Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 279 |January 13-19, 2023
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Shaping Section : Ideas and forces shaping economies and industries
How technology is redrawing the boundaries of the firm
The Economist | January 8, 2023
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Technology and business are inextricably linked. Entrepreneurs harness technological advances and, with skill and luck, turn them into profitable products. Technology, in turn, changes how firms operate.
In the rich world, fast broadband and apps like Zoom or Microsoft Teams are allowing a third of working days to be done remotely. Jobs are trickling out from big-city corporate headquarters to smaller towns and the boondocks. And the line between collaborating with a colleague, a freelance worker or another firm is blurring.
Companies are drawing on common pools of resources, from cloud computing to human capital. By one estimate, skilled freelance workers in America earned $247bn in 2021, up from about $135bn in 2018. The biggest firms in America and Europe are outsourcing more white-collar work. Exports of commercial services from six large emerging markets have grown by 16.5% a year since the pandemic began, up from 6.5% before it.
A useful lens for understanding these changes was offered by Ronald Coase in his paper from 1937 entitled “The nature of the firm”. Coase, whose insights earned him a Nobel prize in economics, argued that firms’ boundaries—what to do and what not to do yourself—are determined by how transaction and information costs differ within firms and between them. Some things are done most efficiently in-house. The market takes care of the rest.
For example, between the 1980s and the 2010s, globalization and the IT boom boosted economies of scale, which encouraged market concentration. But they also increased competitive pressures and cut the cost of communication and collaboration between firms. The net result was for many companies to shrink their scopes.
Today Coasean forces are ushering in a new type of corporate organization. It resembles a 21st-century putting-out system—not for artisan craftsmen but for the white-collar professionals who epitomize modern Western economies. Firms are also distributing more work not beyond big metropolitan areas but also across borders. Technology also pushed more self-employed professionals. Besides making it easier to tap non-employees, technology is enabling companies to collaborate more seamlessly with other businesses.
As technology evolves further, so will the contours of the firm. Companies may gain more flexibility to seek out new workers for new tasks in new places. Wages differ less between countries for occupations that are more prone to outsourcing.
3 key takeaways from the article
- Technology and business are inextricably linked. Entrepreneurs harness technological advances and, with skill and luck, turn them into profitable products. Technology, in turn, changes how firms operate.
- Today market forces are ushering in a new type of corporate organization. It resembles a 21st-century putting-out system—not for artisan craftsmen but for the white-collar professionals who epitomize modern Western economies. Firms are also distributing more work not beyond big metropolitan areas but also across borders. Technology also pushed more self-employed professionals.
- As firms grow larger and adopt more technologies, thus becoming more complex and unwieldy, they outsource more operations. As technology evolves further, so will the contours of the firm. Companies may gain more flexibility to seek out new workers for new tasks in new places.
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Topics: Firms, Outsourcing, Technology, Competition
The Global Economy of 2023 Is Going to Be a Wild Ride
By Stephanie Flanders | Bloomberg Businessweek | January 12, 2023
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After the shocks of 2022, a recession for large parts of the world in 2023 seems a safe bet. Tougher to gauge, and more frightening, is the long-term impact of money itself being repriced and the assumptions that underlie more than 30 years of global economic history being overturned.
Plentiful cheap labor, low energy and transportation costs and a generally peaceful era for geopolitics all helped turbocharge the globalization of supply chains and drive economic growth around the world in the decades after 1990. Whenever one of those pillars wobbled, there was cheap money to keep the party going, especially in the years after the 2008 financial crisis. The three major central banks—in the US, the eurozone and Japan—have kept their key interest rates below 5% since 2001. For most of the past 10 years, rates have been close to zero and certainly well below the rate of inflation.
In less than three years, each of those supporting pillars of globalization has been knocked away. Workers are scarce and increasingly expensive in the US, Europe and the UK. Oil prices have more than tripled since 2020, and the global cost of energy jumped 50% in 2022 alone.
War has come to Europe with Russia’s invasion of Ukraine, and President Vladimir Putin and President Xi Jinping are openly challenging the post-Cold War order and Western liberal values. In response, the major powers have declared war on Russia’s economy—and the US has begun openly pursuing policies designed to slow China’s rise. Global businesses are left wondering whether—and how—intricate supply chains that took decades to build must be remade.
