Category Archives: Business

Is green the new gold?

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Sadly the Environment seems to be increasingly one of Westminster’s favoured battlegrounds. A place where the Treasury can show who really is boss while the Department for Energy and Climate Change (led by a Lib-Dem) attempts to grapple with some of the most challenging issues facing our country today.

I say grapple but I could also (again sadly) say fumble or stumble as there has been an alarming amount of dilly dallying at times on the timing and structure of key environmental policies – but that’s the theme for another post. The key point here is that despite all of this political posturing, the green agenda is not going away and nor can it.

We’ve all heard the view that now we are going through the economic wringer, any thoughts of doing something good for the planet have to take a back seat. That is a view fostered in the main by never-knowingly-under-lunched City types who much prefer to assess business on the levers they best understand and to avoid harder to assess, in number terms, contributory factors like social and environmental responsibility. I think they are missing the point and not just because we all need to ‘save the planet’. (A euphemism for ‘save ourselves’, by the way.)

Environmental issues need to be put into a stronger business context because they are just as relevant to many businesses’ balance sheets as the cost of raw materials, payroll or competitive pricing. That might seem a bit of a stretch but this is really not the warped view of the strident environmentalist lobby. Managing energy use in business today is about making your business more competitive.

A number of factors are at work. Here are three of them:

  • Firstly, the simple cost of energy. Despite some recent decreases, the general trend is for a steady and inextricable increase in energy costs – to heat the factory, power the machine tools, light the call centre, turn the turbine.
  • Then there is an increasing trend towards supply-chain compliance. If you make sandwiches (or trucks for that matter) for a supermarket, the chances are that they will be placing increasingly punitive penalties in place if you don’t cut their environmental mustard. Or they may just choose to work with someone else. While that is a factor already with some clear precedents in the Food & Drink sector, we are seeing signs of other markets adopting this strategy – manufacturing, aviation, entertainment and leisure.
  • Also, while there is a lot of carrot in the Government’s approach to encouraging consumers to be more efficient in their energy use, it’s the big stick that is being used increasingly with businesses. The Carbon Reduction Commitment (CRC) is already causing disquiet among the UK’s largest businesses – it’s effectively designed to place an energy tax on the country’s biggest energy users. My colleagues and I believe that this approach will begin to filter down towards SMEs before too long. The basic message being, “if you haven’t got your energy act together then the Government are going to strongly ‘encourage’ you to do so …”

What many businesses are missing is the will to do something about all this. To date, unless you are a power user of energy there has been little compulsion to do anything. It’s simply not been that important. My view is that those businesses, no matter how small, who grasp the concept that good energy management can be good for business, will improve their competiveness and their bottom lines. So green can be made into gold.

 

Baby, bathwater, beware …

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William Hague said recently, “There’s only one growth strategy: work hard.” Without daring to go near the politics of that statement, I have to say that it would have made more sense to say “work smart.” You can flog your guts out working hard the same old way but if you don’t take into account the changing world and intelligently figure out how to work with it, then you’re likely to exhaust yourself and fail into the bargain. Sorry William.

At the moment, you hear a lot of buzz around ‘social business’ or, before that, ‘Business 2.0′ and similar sounding slogans. The trouble with such ‘paradigm shifts’ is that they all imply a jettisoning of past experience. How stupid is that? And, no, I’m not taking a pop at anyone or any organisation in particular, just making the point that ‘new’ is often complementary to some of the ‘old’.

Some of the ‘old’ is with us, rallying under a new banner. “Organisations are networks of formal and informal relationships.” Geddaway. Of course they are; they always have been. The difference now is that we have software and communication tools to massively improve their effectiveness.

We have the legacy of the first wave of smart working, in particular, “the need to make innovation everyone’s business and to empower workforces to ‘take action that will benefit the customer without layers of bureaucratic approval’.” Lessons learned from the successful pioneers of these working methods are invaluable input to what’s needed now, in this even more uncertain and chaotic world.

We need to build flexible systems with adaptability, integration, disciplined collaboration, innovation and knowledge sharing in mind. This isn’t a lazy set of buzzwords, each is a vital consideration as we invent our way to a better future. I could have added more – discovery, sharing and co-creation, for example. The point is that the networked world really is a network of brains, knowledge and information sources all orchestrated for the collective good. ‘Collective’ in this case has to include customers which, by extension, means suppliers. Otherwise you won’t have any customers when the current turmoil ends.

