Extractive summaries of the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision making | Week 214 |October 15-21, 2021
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Shaping Section : Ideas and forces shaping economies and industries
Who should police the web?
The Economist | October 16, 2021
Should video websites have to review content before they publish it? Where does the boundary lie between hate speech and incitement to violence? Questions such as these are all hard questions, but behind them lies an even more difficult one: who should provide the answers? On the internet, such dilemmas are increasingly being resolved by private firms. Social networks are deciding what kinds of misinformation to ban. Web-hosting companies are taking down sites they deem harmful. Now financial firms are more actively restricting what people can buy. The digital gatekeepers are doing a mixed job. But it is becoming clear that it ought not to be their job at all. The trade-offs around what can be said, done, and bought online urgently need the input of elected representatives. So far governments have been better at complaining than at taking responsibility.
Liberals must strike a balance. Private firms should in general be free to deal with whom they like. Just as Facebook may legally ban people like Donald Trump from its network and Amazon Web Services can decline to host alt-right-friendly apps. Yet the market power of these firms and their often like-minded rivals means that without their approval and support, individuals or businesses may face exclusion, even if they have broken no law. In edge-cases, private gatekeepers will err on the side of caution. The best remedy would be more competition, so that if Facebook cancels a controversial figure, consumers have alternatives. That will not happen soon: network effects are powerful in social media and crushing in the payments business.
In the meantime, private companies that find themselves acting as gatekeepers should be transparent about their rules, how they make them, and what redress they offer. Yet the bigger responsibility lies with governments. And politicians are right to warn that some private companies have too much power online. But those firms have ended up with so much responsibility partly because politicians themselves have abdicated it.
3 key takeaways from the article
- Should video websites have to review content before they publish it? Questions such as these are all hard questions, but behind them lies an even more difficult one: who should provide the answers?
- On the internet, such dilemmas are increasingly being resolved by private firms. Yet the bigger responsibility lies with governments.
- Politicians are right to warn that some private companies have too much power online. But those firms have ended up with so much responsibility partly because politicians themselves have abdicated it.
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Topics: Regulating Industries, Technology, Worldwide Web, Social Media
The Key To An Economy’s Robust Long-Term Growth
By Milton Ezrati | Forbes | October 18, 2021
A new book, from France of all places, offers Americans much-needed insight into the sources of economic growth and the kinds of policies that will promote it. Entitled in the English translation The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations and written by Philippe Aghion, Celine Antonin, and Simon Bunel, the book builds on the work of the great Austrian and free-market economist Joseph Schumpeter who coined the term “creative destruction.”
The authors use four succinct points to frame Schumpeter’s thought: First, innovation, supported by a wide diffusion of knowledge, lies at the heart of any economy’s growth process. Second, an economy can elicit innovation by offering incentives to those who would take the risk of pursuing something new, notably through protections for private property, especially intellectual property. Such protections – patents and copyrights – not only enable innovators to enjoy the returns due their innovations but by removing the fear of usurpation, also encourages them to diffuse their ideas widely. Because the innovators, the creators of the new, destroy old ways, a third element of the process must prevent established players from blocking the innovations that would supplant them. Fourth, creative destruction also needs an active financial sector to bring the innovations to practical, commercial effect.
Aghion, et. al. use this structure to offer a welcome departure from the almost exclusive focus on capital accumulation used in both standard and Marxist growth theory. Instead of this common but rather limited approach, they use the emphasis on innovation to integrate thinking on growth with the social and political climate of a country. So, for instance, they find the roots of Britain’s late eighteenth century industrial revolution less in economics and finance than in how the growing dominance of parliament secured property rights for the first time in history and how that new environment, at the same time as it encouraged innovation and innumerable innovative spinoffs through the widespread diffusion of knowledge, also fostered the growth of finance to bring all the inventiveness into practical existence.
The authors support their arguments through an array of statistical sources that track the progress of these changes in Britain and throughout Western Europe. Their final proof lies in impressive estimates of per capita real incomes, showing how after stagnating for centuries these tripled over the course of the nineteenth century and since have risen by a factor of ten.
2 key takeaways from the article
- A new book, from France of all places, offers Americans much-needed insight into the sources of economic growth and the kinds of policies that will promote it.
- The authors use four succinct points to frame Schumpeter’s thought: innovation, protections for private property, prevent established players from blocking the innovations, and an active financial sector.
