Extractive summaries of the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision making | Week 217 |-November 5-11, 2021
The uses and abuses of green finance
The Economist | November 6, 2021
Alas, the cop 26 summit in Glasgow is shaping up to be a disappointment. The hope that emerging markets, which belch out much of the world’s greenhouse gases, would announce ambitious proposals is being dashed.
But one area where enthusiasm is growing is climate finance. Financial institutions representing nearly $9trn in assets pledged to uproot deforestation from their investment portfolios. The most striking announcement has come from the Glasgow Financial Alliance for Net Zero (GFANZ), a coalition co-chaired by Mark Carney, a former governor of the Bank of England. Its members, which include asset owners, asset managers, banks, and insurers, hold about $130trn of assets. They will try to cut the emissions from their lending and investing to net zero by 2050. Can the financial industry really save the world?
In principle, it has a huge role to play. Shifting the economy from fossil fuels to clean sources of energy requires a vast reallocation of capital. By 2030, around $4trn of investment in clean energy will be needed each year, a tripling of current levels. Asset owners would have both the motive and the means to reinvent the economy.
The reality of green investing falls short of this ideal. The first problem is coverage. The Economist estimates that listed firms which are not state-controlled account for only 14-32% of the world’s emissions. A second issue is measurement. There is as yet no way to accurately assess the carbon footprint of a portfolio without double counting. The third problem is incentives. Private financial firms aim to maximise risk-adjusted profits for their clients and owners. This is not well-aligned with cutting carbon. And heavily polluting firms or assets will often find new owners.
What should be done? Fine-tuning can help. Measurement should be improved. The EU is rolling out mandatory carbon reporting for businesses; America is considering it. Some accounting bodies want to standardise how climate measures are disclosed.
Pledges like GFANZ are good as far as they go, but the world needs a widespread price on carbon if finance is to work wonders. That would target all firms, not just those controlled by some institutional investors. The urge to avoid the tax would supercharge efforts to count emissions.
3 key takeaways from the article
- The COP 26 summit in Glasgow is shaping up to be a disappointment. The hope that emerging markets, which belch out much of the world’s greenhouse gases, would announce ambitious proposals is being dashed.
- But one area where enthusiasm is growing is climate finance. Financial institutions representing nearly $9trn in assets pledged to uproot deforestation from their investment portfolios.
- Pledges by private investment portfolios are good as far as they go, but the world needs a widespread price on carbon if finance is to work wonders. That would target all firms, not just those controlled by some institutional investors. The urge to avoid the tax would supercharge efforts to count emissions.
Topics: Global Economy, Equity Funds, Green Economy, Environment
Future of Asia: The future of financial services
By Jonathan Woetzel et al., | McKinsey & Company | October 11, 2021
Asia is the world’s consumption growth engine—miss Asia and you could miss half of the global picture, a $10 trillion consumption growth opportunity over the next decade. New McKinsey Global Institute (MGI) research finds that three large shifts are playing out across the region. First, as incomes rise across Asia, more consumers will reach the highest tiers of the income pyramid, and movement within the consuming class is likely to be a larger driver of consumption growth than movement into it. Second, cities will continue to drive consumption growth, but promising sources of growth are increasingly diverse cohorts within cities, such as Insta-grannies in Seoul, Generation Z gamers in Surabaya, career moms in Manila, and lifestyle-indulging digital natives in Chengdu. Third, as the relationship between income and consumption breaks down in some instances, new consumption curves are emerging in specific categories.
What should financial services players look out for? MGI’s research highlights eight growth angles that are particularly relevant to financial services and offer new opportunities to serve consumers in the region. These angles are:
- Many consumers take a “mobile-first” approach, fueling the rise of digital ecosystems, including highly integrated super apps that offer a one-stop-shop for a range of services.
- Sharing, rental, and subscription economies are gaining traction in Asia, for instance, mobility, fashion, electronics, and housing. As Asian consumers consider new forms of ownership, some conventional financial products such as home insurance and car loans may start to become less relevant.
- Digital natives (people born between 1980 and 2012) are expected to account for 40 to 50 percent of Asia’s consumption by 2030.
