Trends that are shaping the World – part 4

Whereas in the previous weeks we have looked at megatrends affecting emerging countries, this weeks’ blog will mainly focus on societal changes in developed countries. It is an aspect that almost all western countries face, often referred to as the ageing population as in the increase of the proportion of people older than 65. In Germany this proportion was as large as 20% in 2009. In the UK and the US it amounted up to 16% and 13% respectively and is rising. In comparison with China on a mere 5%, these numbers are very elevated. Why is this proportion so high in western countries and how should the public and private sector react to it?

Due to improved quality in health care and a relatively higher fertility rate in the 1950s and 1960s, there has been an increase in the ageing population. Another driver which further increases this proportion is the higher independency of women since the 1980s.

Unless more funds are made available to support the ageing population, the burden of this growing segment will continue to impact the economy further. To counteract this, if productivity can be increased especially in the public sector, more resources are freed to finance the elders’ pension schemes of tomorrow. There are a number of ways to improve performance that include organizational redesign, strategic procurement and operational design.

Firstly, organizational redesign is the broad term for streamlining processes to provide more of a focus on the end-customer. Secondly, a better understanding of a suppliers’ economics and the environment in which a public institutions operates in, often leads to positive savings and therefore performance improvement. Lastly, through redesigning the operations and subsequently reducing waste and duplication of effort, improvement can be achieved.

These three ways of performance improvement are already established methods in the private sector, why aren’t they commonplace in the public sector? It is often stated that in the absence of competition, managers do not have an incentive to take risks or to improve their business. This is what happens in most monopolies and why governments prohibit them in many industries. The same goes for public institutions: choices should be created for the end-user to create competition and private companies should be able to bid for social service contracts.

In terms of the private sector, businesses in B2C should position themselves to be able to address the growing segment of older people. The elderly of today and tomorrow are wealthier and more outgoing than yesterdays’. Hence, the right brand image and products could prove fruitful when tackling this growing segment.

The ageing population in western countries is a fact and poses a major change in the external environment of public and private entities. Therefore both types of entities should proactively approach this societal change.

Trends that are shaping the World – part 3

The third trend of seven is the increasing population migration from rural to urban areas – Urbanisation. The economic development witnessed in emerging economies has led to huge urban migrations as cities continue to be main drivers of GDP growth. This migration is occurring at a tremendous pace; the urbanisation rate in China for example has reached around 45% last year from a level of around 35% in 2000. This means that in less than 10 years over 130 million people or about a half of the US current population, have migrated to major cities in China and this looks set to continue. By comparison, urbanisation in the US stands at about 80% (i.e. 4 out of 5 people in the US live in urban areas).

What are the triggers for this explosion in urbanisation in emerging countries? Economic growth in urban areas far outstrips that of rural ones. This in turn provides jobs which then drives migration. Beyond this, services and infrastructure investment further accelerate the economic development and the cycle continues. It is this reinforcing spiral of demand, corporate investment and job opportunities which will continue to drive urbanisation of the next 10-15 years.

As urbanisation continues, there will be significant pressure points that Governments and the private sector will have to address if economic development is to continue. A study conducted by McKinsey identifies these pressure points as land, funding, human and natural resources.

Firstly, the land issue relates to urban sprawl, loss of arable land and traffic congestion. Governments should anticipate the growing proportion of people living in urban areas by providing the availability of decent housing and larger and more effective mass public transport.

Next to this, funding will be needed not only for infrastructure, but also for the provision of services. The provision of health care and educational services for migrants will become an important factor.  As an increasing proportion of the urban population will be from rural areas, there will be a huge need to develop skills for urban jobs in industrial and services sectors. This leads to the third pressure point, namely the need for high-skilled labour forces.

Even though the number of university graduates will rise significantly in the coming years, these people will move to mega-cities where more job opportunities with better benefits are. If an evenly distribution of talent is to be achieved, governments should address this issue, as otherwise shortages in labour supply will occur in small to mid-sized cities in emerging countries.

Finally, the demand for energy and water resources will likely surge as urbanisation increases. If continued economic development is to be achieved, resource efficiency will become very important.

Planning must be conducted across these four areas in order for the current and forecasted rate of urbanisation to be sustainable and for emerging economies to drive economic growth.

Trends that are shaping the World – part 2

The second of the seven megatrends that I will discuss in this blog over the next six weeks or so is the growth in personal wealth, particularly in emerging economies. Over the last decade, there have already been substantial increases in people’s personal wealth, a result of economic development, discussed in last week’s blog. Since 1990, Gross National Income (GNI) in China and India has grown 768% and 275% respectively versus 104% in the US. As a result, there has been a decline in the number of people deemed to be living in poverty as well as the development of middle classes in emerging economies. This looks set to continue over the next 10 to 15 years and at a greater pace.

There are several drivers behind this trend. The first is the increasing workforce and the shift away from Agriculture towards the higher value added Industrial and Service sectors. This has and will continue to drive significant increases in average salaries in emerging economies. The third aspect is the changing demographics and the change in family structures. The average household size is decreasing as is the number of dependant’s per income earner.

These three factors combine to drive higher levels of disposable income. The consequence to this will be an increased demand for goods and services from companies positioned to capture this growth.

Trends that are shaping the World - part 1

As we enter the 4^th Quarter, it is normally a time of reflection on the year gone by and also a chance to look ahead at what could await us in 2011. However, this time, we have decided to take a slightly different approach and take a longer-term view to think about some of the major global trends that are and will continue to shape the world over the next 10 to 15 years. You’ll see that these trends vary in their nature; some are economic, some are more political whilst other relate to the changing demographics and social make-up in both the developed and emerging markets.

The purpose of this blog is simply to provide ‘food for thought’. We will provide an overview of each trend every week. More detail on these trends and their impacts will be discussed in a whitepaper that will also be available on the website (www.point-consulting.com).

The seven trends we will be discussing are:

1.       The rebalancing of economic power

2.       Increasing prosperity

3.       Urbanisation

4.       Ageing population

5.       Connectivity

6.       Sustainability

7.       Global markets, national governments

Part 1 – The rebalancing of economic power

In the next 10 to 15 years we will experience a continuing rebalancing in the global economic power, led by Brazil, Russia, India and China (the ‘BRIC’ countries – a term first used in 2001). According the GDP forecasts, China will have the world’s largest economy by 2020, roughly 1.25 times that of the US (whilst it only accounted 12% of the US in 2000) and India the 3^rd largest economy, with its economy accounting for just under half that of the US in 2020. This shift will bring greater balance to the world stage both economically and politically and a more global platform for decision-making – the G8 became the G20 to reflect these changes.

For companies, this means that the ‘emerging’ markets will continue to be the avenue for growth, away from the traditional markets of the US and Europe. However, capturing this growth will require the right strategies to be developed and successfully executed.

