Blog

Lorem ipsum dolor sit amet consectetur adipisicing elit. Tempora quaerat nostrum tenetur quo placeat, ducimus fugiat. Corrupti, provident neque repellat veniam quos rem quis accusantium reiciendis excepturi explicabo velit ut.

Business sustainability has come a long way. From the dawn of the modern environmental movement and the establishment of environmental regulations in the 1970s, it has become a strategic concern driven by market forces. Today, more than 90 percent of CEOs state that sustainability is important to their company’s success, and companies develop sustainability strategies, market sustainable products and services, create positions such as chief sustainability officer, and publish sustainability reports for consumers, investors, activists, and the public at large.

This trend will not abate anytime soon. Surveys show that 88 percent of business school students think that learning about social and environmental issues in business is a priority, and 67 percent want to incorporate environmental sustainability into their future jobs. To meet this demand, the percentage of business schools that require students to take a course dedicated to business and society increased from 34 percent in 2001 to 79 percent in 2011, and specific academic programs on business sustainability can now be found in 46 percent of the top 100 US master of business administration (MBA) programs.

For all this interest, we should expect the world to become more sustainable. But problems such as climate change, water scarcity, species extinction, and many others continue to worsen. Sustainable business is reaching the limits of what it can accomplish in its present form. It is slowing the velocity at which we are approaching a crisis, but we are not changing course. Instead of tinkering around the edges of the market with new products and services, business must now transform it. That is the focus of the next phase of business sustainability, and we can see signs that it is emerging.

The first phase of business sustainability, what we at the University of Michigan’s Erb Institute call “enterprise integration,” is founded on a model of business responding to market shifts to increase competitive positioning by integrating sustainability into preexisting business considerations. By contrast, the next phase of business sustainability, what we call “market transformation,” is founded on a model of business transforming the market. Instead of waiting for a market shift to create incentives for sustainable practices, companies are creating those shifts to enable new forms of business sustainability.

Enterprise integration is geared toward present-day measures of success; market transformation will help companies create tomorrow’s measures. The first is focused on reducing unsustainability; the second is focused on creating sustainability.1 The first attends to symptoms; the second attends to causes. The first focuses primarily inward toward the health and vitality of the organization; the second expands that focus to look outward toward the health and vitality of the market and society in which the organization operates. The first will help future leaders get a job in today’s marketplace; the second will help them develop a target for a lifelong career. The first is incremental, the second transformational.

Changing the way we do business is essential to addressing the challenges of environmental degradation. The market is the most powerful institution on earth, and business is the most powerful entity within it. Business transcends national boundaries, and it possesses resources that exceed those of many nation-states. Business is responsible for producing the buildings we live and work in, the food we eat, the clothes we wear, the automobiles we drive, the energy that propels them, and the next form of mobility that will replace them. This does not mean that only business can generate solutions, but with its unmatched powers of ideation, production, and distribution, business is best positioned to bring the change we need at the scale we need it.

Sustainable Business 1.0: Enterprise Integration

In its first incarnation, business sustainability represents a market shift. Market pressures bring sustainability to business attention through core management channels and functions. This began with Nixon-era government regulation and grew to include insurance companies, investors, consumers, suppliers, buyers, and others through the 1980s and 1990s.2 Such market pressures can emerge from numerous sources: coercive drivers—from domestic and international regulations and the courts; resource drivers—from suppliers, buyers, shareholders, investors, banks, and insurance companies; market drivers—from consumers, trade associations, competitors, and consultants; and social drivers—from nonprofit organizations, activist groups, the press, religious institutions, and academia.3

While corporate social responsibility (CSR) is one response to such pressures, companies have sought to improve competitive positioning by linking sustainability and corporate strategy. This involves translating the issue into the core language of business management: operational efficiency, capital acquisition, strategic direction, and market growth. In each case, the firm has an established model that it can use to conceptualize the issue and formulate a response. In this way, sustainability becomes much like any other business threat, where market expectations change and technological developments advance, leaving certain industries to adapt or face demise while others rise to fill their place.

For example, when insurance companies apply sustainability pressures on the firm, the issue becomes one of risk management. When competitors apply such pressures, it becomes an issue of strategic direction. When investors and banks do so, it becomes an issue of capital acquisition and cost of capital. When suppliers and buyers do so, it becomes an issue of supply-chain logistics. When consumers do so, it becomes an issue of market demand. Framed in such terms, much of the specific language of sustainability recedes and is replaced by standard business logic. Therefore, companies can remain agnostic about the science of particular issues (such as climate change) but still recognize their importance as business concerns. The successful company can perform this translation process and integrate sustainability into its existing structures and strategies.

Take Whirlpool, for example: It has improved appliance energy efficiency because it has watched energy efficiency move from number 12 in consumer priorities in the 1980s to number three, just behind cost and performance, today. Whirlpool and others expect those concerns to continue to grow.4 One signal of this growth is the LOHAS consumers (Lifestyles of Health and Sustainability), a segment that considers environmental attributes in purchasing decisions and was estimated to be a $355 billion market in the United States in 2016 and a $546 billion market worldwide.

Another signal comes from impact investors, who consider environmental, social, and governance (ESG) factors in their investment criteria. The sector reached $8.72 trillion of professionally managed assets in the United States in 2016, or one-fifth of all investment under professional management. But it is not just a specialized sector; this past May, financial advisory firms BlackRock, Vanguard, and State Street cast votes in opposition to ExxonMobil management and called for the company to disclose its climate change impacts.

These are all signs that the market has shifted and continues to shift. Today, consumers can buy sustainable products, stay in sustainable hotels, eat sustainable foods, and use sustainable cleaning products. While this greening of the market is a good thing, it is not actually solving the root problems it was meant to address. Our world continues to become less, not more, sustainable.

Sustainable Business 2.0: Market Transformation

While business sustainability has been going mainstream, the world has witnessed unprecedented human impacts on the natural environment that threaten the viability of life on Earth. To mark this shift, scientists have proposed that we have left the Holocene and are now entering the Anthropocene, a new geologic epoch that acknowledges the enormous influence of the world’s 7.5 billion people (to be nearly 10 billion by 2050) on the planet.5

To measure that influence, they have identified nine “planetary boundaries” that represent “thresholds below which humanity can safely operate and beyond which the stability of planetary-scale systems cannot be relied upon.”6 These are what Lancaster University management professor Gail Whiteman has called the “key performance indicators” (KPIs) of the planet, many of which are not doing so well. While one (ozone depletion) is on the mend, scientists believe we have overshot the boundaries of three: climate change, biodiversity loss, and biogeochemical flows (nitrogen and phosphorus cycles). Further indicators are also blinking red, such as ocean acidification, freshwater use, and deforestation. The remaining two boundaries—chemical pollution and atmospheric particle pollution—require more data to assess. All of these disruptions are the result of system failures created largely by our market institutions. They will have to be remedied by those institutions.

Fortunately, capitalism can be quite malleable. It is designed by human beings in the service of human beings, and it can evolve to meet the changing needs of human beings. This has happened throughout its history to address issues such as monopoly power, collusion, and price-fixing. Today’s pressing need is sustainability—particularly to address climate change—and legislators are not the only ones who can shift course. Many companies recognize this challenge and are pushing for new market models. In the words of Unilever CEO Paul Polman, “We are entering a very interesting period of history where the responsible business world is running ahead of the politicians” and taking on a broader role to “serve society.”