Turmoil? No, I’ve not made a big deal of the ways in which the world is changing and the challenges we face because I assume you know. But, just in case, try these for size: ageing populations; shifts in global economic power and declining industries. The latter being replaced by new high-value industries such as: bio-tech; electronic gaming; renewable energies; and so on. Adapting to change is not easy but the status quo is no longer a place of refuge.

The future of work is visible. Most of the ingredients exist, even though we’re bound to see more come along. It doesn’t matter; we have enough to act. We can blend the old with the new and connect up to internal and external knowledge flows.

Here’s an example taken from a presentation by Alistair Moffat: NSN, a 60,000 person organisation formed from parts of Nokia Networks and Siemens Communications, faced the challenge of accelerating the emergence of a common culture. It chose to use discussion forums to create The Culture Square, a forum where company‐wide conversations could take place.

People were encouraged to talk freely and anonymously without risking dismissal for saying what they believed.The values and attitudes of the Chief Executive and his desire to nurture an organisational culture consistent with adult-to-adult relationships, where people could disagree without being disagreeable, were core to how the conversations unfolded and, indeed, succeeded. The Culture Square came to represent trust and inclusion., revealing the important issues that people were most concerned about.

Each person involved in innovation and problem-solving can be augmented by the knowledge and capabilities in their network. This is massive. And it’s at our fingertips. Yet what are many businesses doing with social technologies, the potential turbochargers of change? Imposing a blanket ban.

How blinkered is that?

 

Anne Marie wants you to know that she was aided and abetted by David Tebbutt in the creation of this post.

Get on the trust trajectory

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Who do you trust these days? Your holiday company or TripAdvisor? Your PC provider or a user forum? Your mates for an introduction to a new partner or an online dating service? I could go on, but you’ve probably caught my drift. The world has changed. Whether it’s automation or crowdsourcing, there are now better ways to achieve the results you want.

What does this mean for suppliers of goods and services? Once upon a time, they were the source of information and knowledge about their products. And, yes, they were trusted. Many of them did apparently sensible things like outsourcing crucial elements of their operation to low-paid people in far-flung lands who did the minimum they could get away with. This worked for the accountants but not for the customer. Producer-efficient but not customer-effective. No wonder trust and respect evaporated.

We’re waking up. We inhabit a world where we expect the right answers, where we demand high levels of service, where we switch on and get everything we need and, crucially, where we’re used to transferring our business to somewhere more amenable if we feel let down by a supplier.

We don’t actually care much whether we get our answers from an automaton or from a human as long as they’re the right answers. My car tells me when it thinks I’m tired. I don’t mind. It’s usually right. It knows because it looks at time behind the wheel and my driving pattern. I love it (the car that is) so much that I’ve not so much bought a car as bought a driving experience. My every need – service, insurance, monitoring for advance warning of problems en route – is taken care of by the manufacturer’s IT service network, in which the car is a wifi node.

If trust is at the heart of business these days (as it always should have been) then it’s clear that many companies have taken their eye off the trust trajectory. They simply don’t ‘get it’ and continue with their traditional behaviours. They worked in the past, why shouldn’t they continue? Because their customers are different, their expectations have changed and this can only accelerate as the good companies show up the bad. Switching, in most cases, is a button press away. And that button press might dissuade many other people not to use your services too. That press, and all the others, could add up to a massive thumbs down for you.

The good companies, the ones that do ‘get it’, use smart humans and automation driven by data patterns to achieve a positive effect, with the traditional middle bits – outsourcing and out-tasking – being disintermediated. Companies are taking back control and protecting their reputations. At one extreme is the expert interpretation of context, and at the other lies self–service, augmented by knowledge and data. Each aims to completely satisfy the needs and desires of the customer. The boot is now well and truly on the other foot. The customer’s, that is. And we like it. We use this approach to learn where to go on holiday, where to eat, what to watch, who to date, what jobs exist, how to travel to work, how to lose weight, how much my house is worth, and so on.

If your business is unaware of this polarity, then I have bad news for you. You won’t last. If you’re a personal services company – hairdresser, window cleaner, housekeeper – you’ll probably last longer than most. But even your lives will change as people increasingly find you, and drop you, by what they read online.