The vast population numbers suggest a huge demand for products and services but it is worth considering that spending power in ‘emerging’ economies is less than one fifth of ‘developed’ economies. This suggests that affordability and therefore product pricing remain critical in gaining market share. This is reflected when analysing market share data by revenue and then by volume. In some industrial sectors, the market leader by revenue does not feature in the top 10 by volume. This should be worrying as unit share in emerging economies will likely drive revenue share as the economy and spend increases.

But it’s not all about price. Successful companies will be the ones who understand the markets and the customers’ needs and develop products to meet those, rather than focus on low cost products. An example of this is in the Wealth Management industry. There is significant disparity to the risk-profile of customers across different geographies. Part of these differences can be explained from how wealth was acquired by the individual. First generation millionaires versus second or third generation (emerging vs. developed) have very different risk-appetites and reward expectations and banks serving these clients need to enhance their offerings to make sure these differences are addressed.

The final point relates to the evolving competitive landscapes. The next 10-15 years will see the continued rise of companies from emerging economies. How many of those will be truly global players by 2025? This is challenging to determine as there are many factors that will shape the debate. In China for example, local companies tend to do well in slow-moving industries, where product and design changes are less frequent, there is a reliance of extensive distribution and where production cost accounts for a high percentage of the product price. On the other hand, multinational corporations (MNCs) tend to do well in fast-moving industries, where product changes and redesigns are frequent, the customers’ needs are changing, and where R&D and advertising is important.

However, this situation may also be evolving. Last year, the Chinese manufacturer Huawei, led the world in patent applications. No US Company was in the top ten. It will be interested to see how competition develops and what risks may arise from emerging players making inroads into the US and Europe markets.

What we can take from all this is that the rebalancing in the global economic power is and will continue to have a profound impact on global companies. There are new avenues for growth, and, as always, the winners will be those who can develop the right strategies and execute them successfully. In doing so, companies need to recognise the differences and subtleties in the market, customer and competitor landscapes and adapt appropriately. This will mean developing the ability to operate different business models across different markets in meeting the customer needs profitably.

Not all fun and Games in India

India has been in the media spotlight these last few weeks in the build up the 2010 Commonwealth Games in Delhi, scheduled to open on 3 October. Whereas hosting the event should have signaled India’s emergence on the international stage and an opportunity for important infrastructure investment, preparations have been dogged by allegations of corruption and incompetence. Conflicts of interest have come to light between Games organisers and private companies in the way contracts were awarded. Athletes’ accommodation described as filthy, facilities collapsing and the increasing concern over security has been a public relations nightmare for India.

Emerging countries are increasingly eager to host major sports events. In doing so, they have the opportunity to invest in infrastructure and to demonstrate a new and improved image. In recent years, both the 2008 Olympic Games in Beijing and, to a lesser extent, the 2010 FIFA World Cup in South Africa, have enjoyed relative success. Looking ahead, Brazil will play host to the 2014 FIFA World Cup as well as the Olympic Games in Rio two years later. Not to be outdone by the other BRIC countries, Russia will host the 2014 Winter Olympic Games.

India’s experience will no doubt throw into question the confidence of emerging countries to stage major sports events. Hosting such events remains a significant challenge and there is huge downside to getting it wrong. How much should we read into successes and failures at hosting such global events?

Using intelligence to drive competitive advantage

As published in ‘The Retailer 2010’ (http://www.retail.org.sg/Retailer.htm) 

Retailers in the region are continuing to face up to a demanding market environment and an uncertain outlook.

As buying behaviours continue to evolve, customers are making more complex trade-offs and the traditional methods and trends established over the last five years are no longer holding true as customers become harder to predict. Regional strategies in targeting these customers are also being tested as “the one size fits all” approach can no longer capture the intricacies of the differing customer groups in an increasingly competitive environment.

Synonymous with being able to respond effectively to a more sophisticated customer in a demanding market, is the ability to successfully map out the competitive landscape to ensure your business is well positioned to react to potential threats. The ability to understand your competitors is even more relevant in an environment where the onus on delivering a unique service proposition (USP) to the customer is a key priority. The differing characteristics of the Asian region provide yet another level of complexity, as a competitor in Singapore, for example, may well be very different than one in Malaysia as the business infrastructure such as income levels, religion, demographics and cultural values of the country impacts the buying patterns of the consumer.

We often ask our clients of the value of understanding their competitive environment, and the resounding answer is always ‘extremely valuable’. We then ask if they feel that they use competitive intelligence insights effectively. This time, the response more often than not is that they do not.

What does competitive intelligence (CI) mean in relation to your company? The broad based description of CI focuses on answering three main questiongs:

·         Who are my direct competitors and closest rivals?

·         What information is worth gathering and analysing?

·         How are insights translated into practical application?

Who are my competitors?

A competitor is any company that is able to meet the demands of your customers. Many companies are confident that  they know who their immediate competitors are, but let us also remember that in challenging market times, when innovative methods are required to capture market share, the competitor environment, more likely than not, will adapt to these new surroundings. This may indeed come in the form of a threat from a new channel or new product. For example, the emergence of e-books has hit at the very foundation of the high street book retailers such as Borders, who have in turn now launched themselves into this market.

Regional variance also plays a significant role in determining who your competitors are;  A senior retail executive recently told me the differing attributes in China that were forcing his business to think of the country in sixteen separate entities. Online retailers like Amazon battle for market share with high street stores within Singapore where internet penetration is around 75%, however that channel will be a different threat in Vietnam, for instance, where internet penetration is closer to 30%.

What information is worth gathering and analysing?

Gathering the right information will help support business critical decisions. While competitive advantage has a lot to do with leveraging the knowledge base of your own firm, it is also about determining how competitors are likely to leverage theirs.

Competitors can be analysed across all areas of their operations, including sales and marketing, new product development, distribution, logistics and procurement. Data collected may be used in developing growth strategies, in responding to and anticipating competitor moves, in validating rumours about what competitors are doing, in improving your operational performance by understanding what best-in-class companies are doing and how and why they are able to achieve their superior performance.

Translating best-practice from other industries should also be considered when looking to realise market advantage. Why don’t we try to understand IBM, Cisco and DHL in the field of supply chain – surely lessons can be learned for the retail operation? If customer service is defined as the differentiator, let us understand how financial services firms or hotels deliver a parallel experience. By segmenting the retail business in this manner, we have the ability to capture information that will ultimately support the ability to set apart your business in the industry.

Within a demanding market landscape, the so-called ‘recession-proof’ sectors have been significantly impacted and the ability to stand out of the crowd and determine your USP has become even more important. Competitive intelligence is a fundamental driver of creating this USP.

How do we translate CI into practical application?