The next phase of business sustainability calls for a transformation of the market, discarding such outdated notions as treating the environment as a limitless source of materials and sink for waste, seeing economic value as the only measure of nature’s worth, encouraging unbridled consumption, and considering perpetual economic growth as even possible. Corporate decision makers have a key role to play in facilitating this transition. Instead of accepting the rules of the market as given, they must change them to incorporate the planet’s KPIs. For example, to turn around the KPI of climate change, the market must go carbon neutral and eventually go carbon negative. We don’t yet know how to do that, but we know that it cannot be done by one company or one product. It requires a change in the overall market.

Real sustainability is a property of a system.7 For example, the notion of an energy company installing a wind farm and calling itself sustainable makes no empirical sense. A more sustainable energy system incorporates the whole grid, encompassing generation, transmission, distribution, use, and mobility. We can already see signals of this change happening as new energy sources, distributed energy, demand-side management, smart appliances, and smart meters are beginning to transform our conceptions of energy. Already, jobs in the clean energy sector have exceeded those in oil drilling.

But the energy renaissance goes further. Electric vehicles have the potential to change the grid, leveling the electricity demand curve by charging at night and providing storage capacity during the day for intermittent energy sources like wind and solar. Already, a Nissan Leaf automobile owner in Japan can buy a transformer to power the house off the battery pack during a power failure. Research is under way to scale this concept and allow consumers to rent their batteries to utilities while their car is parked. Electric vehicles are also transforming the auto industry. Who could have predicted 20 years ago that new entrants like Tesla would enjoy a larger market capitalization than General Motors?

And as the shift to driverless cars continues, IT companies such as Apple and Alphabet have entered the fray, shifting success factors in the auto sector from hardware to software, and with them our conceptions of personal mobility. For example, as incumbents such as Ford Motor seek to become mobility providers, they must learn to operate like the airline industry, where profits increase when their cars spend minimal time idling. Given that today’s personal car is parked 95 percent of the time, driverless cars can result in fewer cars on the road (at least in urban centers) as people purchase mobility services rather than own cars. Fewer cars on the road means repurposing unneeded roads, parking lots, garages, and service stations.

Systemic Corporate Strategies

As we see with the energy and transportation sectors, the potential scope of market transformation is vast. To help flesh this out, we can conceive this sustainability revolution as proceeding from two initial phases. First, corporations rethink their business strategies to play a stronger role in guiding the sustainability of the systems of which they are a part. Second, the business model itself undergoes reconceptualization. The first phase includes at least four new ways of conceiving their approach to operations, partnerships, government engagement, and transparency.

New conceptions of operations | Market transformation calls for optimizing supply-chain logistics to reduce risks from numerous factors such as disruptions due to increased storm severity caused by climate change; current and future resource availability and price volatility; accelerating emissions and concerns for public health and the environment; and the future resilience of business and civil society. These risks can directly affect assets and operations, availability and costs of inputs, regulation of sourcing and distribution, workforce availability and productivity, and stakeholder reputation. For instance, Nestlé, Coca-Cola, Cargill, and General Mills have all faced threats to supply chains due to the decreased availability of water, a once-plentiful resource now scarcer because of climate change and overconsumption.

To better manage such operational systems, companies are moving away from linear models in which items are created, used, and disposed of once they reach their end of serviceable life, and toward circular models, where items are created, used, and then either restored or reprocessed to recover energy or materials that can be used again. One key to this new vision of a circular economy is that it is regenerative by design; it is organized to keep products, components, and materials at their highest utility and value at all times.

For example, industrial and consumer products company Ricoh has concluded that by 2050, there will be an insufficient supply of many reasonably priced raw materials to support its manufacturing needs. As a result, the company is revising its business model using life-cycle analysis as the basis for decision making and establishing a series of what it calls “Resource Smart Solutions” for product design and manufacturing, reuse, collection, maintenance, and materials recovery. To change the system around it, the company is also helping its customers reduce energy use, carbon footprint, and virgin material use while also expanding its own opportunities for product refurbishing, recycling, and new designs. Targets include reducing virgin resource use by 25 percent by 2020 and 87.5 percent by 2050. In adopting circular economy thinking, Ricoh is striving to move beyond incremental efficiency goals to more ambitious “net zero impact” business operations.8

New conceptions of partnerships | Going beyond the supply chain, companies also look to novel partnerships outside standard modes of shifting the market, including nonprofit organizations, the government, competitors, and seemingly unrelated companies.

For example, as Ford increased its research and development in hybrid and electric drivetrains, it saw an opportunity in how customers would live more electrified lifestyles overall. Together with Infineon, SunPower, Whirlpool, and Eaton, Ford developed the MyEnergi Lifestyle program, exploring ways in which hybrid electric vehicles, solar power systems, energy-efficient appliances, and home design can be integrated to reduce the total carbon footprint. Similarly, Toyota Motor is seeking a broad array of partnerships to achieve its goal of going “beyond zero environmental impact” by eventually eliminating CO2 emissions from vehicle operation, manufacturing, materials production, and energy sources by 2050.

New conceptions of government engagement | Very few business schools offer courses on collaborative and constructive lobbying. Indeed, the public perceptions of lobbying are generally negative. But lobbying is basic to democratic politics as governments seek guidance on how to set the rules of the market and usher reforms as needed. Forward-thinking companies are looking for ways to participate constructively in policy formation.

For example, Intel was instrumental in calling attention to the horrors of tin, tantalum, tungsten, and gold mining in the Democratic Republic of Congo. While the company could have simply stopped sourcing such conflict minerals from the region, it did not want to create additional hardship for legal mining operations. Instead, it helped create provisions in the Dodd-Frank Act that require the tracking and disclosure of such mineral sourcing within the broader electronics industry.

This is not unusual. Companies are also working with governments to phase out heat-trapping HFC chemicals and setting new efficiency standards on trucks. The Paris Agreement on climate change would not have been possible without the powerful business interests that helped broker a deal. In each of these examples, business took a responsible position in bringing about a sustainable shift in the market through policy.

New conceptions of transparency | The only way that market transformation will be successful is through trust, and trust can be gained only through greater transparency. The expansion of corporate influence in society, particularly as it relates to government, will make some justifiably uneasy. But robust reporting mechanisms can help allay those fears and also help protect companies from the effects of misconduct, including legal liability and penalties. To be sure, companies are already disclosing numerous sustainability indicators through established standards, such as the globally recognized Global Reporting Initiative or Carbon Disclosure Project. But transparency goes further as companies face increasing demands for data, for both internal management and external validation, under the watchful eye of activists, investors, suppliers, buyers, employees, and customers. The gathering and dissemination of such information can open up new awareness of supply-chain risks and opportunities.

For example, IBM and partner companies are experimenting with blockchain technology to transform visibility and traceability in complex, often opaque, global supply chains. In 2017, IBM piloted supplychain blockchain with Walmart to address food safety in its global supply and distribution network and plans to roll it out further with nine global agricultural companies. In another example, Nestlé conducted an internal investigation of its Thai fish supply chains in 2014 and found forced labor and brutal treatment of workers. But in a dramatic shift from standard practices of privacy and nondisclosure, the company posted the report online, imposed new requirements on suppliers, and commissioned outside auditors to assure compliance. This public disclosure compelled other companies that source fish in Thailand to follow suit, shifting the competitive dynamics of supply-chain logistics.