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Topics: Economic Development, Innovation, Entrepreneurship
Leading & Managing Section
5 Questions to Build Your Company’s Capacity for Innovation
By Rita Gunther McGrath | Harvard Business Review | October 15, 2021
With so much uncertainty about, well, everything, people are realizing that innovation — the process by which new things create value — is essential to thriving going forward. But we don’t know where to start. According to the author asking yourself these five questions is a good place to begin.
- What is your growth gap? While it’s quite common for executives to promise their investors both performance and growth, the reality is that they are seldom set up to deliver both. Typically, they are paying a lot more attention to day to day performance. A useful way to shake up the status quo a bit is to ask your organization to articulate their growth gap — in other words, at some point in the future, how much new growth do you expect to get and where will it be coming from? Next, you need to have a look at your portfolio of opportunities — the projects and programs that you are working on right now. Ultimately, you’re examining whether you have projects that are potentially capable of closing the growth gap, recognizing that your existing core business is likely to experience a decline over time.
- How will your innovation practices be governed? There are a number of different models. In some organizations, senior leaders themselves are part of the growth board and are intimately involved in resource allocation decisions. In others, it’s driven by technical functions. In still others, innovation is widespread without specific “ownership,” at least at the early stages.
- How will you allocate resources for innovation? It is quite astonishing how often innovations get started, and even get to some considerable size, before someone realizes that they aren’t a good fit with the firm’s strategy. To address this, go through a process of translating the grand strategies of your firm into specific screening scorecards. While these scorecards are never perfect and precise, they can provide enormous value in immediately distinguishing among things that are potential big wins and things that are unlikely to be, even if they succeed.
- Where does your innovation group belong? There are several archetypes for how to locate an innovation group within the firm. All of them have advantages and drawbacks.
- How will you get started? If you are at an early stage, do not start with a huge team, big ambitions, and a major budget. That’s a recipe for total disaster.
2 key takeaways from the article
- With so much uncertainty about, well, everything, people are realizing that innovation — the process by which new things create value — is essential to thriving going forward but we don’t know where to start.
- Five questions would be a good place to begin with: What is your growth gap? How will your innovation practices be governed? How will you allocate resources for innovation? Where does your innovation group belong? And how will you get started?
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Topics: Innovation, Strategy, Teams
Three Steps to Building a Learning Culture That Delivers Innovation
By Ori Mor | MIT Sloan Management Review | October 14, 2021
Many of the biggest, most daunting challenges of our time need technological solutions as quickly as possible. And all over the world, there are teams of scientists, engineers, and business leaders looking to create those solutions. But it takes more than expertise, hard work, and determination to come up with them. It takes a culture that supports continuous learning and daily experimentation. Three steps in particular allowed that culture to thrive. The author shared his experience of developing wireless power.
- Let Go of Ego. The team was comprised of highly driven, well-trained, brilliant engineers. With that kind of brainpower, it can be especially difficult to let go of egos. But they recognized early on that if they were to get along and operate with synergy, they couldn’t let anyone’s sense of self-esteem or self-importance get in the way. Those of in charge made it clear that no one was there to prove themselves; they all had the skills and work ethic to be valued.
- Build Long-Term Optimism. According to the author he discovered that long-term optimism is a skill that can be learned. As medically reviewed research from Verywell Mind reports, optimists tend to emphasize that setbacks are only temporary; that when things go wrong, it’s because of external forces, not the fault of people trying their best. For optimists, a failure in one area does not make a failure in other areas any more likely. Of course, there is such a thing as too much optimism. Some level of pessimism can be a good thing, helping people make their predictions and expectations more realistic. The long-haul optimism that helped the team was never about having a rosy take on everything; it was about avoiding the kind of despair that can result from repeated frustration.
- Celebrate Small Successes Along the Way. To keep up a culture of learning, you need to recognize that every time you discover something new, it’s an important step forward. Researchers call this the progress principle. The more people experience a sense of progress, the more productive they are — including in the effort to “solve a major scientific mystery.”
2 key takeaways from the article
- Many of the biggest, most daunting challenges of our time need technological solutions as quickly as possible. And all over the world, there are teams of scientists, engineers, and business leaders looking to create those solutions. But it takes more than expertise, hard work, and determination to come up with them. It takes a culture that supports continuous learning and daily experimentation.
- Three steps in particular allowed that culture to thrive are: let go of ego, build long-term optimism and celebrate small successes along the way.
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Topics: Innovation, Teams
Strategy for a digital world
By Simon Blackburn et al., | McKinsey & Company | October 8, 2021
Digital’s ascendancy is visible not only in the dominance of hyperscale tech companies but in the success of non-digital-native companies. Five strategic moves in particular with increased digital investment make the difference.
