can capture the tax revenue associated with future growth.
We have recently proved that we in a world where many can work from anywhere, hold meetings without travelling and remotely operate large plants and machinery. This is not new but since COVID it has become normalised and now widespread. The physical property of the company may only be a TEAMS server in the Bahamas and workers can be located wherever they wish to be.
So how do you tax this activity? How and where can you collect payroll taxes? Where is the economic benefit created? Whose rules and laws apply? How can a government even know what is happening within its borders?
Automation in transport, manufacturing and logistics are also likely to increase pressure on labour tax revenue.
Will we see restrictions on commercial data, handling, and transmission across borders like we have seen for personal data with GDPR regulations? It’s not unheard of – in the oil industry some geological data was prevented from leaving countries for years, forcing exploration activity to establish a physical presence in country.
Commercial property taxes and rents
Until recently landlords and local government were able to extract rents and rates from physical businesses that wanted to be located where the crowds came. Recently, local governments have even borrowed large sums to buy the properties on the high streets. They are speculating in the properties for which their previous role was to sweep the street and collect rubbish.
They do this to rent them out, trying to exploit the difference between their cheap borrowing and the return from commercial rents. So that they make enough money to pay for the street sweeping and bin-emptying that they used to charge for explicitly. They have an inbuilt advantage over private landlords because buildings left empty force the landlord to pay rates, but these just recirculate inside the finance dept of a local authority. Perhaps this will end in tears for the public (and risk-free profit for financiers) when they need to refinance and interest rates are higher and vacancy has increased? Surely there must be a better way to fund public services? [LINK]
Working from home seems likely to reduce the requirement for prime office space not only leading to worsening public tax receipts but also reductions in income for pension funds and insurance companies who own the buildings – just at a time when returns on other forms of assets are also falling, and insurance playouts are increasing. [LINK]
The pandemic saw an accelerated rise in on-line purchasing and home delivery (which is often less expensive due to lower labour costs and lower property taxes). This means retailers are going bust, rents are not being paid and rates are on hold. This causes another of problem for public revenue which means spending must be reduced, borrowing increased or new methods of taxation found. [LINK]
The end of the freelancer?
In Europe at least, workers within traditional employment structures (and public sector workers most of all) have been better protected by the government. Self-employed, freelancers and small company directors have not been supported well. [LINK]
In recent years we have witnessed the fragmentation of work and a slow reduction in the number employed in professional classes. The world of private commerce seemed to be dividing into successful owners (and financiers) and jobbing workers, with a rise in zero-hour contracts and “gig” work. [LINK]
One of the attractions of freelance work for some was the flexibility it afforded in terms of working from home, this benefit seems likely to become more available to traditional office employees in the future. Policy is likely to shift towards increased taxation of small owner-managed companies and freelancers. The benefits from freelancing are being eroded. [LINK]
Will there be a rebalancing in favour of a stable employment contract and the re-rise of big employers, or will the welfare state make new arrangements with its citizens to enable flexible, part time working? What will this mean for personal finance and the unintended consequences of “prudential lending” that have forced many to rent properties they could easily have afforded to buy? [LINK]
The role of the state and its relation to private commerce
Our elected government has been willing to incur large debts and restrict personal freedoms to protect lives during this pandemic. This brings into question, perhaps, the lack of spending up until this point for other preventable causes of death such as seasonal flu and driving motor cars. Though one has to be careful not to downplay the seriousness of the current pandemic, the argument may be extended that intervention should increase in the future. [LINK]
Governments have stepped up to support rail operators, aviation, provide furlough schemes and give grants to the performing arts. The narrative of the free market and the accepted arguments for roll-back from state activity in commerce we’ve seen for the previous half century will likely be revisited. [LNIK]
I have noted many more articles about the collective response of public services, the requirement for us all to contribute (and not try to dodge taxes) if we want potholes filled in and have a medical service that works. We have even seen large corporations such as Tesco return COVID rates relief payments without obligation because it was “the right thing to do”. [LINK]
Perhaps we are moving to a phase where more collective responsibility will be shown, and individualism will be less valued. Perhaps we are moving towards basic universal income. Perhaps we are changing our relationship with tax and with state spending? Perhaps companies will revise their arrangements with workers? [LINK]
The UK government continues to make overtures about investing public money into science and technology research through an industrial strategy. [LINK]
We’ve seen government intervention in the hospitality sector on the grounds of public health. Perhaps it will not be “the right thing to do” to spend a universal income on gambling and drinking? Will it be “the right thing to do” to compromise your health at the expense of the nation’s taxpayers? Where will the new boundaries for state intervention in private life be drawn? How will the people who control business take steps to voluntarily increase their tax bill? What will all this mean for basis of competition and fiduciary duty to shareholders?