When discussing within the intelligence community the merits and drawbacks of using CI to drive business decisions, the ability to execute strategies is where this conceived competitive advantage is lost.  Often there is no dedicated resource that focuses on business to business competitor tracking but rather functions that concentrate on general market research and customer insights. Competitive intelligence often falls between the two roles and as a result it becomes consigned to discussions rather than actions.

The ability to formulate strategies and take key business decisions ought to be based on having the best available data on hand. Understanding your competitors is integral to the business decision-making process and so having dedicated competitor profiling in place ought to be integrated into the daily operational requirements of the business.

Taking advantage of the opportunities

In Asia, where there are distinct differences between each country’s buying markets, improved market knowledge through effective CI will only help retailers improve their product offering and ability to match specific market needs. The aim is to ensure your business has the competitive advantage needed to either sustain excellence in your market or enter a new one and a robust basis of information will provide you with the ability to make decisions with greater confidence.

Competitive intelligence is by no means a new discipline, but understanding what competitors will do, rather than what they have done is increasingly important in an environment that does indeed suggest insight is better than hindsight. 

Meetings can add value!

I have often been told stories about Singapore: the cleanest place on earth with strict laws to maintain a high overall security level. The Singaporean government has been investing in this “Singapore brand” for many decades. A clean, safe city for both leisure and business purposes. The latest new innovations in this area are the integrated resorts in Sentosa and the Marina Bay.

This availability of leisure and business facilities appeals to many businesses and international organisations to hold their conferences in Singapore. This year is the third consecutive year that Singapore has won the award of ‘Top International Meeting City’ handed out by the Union of International Associations. Such meetings are very important for the circulation of knowledge and the improvement of networks. In my opinion there is a strong correlation between the level of international meetings held in a country and its business activity. Let’s do the test: For the last 3 years Singapore is the top city for international meetings and Bloomberg estimated Singapore’s growth in 2010 between 13% and 15%, rating the country as the world’s fastest growing economy. Coincidence?

 Next month there will be another important international meeting, namely the Human Capital Summit 2010 in which many industry experts will discuss human capital management in organisations in order to share best practices and improve organisations. I think that it is very important that the summit is held in Singapore out of all the Asian cities. Think for a second about what the future will be for Singapore. There will be a flatter distribution of global power in which emerging economies will gain economic power at the expense of the regions that are now being considered as the global economic powers. Singapore is a relatively small island with a low level of natural resources. This highlights the importance for Singapore to invest in expertise and knowledge in which human capital is very important.  Therefore it can be understood that keeping chewing gum out of the country has more advantages than just keeping the city clean, it also contributes to Singapore being the top international meeting city.

The cloud up ahead

Cloud computing has been looming over the business world for some time now (pardon the pun). The arguments for and against the adoption of cloud computing are well known: cost reduction and increased agility versus potentially decreased security. Can anything new be added to the argument? Actually, there have been several recent developments that, unfortunately, while relevant to the conversation about cloud computing, may not help advance the argument in one way or the other.

On the one hand, the increasing trend towards more mobile and powerful personal devices like the iPad (and ensuing tablets surely to come) and the Kindle point towards a consumer need to access data remotely, a feat most easily accomplished through the cloud. On the other hand, rising concerns about the privacy of information (think Facebook, Wikileaks and Blackberry in the UAE) seem to point in the direction for a desire to maintain proprietary control over data. Understanding that a company is but a collection of the individuals that work there and that, therefore, business decisions are usually reflections of those individual's tendencies, these two developments in the retail realm may help to understand businesses' future acceptance for cloud computing solutions.

The discussed trends, each pulling the argument is opposite directions may actually shed some light on the future of cloud computing. It seems that the most probable result is that rather than being a zero-sum game in which cloud computing solutions can only be adopted at the expense of more traditional in-house solutions, cloud computing will be adopted in those cases in which the need for flexibility and cost-reduction out-weight privacy concerns. Such a future may mean that potential businesses that once failed to get off the ground due to crippling IT costs may now flourish through the help of third-party servers and applications until their need for privacy and security is matched by their ability to afford secure in-house solutions.

A Tale of Two CEOs

Recently, there have been two very good examples of the perceived importance of CEOs: Steve Jobs' dealing of the iPhone 4's antenna issues (not to mention the way he has turned around Apple since he re-joined them over 10 years ago) and Tony Hayward's imminent departure from BP are two examples that seem to suggest that a CEOs actions can make or break a company. While the example of Jobs is clearly that of a CEO having a positive influence and Hayward's is an example of the negative influence of a CEO, they both suggest that a single person, at the top of a company, can have a disproportionate impact. The question that then arises is - is this true or not? Is Apple's success due to Steve Jobs? Is BP's failure Hayward's fault?

The truth is that it is impossible to say how much of a company's situation (positive or negative) can be attributed to factors associated with its CEO. Is a company's success attributable to its CEO or merely a result of circumstances? While, for obvious reasons, it should be impossible to conclude how much of a company's situation is directly the result of a CEO's actions, it seems that everybody has concluded that the role of a CEO is of paramount importance - the public, which has been demanding Hayward's head ever since the spill begun; the boards that decide to pay CEOs vast amounts of money; and shareholders who often make investment decisions based on management teams.

The importance of a good CEO and management team is undeniable but what is often ignored is that successes (or failures) that are sometimes attributed to the company's leader may simply be a result of context rather than personality. Will BP be better able to clean up the Gulf and its image now that Hayworth is no longer there? Are people willing to buy the iPhone 4 in spite of its call-reception problems solely because Jobs says that it is not that big of an issue? I, for one, am not so sure...

Anntenagate

While Apple is seen as a company that produces great, stylish products, it has seemed (in the last decade or so, at least) that what Apple represents is more important than the products it manufactures and sells. The case of Apple's relatively recently released iPhone 4 is an example of this: it has becomes Apple's most successful product launch ever in spite of the fact that what apparently makes it so great is the fact that it finally encompasses several features that competing phones have long had (removable memory, multi-tasking applications, etc.). There has long been a feeling that Apple is in an enviable strategic position in which its superb marketing and its easy to use products have been enough to trump competition and build an enviably loyal consumer base with which it is able to fight off market forces that companies are normally weary of.

The highly publicized issue regarding the antenna of the iPhone 4, which was addressed by Steve Jobs in a press conference on Friday, will surely represent a formidable test to Apple's position. Regardless of whether the issue with the antenna is as real and cumbersome as has been reported by product review publications or as normal as Jobs made it out to be, it will be interesting to see whether it will have a discernible impact on sales as the iPhone 4 is released in new international markets in the upcoming weeks and months.