New Ways of Doing Business

Market transformation not only compels more systemic business strategies but also challenges traditional ways of conceiving business itself. It demands new conceptions of corporate purpose, notions of consumption, and models and metrics of business success.

New conceptions of the corporation’s purpose | The dominant idea of the purpose of the corporation as simply to make money for its shareholders took hold within business in the 1970s and 1980s. But the narrow pursuit of shareholder value leads to excessively short time horizons for investment planning and measures of success. It also leads to a focus on only the type of shareholder who is less interested in sustainability efforts and, in the words of Cornell Law School professor Lynn Stout, is “shortsighted, opportunistic, willing to impose external costs, and indifferent to ethics and others’ welfare.”9

New ideas of corporate purpose are beginning to grow within business practice and education. For example, benefit corporations are one type of innovation that seeks to integrate a broader array of objectives than simply profits into its forms of organizing, governance, and legal statement of purpose. And other companies are watching closely, sometime mimicking them. This trend has caught on among MBA students who challenge conventional thinking around capitalism and corporate purpose. At the Harvard Business School, an immensely popular course called “Reexamining Capitalism” explores “the evolution, power, and limitations of our current capitalist systems” and “how the ‘rules of the game’ by which capitalism is structured should change” to address the social and environmental issues of our day.

New conceptions of consumption | Is “sustainable consumption” an oxymoron? The World Business Council for Sustainable Development doesn’t think so, calling on businesses to “abandon the existing consumption paradigm” and move toward “transformations in mainstream lifestyles and consumption patterns.”10 Several businesses and activists have sought to put such an idea into practical use.

For example, Patagonia, through its Common Threads Initiative, encourages people to buy used Patagonia products on eBay before going to the store to buy them new. Adbusters has long promoted its “Buy Nothing Day,” what it calls a “24-hour moratorium on consumer spending” as a counterpoint to the Black Friday spending spree that traditionally follows the holiday of Thanksgiving. The outdoor lifestyle retailer and co-op Recreational Equipment (REI) closes its 149 stores on Black Friday as part of its “#OptOutside” program. In 2016, Subaru, Google, Meetup, Upworthy, and competing outdoor brands such as Burton, Keen, Yeti, and Prana chose to partner with the effort. In the end, resource use must be reduced at the source, and that means developing new models of consumption.

New conceptions of business models and metrics | Market transformation requires a compelling new business model to replace traditional ones that dominate business thinking. For example, neoclassical economics and agency theory employ dismally simplified models of human beings as driven primarily by selfishness, where those running the company (agents) will shirk or even steal from the owner (principal) if they do the work and the owner gets the profits.

But behavioral economists have argued that real humans don’t behave as neoclassical economics suggests we do, and legal scholars argue that managerial motivations are far more complex than a simple principal/agent relationship and instead involve thousands of shareholders, executives, and directors with more socially positive motivations. And new models have arisen, such as positive organizational scholarship and appreciative inquiry, that move beyond standard cynical conceptions of human behavior to understand how and why people are motivated to devote their work toward improving the world around them and learn how to create the organizational conditions that will foster that activity. These models are gaining increasing interest in business teaching, research, and practice as a way to create a more committed and effective organization.

Other models are also beginning to gain recognition. Doughnut economics11 is a model of economic growth that links social justice to efforts to stay within the planetary boundaries of the Anthropocene epoch. Shared value is aimed at redefining capitalism by arguing that the competitiveness of a company is closely tied to the health of the communities in which it is embedded.12 Conscious capitalism is a model of business that serves the interests of all major stakeholders—customers, employees, investors, communities, suppliers, and the environment. And regenerative capitalism reimagines capitalism in terms that are self-organizing, naturally self-maintaining, and highly adaptive to produce lasting social and economic vitality for global civilization as a whole. Each of these models is seeking an amended form of capitalism that is sensitive to the constraints of the Anthropocene.

Closely related to models of business behavior are the metrics used to define success, many of which lead to unsustainable outcomes. For example, discount rates are used to capture the time value of money—the fact that a dollar today is worth more than a dollar tomorrow. But a common discount rate of 5 percent leads to a conclusion that everything 20 years out and beyond is worthless. When gauging the response to climate change, is that an outcome that anyone—particularly anyone with children or grandchildren—would consider ethical? London School of Economics professor Nicholas Stern answered no with an argument that used an unusually low discount rate when calculating the future costs and benefits of climate change mitigation and adaptation.13

Another problematic metric is gross domestic product (GDP). This measure of national economic health fails to distinguish between financial transactions that add to the well-being of a country and those that diminish it. Any activity in which money changes hands will register as GDP growth, even money spent on recovery from natural disasters and pollution cleanup. To examine alternatives, former French president Nicolas Sarkozy created a commission, headed by Nobel laureates Joseph Stiglitz and Amartya Sen. Their 2010 report recommended a shift in economic emphasis from the production of goods to a broader measure of overall well-being that would include measures for categories such as health, education, security, and sustainability.14

Reshaping Politics to Reshape the Market

A discussion of market transformation and the corporation’s shifting role in society cannot be complete without a discussion of the current political and social climate and what impact it has on this agenda going forward. The Trump administration denies the science of climate change and has embarked on an agenda of loosening the regulatory environment to stimulate economic growth. This is a similar script to that employed by President Ronald Reagan more than 35 years ago when he appointed Ann Gorsuch Burford to lead the US Environmental Protection Agency, James Watt to head the US Department of the Interior, and Rita Lavelle to run Superfund, the program for cleaning up the country’s most polluted sites.

Reagan’s appointments set about slowing or stopping environmental enforcement, but they ultimately led to scandals and created a critical public backlash: In 1983, all three were removed from office, and in subsequent years, Congress went on to strengthen numerous environmental regulations, and environmental groups increased membership and budgets. In the words of former Sierra Club executive director Carl Pope, Reagan “reinvented the environmental movement by his contempt for it.”

While President Trump’s approach to the environment bears similarities to Reagan’s attempts to roll back environmental regulations and likely faces a similar backlash, there are several key differences. First, some of the backlash this time will come from businesses that are leading on greenhouse gas reductions and not fighting government-led environmental policies, as they did in the 1980s. Indeed, recent surveys show that 85 percent of business executives believe that climate change is real (well above the national average of 64 percent), and many see the associated market risks and benefits. General Mills CEO Ken Powell was not alone when he told the Associated Press, “We think that human-caused greenhouse gas causes climate change and climate volatility, and that’s going to stress the agricultural supply chain.” Cargill executive director Greg Page warns of food shortages if we do not act. Such concerns represent a strong and growing perspective within the corporate sector that we have a problem and government inaction will only make it worse.

While those who lose in a carbon-constrained world (such as fossil fuel interests) will continue to resist acknowledging climate change, most companies see the long-term trajectory of this issue and do not see the current administration’s position as the long-term future. The market is shifting with or without the US government, as other national governments as well as many US state and city governments continue to set policies. Many companies are part of global markets and see the US withdrawal from the Paris Agreement as ceding US leadership but not stopping the market transformation that is under way. Some markets may slow, but some may just move to other parts of the globe, such as Germany, India, and China, where heavy investments in renewable energy and alternative drivetrains (such as electric and hybrid) are viewed as the future of the energy and mobility sectors.

