Extractive summaries curated from TOP TEN BUSINESS MAGAZINES to
promote informed business decision making
Issue/Week 208 – September 03-09, 2021
How the pandemic became stagflationary
The Economist | September 02, 2021
It has been a summer of unpleasant surprises for the world economy. America, Europe and China are growing more slowly than investors had hoped. Consumer prices are rising uncomfortably fast, especially in America. Economies are troubled by shortages of parts and labour, slow and expensive shipping and the bewildering variation of lockdown measures.
The spread of the Delta variant is to blame, but the way the pandemic is affecting the economy is shifting. The world had become accustomed to the virus battering growth, as waves of infection caused a sudden stop in activity, and prices moderated or even fell. Delta, by contrast, looks like a stagflationary force that is sapping growth less dramatically but firing up inflation.
Consumers seem less scared of the disease even if there are enough unvaccinated people to fill up hospitals. Meanwhile, the spread of Delta continues to interfere with the global supply of goods just as consumers, especially Americans, are intent on buying more cars, devices and sporting gear than ever. Outbreaks in South-East Asian countries with low rates of vaccination are causing production plants and logistics networks to shut down temporarily, prolonging the disruption to supply chains. Shortages are driving up prices.
The changing relationship between the virus and the economy has implications for policymakers. They will not be able to repeat the trick from earlier in the pandemic of restricting people’s movement as a way to contain the spread of the virus, while at the same time unleashing stimulus to create a compensating boom in demand for goods. A service-sector revival is now the only quick route to fast growth because that is where the slack is. Should the spread of Delta interfere with service industries such as leisure and hospitality, more stimulus will only create more inflation.
It is also harder to argue that fear of the virus scares consumers off spending, and that government restrictions to slow the spread of disease therefore have little extra economic cost. A weaker link between cases and people’s movement, and the necessity of service-sector growth, raise the cost of lockdowns. If pressure on hospitals causes even highly vaccinated countries like Britain to restrict services over the winter, the economic damage will be large and the benefits smaller. The Delta wave may subside soon, easing the pressure on the world economy. If it does not or another variant takes its place, the trade-offs involved in fighting the virus will become harder to justify.
3 key takeaways from the article
- The way the pandemic is affecting the economy is shifting.
- The world had become accustomed to the virus battering growth, as waves of infection caused a sudden stop in activity, and prices moderated or even fell.
- Delta, by contrast, looks like a stagflationary force that is sapping growth less dramatically but firing up inflation.
Topics: COVID-19, Global Economy, Pandemics
Forget Finance. Supply-Chain Management Is the Pandemic Era’s Must-Have MBA Degree
By Mathew Boyle | Bloomberg BusinessWeek | September 03, 2021
Stores with no toilet paper. Colossal cargo ships run aground in the Suez Canal. Factory shutdowns in Vietnam. Ports closed in China. It almost seems that not a day goes by without reports of another supply-chain snafu wrought by the pandemic, which dismantled just-in-time inventory systems that couldn’t cope with massive, simultaneous disruptions of supply and demand.
Companies have struggled to adapt, with some taking unusual steps. Walmart Inc. and Home Depot Inc. are chartering their own private cargo vessels so they don’t get caught short as the holiday season approaches, and logistics experts say disruptions from congested ports won’t end anytime soon. The tumult has forced companies to lavish more attention on their supply-chain professionals, who typically toil in obscurity until disaster strikes. It’s also prompted business schools to refresh their supply-chain curricula to make sure the next generation of logistics managers are prepared for future crises.
In response to tremors caused by this pandemic, business schools are now emphasizing things such as risk mitigation, data analytics, and production reshoring—while also carving out room to explore more intangible topics like ethics, communication, and sustainability.
Students who pursue supply-chain degrees this fall are certain to get an earful about the limitations of just-in-time inventory systems, which grew in popularity during the 1990s as companies aimed to mimic the success of auto makers like Toyota Motor Corp., the gold standard of lean manufacturing. Covid-19 exposed the weaknesses of legacy inventory systems, which typically emphasize cost reduction above all else. The pendulum is now shifting the other way. Classroom discussions will now delve into the downsides of sourcing too much from China or any single country, while they also explore the role that new technologies like machine learning and artificial intelligence can play in manufacturing and inventory decisions. What’s also needed, though, is a realization in corporate C-suites that logistics isn’t just an expense—it can actually create value when done well.
3 key takeaways from the article
- Not a day goes by without reports of another supply-chain snafu wrought by the pandemic, which dismantled just-in-time inventory systems.