Conclusions
If we are to see wide-scale automation, movement of economic activity on-line and a substantial rise in remote working for those that remain employed, there will implications for tax, wealth distribution and state intervention which are likely to follow. Organisations may wish to consider how to set up systems of work that enable innovation, so they are not be left behind by these advances.
Scenario planning might consider wider societal responsibilities as well anticipating changes in rules, regulation, worker expectations, less flexible labour markets and competition from state-backed entities (possibly publicly owned). They may also anticipate changes in expectation from the public as regarding corporate citizenship and modifications to taxation systems.
I have lots of new ideas to share, but not the time to commit them to words.
I’ve not found time to update this blog for a while. To be honest I don’t think the uncertainty that comes with this crisis makes it wise to take too rigid a point of view. And, like many others I speak to, my days seem to be slipping past. I seem to be doing a lot of work, but I am finding less time to invest in new areas for the future and many discretionary tasks I no longer have the concentration to focus on.
Some of my friends and colleagues have noticed similar fatigue levels affecting performance in their businesses too. As one put it, we are now six months into a three week crisis.
All the emergency measures we put in place are all still there, the system is starting to creak and it no longer seems temporary. And it doesn’t really work for the long-run. We have learned new ways to use technology and have become expert in the tools for remote working. What we must now do is rethink our processes and routines to take advantage of these while making space to grow and learn.
Ken & Mark from AGM transitions, and I have been working on turning our small guides into a book. It’s now available from Amazon here: [LINK] – I hope that the practical advice and structure are something that will help you through this stage of lock down.
It’s an economic emergency. Every company is having to rethink what they do and how they operate. Together with AGM Transitions we’ve asked our networks to share their recent experiences. We’ve written three guides:
Since I published my post on March 9th the world turned upside down. Covid-19 is a “big one”, certainly when considering the economic impact of the measures taken to stop its spread.
Couple that with the shocks to both supply and demand in the oil world and members of the Bestem Network have been left slightly shell shocked.
What will happen next?
We are starting to understand where we are – but we’re battling to understand where we will need to go.
As Gordon Ballard said in the FT on Saturday: “In the past, activity decreased then picked up again — each time, we saw it come back,” he said. “Now it’s not entirely clear if things just come back as normal. Everything has changed.” [Link]
For some context however I should point out that even with 30% drop in oil demand we are now only at the level that was normal in 1996 [Link]
What have I been up to?
Alongside my hour’s cycling, home cooking, housework and playing with electronics:
Looking after my clients
Contributing my skills to my community to innovate systems to support neighbours in need; and
Working out what we have to do to come out of this ready for the next phase.
My first post of the year – a look ahead for 2019 – was a bit tongue-in-cheek. Now The World Economic Forum (WEF) is meeting in Davos, Switzerland, I thought I would provide a more insightful analysis.
The WEF will be considering the implications of the 4th Industrial Revolution as the headline theme for their annual conference. If you’re new to all this here is a I4.0 primer from CNBC [Link]. 2019 is going to be a year where industrial innovation takes centre stage.
The thinking from WEF is always good, detailed thorough. I think that some of the crucial themes for unlocking innovative value will be focussed around opportunities and risks. Here are some of my current favourites.
The Opportunities
Using information and reconfigurable platforms to provide new solutions to stakeholder experience. This will establish new ways to create, deliver and consume the core outputs from industrial processes.
Removing the idea of separation between “IT and the Business”. The two are now conjoined. Being good at tech will be a prerequisite of being good in business. Technology will be embedded in every way that work is done, products are created, consumed and delivered.
Empowering the front-line will be crucial. The winners will be faster organisations where workers make autonomous decisions and are rewarded for outcomes. As an analogy think of Deliveroo drivers. For many reasons, more refined models of work-coordination are required but the core autonomous nature of the work is being previewed here. Decentralised decision-making and autonomous action guided by technology removes many of the tasks performed by middle management. I hope we will start to see teachers, dentists, doctors and nurses no longer filling in spreadsheets and working as relecutant automatons directed by ill-informed command-and-control resource-allocation systems.
With power comes responsibility. Without middle management, new forms of controls (and motivation) will be needed to spot problems and reward behaviour. Surprisingly for some, I don’t believe it is the front-line worker, but middle management, that is most under threat from AI, visual computing and big-data. I hope the CFO won’t push progress only on AIQ but that marketing and talent managers will push the AEQ agenda. It’s important we understand not only economics but also pride, satisfaction and feelings of accomplishment.
Innovation may not be in new forms of technology. The tech available to us now is far ahead of our application of it. Deployment options are already available but not used. Innovation will come from the application of existing technology to new areas of business. Those stuck with old infrastructure will not be able to reconfigure fast enough to keep up. Value will arise from designing new ways of working. Capturing the value will rest on finding ways to get the rest of us to work that way too.