The public is also moving in favor of sustainability. Already, public opinion polls show that an increasing number of Americans believe climate change is real. Some even show that a majority of Republicans—including 54 percent of self-described conservative Republicans—now believe that the world’s climate is changing and that human beings play some role in the change. This is a marked shift from 2009, when just 35 percent of Republicans believed that climate change was real. The truth is that many Republican politicians, congressional aides, lobbyists, and staff believe in the science of climate change as well but are waiting for the right political cover to voice their views.

Concern for the environment is a long-term interest of the American public, one that is more latent than urgent and top of mind. While surveys show that it ranks low on election issue topics—number 12 in one poll, behind the economy, terrorism, foreign policy, and health care—it is also driven by saliency, and it will awaken when threatened. That awakening can be triggered by any number of levers. If history is any indication, smart business leadership will read these signs, anticipate the market shift, and seek to take advantage.

Acquisitions of 2020

2020 has been (and continues to be) a challenging year. Amid these tough times, the first priority for corporations has been to keep their employees and businesses safe. However, many companies have shown resilience even during this turbulent period and have managed to take strategic decisions to grow and expand their businesses via acquisitions.

Here’s a look at some of the prominent acquisitions of 2020 so far (in terms of deal value, in no specific order). 

Intuit – Credit Karma

In February, Fintech giant, Intuit (INTU) announced that it would be acquiring Credit Karma for approximately $7.1 billion, making it Intuit’s largest acquisition ever. Intuit is a global financial platform company with TurboTax, QuickBooks, and Mint as its flagship products. Intuit’s financial management solutions serves approximately 50 million customers worldwide while Credit Karma is a consumer technology company with more than 100 million members in the U.K., U.S., and Canada with a high millennial user base. Credit Karma had reported nearly $1 billion in unaudited revenue in CY 2019, up 20% from CY 2018. The transaction is expected to close during 2H 2020.

Grubhub – Just Eat Takeaway

In June, Just Eat Takeaway entered into an agreement to acquire Grubhub (GRUB) for $7.3 billion. The move marks Just Eat Takeaway’s foray into online food delivery in the U.S. with the two companies together creating the world’s largest online food delivery company outside of China. Grubhub is a leading online and mobile food-ordering and delivery marketplace in the U.S., with nearly 300,000 restaurants across 4,000 U.S. cities. The deal sidelined Uber, which had been in talks with Grubhub for acquisition.

Uber – Postmates

In July, Uber (UBER) entered into $2.65 billion deal to acquire Postmates. This comes after Uber’s $6.5 billion bid for Grubhub fell through. Postmates is complementary to Uber Eats, with differentiated geographic focus areas and customer demographics. Postmates is a pioneer of “delivery-as-a-service,” which would complement Uber’s growing efforts in the delivery of groceries, essentials, and other goods.

Visa – Plaid

Visa (V) announced the decision of Plaid’s acquisition for $5.3 billion in January 2020. Connectivity between financial institutions and developers has become increasingly important with the growing demand to facilitate consumers’ ability to use fintech applications. Plaid enables consumers to conveniently share their bank accounts with thousands of apps and services, such as Acorns, Betterment, Chime, TransferWise, and Venmo. Plaid connects with more than 11,000 financial institutions to more than 2,600 fintech developers. The acquisition will open new market opportunities in the fintech space for Visa, both in the U.S. and internationally.

Morgan Stanley – E*TRADE

The acquisition announcement of E*TRADE (ETFC) for approximately $13 billion by Morgan Stanley (MS) in February 2020 has been one of the biggest acquisitions of 2020. The decision is expected to boost Morgan Stanley’s position across all channels and segments in the wealth management business. E*TRADE has over 5.2 million client accounts with over $360 billions of retail client assets, which will be added to Morgan Stanley’s existing 3 million client relationships and $2.7 trillion of client assets. The deal is expected to be closed in Q4 CY 2020.

Other Deals

Out of the other acquisitions that have happened over the past seven months, here are few more which are in billions in deal value:

  • In February, Salesforce (CRM) announced a $1.33 billion deal to acquire Vlocity, a leading provider of industry-specific cloud and mobile software built natively on the Salesforce platform
  • To strengthen its capabilities in 5G, Microsoft (MSFTannounced the intent to acquire Affirmed Networks in March and completed the process in April for approximately $1.35 billion
  • Zoox, a California-based company working on autonomous technology to enable mobility-as-a-service, has been acquired by Amazon (AMZN) for roughly $1.2 billion

            Among private companies:

  • Koch Industries decided to acquire the remaining equity stake in Infor held by Golden Gate Capital in a deal worth close to $13 billion. Koch completed the acquisition of Infor in April. With estimated annual revenues of $110 billion, Koch Industries is one of the largest U.S. private companies
  • In January, Insight Partners, a leading software investor, entered into an agreement to acquire Veeam, a Swiss cloud data management company in a $5 billion deal
  • In March, BMC, a global leader in IT solutions for the digital enterprise (a KKR portfolio company), signed a definitive agreement to purchase Compuware for an estimated $2 billion. The process was completed by May
  • To strengthen current offerings and broaden its ecosystem, SoFi, an online personal finance company, entered an agreement to acquire Galileo, a financial services API and payments platform, for $1.2 billion

Overall activity in the M&A space remained subdued amid the pandemic. During 1H 2020, 24,698 deals were announced globally, marking a 15.1% decline from 1H 2019. The drop is sharper in terms of deal value, which witnessed a fall by 44.7% from $1.85 trillion in 1H 2019 to $1.02 trillion in 1H 2020, according to a report by GlobalData.

While the fate of these acquisitions will only be known with time, a BCG report does demonstrate that “deals done during weak economic times create value for dealmakers and their shareholders.” 

supply chains are adapting to the COVID-19

As the world grapples with the human and economic crisis unravelling before us, supply chains are finding themselves squarely within the public eye and experiencing unique challenges of their own.

First, the supply shocks

For weeks at the start of the year, as COVID-19 was taking its toll on China, experts were focusing on ‘supply shocks’. These were disruptions to the availability of goods sourced from China; both finished goods for sale and products used in factories in developed markets. Companies scrambled to sort out what production was feasible, and what demand could be met.

At that moment, it made sense to think of supply chain resilience. We have previously talked about the lessons learned on resilience for global value chains under threat and the five supply chain resilience levers companies should put in place.

Some companies will already have integrated these learnings while others, in the interests of costs, and at the sacrifice of agility and resilience, have been relentlessly consolidating production and extending sourcing.

Second, the demand shocks

As the pandemic crisis deepened and nations have begun instituting lockdowns, supply chains have been experiencing something completely new: systemic demand shocks, where people are stocking up on consumer staples in order to comply with restrictions on movements, in some cases buying months’ worth of goods in a single day.

The most talked-about example, toilet paper, is ironically usually the go-to example of a perfectly forecastable product, since the end consumption is usually rather stable. There seemed to be a fear that food supply chains would be unable to respond to this unprecedented, massive spike in demand.

With a few exceptions, consumer staple supply chains have answered the call. Store shelves have been restocked and this has provided a measure of reassurance to people in a distressing time. But the supply chain professionals behind the scenes have accomplished this with a herculean exceptional effort, as the classic planning models are not built to accommodate such severe peaks in demand.