Making the right decisions

There has been recent discussions regarding whether or not Carrefour will remain in South-East Asia. Reports were published that suggested that Carrefour would be pulling out of all markets in which it is not number one - namely, Thailand, Malaysia and Singapore. While those initial reports have since been denied by Carrefour it still raises interesting questions regarding the motivation behind the decisions that businesses make. Standard corporate finance theory dictates that projects that generate positive net present value are worthwhile undertaking as they, by definition, add to the bottom-line; however, businesses sometimes ignore rational business thought and make decisions purely based on visions of industry domination and expansion. While it is understood that Carrefour has made this particular decision based on economic reasons (Carrefour has chosen to focus on the Indian market, for example, and may be using the proceeds from the sale of their South-East Asian assets to fund that expansion), are there examples of companies readily available that have made decisions not based on the underlying economics but rather a visionary target?

Changing Competitor Landscape in the Satellite Navigation Space

With the growth of mobile and smart phone users and applications built for these devices, Personal Navigation Devices (PNDs), like those manufactured by TomTom and Garmin, are set to face a tough challenge from GPS-enabled mobile phones. While Google and Apple are set to redefine the navigation space, with terms like Mobile Internet Devices (MID) getting clearer definitions, it is still too early to say which direction the navigation market will move in or what niche each player will create for itself. There are arguments for both PNDs and smart phone based navigation systems alike - will the future belong to PNDs, Mobiles or both?

For a thoughtful article discussing the shifting competitor landscape, explore the following link - http://mycoordinates.org/pnd-vs-mobile-is-landscape-shifting/.

Nike's World Cup

Already in its second week, there are a few themes running through the World Cup: for those interested in the football, the results obtained by minor nations against world power houses have been noteworthy; for those more focused on the spectacle provided by the biggest sporting event in the world, the vuvuzelas' incessant humming has given rise to mixed emotions; meanwhile, those interested in the business aspect of sports will have observed Nike's successful ambush marketing strategies.

Ambush marketing refers to a situation in which a company not officially affiliated with an event, the World Cup in this case, runs and ad campaign that links the advertiser to the event in the customer's mind without ever calling itself a sponsor, therefore creating brand awareness by association while saving the money that would have to be spent to secure official sponsorship status. Nike is but one example of a company engaging in ambush marketing, Dutch brewer, Bavaria, provides another highly publicized example.

Not only has Nike taken the World Cup by storm and turned attention away from Adidas, the official sponsor, through the thoughtful use of social media channels, it has gone a step further through the brilliant use of product placement on a scale not often seen. Much like the vuvuzelas draw the attention of the ears, Nike's distinctively purple and orange coloured boots catch the eye as much as some of the skills on display. While official statistics are not available, it is without exaggeration that it can be said that a significant proportion of the players on the pitch during any given match are wearing one of three Nike boot models that have the same colour pattern. The colour pattern is precisely what sets Nike's strategy apart from other boot manufacturers that simply see it as enough to get as many players to wear their boots as possible. By making sure that all models are of the same colour and by making sure that that colour pattern is as loud as possible, Nike has made sure that the spectator knows immediately that a given player is wearing a Nike boot without necessarily having to see the boat from up close.

Nike's advertising strategy for the World Cup is a perfect example of how to get new life from a tried and tested strategy and its competitors better realize, sooner rather than later, that mere product placement is no longer enough.

Do Silver Linings Exist?

After several weeks and millions of barrels of oil spilt, Barack Obama addressed the American public last night from the oval office about his administration's response to the BP oil spill in the Gulf of Mexico. While it may still be too early to fully assess the damage caused by the uncertain amount of oil that has leaked out of BP's Deepwater Horizon well and it may even be too early to determine who is ultimately responsible for what is sure to be the biggest environmental disaster in American history, it is not too early to begin to hope that the appropriate lessons are learned.

Much like the silver lining of the worst financial crisis in a generation was the fact that it would hopefully spur on much needed financial regulation and much in the same way that the current European fiscal crisis will hopefully bring with it increased financial awareness in what have been free-spending governments, the seemingly never-ending oil spill will hopefully usher in an era of increased environmental awareness. However, it is far from certain that any of the above-mentioned crises will result in anything more than band-aid solutions and political blame games. It is often remarked that a crisis should never be wasted - implying that along with tough times, opportunities often roll along. It is unfortunate that it is a characteristic of human nature that we are often only called into action after things take a turn for the worst but what is even more unfortunate is that problems are often never fixed, even after a disaster presents a perfect opportunity to do so.

In the specific case of the BP oil spill, what would constitute a reasonable outcome would be something along the lines of realizing the perils of relying so extensively on polluting fossil fuels and consequently taking steps towards moving away from such a dependence into cleaner, renewable and eventually cheaper sources of energy. However, what is more likely to happen is that BP will end up spending a lot of money cleaning up the oil spill, then cleaning up its image while the American government moves to ensure that its regulatory framework is better placed to ensure the safety and reliance of deep sea oil wells. Barack Obama's speech (in terms of content and tone) made a clear argument towards aligning the United State's energy policy in the direction of decreased oil dependence and increased renewable energy sources; however, only time will reveal which path was chosen.

The Wisdom of the Markets

"Because crises can be self-fulfilling, sound economic policy is not sufficient to market confidence - one must cater to the perceptions, the prejudices, the whims of the market. Or rather, one must cater to what one hopes will be the perceptions of the market. And that is how the Keynesian compact [my words: the logical and proven understanding that recessions are managed by decreasing interest rates or increasing budget deficits - less taxes more spending] got broken: international economic policy ended up having very little to do with economics. It became an exercise in amateur psychology, in which the IMF, and the Treasury Department tried to persuade countries to do things they hoped would be perceived by the market as favorable."

The quote is from Paul Krugman's "The Return of Depression Economics", which outlines the lessons that should have been learned from countless previous crises, mainly, in Latin America and Asia and that should have been applied to the now largely gone subprime mortgage crisis and the increasingly looming threat of the fiscal crises in debt-burdened economies around the Western world.

While the economic soundness of the decisions that the Euro zone is making as a response to Greece's dire financial state can and should be debated by those with more knowledge of the field of economics than myself, the fact remains that there is a very real sense that the value of any decision taken is measured by the market's reactions rather than by its potential to remedy the situation at hand. People may point out that the market's reactions should depend on whether a particular course of action is beneficial or not. Yes, the reaction should depend on the validity of a decision; however, it does not because of differing time horizons and incentives.

The role of policy makers is to ensure that the long-term prospects of the country are favorable while investors are motivated by the same thing that most other business people are motivated by - short-term profits. Why have we entrusted so-called investors with deciding what a good company and a good country look like? Surely, a good company is defined as a well run organization with a clear and sustainable strategy, not necessarily one with high stock valuation - more often than not a reflection of a company's balance sheet than of its strategy. Likewise, a good country is surely defined as one in which its citizens live in peace and harmony, have access to basic necessities and have the possibility to make an honest living, not necessarily one which can convince the markets that it will not default on its debt obligations.