You are increasingly, not who you think you are, but what others think of you. Collectively. Get it or die.

Inhumane HR behaviour

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Taking my usual journey into town (London) I sat next to an individual who was quite obviously distressed. Over the phone and despite knowing he was on a train, his employer gave him the news that he had to make a choice there and then about a relocation package.

It transpired later that the company had just merged with another and he was offered several jobs, all of which were a fair way from his home, meaning that he needed to relocate his family. As he has two teenage children aged 15 and 17, he felt that he would have to decline all such offers in order to prioritise the needs of his children.

This was a dreadful conversation to overhear and I apologise for not tuning out. But it was a distressing demonstration of how not to deal with a situation in the right way; firstly that the HR department chose to talk to him on a train with no privacy and, secondly, that it insisted that he made a decision there and then. I and another passenger agreed after he’d left the train that the company’s behavior was totally unacceptable. What made the situation considerably worse was that, from his responses and his body language, it was clear that this individual was made to feel inadequate for choosing to put his family needs first.

In reading Roger Steare’s book, Ethicability: How to Decide What’s Right and Find the Courage to Do it, I realised that we can lose some basis caring fundamentals in the way we deal with situations. What would have been the right thing to do in this situation?

I put myself in the train passenger’s shoes and immediately felt his distress and then put myself in the employer’s shoes. I rummaged around to find a rational justification for this behavior, but couldn’t find an element where the employer would be in the right. The lack of care in dealing with this situation would put me off ever working for the firm. Lucky for them I didn’t find out who they were.

But it did illustrate that some businesses need to change the way they see their employees, not as a commodity they can deploy wherever they like but a human resource that needs to be valued and nurtured in order to be able to thrive in the home and then at work. A happy family man or woman is often a happy worker, so surely the potential for a better system should be reviewed. Perhaps said company needs a workshop with Roger Steare!

(later)

I’m on my way home now to appreciate the times that my husband and I put our boys first. A good lesson to be reminded of!

Mind the gap

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Large income disparities are very destabilising for any economy. In the UK this is a very real problem. This graph shows the Gini Index for the UK to 2009. (With kind permission of the Institute of Fiscal Studies which owns the copyright.)

Gini index

 

 

 

 

 

 

 

 

A coefficient of 1 would mean one person receives all income, while 0 gives everyone an equal share. Among all developed countries the UK has the largest growth in income inequality. By contrast, Scandinavian countries, France and Germany have actually managed narrow ‘the gap’.

Most people were appalled by the excessive salaries and bonuses that bankers paid to themselves and found the practice immoral and bad business ethics. The government told us that it only concerned a few bankers and we should accept this to stay competitive in the global market.

Monetary Financial Institutions are of concern because they should fulfil key socio-economic functions, i.e. providing liquidity to consumers and small businesses. However they have become a self-serving industry more occupied with gambling and speculation for their own profit interests and quite disconnected from the needs of the rest of us.

But, let’s face it, if you could create money from nothing and 65% of your income came from interest, wouldn’t you want to create and lend as much as possible? This, combined with a compensation policy that encourages this behavior, is one of the major drivers for the widening of ‘the gap’.

In the five years 2004 to 2008 the money supply (M4) in the UK almost doubled in five years. £1.3 trillion was created by our MFI’s and lent, with interest, to consumers, businesses and the Government. The relevant part of the Gini index – below – shows that wealth at this time accumulated increasingly to the rich. ‘The gap’ widened.

Slice from the Gini index

 

 

 

 

 

 

The chart below divides the taxpaying population into 10 deciles, each containing roughly 3 million people; the poorest to the left and the richest to the right. As you can see, the richest ten percent got 37 percent of total compensation while the poorest ten percent actually lost 1.3 percent of theirs.

Distribution of complensation

 

 

 

 

 

 

About 1.3 million people work in the banking industry (4.2 percent of total employees in the economy). Of them, 702,000 are represented in the top decile. In other words, 23 percent of the richest 10 percent are bankers.

The next chart compares the growth in banking compensation with the rest of the economy. Up to 2008, banks ran at 11 percent compared with 4.3 percent for the rest of the economy. After that the banks booked £30 billion in losses and remuneration dropped by 8%. But, as you can see (green line), it was only a short interlude, then remuneration continued at the rate they had become accustomed to.