- Drive differentiation with technology and digital. To jump into the top quintile of performance on the power curve of economic profit, your gross margin needs to reach the top 30 percent in your industry over a ten-year period. As digital technology becomes ever more important, the sources of these innovations and advantages are now shifting from traditional sweet spots into less familiar terrain, such as using digital technology to innovate products, services, and business models.
- Drive digital productivity from both inputs and outputs. McKinsey’s 2018 research showed that jumping into the top quintile of performance, or staying there, required a productivity improvement rate in selling, general, and administrative (SG&A) activity in the top 20 percent of the companies in your industry over a ten-year period, and an overall labor productivity improvement rate in the top 30 percent. But technology is changing the rules of the game. Digital disruption—for example, the ability of smaller players to leverage the public cloud and access large-scale data sets—is now changing the math on productivity in many industries.
- Invest smart in the tech that sets you apart. Top-quintile companies on effective capital spending curve have boasted a ratio of capital expenses to sales in excess of 1.7 times the industry median for at least ten years. But strong capital programs make sense only when companies have the foundations for profitable growth in place, and in the presence of underlying demand for the additional capacity capital programs generate. Absent these, companies risk accelerating projects that destroy value rather than create it.
- Reallocate resources at digital speed. McKinsey research has shown that companies shifting more than 50 percent of their capital spending across their businesses over ten years created 50 percent more value than counterparts that moved resources at a slower clip. Dynamic resource allocation shifts money, talent, and management attention to where they will deliver the most value to your company. But now companies need to reallocate resources at an even faster pace.
- Get digital M&A right. Differentiating through digital technology requires having the right capabilities, culture, and infrastructure. But companies can struggle to build these organically at sufficient scale and speed. That’s one reason many companies instead look to acquire digital assets, skills, and talent through digital M&A.
3 key takeaways from the article
- Competitive differentiation, now more than ever, emerges from superior digital capabilities and technology endowment, more agile delivery, and a progressively more tech-savvy C-suite.
- Digital’s ascendancy is visible not only in the dominance of hyperscale tech companies but in the success of non-digital-native companies.
- Five strategic moves in particular with increased digital investment make the difference: active resource reallocation, differentiation and productivity improvements, strong capital expenditure, and programmatic M&A.
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Topics: Strategy, Technology, Disruption, Business Model
Entrepreneurship Section
Strategy for a digital world
By Simon Blackburn et al., | McKinsey & Company | October 8, 2021
Digital’s ascendancy is visible not only in the dominance of hyperscale tech companies but in the success of non-digital-native companies. Five strategic moves in particular with increased digital investment make the difference.
- Drive differentiation with technology and digital. To jump into the top quintile of performance on the power curve of economic profit, your gross margin needs to reach the top 30 percent in your industry over a ten-year period. As digital technology becomes ever more important, the sources of these innovations and advantages are now shifting from traditional sweet spots into less familiar terrain, such as using digital technology to innovate products, services, and business models.
- Drive digital productivity from both inputs and outputs. McKinsey’s 2018 research showed that jumping into the top quintile of performance, or staying there, required a productivity improvement rate in selling, general, and administrative (SG&A) activity in the top 20 percent of the companies in your industry over a ten-year period, and an overall labor productivity improvement rate in the top 30 percent. But technology is changing the rules of the game. Digital disruption—for example, the ability of smaller players to leverage the public cloud and access large-scale data sets—is now changing the math on productivity in many industries.
- Invest smart in the tech that sets you apart. Top-quintile companies on effective capital spending curve have boasted a ratio of capital expenses to sales in excess of 1.7 times the industry median for at least ten years. But strong capital programs make sense only when companies have the foundations for profitable growth in place, and in the presence of underlying demand for the additional capacity capital programs generate. Absent these, companies risk accelerating projects that destroy value rather than create it.
- Reallocate resources at digital speed. McKinsey research has shown that companies shifting more than 50 percent of their capital spending across their businesses over ten years created 50 percent more value than counterparts that moved resources at a slower clip. Dynamic resource allocation shifts money, talent, and management attention to where they will deliver the most value to your company. But now companies need to reallocate resources at an even faster pace.
- Get digital M&A right. Differentiating through digital technology requires having the right capabilities, culture, and infrastructure. But companies can struggle to build these organically at sufficient scale and speed. That’s one reason many companies instead look to acquire digital assets, skills, and talent through digital M&A.