The replenishment models that dictate orders from retail chain distribution centers to stores can be notoriously manual and lacking in sophistication. They are best suited to continuous, relatively smooth demands. With pipelines being emptied out, there was a scramble to redirect inventories, identify priorities and override IT supply proposals.

On the production side, the successful replenishment is the result of maximizing production with all spare capacity in use. Since food supply chains are usually finely tuned for steady demands, the full pipeline has likely not yet been restored.

The resilience issue is less relevant for food supply chains as they tend to be much more local than non-food supply chains.

Third, the aftershocks

Many readers will have heard of the bullwhip effect. It describes the way in which demand spikes tend to amplify as they move up the chain. A small increase in demand at the consumer level may lead to a large increase in production at a food manufacturer or their packaging suppliers. So, it is fair to ask: Will the bullwhip strike now?

There are reasons to think it will not. Among the key drivers of the bullwhip effect is a lack of visibility into the nature of the demand increase. One imagines that all actors in the supply chain are very well aware of why demand is increasing, and that it does not represent an organic evolution in the sales of the product.

However, there is one classic cause of the bullwhip effect that must be managed, and that is ‘shortage gaming’. This describes how, when there is a shortage of a product, the tendency is for downstream actors to inflate their supply needs artificially, in order to claim a greater share of a scare resource.

This will require vigilance moving forward to be sure that visibility into true supply priorities is not lost as pipelines are refilled.

The supply chain has not seen the end of manual interventions in supply processes, however. Many replenishment systems use simple moving averages to calculate store-level requirements. With such an unprecedented demand spike polluting these moving averages, supply chain planners will have to modify supply quantities manually and scramble to adjust their planning systems.

Adding to the complexity moving forward is the ability to develop robust demand plans. There are several variables that bring unique uncertainty. It is impossible to predict how consumers will behave moving forward, since the extent and duration of restricted movements is unknowable.

Will demand return to a normal baseline, or will there be waves of large-scale buying? It is also challenging to know to what extent restaurant closures will have a clear impact on the level of grocery purchases.

Fourth, the new normal

The economic impacts are beginning to be felt, and many economists are predicting a deep recession of unknown length. Indeed, while some supply chains are spinning incredibly hard to keep up, others such as VW in automotive are being forced to ramp down.

For supply chain planners, one pitfall to avoid in order to move forward is the dynamic called the inventory bounce. When demand reaches a new steady state that is lower than the previous steady state, there must be a cut in production to allow the pipeline of stock to lower to a new steady state level. At that point, production actually increases a bit to match the new demand.

In the last major recession ten years ago, the inventory bounce fooled some upstream supply chains into thinking that demand was rebounding. The bullwhip effect kicked in and the bounce became amplified. Havoc and distress prevailed.

Out of the shocks, an opportunity?

The shrinking of the supply chain footprint dynamic may accelerate as companies seek a different cost/resilience trade-off and look to localize production and sourcing.

Now has also been a moment for the supply chain to step up and contribute. One company resolved a shortage of parts for life-saving ventilators in Italy by using 3D printing and making them available within a day (though they are being sued for their efforts). Perhaps this trigger the creation of a role for additive manufacturing in the spare parts supply chain.

LVMH, L’Oréal and Coty and others have stepped up and repurposed production facilities intended for fragrances and hair gels in order to produce hand sanitizer. In addition to providing a valuable resource that may help save lives, this move helps keep workers on and facilities operating despite difficult economic conditions for luxury items.

A unique moment

Supply chains are showcasing singular resourcefulness and adaptability, though the challenges are far from over. But the outcome may be fundamental changes and a whole host of managers and regulators who find it second-nature to rethink global models and supply dependencies.

china economy in pandemic

Companies in China are gradually resuming production, but the challenges imposed by the coronavirus pandemic are far from over. Cash-flow problems and parts shortages may slow efforts to get plants up and running. And the spread of the disease, creating a humanitarian crisis around the world, is likely to weaken demand. Senior executives in China expect Covid-19 to pummel their businesses in the short term, followed by a gradual recovery, according to Bain research.

But uncertainties abound. Few leadership teams and boards have managed through a disruption of this magnitude. As they consider actions to reduce the medium- to long-term effects of the crisis, many remain worried about the path ahead. Nearly 60% of the senior executives we surveyed were skeptical that these actions would be successful. The findings are drawn from interviews with 89 senior executives in China at multinationals, private companies, state-owned enterprises and joint ventures in multiple industries.

Short-term headwinds

In the next 3 to 6 months, all industries will encounter obstacles restarting a smooth collaboration with suppliers, distributors and customers. The nationwide lockdown on production and consumption disrupted supply chains and logistics, hitting some industries harder than others. The advanced manufacturing, consumer products, retail and healthcare industries face the biggest challenges, given the complexity of their supply chains and surging demand for their products during the outbreak (see Figure 1).

Figure 1

Companies are most worried about Covid-19’s effect on supply chains and damage to business partners

Over the next 6 to 18 months, fallout from the epidemic will include mounting operating costs (labor and raw materials, for example), supply chain disruptions, and possible deterioration in market demand. The challenges will differ from industry to industry. Retail, advanced manufacturing and financial services, for example, are tied more closely to the macroeconomic cycle and as a result, are more vulnerable to a downturn in demand (see Figure 2).

Figure 2

Manufacturing, financial and retail companies expect a long-term deterioration of market demand

The most effective medium- to long-term responses to Covid-19 also vary from industry to industry. Advanced manufacturing, retail, financial services and technology, media and telecom typically put more emphasis on cost reduction and operational efficiency to bolster performance. Retailers, with their extensive supplier networks, tend to focus on optimizing their long-term supply chains, vendor management and inventory (see Figure 3).

Figure 3

Retailers’ Covid-19 recovery plan: reduce costs and improve supply chains

To minimize the impact of the coronavirus in the medium to long term, leading companies are starting to reduce costs and optimize their supply chains. More than 60% of the executives we interviewed pointed to labor and nonlabor costs as a top priority. Companies that focused on supply chains said sales and operations and production planning, inventory management and digitalization are critical. Leaders will also diversify their supply chains to avoid excessive reliance on a single supplier or single region

Two priorities to grow out of the crisis

The coronavirus epidemic has accelerated the pace of structural change and innovation. Leaders are taking two important steps to kick-start sustainable growth: cost reduction and supply chain optimization.

Cost reduction

For many companies, cost-cutting is a one-time reset that delivers short-term results at the expense of employees and customer experience. Our experience shows that costs eliminated by radical cuts often creep back over time. Cost productivity leaders take a more programmatic approach, following five key principles:

Define clear targets using a today-forward, future-back perspective. Cost-reduction plans with clear targets and specific measures are more likely to deliver the expected results. Leaders formulate a plan to improve current operations while developing future productivity targets and long-term strategy.

Focus on best in class vs. best in cost. Instead of cutting costs indiscriminately, successful companies adapt the cuts to their strategy. They invest in low-cost capabilities, but also build a competitive advantage to fuel sustainable growth.

Adopt a zero-based budget approach. Applying cost-reduction tools to an existing business model is likely to produce disappointing results. Leaders start from scratch to rethink processes and unearth new efficiencies. They use zero-based redesign and zero-based budgeting to align spending and investment with the firm’s stage of development.