- Companies have struggled to adapt, with some taking unusual steps. The tumult has forced companies to lavish more attention on their supply-chain professionals, who typically toil in obscurity until disaster strikes.
- Pandemic-induced supply shocks also prompted business schools to refresh their supply-chain curricula to make sure the next generation of logistics managers is prepared for future crises.
Topics: Supply Chain, Pandemics, COVID-19
Inbound freight: The savings opportunity chemical players overlook
By Theo Jan Simons et al., | McKinsey & Company | August 3, 2021
Raw-material spend accounts for 50 to 70 percent of sales revenue for chemical companies. A growing number of these companies have already realized more accessible cost savings, so procurement leaders need to turn to undermanaged areas to find additional savings opportunities. Inbound freight offers one such opportunity. According to the authors’ estimate, these costs account for 8 to 12 percent of total raw-material spending, but they are often overlooked. Buyers typically focus on renegotiating the price of the raw materials themselves and rarely discuss freight costs. This is largely a problem of cost transparency; delivery costs are often handled directly by suppliers and might not be disclosed separately.
Chemical companies that make the most of a new suite of tools and techniques—and that follow a structured approach—can typically save 5 to 10 percent of their baseline inbound-freight costs. The first step is to create a detailed view of this baseline, which involves gathering and combining a broad range of data sources. Second, they should use clean-sheet analysis to develop a specific sense of what their inbound-freight costs should be and compare this to their baseline. Finally, and starting with the areas that offer the biggest savings opportunities, they should develop a new negotiation approach that takes into account all potential cost-saving levers.
In both cases—in which either suppliers or a separate team is responsible for freight—buyers typically focus on renegotiating the raw-material price and rarely look at inbound freight. Undermanaging these costs leaves a lot of value on the table; inbound freight typically makes up 8 to 12 percent of total raw-material spend, and a full renegotiation can lead to savings of 5 to 10 percent of this total.
To extract value from their inbound freight, chemical companies should follow a structured approach comprising of: create a baseline of current spending, calculate what the spending level should be, and develop a new approach to negotiations, starting with priority cost-saving areas.
3 key takeaways from the article
- Raw-material spend accounts for 50 to 70 percent of sales revenue for chemical companies. A growing number of these companies have already realized more accessible cost savings, so procurement leaders need to turn to undermanaged areas to find additional savings opportunities.
- Inbound freight offers one such opportunity. According to one estimate, these costs account for 8 to 12 percent of total raw-material spending, but they are often overlooked.
- To extract value from their inbound freight, chemical companies should follow a structured approach comprising of: create a baseline of current spending, calculate what the spending level should be, and develop a new approach to negotiations, starting with priority cost-saving areas.
Topics: Chemical Industry, Procurement, Efficiency, Supply Chain
Future-Proofing Your Organization
By Michael Mankins et al., | Published in Harvard Business Review | From the Magazine (September–October 2021)
As businesses rebuild in the aftermath of the global pandemic, those that take the opportunity to remake and future-proof their workforce will pull far ahead of rivals. So how should companies rebuild? In this article, the authors draw on research to share the six best practices of the companies in the course of assembling and managing their teams.
- Think Ahead When Defining Business-Critical Roles. Not all jobs are equally important. Research by Bain and others indicates that fewer than 5% of an organization’s roles account for more than 95% of its ability to execute on its strategy and deliver results. But which 5%? Companies need to rethink which skills will be most important in an increasingly tech-enabled future, develop them in the current workforce, and actively recruit for them.
- Redefine What Great Looks Like. Like our assumptions about which capabilities are mission-critical, our assumptions about what success looks like must change in the wake of the pandemic. Fortunately, new tools and techniques that utilize people analytics and behavioral science can help companies define “what great looks like” in a particular role and identify employees who already have the needed skills or could develop them with training.
- Don’t Cut Back on Management Development. The best companies look to management development, often supported by technology, for reskilling their current workforces and filling at least some of their capability gaps with existing employees.
- Tech Up the HR Function. From an HR perspective, a model that relies too heavily on frequent human interaction will not be cost-effective. Technology will enable companies to do a far better job of recruiting, deploying, developing, and retaining talent, at a lower cost.
- Get People to Engage with Tech. Companies and workers everywhere are increasingly engaging with AI-enabled processes. This trend will only accelerate after the pandemic, as more and more people transact and work in the virtual world. Unfortunately, few companies—or employees—manage engagement with technology in a coordinated way, so employees become suspicious of it, and the technology underperforms management’s expectations.
- Figure Out What Tomorrow’s Stars Want from You. Even without the pandemic, tomorrow’s managers would have been looking for a workplace value proposition that comprises of: flexible schedules, diversity in the workplace, engagement, autonomy, and a meaningful connection with their employers.