- As consumers’ uptake of digital channels increases, their expectations of customer experience are also rising.
- The segment of one is emerging as personalization spreads, and some financial services players are well positioned to tap into it.
- Women’s economic empowerment is creating new financial opportunities, and financial needs for women.
- Senior segment is growing faster than the rest of the population, and presenting unique needs.
- Eco-responsibility is rising as Asian consumers are increasingly concerned about sustainability.
MGI’s new research identifies three key actions companies may need to consider in Asian consumers reshaped financial landscape: redraw your growth map, increase your agility, and open up.
3 key takeaways from the article
- Asia is the world’s consumption growth engine—miss Asia and you could miss half of the global picture, a $10 trillion consumption growth opportunity over the next decade.
- The Asian consumer landscape is being reshaped by rising incomes, diversifying and new sources of growth, and the mutating consumption curves, and companies need to rethink how to serve consumers and compete in these changing markets effectively over the next decade and beyond.
- MGI’s new research identifies three key actions companies may need to consider: redraw your growth map, increase your agility, and open up.
Topics: Financial Markets, Technology, Data, Asia
Leaders: Stop Confusing Correlation with Causation
By Michael Luca | Harvard Business Review | November 05, 2021
We’ve all been told that correlation does not imply causation. Yet many business leaders, elected officials, and media outlets still make causal claims based on misleading correlations. These claims are too often unscrutinized, amplified, and mistakenly used to guide decisions.
A large body of research in behavioral economics and psychology has highlighted systematic mistakes we can make when looking at data. We tend to seek evidence that confirms our preconceived notions and ignore data that might go against our hypotheses. We neglect important aspects of the way that data was generated. More broadly, it’s easy to focus on the data in front of you, even when the most important data is missing. As Nobel Laureate Daniel Kahneman has said, it can be as if “what you see is all there is.”
This can lead to mistakes and avoidable disasters, whether it’s an individual, a company, or a government that’s making the decision. The world is increasingly filled with data, and we are regularly bombarded with facts and figures. We must learn to analyze data and assess causal claims — a skill that is increasingly important for business and government leaders. One way to accomplish this is by emphasizing the value of experiments in organizations.
You don’t need to be a PhD economist to think more carefully about causal claims. A good starting place is to take the time to understand the process that is generating the data you are looking at. Rather than assuming a correlation reflects causation (or that a lack of correlation reflects a lack of causation), ask yourself what different factors might be driving the correlation — and whether and how these might be biasing the relationship you are seeing. In some cases, you’ll come out feeling reassured that the relationship is likely causal. In others, you might decide not to trust the finding.
If you are worried that a correlation might not be causal, experiments can be a good starting point. But experiments are not always feasible. In these cases, you should think about — and seek out — other evidence that might shed light on the question you are asking. In some cases, you might even find a good natural experiment of your own.
3 key takeaways from the article
- We’ve all been told that correlation does not imply causation. Yet many business leaders, elected officials, and media outlets still make causal claims based on misleading correlations.
- A large body of research in behavioral economics and psychology has highlighted systematic mistakes we can make when looking at data.
- To think more carefully about causal claims. A good starting place is to take the time to understand the process that is generating the data you are looking at. Rather than assuming a correlation reflects causation (or that a lack of correlation reflects a lack of causation), ask yourself what different factors might be driving the correlation — and whether and how these might be biasing the relationship you are seeing.
Topics: Decision-making, Data, Biasness
Sharing Value for Ecosystem Success
By Ron Adner | MIT Sloan Management Review | November 01, 2021
What do you call an ecosystem in which you always see your company as the central actor? An ego-system. Eco-system in the arena of technology, seem impressive at the get-go, but they undermine an important truth: Ecosystem strategy is alignment strategy.
Defining ecosystems around companies blinds everyone involved to alignment hurdles and limits their ability to craft appropriate strategies. The presumption of centrality makes it harder to establish the relationships needed to achieve their goals: It’s harder for ecosystem leaders to create strategies that attract followers, and harder for ecosystem partners to know which leaders to follow and where to place their bets.