Improve organizational capabilities. Top-down cost-reduction plans typically are difficult to implement, lack frontline commitment and produce less satisfactory results. Effective leaders give the front line a sense of ownership in change programs. They cultivate an open culture focused on productivity, streamline decision making and offer incentives that sustain results.

Harness digital solutions. Digital tools can significantly improve operations efficiency and strengthen supplier and inventory management. Leading companies deploy digital technologies to create outstanding cost and operating models.

Companies that follow these principles are likely to recover faster and emerge from the crisis stronger. One international fast-food chain in Greater China embarked on a series of cost-reduction efforts, including zero-based redesign and zero-based budgeting. The leadership team built a transparent cost baseline to reevalute its savings priorities. Using digital tools, it generated a more accurate sales forecast. That, in turn, helped optimize the costs of labor, packaging and raw material, and supported vendor evaluations and negotiations. The company met its profit goal, cut baseline costs 5% to 25%, and invested the savings in projects tied to future priorities.

Supply chain optimization

The coronavirus epidemic has dramatically changed companies’ external environment, upending the competitive landscape and collaboration along the value chain. Leading companies now are reconfiguring their supply chains for the future by focusing on three vital steps.

Align supply chain objectives with business strategy. Supply chain managers typically balance three competing priorities: improving efficiency (cost, lead time and inventory turnover, for example); reducing supply risk; and enhancing customer satisfaction. To make the right trade-offs, leaders review their medium- to long-term business strategies and focus on the factors that sharpen their competitive edge, such as speed to market, supply security, pricing or innovation. Setting strategic priorities guides future supply chain objectives and the overall supply network’s design, as well as daily supply chain operations.

Adopt a global perspective. A global supply network—including suppliers, manufacturing sites, logistics and warehousing—helps lower costs and spread risks across regions. Companies can reconfigure their manufacturing footprint by moving production to lower-cost regions such as inland China or parts of Southeast Asia. To improve supply security for core components, leaders are developing alternative suppliers and sites in other countries. They also are cultivating strategic suppliers for key technologies to avoid potential disruption from international trade disputes.

Embrace digitalization. Digital tools give managers a comprehensive view of their internal and external supply chain and provide real-time performance feedback. In addition, leaders make sure the digital platform is linked to the operating model and includes a mechanism that can rapidly engage senior executives for decisions on critical issues at the right moment.

The coronavirus outbreak has provoked unprecedented economic disruption around the world. As leadership teams in China emerge from the most acute phase of the crisis and restart operations, they are rightly focused on the long-term health of their businesses, employees and customers. Those that optimize their costs and supply chain structure will be best positioned to meet the challenges ahead and succeed in the long run.

clean energy future

The economic lockdown resulting from the coronavirus pandemic has had an immediate negative impact on renewable energy projects and electric vehicles sales, but the sustainable trends are still in place and may even be strengthened over the longer term.

For the first time in four decades, global installation of solar, wind and other renewable energy will be less than the previous year, according to the International Energy Agency, which is projecting a 13% reduction in installations in 2020 compared to 2019. Woods Mackenzie projects an 18% reduction for global solar installations in 2020. Morgan Stanley is projecting declines in U.S. solar PV installations from 48% in second quarter to 17% in the fourth quarter of 2020.

This is due to a combination of construction delays, supply chain disruptions and a capital crunch.

Installation of rooftop solar has been hit particularly hard. Access to homes and businesses was generally halted in March 2020 for several months. Installers have indicated that as much as half the workforce had to be furloughed. The supply chain was also disrupted as PV manufacturing in China was temporarily suspended. Installations and the supply chain will resume, and most contracts are still in place, but the robust projected growth in rooftop PV for 2020 will not be met, and it may take more than a year to catch up. Also, some businesses that planned installations may have higher priorities for cash and investment now as they reopen. Many of the small businesses planning solar installations may not return at all.

On the other hand, utility scale electricity generation from renewable energy continues to grow and take market share. In the first part of this year, renewable energy has produced more electricity than coal for the first time since the late 19th century, when hydropower started the power industry. Wind and solar are the cheapest alternatives for new electric generation in the U.S. The pandemic and collapse in oil prices will not change that. The closure of coal plants has been accelerating this year, and wind and solar will continue to be competitive with gas.

Furthermore, most solar and wind farms were already financed and construction underway in rural areas not affected by the lockdown. About 30 GW of new solar capacity have already been contracted, and as long as interest rates remain low, financing should not be a problem. In fact, many solar and wind projects in the U.S and China are rushing to completion this year to qualify for government incentives.

But supply chains for utility scale renewables were still disrupted. Solar panel manufacturing in China was halted during the first quarter and has now reopened, but facing reduced orders. At one point, 18 wind turbine manufacturing facilities in Spain and Italy were stopped while social distancing and sanitation measures were put in place. Mining operations in Africa and other countries were also temporarily halted and now face reduced demand.

The replacement of oil and gas electricity generation with renewables in developing countries is not going to seem as attractive as a few years ago. Emerging economies need to expand electricity as cheaply as possible, which means coal, gas and even diesel plants. New fossil fuel plants in developing nations could lock in carbon emissions for years.

Electric vehicle sales globally have also been severely impacted. The transition to electric vehicles takes place as people purchase new vehicles. The price of oil has collapsed, used-car prices are dropping and unemployment has soared to levels not seen since the Great Depression. Cheap gas, cheap cars and high unemployment will dramatically lower the expectations for multipassenger EV sales in 2020. Wood Mackenzie has projected a 43% global decline in EV sales in 2020 from 2019. Furthermore, many new electric models from the automakers are not expected until 2021.

However, the long-term transition to EVs will continue and may even accelerate. It still costs less to drive a mile on electricity compared to gasoline, and when the upfront cost of electric vehicles becomes competitive with internal combustion vehicles in a few years, the market should quickly move to EVs. Now that the battery range is adequate for the average driver, the last barrier seems to be the availability of fast charging stations between cities.

Before the collapse in oil demand this year, the oil majors were expecting peak oil demand to occur sometime during the 2040s. Now peak oil demand is expected earlier, perhaps in the mid-2020s. Some even think that 2019 might turn out to be the highest level of oil consumption historically. At any rate, it seems that it will be at least a few years until the 2019 levels are reached again, if ever.

However, the recent collapse in oil prices means the oil and gas industry will be able to supply fuel at very competitive prices for decades. This will at least make it more difficult for electric vehicles to take market share in the short term, and very difficult for alternative liquid fuels to be competitive. For biofuels and synthetic fuels, it seems to be a repeat of earlier decades when cheap oil crushed those industries. Replacing gas and diesel-powered cars is certainly going to be unattractive in the impoverished economies of developing nations.

But there are also bright spots for clean transportation alternatives emerging. Electric bicycles, for example, are a hot item. As people look for alternatives to mass transit and want something to move outdoors in the fresh air, electric-assisted bikes are a great solution and are no longer looked down upon as a vehicle for older (or lazy) cyclists.

Telecommuting struggled for years to take hold, but the pandemic seems to have finally changed that. The recent national lockdown has spurred many large businesses to set up their employees to work from home. They have found that it works fairly well, and many will not return to packed downtown offices.

Several experts have cited the potential for cleaner energy alternatives because the public is seeing cleaner air and the environmental benefits of a 30% reduction in daily oil consumption. Some consumer surveys have indicated a greater interest in electric vehicles.