And now the risks
Innovation will come from networks. Big companies will look to small companies for ideas, small companies will be formed from collaborative networks of individuals. Ideas will be mashed-up to cross-fertilise creativity. Guards must be in place to avoid exploitative situations – if they arise unchecked it will mean that the small-guys can’t and won’t play for long. Without them, brilliant ideas will never be used. Rights management is crucial for the distribution of the value created. In the way that song-writing credits generate performance fees for artists. Licenses for ways-of-working are needed to stimulate innovation, and society needs to enable easy access to legal enforcement to uphold claims against copying without permission.
Massive generalisation follows: Young people are frustrated by old-people’s inability to embrace new ways of working. Technology savvy folks are orders of magnitude more productive than their peers. They are quicker to make decisions and to multi-task. This leads to not only high-productivity but also to high-error rates. Iterative short-cycle experimentation and learning-by-doing is the hall-mark of agile strategy. This is not an approach that has been adapted to high-risk industrial work-settings. This leads to a clash of culture and an inability to attract and retain talent.
Innovative individuals will continue to pursue independent careers in increasing numbers. Old industries will die, vested interests will be disenfranchised. The world of work, taxation, social contracts, pensions and access to finance will have to evolve to cope with this. To create a consensus and establish a sense of fairness new-politicians will need not only wisdom but also to deploy the old-tools of oratory and persuasion. There will be big disagreements across society and between nations. It will be necessary to create hope for those who fear being disenfranchised. They will not go quietly into that good night.
Politics of property will come to the fore – the control of assets will be important. Whether that is physical real-estate where low-paid important workers are unable to afford to live where the people who need them reside; property from an accumulation of historical data that provides an unassailable lead and monopoly positions; or the “IDEA” that one person has spent 10 years creating that is exploited by a large corporation without reward. Society will need to find ways to address the control and distribution of property in a world where labour and working-time may not function as a distribution & motivation method.
I will spend time exploring these themes during the year – I have a number of initiatives already kicking off for the year and I hope that you’ll be able to help.
The oil and gas industry is finding it hard to access needed talent. There are many reasons for this, and it’s only going to get worse. This report from the BBC is about the GETI (Global Energy Talent Index) survey [Link] that found the oil and gas sector is suffering from a talent shortage and an inability to attract graduates.
The survey said:
“possible recruits are attracted to the ‘technology’ sector rather than oil and gas.”
It did not elaborate on why that might be. My guess is that its to do with the old-fashioned approach our industry takes to adopting new ways of working coupled with young people’s expectations for the way they want to engage with the world. The idea that they want to work “in tech” may be read as they want to work “with tech”, and perhaps they equate “tech” with innovation and creativity.
This report on CNBC [Link] sets out to explain why people want to work in tech instead of finance. It’s findings include: “High-potential grads want to work at tech companies like Google and Facebook because they are more innovative in nature, give employees a deeper sense of purpose and offer flexibility”
The GETI report also found that
“young people were less attracted to big salaries than in the past – and instead wanted roles which offered promotion opportunities.”
What do you think that they meant by a promotion? Perhaps that’s a desire for autonomy, self-direction, control and flexibility. Perhaps the new generation don’t appreciate being told what to do by an old bloke (and it normally is a bloke) who can’t use his email, who can’t be bothered with these guys who constantly have their face down using “twitbook” or “facesnap” on smarty phones.
The BBC quoted Hannah Peet from Energy Jobline saying
“Leaders and hiring managers recognise that the world has changed and the desires of young people are different, with only 30% of those aged under 25 believing that higher pay effectively attracts talent. The trick now is to respond by working to provide individuals with more opportunities to grow their careers, travel and work with new technologies.”
What do you think she meant by the word “trick”, surely this language conveys an underlying lack of buy-in to the fundamental change that is required. Trick seems like a quick fix. Perhaps a deception. What I hear when I read it is: “We’re doing it right, we’re not going to change, we need young people to come into our industry – let’s trick them and they’ll come. Then we can show them what the world is really like which is not innovative, or tech led nor does it embrace change and discovery – by then it’ll be too late”.
Well I’m sorry: they’re right and you’re wrong. There isn’t a trick. We need to change – and the young recruits are going to show us how.
Leadership in the fourth industrial revolution is crucial, luckily the WEF (Davos) just published this a guide on how to lead in the Fourth industrial Revolution.
Googling the phrase “Every business is a digital business” reveals a list of today’s leaders attributed to that phrase. Yet, 44% of leaders say a lack of digital skills in their organization is delaying business transformation. Executives believe only one-fourth of their workforce is ready to work with intelligent technology. Less than half of executives believe they possess the skills and abilities to lead in the digital economy.
In his book, Dreams & Details, Jim Hagemann Snabe, Chairman of Siemens, wrote: “The new digital reality requires a new kind of leadership, one that understands the rules of the digital season, reinvents business from a position of strength, thinks exponentially rather than linearly and develops people to unleash their full potential.”