3 key takeaways from the article
- Technology is fundamentally changing the nature of work. Organizations that rebuild following traditional analog processes will be outpaced by more-prescient competitors.
- Given how much time it will take to build a winning talent pool, companies must begin future-proofing their organizations today.
- They all seem to adhere to the following six practices in the course of assembling and managing their teams: Think Ahead When Defining Business-Critical Roles, Don’t Cut Back on Management Development, Redefine What Great Looks Like, Tech Up the HR Function, Get People to Engage with Tech, and Figure Out What Tomorrow’s Stars Want from You.
Topics: Communication, Technology, Strategic Planning
Entrepreneurial Identity: A Leader’s Superpower and Their Achilles’ Heel?
By Eliana Crosina et al., | MIT Sloan Management Review | September 02, 2021
The way entrepreneurs answer the question “Who am I?” — that is, their entrepreneurial identity or EI — plays an important role in how they think and act from new venture launch to harvest. For example, how they define their background, their purpose, and their values as founders can inform the type and scale of resources they gather, the structure and goals of their businesses, and even their propensity to persevere (or not) in the face of adversity.
In the early stages of the life of an organization, when teams, processes, products, or services are being defined, EI serves the dual role of motivator and grounding resource. Because many start their ventures moved by the desire to express who they are, particularly early on, entrepreneurs make decisions that align with their EI. These decisions span product and service design, business location, hiring, and more. Thus, entrepreneurial identity sets individuals in motion and anchors their strategic choices and organizing efforts. To the extent that leaders can uniquely express their identity through their work, their EI not only might motivate them but also serve as a source of differentiation. To harness their EI as a source of motivation and differentiation, leaders should start by taking stock of who they are.
As organizations grow, EI can turn into a liability, contributing to rigid thinking and ultimately an inability to adapt to new challenges. To remain more attentive and nurturing toward the needs of their growing organizations, leaders should periodically assess how important a role or a group is to who they are, and recognize that when any one given role or group becomes all-defining, there is a risk of losing perspective. Periodic introspection, including discussions with others — including family or friends — can help mitigate this risk.
It’s inevitable that organizations will face setbacks at some point, and many might reach a plateau rather than continuing on an upward growth trajectory. EI can help combat stagnant growth, serving as a source of renewal and resilience. In particular, research indicates that when their businesses face challenges, some entrepreneurs find energy and continuity by holding on to parts of their identity while letting go of others to match changed conditions in their environments.
3 key takeaways from the article
- The way entrepreneurs answer the question “Who am I?” — that is, their entrepreneurial identity or EI — plays an important role in how they think and act from new venture launch to harvest.
- By continuing to reevaluate their entrepreneurial identity — what makes them tick, why, and how — leaders may harness Entrepreneurial Identity’s generative power as a source of motivation, persistence, and innovation.
- This ongoing introspective process may also help leaders decide when it is time to hire others to help them run their organization; after all, EI is as much one’s superpower as it is one’s Achilles’ heel.
Topics: Entrepreneurship, Leadership, Decision-making
Don’t Be the Smartest Guy in the Room
By George Deeb | Entrepreneur | September 01, 2021
Based on the author’s experience the difference between the average leader and the great ones is how they viewed themselves, and the role they thought they needed to play within their company. His conclusion: the persons that saw themselves as the smartest guy (or gal) in the room, who needed to control all the decision-making in the company, are the ones who achieved the least success, and ended up alienating their peers the most. He explained further, so we should not repeat these same mistakes.
The smartest guy in the room. There is no one in the company whose opinion he values more than this guy. He doesn’t trust his staff to make the tough decisions. He loves to hear himself talk. No new ideas are good unless he came up with them. He loves to micro-manage every decision. He pretty much “knows it all,” regardless of the topic, and would never hire a person smarter than himself, to not look stupid. The company’s revenues are simply not growing and he has no idea why. The reaction of this guy’s employees could be nobody likes working for him. They have given up on contributing new ideas, because they are tired of being turned down, over and over again. Frankly, they don’t care about the company and are simply going through the motions of the job, most likely keeping their ears open for new job openings since this company has very high employee turnover, low morale and a poor culture, all of which has trickled down from the top. Reverse would be true for a boss who is opposite to what has been described about the smartest guy in the room and the employees’ reactions.
The problem is, most “The smartest guys in the room” in the world don’t even know they are behaving that way. So what you really need to do is have an outsider survey your employees and have them tell you exactly what they think about you, your management style and the company. That is the only way good learnings can be had, for you to improve yourself, and the business in the process.