There is certainly the hope that we will take the opportunity to revive the economy with cleaner technologies than before the lockdown. However, the reality is that workers and businesses need to start up again with the infrastructure they have, and investment in cleaner technology requires capital. Since many business operations are struggling to find cash and loans to just remain open, new clean technology may be delayed.

Yet the major infrastructure changes for a sustainable future are well underway. Solar and wind are rapidly replacing fossil fuels for electricity. Automakers and governments are committed to electrification of the transportation sector. The pandemic may be a near-term obstacle, but the transition to a sustainable economy is just delayed and may even be accelerated in the coming years.

Digital Transformation in telecom

As the technology is filling each and every corner of our lives, businesses feel an ever-increasing need to go digital. From banking to telecom industries, companies launch digital transformation initiatives trying to anticipate and satisfy the rapidly changing consumers’ needs. Gartner anticipates that tens of billions more devices will come online and become connected by 2020 and it exerts a profound impact on telecommunications. The rapid growth in the use of smartphones has transformed customer interaction with telecom providers. More and more telecom companies leverage the power of technology to reimagine their business models, rebuild their market positions, and create innovative offerings for customers. 

The universal connectivity trend gives people on-demand access to all their business and social activities from simple instant messaging to global money transactions. If telecoms use these new opportunities wisely, they could improve their profits by as much as 35% in the near future. So let’s have a closer look at 7 major technologies fostering digital transformation in the telecom industry.

1. Big Data providing valuable insights for telecom providers

Undoubtedly big data analytics brings in considerable value to decision making and provides more accurate and actionable insights. Big data may not only foster digital transformation in telecom but also enable providers to prepare their networks for future demands. For instance, it helps businesses take advantage of the available information within their networks to make them robust, optimized, and scalable by analyzing network traffic in real time. Reviewing a network from a mobile perspective helps reveal areas that require improvement as well. 

Furthermore, the examination of user behavior can play an important role in understanding how to deliver media content more effectively and deliver a better customer experience. This detailed understanding of customers helps establish customer-centric KPIs, which eventually brings competitive advantages and increases cost structure efficiency. 

By gaining insights with the help of big data, telecom companies may leverage this information to create personalized customer profiles and launch targeted ad campaigns. With global mobile advertising expected to reach $41.9 billion in 2017, telecom providers can gain profits by serving better-targeted ads. Therefore, with the help of big data, telecom companies can deliver customer-tailored experiences, grow their user-base, and increase revenue.

2. Effective digital transformation of telecom with Business Intelligence

A typical telecom business encompasses huge array operations and processes. Those providers that have already realized the importance of analyzing their key metrics, started gathering information about their business performance and customer experience at all levels. However, making sense of all that data and taking advantage of it is quite a challenge. Business Intelligence technologies offer the tools for interpreting the collected information and using these insights for more predictable and smarter business moves. 

BI allows telecom companies to analyze their customers’ needs and tailor all of their business processes to effectively meet them. Thus telecom providers are widely adopting BI solutions for reporting, dashboards, and analytics. They include Tableau, Power BI, QlikView, Cognos etc. These technologies are widely used for predictive analysis, data mining, forecasting, and optimization. Overall, the adoption of BI in telecom is aimed at improving core operations, eliminating risks, identifying market trends and producing data-driven forecasts. 

3. Digitizing financial operations in telecom with Mobile Money

Although mobile payments, mobile banking, and mobile commerce might seem to be very distant from telecom, they present endless possibilities to the industry. Many telecommunication companies that have already embraced digital transformation deliver simple money transfer services within their solutions. In addition, they offer wider availability and lower costs than traditional banks by integrating fintech platforms like Currencycloud into their existing systems. 

For instance, our telecom client Lebara has created Lebara Money, a cross-border mobile money transfer service. It is easily accessible via smartphone and allows to make reliable, peer-to-peer money transfers in just a few clicks. Moreover, Lebara users can top up their accounts, check their balance, and view payments history with MyLebara digital wallet. This is another opportunity unexplored by many telecom businesses. Yet the global mobile wallet market is expected to grow from $235 billion today to $721 billion in 2017. 

Bringing all the financial operations to one place may help telecom providers significantly improve the user experience of their clients. Thus more and more businesses use fintech app development and mobile money technologies in their digital transformation strategies.

Evolution of the global mobile money landscape (2001 to 2016)

Evolution-of-the-global-mobile-money-landscape-2001-to-2016g

4. Transformational potential of messaging technologies

Without any doubts, messaging technologies have revolutionized how we communicate, and today more than 2.5 billion people are actively using at least one messaging app. These technologies integrate features like video, photos, voice, e-commerce, and gaming with plain-old messaging. A recent report of telecommunications industry analysts Juniper Research predicted that instant messaging will account for 75% of all mobile messaging traffic by 2018. This would be the equivalent of almost 63 trillion messages. 

Such dominant apps like Snapchat, Facebook Messenger, and Whatsapp have already overtaken SMS as the consumer’s favored form of communication and our client Lebara is also actively adopting this messaging trend. In cooperation with N-iX dedicated development team, they have built an HD quality calling and messaging app Lebara Talk. This app offers low-cost international calling rates, with no connection fee and free credit on download. And this is just the beginning of the development of innovative ways of communication telecom businesses will have to face. 

5. The Internet of Things (IoT) revolutionizing telecom sector

As technologies evolve, the Internet of Things (IoT) is increasingly becoming a part of our daily lifestyle and is widely influencing telecom as well. Technavio’s market research analysts estimate that the global telecom IoT market will grow steadily with CAGR of more than 42% by 2020. IoT has a pivotal role in terms of infrastructure management in telecom. It serves as an intelligence platform for achieving significant energy savings and enhancing workplace experience.

IoT provides a unified console to manage several devices connected across the telecom network in an integrated manner. Its applications in telecom are likely to extend across both consumer and enterprise applications. These services will be concentrated on connectivity, consulting, implementation and operations services.

Leading telecom providers have already exploited the possibilities of major IoT applications. For instance, Intel has launched its integrated suite of IoT solutions under its Intel IoT Platform. It provides device connectivity, cloud hosting, and analytics support. AT&T in cooperation with IBM and Spain’s Telefónica offers an IoT product called Thinking Things. It allows individuals to develop programs which adjust climate and lighting in rooms and offices. In the future, it will control all of the home and office equipment and data they interact with. Moreover, UK’s telecom provider Orange has launched a machine-to-machine (M2M) communications system. So this move towards a digitally smart world is representing major opportunities for telecom providers.

Forecast growth of connected objects in telecom (billions)

Screenshot (38)

6. 5G fostering digital transformation in telecom

In the age of digital technologies, mobile internet and its speed play a crucial role for telecom providers. The rise of 5G networks is expected to represent a major leap forward from current telecommunications technologies. This may include revolutionary changes in radio interfaces and spectrum use. While this technology has not yet been fully defined, lab and field trials are being actively carried out for at least the basic connectivity elements. The promise of 5G rests in providing more speed, greater efficiency, and less latency. 5G networks will be highly reliable and efficient in terms of handling a very large number of devices (including smart objects in the Internet of Things). According to Deloitte, there will be full, mass-market 5G coverage by approximately 2020 and it will have a transformational effect on telecom.