Regardless of whether the current market-led system is ideal or not, the fact remains that it is what we have to contend with nowadays and largely because of its self-fulfilling ways, we are now looking at a fiscal budget crisis as we begin to emerge from the worst recession in a life-time.

Singapore's Gamble

Over the last month, Singapore has gone from having no casinos to being home to two of the most expensive casinos ever built - Resorts World Sentosa and Marina Bay Sands. While both casinos have anecdotally been successes since they opened, attracting thousands of visitors, it will be months, if not years, before it can be determined whether they have indeed been successful. Of course, the casinos are not only gambles for their owners but also for the Singapore government that has bet that they will go a long way to increasing Singapore's reputation as a tourism destination.

It has widely been documented that Las Vegas Sands, the owners of the Marina Bay Sands expect to recover their investment in about 5 years, in spite of having gone more than $2 USD billion over budget. Las Vegas Sands' expectations, coupled with Asia's seemingly insatiable appetite for gambling (in terms of revenue, Macau has overtaken Las Vegas as the world's premier gambling destination and industry analysts state that there is room for the equivalent of 5 Las Vegas' in Asia) surely means that both casinos should stand every chance of proving to be financial successes.

While the casinos will surely help to increase Singapore's tourist numbers, what is less clear is how Singaporean society at large will cope the with the presence of the two massive Casinos. Singapore's traditionally conservative society and government has long made its anti-gambling posture clear. In an effort to consolidate its traditional posture with its recent pro-gambling actions, the Singapore government has established a few precautionary social policies: a $100 SGD entrance fee for locals, a ban on bankrupts gambling and the establishment of a free telephone line for families to call to get their relatives (that may presumably be addicted to gambling) banned from the casinos' premises. It is obvious that the government is treading a fine line and what the future holds in terms of how the citizenry will react to world-class gambling facilities on its doorstep is far from certain. Furthermore, the demand for thousands of low-skilled workers to man the casino floors and clean guest rooms will surely translate into the arrival of thousands of foreign workers in a country in which immigration is a touchy issue.

With the social impact of the presence of the casinos in mind, it seems like their eventual success rests squarely on the government's ability to grapple with these issues and ensuring that social costs do not undermine the benefits of the surge of tourism that is expected.

The World Cup for Everybody

After months of long and drawn-out negotiations with FIFA, it seems that Singapore's two telcos have finally secured the rights to broadcast all of the 2010 football World Cup matches. Although the final terms are unclear - it is not yet actually certain that a deal has indeed even been reached - everyone can rest assured that it will have cost Starhub and Singtel far more than the SGD 15 million that they paid for the 2006 World Cup as FIFA were reportedly initially asking for upwards of SGD 40 million. While the fact that seemingly all 64 World Cup matches will be shown in Singapore is undoubtedly good news for football fans here, who else stands to profit?

By all accounts, it seem that the two telcos will not make money directly from the event. Early reports suggest that the fact that the negotiations took so long and that the final decision was made so close to the opening match means that traditional big sponsors will not be advertising on TV but will rather look at alternative mediums, like online advertising campaigns. The imminent pull-out of large traditional sponsors, coupled with the small domestic market clearly signals that neither Starhub nor Singtel stand to re-coup the large sum dished out for the broadcast rights. However, while direct revenues from the event may not justify the telcos' decision, it is thanks to that decision that they have managed to avoid losing a lot of goodwill which may have costed them dearly in the future.

Beyond the two telcos, there are several other sectors of the Singapore economy that stand to be affected by the decision to purchase the rights for what is largely regarded as the largest sporting event in the world. Bars, restaurants, sports retailers, private football pitches for hire and many other industries were surely hoping that the Starhub, Singtel and FIFA would come to an agreement sooner rather than later. Had Starhub and Singtel failed to secure the rights to the World Cup, the above-mentioned businesses would have been severely affected by failing to reach the increased revenues that they will have budgeted for the World Cup period.

The case of football-mad Singapore's telcos almost failing to secure the rights to such an important event serves a wonderful example that helps to prove the point about the importance of long-term strategic decision making as well as about the inter-connectedness of the economy.

Strategy Exemplified

For the last five decades or so, there has been an intense debate between those who believe that strategy is paramount to success in the business world and those that believe that success is influenced by other factors and that strategy may even be a hindrance. The argument put forth by those that do not view strategy as indispensable goes along the line that in today's business world there is no time to sit back and analyze a business or an industry as a whole and make decisions accordingly - they believe that a business' success is determined rather by the leadership skills of its executive team and the adaptability of an organization's culture to ever more rapid technological changes. Conversely, the proponents of strategy as the sole vehicle towards success advocate careful analysis of the companies' capabilities and its industry's trends through which a path is carefully plotted and consequently executed. While there are surely examples that point out the relevance of each argument and while the truth about the true determinant of success surely lies somewhere between the two extreme views, there is at least one current example of what seems to be a carefully thought out strategy that is being executed before everybody's eyes.

With roughly 400 million users around the world, Facebook is by far and away the largest social networking site in the world. Other, older, sites like MySpace currently pale in comparison and newer services like Google's Buzz have yet to make much of an impression. By all accounts, Facebook is still barely profitable. By the same token, it is widely acknowledged that it is only time before it figures out how to turn all of its users and, more importantly, all the information it has about its users into a reliable and surely extremely profitable revenue stream. While it is certainly the market leader in its domain, Facebook is certainly not resting on its laurels and is constantly looking to venture into other spaces in the online world. Most recently, Facebook has sought to expand its social networking capabilities to the internet as a whole - beyond simply connecting its users, it is now seeking to intimately connect its users to the internet as a whole by tailoring their general online experience to their desires as defined by their Facebook accounts and those of their Facebook friends.

Technological advances are certainly somewhat responsible for Facebook's latest expansion; however, it seems that it is a rather deliberate strategic action taken as a response to some of the underlying threats faced in the online world. For any internet company, the single biggest threat comes from expected new entrants, due to the extremely low barriers to entry and low switching costs. Online companies usually seek to mitigate this risk by providing a better service than its competitors or by amassing a critical mass that provides an enormous advantage to certain sites like eBay or Facebook, whose relevance increases as it gains more and more users. Despite the best efforts of certain companies to provide the best possible services or to amass the most amount of users possible, there have been countless examples of dynamic and innovative start-ups that swoop in and steal users - indeed, Facebook was once such a company, stealing millions of users from MySpace. By attempting to establish itself as its user's online identity, Facebook is seeking to increase the barriers of entry and reduce the risk posed by potential new entrants, all at a minimum cost and while increasing the amount of information it has about its users, in turn increasing its profit potential.

Especially with the proliferation of Beta launches of un-finished online products and services, it has long been argued that strategy is particularly irrelevant for Internet companies. It may therefore come as a bit of a shock to some that such a clear strategic move has come from the likes of Facebook, one of the largest and most technologically-proficient online companies.