3 key takeaways from the article
- Competitive differentiation, now more than ever, emerges from superior digital capabilities and technology endowment, more agile delivery, and a progressively more tech-savvy C-suite.
- Digital’s ascendancy is visible not only in the dominance of hyperscale tech companies but in the success of non-digital-native companies.
- Five strategic moves in particular with increased digital investment make the difference: active resource reallocation, differentiation and productivity improvements, strong capital expenditure, and programmatic M&A.
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Topics: Strategy, Technology, Disruption, Business Model
When Is It Time For The Founder To Go?The most difficult decision for every entrepreneurial company
By Jim Schleckser | Inc Magazine | October 19, 2021
The most important person in any startup company is its founder. This is the person who had the vision to create something from nothing while injecting their creativity and energy to make that vision come alive as a business. But there can come a time in any business’s timeline where that same person who gave life to the business can become a liability. The incredible challenge is how can a company know when it time to make a change? Even more, how can the change be made while preserving what is great about the founder? What are some of the ways a founder can look themselves in the mirror to help recognize if it’s time to stay or go as CEO?
- Are you the constraint inside the business? The downfall of many founders is that they become used to the idea that they need to be involved in every single decision inside the business. They’re also the only one who can come up with great ideas and they want to keep their hands on the controls of information flow inside the business. If that’s you, you’ve become the constraint inside the business.
- Is there an exodus of senior people? Having A players inside the business, especially in leadership and management level positions, is critical if a company wants to scale. But A players won’t tolerate working for someone who won’t give them the freedom to do their jobs. That’s why if you’re dealing with a bunch of unhappy senior people, the problem might be you.
- Do you complain about how hard it is to find good people? Every company has a hard time finding and keeping good people. But if you find yourself using that line again and again, either in rejecting a candidate for a job or letting someone go because they didn’t meet your standards, then you might be living in a reality distortion field.
- Do you see ghosts? Founders can sometimes fall prey to paranoia, especially if they answer to a board or investors. They can become obsessed with fear about being replaced or even fired, even when there’s nothing there. It’s all about their ego at this point, and by misperceiving messages and innuendos, they add fuel to a negative work environment.
3 key takeaways from the article
- The most important person in any startup company is its founder. But there can come a time in any business’s timeline where that same person who gave life to the business can become a liability.
- The incredible challenge is how can a company know when it time to make a change? Even more, how can the change be made while preserving what is great about the founder?
- Some of the ways a founder can look themselves in the mirror to help recognize if it’s time to stay or go as CEO are: are you the constraint inside the business? Is there an exodus of senior people? Do you complain about how hard it is to find good people? And do you see ghosts?
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Topics: Entrepreneurship, Startup, Succession
4 Traits Every Leadership Team Should Invest In
By Danilo Diazgranados | Entrepreneur Magazine | October 16, 2021
According to the author throughout his career as an entrepreneur and investor, he have had the opportunity to work with business leaders of all calibers — and varying degrees of success. Based on this exposure he was able to discern the distinct traits that separated those who could build great companies from those who would be limited in what they could accomplish. According to the author whether you are a fellow investor looking to begin a new venture or a business leader who wants to attract financial partners, four traits that he believes are worth investing in.
- Agility. No matter what industry you’re in, being a business leader is not for the faint of heart. Today more than ever, trends are fast and fleeting. So, a leadership team must be willing and able to quickly pivot to better serve its customers — even if that requires rethinking key strategies.
- Conscious of their communities. Companies are accountable to their communities, and therefore have a responsibility to contribute to and improve them. Such acts from the leaders signal that they not only intend to do good, but they are also forward-thinking enough to understand the benefits that these initiatives can have for employees, not to mention their company’s brand.
- Intentional. We should prefer to place our bets on a plan — and a team — that shows deliberate thought. That being said, you may enter into a venture knowing that the plan is risky, and there is almost always a chance that it won’t work. But we should believe that the way that somebody calculates and executes a strategy speaks volumes.
- People-driven. At the end of the day, business is all about people — be it employees, customers, board members or social media followers. The most successful leadership teams never lose sight of that.
2 key takeaways from the article
- How can we discern the distinct traits that separated those who could build great companies from those who would be limited in what they could accomplish.
- Whether you are a fellow investor looking to begin a new venture or a business leader who wants to attract financial partners, four traits that are worth investing in: agility, Conscious of their communities, intentional and people-driven.
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Topics: Leadership, Investment