Apple offers a stark example. The most valuable company in the world has been enormously successful in extending the mobile data device ecosystem it leads — iPod to iPhone to iPad to Apple Watch, encircled by its App Store and iOS platforms. But it has been shockingly disappointing in its efforts to expand into new businesses that require the construction of new ecosystems. Apple’s failures to deliver on ambitious promises e.g., that health care would be the company’s “greatest contribution to mankind”, are concealed by the profits gushing from its core ecosystem, but they are failures nonetheless. The consequences of these failures are borne not only by Apple, but also by all the companies that joined as complementors in these efforts.
If successfully aligning the partners and other participants in new ecosystems is challenging to a company as sophisticated as Apple, a giant at the height of its power, then (1) no would-be market leader should be deluded into thinking that its success in one ecosystem will naturally translate to leadership elsewhere, and (2) no would-be complementor should assume that following established leaders into new domains is a safe bet.
How can all ecosystem players do better? They can anchor their notion of ecosystems in the value propositions that are being pursued, not in corporate identity. This shift in mindset supports the formulation and execution of more successful strategies for leadership (not always the most advantageous role to play) and followership (far more common, but too often neglected) in an ecosystem world.
3 key takeaways from the article
- What do you call an ecosystem in which you always see your company as the central actor? An ego-system. Eco-system in the arena of technology, seem impressive at the get-go, but they undermine an important truth: Ecosystem strategy is alignment strategy.
- It’s harder for ecosystem leaders to create strategies that attract followers, and harder for ecosystem partners to know which leaders to follow and where to place their bets.
- It almost always makes sense for companies to strive for leadership within their industries — winning that position brings great profit and pride. But ecosystems present a different hierarchy: In a successful ecosystem, there are no losers — only partners that win in different ways. In contrast, in an unsuccessful ecosystem, there are only losers.
Topics: Strategy, Eco-system, Leadership, Followership, Business Model
7 Signs Your Productivity Is A Problem (And How To Fix It)
By Jodie Cook | Forbes | November 8, 2021
Have you ever reached the end of the day only to wonder where the time went? This feeling is more common than you think. With more and more matters vying for attention, it’s no surprise that attention is constantly flittered away. Poor time management, however, is just one of the productivity thieves that can creep into each day. Based on advice from Filipa Bellette, a co-founder of virtual health practice Chris & Filly Functional Medicine, the author shares seven signs of poor productivity and guidance on fixing problem productivity across these key areas. These are:
- Extreme multi-tasking. This isn’t an optimal way of working. That could be doing more harm than good. Multitasking can lower IQ, shrink the brain’s grey matter, and reduce productivity by a massive 40%.” Not ideal when high performance is required.
- Poor time-management. Characterised by “feeling scattered and torn, and a bit of an organisational (or emotional!) mess,” this can be a sign that you’re not “prioritising things of highest value” and instead trying to do everything.
- Saying yes. Take a look at your calendar and make an assessment of every entry. How many commitments are there because you truly want to do them? How many did you accept out of guilt or obligation? How many of them progress your goals and how many of them progress the goals of others? If you’re spending time accepting requests from others, it might be a sign you’re saying yes too often. This will “inevitably lead to burnout, a decrease in productivity, and quite sadly, dissatisfaction in life.”
- Experiencing brain fog. The science says brain fog “can occur when you’re feeling overwhelmed and taxed. These may lead to lack of concentration, reduced mental clarity, and forgetfulness, all issues that will kill your productivity. To banish fog’s effect, “have a break and try to ‘ground’. Science shows ‘grounding’ is a quick and effective way to reset your brain. Go outside, take your shoes off, walk on the grass barefoot, or lie down with your bare skin touching the earth, for example.
Fatigue, anxiety and pain are the other three which contribute to lower productivity.
3 key takeaways from the article
- Anxiety, pain and fatigue have no place in the schedule of an entrepreneur trying to make a living and a difference in the world, neither do multi-tasking, brain fog and running around to fulfil unnecessary obligations.
- Unless you are intentional about how you spend your time, your attention will go to who or what shouts the loudest.