Financial institutions vs the rest

 

 

 

 

 

 

Part of the banks’ 11 percent growth rate could be explained by the increasing number of employees but this would only explain about 2-2.5 percent. And it doesn’t explain why compensation grew again after 2009 when employment actually declined sharply and has still not reached the level of 2008.

The red caps in the next chart show the amount bankers received over and above the ‘rest of the economy’ growth rate of 4.3%. This amounts to an average £6.4 billion per year.

The gap as red caps

 

 

 

 

 

To set this into perspective; The poorest 3 million in this country receive only about £10 billion out of the total compensation pot, those little red caps would make a huge difference to their standard of living. Or, if the government received this extra cash, it could reduce the deficit by a massive four to five percent per year.

Yes, fiscal measures can help distribute wealth more fairly but, really, we need to redesign our banking system; one that stops private banks creating money from nothing, stops them taking risks on the back of taxpayers and compensates employees for the right reasons. Such systemic changes will stabilise our economy, end those boom and bust cycles that victimise mainly the poor, and liquidity will start flowing to where it actually produces something real.

Many lessons in history teach us that the path we are on at the moment will lead to revolt and socio-economic instability and, eventually, the collapse of society and depression. Could the recent riots be a portent?

Where’s the ‘social’ in ‘accountancy’?

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At the root of what I would call ‘social accountancy’ is how money has become divorced from its reason for existence. It is now a ‘thing’ in its own right, seeming to be building a life of its own.

One reason for this is the way it is accounted for, particularly in terms of the short-term, bean-counting model currently called accountancy. A change in that model to one that included and accommodated what money achieved when being used, might be more beneficial.

This idea started years ago when people used to call Concorde a ‘White Elephant’. Yet I would argue it cost hardly anything because building it, then using it, kept thousands employed directly, who all paid tax, and then many others employed indirectly, who also paid tax. The money kept moving, and hundreds of thousands, if not millions, enjoyed a reasonable life… arguably not bad for a White Elephant.

And lessons were learned – not least being the huge technological spin-offs that have led to other businesses growing, where people are employed and….pay tax. An obvious example here is DARPA, the US Government’s Defense Advanced Research Projects Agency whose work led directly to the development of the internet. And look how many new businesses have sprung from that.

A more topical example is the planned Government investment of £9.8m in Nissan’s much lauded new car venture, which is expected to yield ’2,000 new jobs’. If we were to assume a collective average wage of £26,000 and a 20% income tax take, that equals £10,400,000 a year in income tax: a complete Return on Investment in less than one year. Many businesses would kill for that.

Going back to Concorde: From the signing of the contract the two governments invested heavily as staff were employed and contractors signed up. The staff were paid, and in those days income tax rates were higher than today. So let’s say some 30% (on average) of that salary bill came straight back to the Government in income tax. In practice it was probably more.

But now extend the idea. One example: any education the new staff needed required not just trainers but an organisation to support them. The trainers, the support staff and even the builders paid income tax. Add the shopkeepers, energy suppliers, transport providers (even if that is just shoe leather), farmers and food processors, and a panoply of others – all making a living, all paying income tax.

One person’s disposable income became the next person’s salary and a source of income tax.

Yet modern accountancy models oblige businesses to, for example, close down here and move off-shore because the manufacturing costs – to just that business – are lower. In fact the money system (such as the stock market) even ‘praises’ them for doing so.

But neither the company nor the stock market has to account for the people put out of work – no longer paying tax, and requiring support from the benefits system. That is a model where money wins for its own sake – not for the sake of the people whom it once served.

And such actions also give other countries an income tax bonanza which maybe the UK should be getting.

The by-products in terms of wider economic growth, more contented and fulfilled people and intangibles such as reduced load on law and order services, the health service and a wide range of other services cannot be fathomed because we have no process that can account for them as part of the ‘whole’.

Is our present trajectory completely mad? What do you think?

The power of community

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In these difficult economic and environmentally challenged times soft issues like community don’t immediately sound fitting. The truth is very different.