The Volcanic Cloud's Lost Silver Lining

In a tumultuous week that saw hundreds of thousands of passengers stranded across the world and the leading Wall Street institution's reputation possibly permanently damaged, there were certain industries that were smiling. The eruption of a volcano in Iceland that nobody had ever heard of before and whose name no one can pronounce and no one is likely to remember a month from now, caused the already fragile airline industry to loose hundreds of millions of euros as a result of massive flight cancellations across Europe. While the conversation has revolved mainly around the troubles of the airlines and of stranded passengers, little attention has been paid to those that have greatly benefited from this exceptional weekend. Certainly, hotels, ferry operators and car rental and coach bus companies have had the best few days in a long time. The question that follows is whether those that stood to benefit from this adverse situation did so as best they could? The answer to this question depends in large part in how we define a company's success.

Despite the lessons that should have been learned as a result of the recent economic crisis from which we are emerging, it seems that we still live in a world ruled by short-term results: hotels across Europe began to charge more for rooms and bus and ferry tickets became more expensive as these companies looked to maximize their immediate revenues. While these price hikes can be explained by the simple law of supply and demand, the fact is that stranded passengers will surely not have taken well to these extortionist pricing policies. Had the goal of these companies been to maximize long- rather than short-term profits, surely alternative measures would have been taken. Sympathizing with passengers and offering them a break in these already tough times might have gone much further towards increasing the overall bottom line rather than aiming to reap immediate rewards. Beyond pricing policies, there are other things that these companies could have done.

As one of the hundreds of thousands of stranded passengers - my flight from London to Dublin on Sunday was cancelled - I looked for alternative travel plans and decided on a train-ferry combination offered by a British operator. When I attempted to book the journey, I encountered a message stating that payment for travel dates within 7 days of the booking date could only be made by telephone and upon calling the ticketing number I obtained a message saying that the offices were closed on Sundays. Surely, on what was set to be the company's busiest Sunday in, perhaps, its history, it would have done well to open their offices on that day in expectation of the increased volume. Whether their failure to open their offices was due to a lack of flexibility or disdain for passengers looking for alternative travel arrangements, it was the wrong action to take.

All in all, it seems that through their collective actions, the industries that were set to profit from the otherwise extremely negative effects of the volcanic ash cloud that paralyzed European air travel most certainly did so in terms of this weekend's bottom line but miserably failed to do so in terms of their longer term brand perception. What this signals is faulty strategic thinking that values short-term results over long-term viability. Unfortunately, this faulty strategy is one that seems to plague all sorts of businesses across myriad industries.

What Sovereign Debt Means for Businesses

A few weeks ago, when discussing the issues that many MNCs may face in far-away markets like China, we emphasized the need to fully understand what your business is getting into as it attempts to amass customers around the world. While the discussion then mainly revolved around the risks that surround differing political and cultural norms, businesses that are looking to expand globally need to understand that there may be significant risks when entering markets that are politically and culturally similar to one's home country.

As we leave behind the worst financial crisis in a generation, a sovereign debt crisis looms large, particularly in Europe but also in several American states. While discussions about sovereign debt crisis are more often then not analyzed in political terms (as in, what does this mean for the incumbent government?), the reality is that such a crisis can have devastating effects on businesses. As the governments of PIGS (Portugal, Italy, Greece and Spain) attempt to control their ballooning and by now out of control debt issues, they are realizing that the only instruments at their disposal are a combination of increased taxes and decreased spending. The existence of the Euro means that countries in peril are not able to devalue their currency to increase exports (and therefore increasing GDP) nor are the able to inflate their debt away. Were these troubled economies able to devalue their currencies, the realities face by businesses that operate within their borders would be less onerous than it currently is. In fact, businesses that produce made-for-export goods would stand to profit greatly. However, as it stands, the prospect of increased taxes and spending cuts, while politically challenging is even worst news for businesses.

As taxes inevitably rise in debt-laden countries and social spending programmes are cut, the risk of a double-dip recession rises. However, the consequences of another recession, this time brought on by a sovereign debt crisis, stand to be far worse, far more wide-reaching and long-lasting than those of a traditional recession brought on by an aggregate decrease in demand. Increased taxes, for example, will mean a decrease in demand as the population sees its disposable income dwindle and will impact businesses' bottom line further as corporate taxes will surely also go up. Decreased spending, in turn, will also have a negative impact on people's disposable incomes but it will also have dire consequences for the country's long-term competitiveness as infrastructure, health-care and education spending decreases.

The iPad and Apple's strategy

Since January, Apple fans have only had one thing on their mind. The subject of their dreams finally became a tangible reality for those in America on Saturday, April 3rd when the iPad was officially launched. While reviews are still coming in from all angles and users in general seem to be far from certain about the iPad, investors and analysts seem almost unanimously in accordance that the iPad is good news for Apple.

Pre-launch reports suggested that Apple's manufacturing partners expect to ship 2.5 million iPads between March and May, many more than the previous estimate of 750,000 units during the same period. It is because of estimates like these that investors are so keen on Apple, doubling Apple's market capitalization in the past year, driving it past the likes of Google and Walmart and at US$214 billion, making it worth more than every other American company other than ExxonMobile and Microsoft.

Because of an array of reasons, most of them rooted in practicality, it is readily accepted that a company's stock price should be used to gauge the success of that company and its strategic decisions. Apple's incredible recent performance in the stock market could be seen as affirmation of its strategy, which has wildly differed from that of many other players in the industry. While Silicon Valley has tended towards a culture of greater openness, Apple has maintained a stranglehold on its products, deciding exactly what kind of content can be used on them. The question that arises from the varying success that these divergent strategies have seen is which one is most representative of the way the industry will look in the future? While the answer is obviously far from certain, it may be that there is room for both strategies, even if each one's success is weighed in terms of their stock value: if Apple is a good example of maintaining control over its products, Google can be offered as an example of a company leaning the other way - Apple is trading at 23 times its profit from the past 12 months, Google's price-to-earnings ratio is 28.

RioTinto, Google, China and you

The recent Chinese experiences of two huge MNCs - RioTinto and Google - can serve as cautionary tales to smaller firms looking to expand abroad. In today's globalized world, growth aspirations must be met with global aspirations. Any business can nowadays reap the benefits of a global marketplace through blurring geo-political boundaries and increased interconnectivity. While the strategy concerns that a growing and aspiring multi-national company must face are numerous, none is more important nor more difficult to accurately predict than political risk. For obvious reasons that have been briefly discussed in previous posts, China is one of, if not the most, attractive foreign market for a lot of companies. However, no country better demonstrates the hazards of political risk than China. While the Chinese example is indeed unique in many ways, it often helps to use the powers of exaggeration to prove a point.