- If you neglect your wellbeing, it will come back to demand further attention and soon you’ll have no time left for you.
Topics: Productivity, Personal Development, Entrepreneurship
Follow the Laws of Business Building to Secure Your Startup’s Success
Written by Lak Ananth | Entrepreneur | November 8, 2021
In the business-to-business (B2B) startup world a big question for startup founders is how can they increase the chances that their startup will succeed and not become one of the many that fail each year? There are certain laws of business building that have long been in place and must be followed. They can make the difference between a fast-scaling, successful startup and one that never quite reaches escape velocity.
It starts with observing a problem. To begin, every great B2B company starts with an observation about a significant customer problem that exists or a space in the B2B ecosystem that hasn’t seen innovation and really needs to be reinvented. There’s usually an entrepreneur who isn’t steeped in a particular area, but who makes an outside observation, and the founding team has the relevant talent to build the product that needs to be built.
Then comes the founder-led selling phase. There is the founder-led selling phase of the product — matching your product with the customer’s needs. This has to be done by the founders. This is the time when you’ve got to get that initial set of customers right, which is naturally the role of the founding team. Then, when the time is right, there is a transition from that founder-led selling to recruiting your first one or two missionary or professional salespeople who can then take over that role and get out to a much wider group of customers.
The transition to execution-oriented sales leadership. After you get this sales team up and running, there’s a very important transition in getting from those initial salespeople to building sales leadership that’s execution-oriented, having marketing that can fill the funnel and then putting the systems and processes in place to execute.
When everything seems like it’s going right. And then, once you hit escape velocity e.g., a $10 million run rate — a tremendous amount of cheap capital is available. This is a very important phase of a company where you’re moving from founder-led selling, to early selling, to repeatable, scalable selling. You have to get that right before you go off and raise a lot of capital that is just very cheap and totally hands-off.
3 key takeaways from the article
- In the business-to-business (B2B) startup world a big question for startup founders is how can they increase the chances that their startup will succeed and not become one of the many that fail each year?
- There are certain laws of business building that have long been in place and must be followed. They can make the difference between a fast-scaling, successful startup and one that never quite reaches escape velocity.
- In addition to hard work, the right people and discipline which all play a significant role in getting a company to breakout status, identifying the customers’ pain points while having an external view, building a great product, engaging the founder team in initial selling and later on bringing professionals for marketing and selling are few of the laws.
Topics: Entrepreneurship, Busines-to-Business, Startup
How Creating an Analogy Will Bring Your Company Vision to Life
By Brendan P. Keegan | In Magazine | November 8, 2021
Every business needs a vision statement that summarizes its purpose. Your vision statement should also neatly wrap up your strategy or what’s special about you — that is, your market differentiators. But a strategy by itself isn’t necessarily all that memorable or engaging for your team. If you really want even your newbies or junior people to be enthusiastic and understand everything they can do for the organization, the best thing to do is take your strategy and turn it into an analogy for them.
Analogies that get your strategy across to everyone can align your team very quickly, even when you have people with very different roles, levels of seniority, or experience. The faster you can get your team aligned, the sooner you can start to collaborate well and get real results. A strong analogy also empowers your people. If an employee doesn’t know much about your business, they can usually only do what their boss tells them to do. But if they know more about the company, they can think differently about how to make the organization money and how to move up in their career.
When you go in search of an analogy for your own team, think about what your people already know and personally connect to. Find something that you and your workers have some shared information or understanding about — something that’s easy for them to see in their head. It’s that shared understanding that helps the light bulb go off and lets them say, “Yep, I know exactly what you’re getting at.” You shouldn’t have to spend much time explaining the idea. And once you have something people can easily relate to and visualize, it’s all about creating awareness amongst the different areas of your business that need to see each other.
2 key takeaways from the article
- Strategy is critical for any organization, but it only serves you if people can remember and really apply it.
- Analogies let you quickly harness all the power of storytelling so people remember what you’re about, understand their roles and opportunities, and can do more for you and themselves with greater autonomy.
Topics: Strategy, Entrepreneurship, Strategic Planning