Working together as a community, or building a community around shared ideals is exactly the way to tackle these challenges. Businesses built on community are thriving despite the challenged economy. Organisations that create an internal community that involves the workforce too are not only trading strongly, but are also assured enough to do the right thing and make environmental issues a pillar of their strategy.

Community projects are tackling housing issues. The media industry is not at death’s door if it knows and understands the community it is part of. And this is the heart of my argument. Taking a focussed approach, knowing the community you exist within, cutting out the periphery players and constantly listening to your community delivers results and therefore allows positive change.

It has never been easier for organisations to find and connect with those with shared ideals. Social media platforms like LinkedIn and Twitter connect communities together and create sub-communities. Their most powerful proposition is the direct one-to-one contact within a community that fosters debate.

Not every organisation can create a community platform and then exploit it as Facebook has, but the social media phenomenon that includes Twitter demonstrates the human desire to come together and collaborate on a topic, no matter how elevated or inane.

Individuals become a mass using social networks and together they can influence an organisation that can then influence policy. Take the Cities Fit for Cycling campaign by The Times newspaper. Twitter gave cycling commuters a platform to discuss and share ideas about improving road safety. Cycling is a very individualist activity, but with Twitter cyclists became a community, then when staff at The Times had a very personal experience of cycling dangers, they discovered the size of the community and launched their campaign which influenced the Prime Minister and Parliament to debate the issue.

The Cooperative Group and fellow retailer John Lewis operate models where customers and workers respectively become part owners in the organisations. This community model of shared responsibility has helped both to flourish and make ethical and environmental business decisions.

Planning decisions in many communities more reflect the needs of developers and shareholders than the communities that then have to live with the supermarket or infrastructure foisted upon them. But by acting as a community the development pressures on authorities and regions can be alleviated. Community Land Trusts in Georgia, Vermont, USA and London have redeveloped regions and delivered affordable and profit-making housing, thus relieving two pain points for local authorities.

The last 30 years has been an era of broad brush approaches by businesses and organisations. In the highly networked, economic and environmentally challenged 2012 the broad brush is the wrong tool for the job. Big no longer works; wide ranging products lack focus and customers and users cannot identify with them. Although there is a lot to be said for the serendipity of discovery when presented with a wide range of choices, communities require focused and specialist information and will naturally coalesce around it. Contrary to perception, targeted media products, even in printed format, are still in good health.

To engender a community, business has to accept the need for face-to-face contact. As a result the recent tendency to rely on consultants, PR or marketing agencies needs to be drastically cut or even eradicated. These organisations are sales driven, often represent a single aspect of a community and have short term targets. A community is a long term project and members increasingly find each other directly through social networking.

Direct relationships, fostered through communities, cut costs, embrace innovation and meet, in partnership, the challenges that our streets, towns, schools, organisations, countries and planet face.

Rag and bone men of the information world

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We are all aware these days of the need to make better use of our available resources, whether this is recycling our domestic waste or minimising our use of energy guzzling technologies. We apply these green principles to our physical environments – why shouldn’t we apply them to our intellectual environments as well?

In the world of business we waste an awful lot of our existing and available knowledge. We reinvent the wheel on a regular basis when we have perfectly good, well documented wheels available to us. We don’t tap into the accumulated experience of our staff. We store vast amounts of information at considerable expense, often making it hard to find in the process, and then feel overloaded with the trivial bits of information that seem to get in our way on a day to day basis.

The main tools currently for business communication are the email and the Word document. Email is commonly cited as one of the main sources of stress and frustration in organisational life. This is largely because it gives priority to the sender of information. The amount of information coming into our inbox is not in our control and we still feel an obligation to respond to things that have been sent to us. Mostly what we are sent are Word documents which have become very formulaic with multi-page reports the norm simply because they are written to a formula and a template.

We could do so much better by than this by using social tools which can add immense value both in the reduction of daily noise and in a greater ability to reuse our existing knowledge. Blogging and Twitter are teaching us collectively how to point and as more of us do this we develop networked sense-making which enhances our ability to learn and improve. We build networks of people to follow who are good at finding, and sharing, the good stuff. Our networks filter the web for us on a daily basis and they dig into our old information to retrieve the gold dust.

These tools are also teaching a more concise form of writing, potentially a whole new form of business literacy. They require us to give context to information and to add value. Unlike email, this time the control is with the receiver of information and they know it. If you don’t make a difference for someone else with your use of social tools no one will subscribe to you – they will tune you out.