As it has been widely reported, four RioTinto executives have been charged with and put on trail for taking bribes in China. It has been widely claimed that the trial, which concluded last week, has been highly politicized and far from transparent. While RioTinto initially stood by its employees and reprimanded the Chinese government for what it claimed was inappropriate handling of the case, its recent actions are in stark contrast to its initial reaction. RioTinto's chief executive recently attended a high level meeting with China's Prime Minister during which he outlined ways in which China and RioTinto could work more closely together. His statement coincided with an announcement that it has signed an agreement to develop a JV with Chinalco, China's state-run aluminum company, in Guinea. On the other side of the spectrum lies Google who recently followed through with its threat to pull out of the Chinese market should the government not ease its censorship laws.

While investors, customers and governments will have differing reactions to the actions of RioTinto and Google, a brief look at both companies in the context of China might shed some light on why their decisions were made. Certainly, the Chinese internet market is poised to grow at monumental speed; however, currently, in spite of being the largest domestic market in the world in terms of the number of users, it only represents a marginal percentage of Google's revenues. Even if the market doubles in size, it would still only be of limited importance. Beyond the fact that, economically speaking, the Chinese market matters little to Google, the fact is that Google matters little to China as there are a host of other players - both domestic and foreign - that offer similar services. Unlike the Google case, RioTinto and China are faced with a reality of inter-dependence: China's growth and continuing demand for its product make it a crucially important market to RioTinto while China's state-run companies require the experience of established companies like RioTinto to effectively expand across the globe. With this analysis in mind it quickly becomes apparent that while Google could afford to stand firmly by its principles, RioTinto cannot. If you are a business looking to enter the Chinese market, or any other market for that matter, you need to look at your potential position in that market and decided whether your decision to enter that given market more resembles Google's or RioTinto's and what that may mean in terms of which laws and policies you may or may not be willing to work with.

Google in China

On January 12 of this year, Google announced that it would pull out of the Chinese market unless the Chinese government eased the censorship restrictions to which Google had reluctantly agreed to when it entered what is set to become the most important internet market in the world. As has been well documented, the announcement on Google's official blog was prompted by cyber-attacks on its servers that originated in China in mid-December. While Google had for years endured Chinese policies with which it did not agree with in order to serve the search needs of millions of Chinese users, it felt that China had crossed a line by attempting to hack into the personal email accounts of Chinese human rights dissidents. After months of uncertainty as to Google's actions with respect to its presence in China, it has recently been widely reported that Google will be pulling out sooner rather than later. The Google-China issue shines new light on the issue of Corporate Social Responsibility.

The issue of Corporate Social Responsibility is a thorny one in today's business world. There are those that advocate that corporations have a responsibility towards the social good beyond what it may mean to their bottom line. There are those that argue that the social good is best served only if corporations focus entirely on increasing their profits. The practice of green-washing seems to have been accepted as a win-win solution to the issue as companies adopt socially responsible projects as a marketing technique - therefore serving the greater good and increasing profits at the same time.

Google will forego nearly 600 millions US dollars in revenue in 2010 by pulling out of the Chinese market and will lose its current 35% share of that market. While Chinese revenues currently only represent 3% of Google's total Global revenues, there is no doubt in anybody's mind that the importance of China within the Global online market is headed upwards. By pulling out of the Chinese market, Google is not only giving up on current revenues, it is also giving up on its market presence and its ability to reap future rewards from the market as well as its ability to sell Chinese advertising space to foreign companies as the Chinese domestic market becomes more important.

In spite of the monetary consequences of its decision to pull out of China, Google seems intent on standing firmly behind its believes. Investors, giving their opinions with their wallets seem to disagree with Google's decision as its stock price drops, it's loyal base of users, wanting to believe that Google's "do no evil" philosophy is more than a marketing slogan are happy that Google is actually standing on the side of human rights. What effect Google's decision will have on its current and future profits, on China's human rights policies (joint Google-US government demands that China ease its online censorship policies) and on its brand perception remains to be seen - the outcomes of these uncertainties will determine the wiseness of Google's decision. However, what is certain, is that Google's decision goes beyond green-washing as they have been made irrespective of the direct consequences on current and future revenues.

China's bubble?

Last week we discussed whether Toyota has responsibilities regarding its quality, beyond what it may mean to its bottom line. As an interesting follow up, a blog on hbr.org discusses one possible explanation for Toyota's recent massive recalls. The blog blames the company's current state primarily on its leadership, stating that its current leadership placed less importance on quality than on growth and that the company suffered accordingly. As China grabs headlines for higher than expected inflation, high export and retail sales growth, it might be interesting to parallel its situation with Toyota's.

While the specific technical causes of Toyota's recalls are still being debated, everyone seems to agree that it is undoubtedly a result of its rapid growth and the changing prioritization that came along with that growth. In early 2008, Toyota surpassed General Motors as the largest automaker in the world in terms of total vehicles sold. Between 1998 and 2008, GM's average annual rate of growth was roughly 1.5%, Toyota's was five times larger. Beyond gaining in market share and growing at a faster pace, Toyota also led the pack in terms of profitability per vehicle. In spite of its stellar performance across all metrics, including brand perception and customer satisfaction, for many years, Toyota has suddenly found itself in a deep turmoil from which it still remains to be seen if it will recover from. From our current stand-point, we can perhaps begin to conclude that Toyota's
hunger for market share may have come at the expense of its traditionally strict quality standards, even though there were no obvious warning signs that this was the case.

Much like Toyota once did, China now stands out amongst its peers. China rebounded more swiftly from the global downturn than any other big economy, growing by more than 10% in 2009. As its exports and domestic retail sales continue to grow and millions of Chinese continue to ascend into the middle class each year, China stands at what many consider to be a cross-road. Pundits and economists alike seem to be divided into two equal camps - those who believe that China is poised to over-take the United-States as the biggest economy in the world and those that claim that China's spectacular growth is based on
a bubble that will eventually explode. For example, in January, the Economist's online edition had a thoughtful article, which outlined the reasons why China's growth is sustainable.

Regardless of the arguments that each camp makes, Toyota's recent experiences should come as a cautionary tale: No matter the fundamentals of your current performance, during periods of rapid growth, there will always be variables that are ignored that may come back to hurt you - everything's fine, until it isn't.

Toyota and its Responsibilities

In recent months, one event has overwhelmingly claimed headlines around the world - Toyota, which has become the largest automaker in the world, has had to recall more than 8.5 million vehicles worldwide due to unintended acceleration and breaking problems in various models. Clearly, the events of recent months will have an effect on the Toyota brand. There are several questions that arise from this episode, the two that I want to tackle here are (a) how badly will the Toyota brand be tarnished? and (b) do Toyota's responsibilities end once it's brand name's reputation is restored?