7. Media & entertainment technologies in a digitalized telecom business

One of the major offerings of telecom providers is the all-time access to media and entertainment streams. Now internet television bypasses cable and delivers video directly to viewers through a broadband connection. According to Fortunelords, 6 out of 10 people prefer online video platforms to live TV. The total number of hours of video watched on YouTube every month has reached 3.25 billion. What’s more, people are increasingly watching media content on their mobile devices. In an average day, 4 in 10 users who watch YouTube do so only on their smartphones. 

Such telecom providers as Lebara have already leveraged the opportunities of media tech. Their solution Lebara Play allows its customers to enjoy high-quality video streaming to watch the worldwide multi-ethnic movies and live TV. It is dedicated to migrant communities across the world who want to watch various content from their home country without any limitations. Moreover, different video-on-demand services are now available with the help of Netflix, Amazon, and Hulu. Along with the above-mentioned services, linear streaming services are gaining traction including Sling TV and DirecTV which stream dozens of cable channels in real time. Thus telecom providers may offer limitless connectivity and real-time access to any kind of media and entertainment content worldwide.

On the whole, connectivity and mobility have become firmly entrenched in our lives, and their power is almost limitless. The development of technologies such as IoT, big data, BI, and others allows telecom providers to gain competitive advantages by transforming their businesses. Telecom companies are actively adopting new ways of analyzing their customers’ needs and changing their traditional business operations accordingly. Therefore, the ongoing change in this sector is likely to make 2017 a year of innovation and digital transformation in telecom.

Digitization in the public sector

The full benefits of digitization could be huge, but to realize them, governments need to tackle the factors that make many e-government efforts fall short of their promise.

Digitization in Public Sector

Citizens and businesses now expect government information to be readily available online, easy to find and understand, and at low or no cost. Governments have many reasons to meet these expectations by investing in a comprehensive public-sector digital transformation. Indeed, governments around the world are doing their best to meet citizen demand and capture benefits.

More than 130 countries have online services. For example, Estonia’s 1.3 million residents can use electronic identification cards to vote, pay taxes, and access more than 160 services online, from unemployment benefits to property registration. Turkey’s Social Aid Information System has consolidated multiple government data sources into one system to provide citizens with better access and faster decisions on its various aid programs.

The public-sector challenge

Digital transformations require changes, to both processes and IT systems, that are more challenging to implement in the public sector than in the private sector. The public sector must cope with additional management issues, including multiple agencies, a range of organizational mandates and constituencies, longer appropriations timelines, and the challenge of maintaining strategic continuity even as political administrations change.

Therefore, it is important that private-sector companies supporting public IT transformations understand that the public sector operates in a different context. For example, it can be challenging to set a specific target, build consensus, align on a leadership structure, secure funding, and meet implementation timelines.

Achieving comprehensive public digitization

While digital transformation in the public sector is particularly challenging, a number of successful government initiatives show that by translating private-sector best practices into the public context it is possible to achieve broader and deeper public-sector digitization. Each of the six most important levers is best described by success stories.

  1. Win government-wide and agency-deep commitment to specific digital targets. The launch of gov.uk in 2012 marked the creation of one of the most accessible digital-government services in the world. A clear mandate helped steer the implementation and build awareness.
  2. Establish government-wide coordination of IT investments. To better coordinate large-scale IT projects across the government and generate cost efficiencies, Denmark established IT Projektraad, a digitization council reporting to the Ministry of Finance, to function as its central IT steering group. The agency’s goal is to ensure that the benefits and gains targeted in a project’s business case are realized.
  3. Redesign processes with the end user in mind. In 2011, the Netherlands released i-NUP, its government-wide implementation agenda for e-government services, to prioritize citizen- or user-centered design by boosting convenience and trimming red tape.
  4. Hire and nurture the right talent. Digital transformations call for specialized skills that are in high demand and therefore increasingly hard to come by. Government organizations often struggle to compete for such talent, since the private sector frequently can offer higher wages, a more entrepreneurial culture, and more clearly defined career paths.
  5. Use big data and analytics to improve decision making. The US government has been one of the most active in leveraging data to support government decision making. In 2009, it gave open data a legal and privacy framework that led to the creation of data.gov, a repository of government tools, resources, and information on anything from energy and science to global development and health. In all, more than 85,000 data sets are available to help businesses and private citizens conduct research, develop web and mobile apps, and create design visualizations. To populate data troves, government departments were required to identify and share their most valuable data.
  6. Protect critical infrastructure and confidential data. Data security has become a top national-security issue. In 2013, the World Economic Forum identified cyberattacks and critical-systems failure as two of the most dangerous global risks. Beyond financial losses, cyberattacks may pose serious reputation risks for companies and governments.

Governments can protect critical infrastructure and confidential data through several initiatives. For example, most major developed economies have created a national cybersecurity strategy in the past five years. They are also developing information-sharing mechanisms to detect and respond to cyberthreats more quickly.

Many state and local real estate professional groups have codes of ethics that they ask their members to uphold. While I definitely practice ethical conduct in all areas of my business, there are ten specific promises that I make to you as my client.

  1. I promise to tell you the truth about your property: I will give you my honest assessment of what your home is worth. I won’t mislead you about its value in order to get your listing or make you feel good.
  2. I promise to disclose all my relationships in the transaction: If I am representing both the buyer and the seller in our transaction, I am obligated to tell you. However, there are other kinds of relationships that may influence our business together, so if you’re thinking of buying my brother-in-law’s house, I’ll tell you that too.
  3. I promise not to put my commission ahead of what’s best for you: Of course I earn more money if you buy a $300,000 house instead of a $200,000 house. But if the $200,000 house is clearly best for you, I will respect your choice and work hard to complete the deal successfully.
  4. I promise to respect your confidences: During the course of our working together, you may share personal, financial, and other confidential information with me. I will not disclose this information to anyone, nor will I use it to gain any kind of advantage in a transaction.
  5. I promise to show you all the available properties in your price range: Some Realtors may try to steer you toward their own or their company’s listings. I’ll show you any property that meets your needs, regardless of who has the listing.
  6. I promise to give you good advice: I deal with lenders, home inspectors, appraisers and countless other professionals on a regular basis. I can give you solid recommendations about these matters, if you need them, and if I think you might be making a bad choice, I’ll tell you.
  7. I promise not to push you into a bidding war: Real estate is a competitive business and there are offers and counter-offers that go on during any business deal. However, I will not encourage you to go beyond your maximum budget to buy a property. I won’t tell you that other people are interested in the property or about to make offers in order to get you to make a higher offer.
  8. I promise that you will understand what you’re signing: Any real estate deal involves a mountain of paperwork. You’ll be asked to sign all kinds of documents and I will explain them all and make sure you are comfortable every step of the way. I won’t get you into a time crunch so that you feel you don’t have time to read through the paperwork.
  9. I promise to tell you the truth about myself: I’ll provide you with information about my background, my training, and my experience as a Realtor. I won’t make any false claims. I’ll discuss my commissions and any other compensation I might receive as a result of our transaction.
  10. I promise to follow through and follow up: I don’t list and leave. I’ll discuss with you exactly how I work and what you can expect. I’ll communicate regularly and you’ll know everything that’s going on as soon as I know it. Even after we close the deal I’ll keep in touch, to be sure you’re still happy with the way things turned out.