Bloggers are the rag and bone men of the information world. They root around in the rubbish tips of information, picking over the bones and finding the good bits. They combine discarded writing in new, innovative and productive ways. They re-discover long forgotten information and breathe life into it by giving it context and meaning. When they combine in networks they offer the possibility of increasing the usefulness and longevity of your information as never before.

Is sustainable growth a myth?

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As politicians continue to try and face up to the worst economic conditions for close on a century, the constant refrain from them seems to be around how we need to create something called “sustainable growth” – a term that is never actually defined, yet which has the benefits of hitting two main topics within a single, woolly, statement.

The presumption has to be that through some form of magic, the economy can be picked off the floor, that money will come in from wealth creation activities without this having any deleterious impact on the finite raw resources such as oil and metals, as well as the less finite resources such as water and food that we have tended to overuse or misuse in the past.

A few problems with this. For every new person in an environment there will be a need for more basic resources such as water and food. And a concomitant growth in ‘need’ for things like fuel and luxury goods. To fund these needs, more money is needed, which requires more growth, which requires more people, which requires more growth, which… Well, you get the picture. Even at the most basic level, there is no sustainability around growth that involves more people, unless a completely different thought process is brought to bear around resource usage and re-use.

Next is around the wealth creation process. A services-led economy is not wealth creating; it is wealth shuffling, generally from the bottom to the top. To create true wealth, something has to be taken, turned into something else that has intrinsic value and sold on to someone else, preferably in a different geography so that the wealth is drawn in from outside.

The problem here is that the main constituent of most manufacturing is on the human resources involved. Those geographies with low-paid human resources have shown how they can draw manufacturing to them, leaving higher cost geographies with higher-end, extremely skilled manufacturing and service-based economies. To get around this involves a mature economy not using human resources, but aiming for as much automation as possible – which means fewer employees, less pay and the need for a larger and more expensive benefits safety blanket.

I don’t believe that “sustainable growth”, no matter how defined by the politicians, is achievable. However, a move towards greater sustainability can work. A more macro view on the economy has to be taken; how can we cut down on the food miles for non-essential foodstuffs by growing more of what we need closer to us? A move towards a barter-based economy, where the physical and mental capabilities of individuals can be well utilised through a non-cash based system, would remove the dependence on financial growth to fund a less manufacturing-focused economy. A concerted approach to energy usage based around facts, rather than lobbying, would lower the overall energy usage across a whole range of areas while optimising how energy is created and distributed, through the use of technologies such as ground heat pumps, community combined heat and power systems and stored hydro power.

This leaves us with the thorny population problem. Seven billion people and growing is completely unsustainable, and population growth has to be faced up to. A greater part can be done through education and allowing choice, but I’d better stop now before I begin to rant…

Why green makes business sense

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Our energy sector, unlike almost every other aspect of life, has barely changed in the past hundred years. Across that same time span, our talent for wasting energy, water and raw materials has reached monumental proportions. I’m sure you know of buildings that run air conditioning and heating units at the same time. And I don’t even need to remind you of our mountains of potentially valuable waste.

Climate change has been eclipsed in the public mind by our recent financial woes but these things are connected. How many trillions of dollars are moved from democrats to despots in exchange for fossil fuels?

Depressed? Don’t be. While politicians dither, businesses and other private organisations don’t. After some experimentation with ‘greenwash’, often led by the well-meaning Corporate Social Responsibility department, green has moved to the boardroom. Companies have woken up to the fact that a more efficient use of resources and a reduction of waste saves them money and prepares them for future regulatory demands and inevitable increases in commodity prices.

Look at DuPont. Its energy efficiency efforts delivered a net saving on its energy spend of more than $3 bn in ten years. And Walmart is a company that always does things for sound financial reasons. Its stated environmental aims are: to be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustain people and the environment. (Taken from its ‘sustainability’ web page http://walmartstores.com/Sustainability/.)

I believe that the next wave of business successes will comprise green technology entrepreneurs, green service providers, renewable energy developers and project financiers. I also think that the smart people are quietly getting on with their ‘green’ projects, thus placing themselves well ahead of the game when we emerge from the present turmoil.