Towards a more comprehensive metric

Until now countries’ success has been measured by their GDP, Gross Domestic Product. In my opinion, purely economic growth can’t express completely the total well-being of a country’s inhabitants. Aren’t there other metrics to determine national wellbeing?

This social study area has been given renewed attention since the end of 2009 when Sarkozy commissioned Nobel Prize winners Joseph Stiglitz and Armatya Sen and many others to think about how to construct such a metric and to determine its possible hurdles. Out of such research, French policy makers should be able to deduct the determinants of people’s happiness on which consequently social policy can be build. Also, this metric should be taken into account when analyzing a country’s GDP and will increase therefore the importance of national wellbeing and sustainability in a country.

In my opinion, happiness increases when the unemployment rate decreases. When one has a job, one feels part of a larger group and has a reason to get up in the morning. Next to this, access to health and a good work – life balance seem to me other vital determinants of people’s happiness. Next to this I think with the installation of a happiness index, social policy will gain in importance at the expense of economic policy which has by far the upper hand in politics nowadays.

Let’s also think about what this phenomenon means for one’s personal life. If wellbeing and sustainability are more often addressed in future politics, we might also on a personal level value the non-economic parts of life stronger. This was an important topic of many parties ‘agenda during the General Elections of last week.

On international relations

Since the beginning of the New Year, we have read numerous articles about tensions between America and China. These issues tend to focus on the US accusing China of violating human rights, disagreements regarding currency politics, accusations of western companies being disadvantaged by ever changing economic policies and the ‘forced’ technology transfer in joint ventures with local companies in China. China, on the other hand, claims that international US economic policies are too protectionist.  These issues are to be viewed in an attempt of US to safeguard its position as largest economy and largest political power, while China wants to manifest itself as a major global economic power.

These tensions become more and more visible because China nowadays competes on more levels of the value chain with the western world. While having historic roots in low-cost manufacturing, Chinese companies are moving up in the value chain into more value added positions and are increasing their global presence, as witnessed by the acquisition of BorsodChem by Wanhua Industrial Group in Hungary.  And so many Chinese manufacturers are in direct competition with western companies. Next to this we are also seeing disagreements concerning access to natural resources as both countries attempt to safeguard their national interests.

This economic war, as it is lately often referred to, is detrimental for the global economy. The world would benefit from cooperation between the two countries pursuing mutual benefits and maintaining fair access to natural resources. Cooperation will not only balance the world economy, but it will also help enabling a more effective tackling of global issues such as climate change, terrorism and poverty.

The only way to accomplish such cooperation is in maintaining open international discussions. A ‘China vs. the world’ scenario can be avoided if China faces up to its responsibilities as an emerging global player and if the rest of the world learns how to adjust to China’s growing impact. 

Japan and the energy question

The earthquake in Japan and its triggered tsunami caused many casualties and a nuclear incident at the Fukushima plant. As the world deeply mourns for this tragedy, the debate is back on whether nuclear energy should be included in the energy mix of the future. Because there are both pros and cons about nuclear technology, this is a difficult to answer question.

This statement actually goes for all electricity generation technologies; there is no champion which is better than the others. Fossil fuel electricity generation causes climate change, nuclear power generation produces dangerous nuclear waste and finally electricity generation from renewable energy sources makes up for only a slight percentage of today’s energy mix. Renewables still need a lot of investment to gain economies of scale.

The incident in Japan makes us think about how the future of energy will look like. While Hidehiko Hishiyama’s, a director general at the trade ministry, states that renewable energy alone isn’t sufficient and that nuclear power is essential, one needs to take into account another important trend in the energy and utilities sector. This is the development of smart grids and smart meters. Smart meters make measurement possible. And that which can be measured, can be managed. Consequently, companies which have implemented an energy management system can save money and resources by reducing their carbon footprint.

If energy efficiency and smart grids will be part of everyday use in the future, (intermittent) renewable energy sources are a better fit to the energy demands than (bulky) nuclear power. However, if safety can be guaranteed with regard to nuclear power generation, also this can be considered as an interesting alternative. 