While it is too early to fully understand the effects that recalling 8.5 million cars will have on the Toyota brand, there are varying degrees of expectations. According to U.S. sales figures released on March 2, nearly all the major auto companies reported double-digit year-on-year percentage sales growth in February, except for Toyota, whose sales declined by almost 9 percent. These figures clearly show that Toyota has taken a major hit due to ongoing safety concerns. However, on the other side of the coin, there are also signs that Toyota's drop in sales will be short-lived - initial reports suggest that chat about Toyota on the social web is positive, relative to its competitors, implying that perhaps there indeed is no such thing as bad publicity. Furthermore, Toyota seems to feel that all it needs to do to lure consumers back is to lower its prices.

It may be too early to begin to assess the full impact of the recalls on Toyota's image but it is not too early to begin to discuss what Toyota's responsibilities are (if any) once it has restored its image and sales figures. The question is, does Toyota only have to worry about restoring its image or does it have a greater responsibility towards ensuring the safety of its cars, beyond what consumers may think they know. The common assumption is that the level of consumer confidence will reflect the perceived safety of the cars, implying that the only way to regain a positive image would be to comprehensively deal with the safety issue. What is often ignored is that it is the perceived safety of its cars that matters to Toyota's bottom line rather than their actual safety. So long as there is no difference between the two, there is nothing to debate. However, in this particular case, in which there are claims and counter-claims about the root cause of the safety issue while cars are still being sold (albeit at a decreased pace), it is evident that what matters most to Toyota is to maintain a positive image as possible rather than ensuring that all of its cars are safe. This case raises the larger issue of corporate social responsibility at large - are companies only responsible for their bottom line (a.k.a ensuring consumer satisfaction) or is there a greater good that they must seek to satisfy?

Collaboration or Anarchy?

Not too long ago, the Wikipedia model of almost anarchy-like collaboration resulting in a polished, usable product was dismissed as unrealistic. Nowadays, Wikipedia is regarded as a credible source of information, able to compete with traditional encyclopedias - matching the likes of Britannica for quality and vastly surpassing it in terms of quantity. While it may be easy to dismiss the success of Wikipedia by saying that it is based primarily on the specific characteristics of the particular need that it attempts to meet, to do so would be to ignore the potential of collaboration across myriad industries as a new business model that can potentially deal with a lot of the issues that organizations will face going forward in these still uncertain times.

A perfect example of another industry that has begun to take advantage of the potential for volunteer collaboration is the mapping industry. On the one hand, there are the traditional mapping companies (which are the main suppliers of the maps on personal GPS devices) and on the other are the giants of the online and software world. It seems that the traditional mapping players seem convinced that they will be able to produce better and better maps by simply improving the things that they have always done. Want to make the image on your GPS device more realistic? Instead of only programming major 3D landmarks onto a map, program entire city-scapes in 3D. Need more Points of Interest (POIs)? Buy more POI databases. What would the alternative be? Skip the programming of 3D landmarks altogether and take real-life pictures of the streets that people will navigate through - a la Google maps. Or even better, take pictures of streets AND rely on public images taken by others and collected from sources like Flickr and compile the two to enhance the detail of the images - a la Bing maps. If you want a more complete POI database, allow users to add POIs directly onto the map, for all users to see.

The question that is clearly being posed is whether a collaborative method is better than a proprietary one. Taking a look at the success of companies like Apple and Amazon, which are becoming increasingly proprietary, it would be foolish to suggest that collaboration always trumps the alternative. However, it would be equally foolish for companies in ANY industry to simply ignore the potential of collaborative trends (or any other trends for that matter) simply because of a prior bias, especially if it presents an opportunity improve a product or service. As businesses begin to slowly grow after a terrible few years, they should be careful not to fall into the same traps that they once did. Business should focus on their core offerings, on maintaining profitability and should be careful about pushing too hard for growth too quickly. Therefore, if social collaboration, for example, allows you to offer a better product, at higher margins, with a smaller workforce, then it should be considered.

Read the Fine Print of Indicators

As we emerge from the worst economic climate in generations and we enter a changed world in which, amongst other things, banks are more cautious in their approach to lending, businesses are understanding that material decisions that they make now need to be evaluated comprehensively. In this new context, it has become more critical than ever to base business decisions on a full understanding of the external environment in which a business operates. The days of crap shooting and hoping for the best are, for the moment, behind us.

However, as we enter a world in which accurate, insightful information is more critical than ever, it has also become increasingly difficult to obtain such information as hindsight is no longer a defining factor in forecasting. This is highlighted through two recent articles commenting on consumer behaviour in the US and the UK that show interesting trends that are counter intuitive to what one may expect post-recession.

Hindsight suggests that in a world in which recession-hit consumers are faced with the prospect of a jobless recovery, cheap brands should do better than luxury goods. However, while consumer spending is expected to remain sluggish, and consumers will still be making trade-offs that they did not need to make in the past, there are examples abound of luxury brands performing better than expected - many consumers still opt for premium coffee and super market brands, for example. How can the reality of a jobless recovery be reconciled with the sustainability of the luxury sector? The answer may lie in the fact that the headline unemployment figures don’t tell the full story - overall unemployment in the US, for example, is hovering at around 10%, but unemployment within high earners (luxury brand purchasers) has not changed significantly over the past 18 months, in contrast to America’s lowest earning population, which stands at around 30%, three times the national average. It is not a stretch to conclude that the vast differences in unemployment rates, depending, on income levels, directly translate into vastly different consumer habits.

Understanding the often ignored subtleties of key economic indicators can go a long way towards ensuring that business decisions are made in an informed manner. Rather than basing decisions on the headline assumptions

Facebook's Doppelganger craze and the Social Media phenomenon

Over the past week, Facebookers around the world have taken to the celebrity Doppelganger craze en masse - what does this say about the state of social media? and, more importantly from our point of view, what does this mean for the state of social media as a business platform?

The Doppelganger phenomenon has been widely reported as yet another example of the group think engrossing social media sites, the most popular of which is currently Facebook. Commentators were quick to conclude that the Doppelganger craze is yet another step towards the eventual decline of sites like Facebook as serious, credible online platforms. What does this mean for the countless businesses, which are currently wondering whether they should jump on the social media bandwagon by establishing a Facebook presence? Following the line of thought of the aforementioned columnists, it would be easy to conclude that you should establish a Facebook presence only if the current characteristics of the platform match the image you wish to portray about your product or service. However, would doing so not be to ignore the true potential of this new medium and to risk falling behind the curve (much like businesses that once stubbornly dismissed the internet and refused to create webpages)? Should not the mere fact that a craze, like Doppelganger, can catch on so quickly, spread virally across the world and be discussed in the mainstream media be viewed as an example of social media's ever-increasing popularity and relevance?

While the future of Facebook and online social media in general is far from certain, businesses need to think about the future of the platform rather than simply about its current brand fit.

Insight is Better than Hindsight

The first Pointers discussion will be posted on Monday, February 15th