3 key takeaways from the article
- The difference between the average leaders and the great ones is how they viewed themselves, and the role they thought they needed to play within their company.
- The persons that saw themselves as the smartest guy (or gal) in the room, who needed to control all the decision-making in the company, are the ones who achieved the least success and ended up alienating their peers the most.
- The real smart leader is who hires smart people, listens more, and avoids micro-management.
Topics: Leadership, Decision-making
How To Generate Organic High-Quality Startup Ideas
By Abdo Riani | Forbes | August 30, 2021
Most startups fail. Yet, building a startup from scratch takes a lot out of you – time, money, emotional investment, etc. So, a couple of rules of thumb that will help you discover high-quality ideas that other people can’t see are:
- Look For Organic Ideas. Successful startup ideas are usually discovered, rather than generated. The valuable startup ideas either aren’t obvious at all (which means you can’t generate them on a whim), or they are obvious but very few people are in the right place to see the problem that needs solving. Successful startup ideas require insights that other people don’t have. And to get those, you need to put yourself in a unique situation.
- Be At The Cutting Edge Of A New Wave. Many startups become extremely successful by being the first ones to ride a wave. This usually means a new technological wave (e.g. crypto, machine learning, genomics, etc.), however, it could also be a new cultural wave – esports, a new genre of music, etc.
- Be At The Intersection Of Two Or More Fields. Another way to gain unique insight is to be at the intersection of two fields. By definition, there will be very few people at your exact location on the Venn diagram. You can use this to your advantage and take successful practices (and businesses) from one field and apply them to another.
- Do. Don’t wait. Valuable startup ideas are discovered and to discover anything you need to search actively. This means that it doesn’t make a lot of sense to sit in your comfort zone and wait for the perfect idea. Accept that the idea in its first iteration will almost certainly fail, but learn relentlessly along the way. This way your unique experience and newly gained insight into the market can help you make the iteration on your idea that hits the bullseye.
3 key takeaways from the article
- Most startups fail. Yet, building a startup from scratch takes a lot out of you – time, money, emotional investment, etc.
- Because of this, if you decide to take the plunge and start your own startup project, it’s very important to be sure you’re working on something worthwhile from the very beginning.
- Yet, the sole act of coming up with high-quality startup ideas is hard enough. So, a couple of rules of thumb that will help you discover high-quality ideas that other people can’t see are: Look For Organic Ideas, Be At The Cutting Edge Of A New Wave, Be At The Intersection Of Two Or More Fields, and Do. Don’t wait.
Topics: Entrepreneurship, Creativity, Startups
3 Steps You Need to Take Before Making the Leap to a Subscription Business
By Krish Subramanian | Inc | September 02, 2021
The trend of subscription-based products or services has been ongoing, it was dramatically accelerated during the Covid-19 pandemic when two years of digital transformation progress happened in just two months. For business leaders who are currently pondering the switch, there are three critical steps to take to help ensure you are set up for success.
- Evaluate whether a subscription model fits your business. Before investing resources in making the switch, consider whether your product or service is positioned for hyper-growth. There’s a strong correlation between hyper-growth and the subscription model, but the foundation for unlocking this growth is having a product or service that’s consistently wanted by a sizable and growing market. Many companies in the e-learning, e-commerce, and publishing, and media spaces are already making the switch. They all share two things in common: A product that drives regular, consistent purchases from consumers, and sustained growth into new markets.
- Establish a strategic roadmap to ease the transition. Going from a legacy model to subscription billing is a big leap. As part of your transition roadmap, there should be a pilot experiment so you can iterate and make the move one step at a time. The transition may seem daunting at first, but it does not require an overhaul of your entire system all at once. The better bet is to start tweaking specific functions. And after a few initial wins, you can then build out and scale parallel lines of operations before moving into an organization-wide adoption. Another benefit of starting with a pilot is that you can learn as you go.
- Break Down Silos Within Your Organization. Siloed operations and departments can quickly become the biggest barrier to transitioning to a subscription model. The reality is that traditional systems aren’t built to support recurring revenue since there are many siloed processes that make it difficult to manage subscriptions and the entire customer life cycle.
2 key takeaways from the article
- The trend of subscription-based products or services has been ongoing, it was dramatically accelerated during the Covid-19 pandemic when two years of digital transformation progress happened in just two months.
- For business leaders who are currently pondering the switch, there are three critical steps to take to help ensure you are set up for success: evaluate whether a subscription model fits your business, establish a strategic roadmap to ease the transition, and break down silos within your organization.
Topics: Entrepreneurship, Business Model, e-commerce, Digital-marketing