Megatrends already at play: Evidence from the Middle East

During the last couple of months of last year- 2010 - we evaluated the key megatrends that will have a significant impact on future societies and businesses. What we are seeing at the moment across the Middle East appears to be a reflection of many of these ‘trends’.

Over the past month and a half, we have seen revolts in Egypt, Tunisia and Libya; young students and professionals demonstrating, in some cases with arms, against what they perceive as an oppressive regime. The increased connectivity of the region coupled with an educated youth faced with unemployment rates of close to 30% has been driving force behind the demonstrations and echoes the ‘trends’ we discussed in our previous blogs.

The unrest in the Middle East has also clearly impacted the price of oil and it raises questions once again about our dependence on fossil fuels and how we ought to continue our focus to find more sustainable energies if we don’t want to be held to ransom by a volatile region.

It is fair to say that the ‘megatrends’ of the next 5 to ten years are evidently a reality now and the events in the Middle East are good example of them at play.

Balancing the retailer - manufacturer dynamic

As global retail chains increase their presence in the Asian markets, analysts question whether the battle for power between brand manufacturers and large retailers will also be fought here.

If pressure from retailers and their private labels continues on brand manufacturers, what are potential moves for manufacturers to alter a possible gloomy outlook of retailer dominance?

Create your own distribution network

If the mass channel becomes difficult to compete in, leverage your dependence away from that channel. Go in-house and target your customers directly. Using the franchise model is a relatively easy way for a quick expansion. McDonald’s uses this method to quickly expand its presence in new markets.

Engage in e-retail

Explore this as a serious option. Online retail has grown at a tremendous rate and there are no signs that this trend will change over the next years. Amazon, for example, has known an enormous success and has recently set up plans to start a free weekly home delivery service.

Provide your customers with a shopping experience

Don’t forget that shoppers see shopping as an important leisure activity. Focus on providing your clients with the best attraction in your category section in the supermarket or in your shop in the shopping complex. Apple experiences a lot of success in this way: shoppers can test and try Apple products, attend workshops and ask for advice from Apple ‘Geniuses’ about all kinds of products. Make your products stand out from the rest by experimenting with creative packaging, creating your own shelves, sample tastings and introducing innovative products. In this way, you essentially force the retailer to stock your products.

Be innovative

Many large brand manufacturers have spent decades creating an emotional brand value. Nowadays, as shoppers are more than ever aware of the huge amount of options they have, focus should shift towards creating innovative products and marketing them accordingly. Knowing how your shoppers shop and offering them a quality product will generate repeated sales. This focus readjustment to products can potentially prove to be effective against private label competition.

Cooperate with retailers

Work together and search for win-win situations.  Retailers and manufacturers are in it together to sell products. Retailers need brands in their shelves to create their own brand image. Look for symmetries between your brand and the retailers’ brand and establish safe long-term contracts to secure that collaboration.

Take these 5 guidelines into consideration and question yourself what they practically mean for your brand. We need to remember that the emergence of mass retailers is an effective channel for brand exposure and reaching your end customer, especially in the Asian markets where infrastructure is still developing.

Stephen Elop of Nokia is no ‘Jerry Maguire’ as Nokia’s share value drops

In a recent internal missive to senior executives of Nokia, that was ‘leaked’ to the wider public, the new Chief Executive, compared Nokia to that of a ‘burning platform’ fuelled further by its own adequacies:

‘We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally.” 

We all appreciate frankness and plain-speaking and it’s good to ‘lay your cards’ on the table, but conveniently for Mr.Elop as he has only recently joined Nokia from Microsoft he is able to lay the blame for Nokia’s failings on his predecessors and incumbents. Now is this the right way to motivate and encourage a business that has been at the forefront of mobile technology for many years and still holds a deep affinity with the wider general public as the mobile phone of choice? Well several arguments laid down by Lucy Kellaway of the FT actually suggest yes honesty is the best policy in this case, though ‘bravest’ leaders admit to not only the burning platform, but being the ones who started it. (Talk like a loser and you might win - FT)

With the new strategic battle lines being outlined by Nokia it will be interesting to see how Mr Elop sees the way forward. A merger may be the only viable route to catch-up in a market that never slows down and could this see Nokia becoming another Google tool in their quest for world domination?

The deal... Feb 11^th

In a move that has effectively taken over $7 billion dollars off the market value of Nokia in two days and threatens over 6000 Finnish jobs, a deal with Microsoft has been struck to make the Windows Phone 7 its primary mobile-phone platform, replacing its home-grown Symbian. Analysts and industry professionals are debating the wisdom of moving to a platform that is significantly behind its rivals, however there is also the flip side, which is what alternative did Nokia really have?

Now it will be Elop’s rhetoric that he hopes will galvanise Nokia behind the Microsoft deal to ensure long term stability, with the short-term gains very much taking a back seat. There will be many Symbian developers within the Nokia ranks who will also need to be quelled and cajouled down the Microsoft route as Elop drives his vision of the business forward.

Nokia is definitely one to watch this year with Elop in full voice, even if its competitors don’t think so... with Motorola describing the alliance as almost ‘a non-event’. Microsoft tie-up

Read the internal memo in full:

Nokia's burning platform

Do companies have a duty to undertake corporate social responsibilities (CSR) initiatives?

Guest Blogger Andrew Storey - Director of Institutional Relationships & Reporting for The Clinton Health Access Initiative (CHAI) writes...

It’s a question that seems to be increasingly debated in the media and an article in a recent edition of The Economist adds an interesting angle to the debate. ‘Milton Friedman goes on tour’ (January 29^th 2011-  Milton goes on tour ) examines a recent report which asked members of the ‘informed public’ (define that as you will because the report certainly seems to, but generally the top quarter wage earners in their particular age groups and countries) what they think of Milton Friedman’s famous assertion that ‘the social responsibility of business is to increase its profits’.

The result of the report suggests that advocates of CSR still have a lot of convincing to do across much of Asia. In Singapore more than 60% of respondents agreed with Mr Friedman, with even greater numbers agreeing in South Korea, Japan, India and the UAE (apparently less than 1 in 5 of the ‘informed public’ in the Emirates would be inclined to disagree with that statement). This is in contrast to attitudes in the West where those in agreement with Mr Friedman seem to be in the minority (although only just in the USA).

Few can suggest that there is anything wrong for a company to seek profits, it’s their raison d’être after all. A well worn statement is that ‘The primary goal of any business is to increase shareholder value,’ but is this really to the exclusion of all other considerations? Need the concept of a business increasing profits and also being socially responsible be mutually incompatible or can a strong CSR program successfully marry these dual aims?

Hewlett-Packard (HP) is a good example of such an organization with a highly successful CSR policy. In November 2010 HP announced an alliance with the Clinton Health Access Initiative (CHAI) that will provide structural and systemic improvements in testing and treating more than 120,000 infants exposed to HIV/ AIDS in Kenya each year. With support from CHAI and the Kenya Ministry of Public Health & Sanitation, HP is investing more than US$1million worth of technology that will capture, manage and return HIV test results in just one to two days after results are ready – a significant improvement from the previous system, which took two to three months. The turnaround time for test results is especially critical, as infants diagnosed with HIV must begin anti-retroviral treatment as quickly as possible to ensure survival. Without immediate treatment, half of HIV-positive infants are unlikely to survive past age two.

In this case HP are partnering with a government and a nongovernmental organization to provide technology and expertise that is not only aligned perfectly with their core skills and abilities, but also is highly targeted and it is no exaggeration to suggest that their support will contribute to saving thousands of children’s’ lives each year. It will be interesting to watch other organizations follow the lead of HP and others as they build on their core skill to successfully find the way to be both highly profitable and have a strong CSR program. Perhaps this and other examples will help convince future survey respondents that businesses need not forget CSR in order to make money.

About the Author.

Andrew Storey is the Director of Institutional Relationships & Reporting for The Clinton Health Access Initiative (CHAI).  CHAI is a global health organization committed to strengthening integrated health systems in the developing world and expanding access to care and treatment for HIV/AIDS, malaria and tuberculosis. CHAI’s solution-oriented approach focuses on improving market dynamics for medicines and diagnostics; lowering prices for treatment; accelerating access to life-saving technologies; and helping governments build the capacity required for high-quality care and treatment programs. Additional information about CHAI is available at http://www.clintonfoundation.org