The most disturbing consequence of all these shocks was the return of inflation. Central banks that ignored the first embers shifted forcefully into firefighting last year, unleashing the fastest, most synchronized tightening of monetary policy in two generations. More than 90 central banks raised interest rates in the spring and summer of 2022, at least half of them by three quarters of a percentage point in a single bound. This had an equally dramatic effect on long-term borrowing costs for businesses, consumers and governments.
3 key takeaways from the article
- After the shocks of 2022, a recession for large parts of the world in 2023 seems a safe bet. Tougher to gauge, and more frightening, is the long-term impact of money itself being repriced and the assumptions that underlie more than 30 years of global economic history being overturned.
- There’s no more free money; macroeconomic policymakers are being tested; and the basic geopolitical assumptions underpinning more than 30 years of global economic integration are being thrown into the air.
- One pressing question for 2023 is how the jump in the cost of borrowing will affect business investment, consumer spending and government budgets. The second key issue is how corporations will react to a world in which the tide of history now seems to be running against them.
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Topics: Global Economy, Inflation, Interest Rate, Recession, Supply Chain
Strategy & Business Model Section
Innovation: Your solution for weathering uncertainty
By Matt Banholzer et al., | McKinsey & Company | January 10, 2023
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In times of disruption and great uncertainty, most organizations tend to protect what they have and wait for a return to “normal.” That’s a high-risk strategy today because we may be on the cusp of a new era. Structural supply-chain issues, rising interest rates, and sustainability challenges are just a few conditions that have become the new norm and hold critical implications for business models. Amid this much change, merely trying to manage costs and raise productivity is unlikely to overcome the growth challenge that seven out of eight organizations face today. Instead, companies need to find emerging pockets of growth that can help them secure long-term success.
Innovation is critical to achieving that goal. Enduring outperformance requires management teams to refocus innovation efforts on fresh opportunities for growth and diversification—and to develop new products, invest in new business models, and forge new partnerships to seize those opportunities. By taking defensive measures such as conserving cash while also going on the offense, “ambidextrous leaders” create value despite volatility, setting up their organizations to thrive in a world that has likely changed in fundamental ways.
Innovation has always been essential to long-term value creation and resilience because it creates countercyclical and noncyclical revenue streams. Paradoxically, making big innovation bets may now be safer than investing in incremental changes. The authors’ long-standing research shows that innovation success rests on the mastery of eight essential practices. Five of these practices are particularly important today: resetting the aspiration based on the viability of current businesses, choosing the right portfolio of initiatives, discovering ways to differentiate value propositions and move into adjacencies, evolving business models, and extending efforts to include external partners.
3 key takeaways from the article
- In times of disruption and great uncertainty, most organizations tend to protect what they have and wait for a return to “normal.” That’s a high-risk strategy today because we may be on the cusp of a new era. Hence, companies need to find emerging pockets of growth that can help them secure long-term success. Innovation is critical to achieving that goal.
- Innovation success rests on the mastery of eight essential practices. Five of these practices are particularly important today: resetting the aspiration based on the viability of current businesses, choosing the right portfolio of initiatives, discovering ways to differentiate value propositions and move into adjacencies, evolving business models, and extending efforts to include external partners.
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Topics: Strategy, Innovation, Growth, Business Model
How Companies Can Decide Whether To Use No Code Or Traditional Development
By Vignesh Wadarajan | Forbes Magazine | January 18, 2023
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No-code platforms are quickly becoming a game-changer for businesses of all sizes, from multinational corporations to small local shops. These platforms have the potential to revolutionize how companies create and deploy digital solutions, making them faster, easier and more cost-effective.
For agencies and organizations that rely on digital products or services, no-code platforms can be a tremendous boon. They can lessen the need for expensive developers, giving other employees access to powerful tools that enable them to produce apps with no coding experience. Because of this, no-code platforms allow businesses to focus their resources on core areas like marketing and customer service instead of spending valuable time and money dealing with technical issues related to creating and deploying software.
Likewise, no-code platforms provide organizations with greater flexibility in terms of customization. These platforms often allow users to tweak features on an app or website without coding from scratch. This is crucial due to the speed necessary to keep up with industry trends and the lack of resources available at most organizations to develop new features.
Overall, no-code platform technology offers tremendous benefits for organizations looking for efficient ways of creating digital solutions without breaking the bank. By eliminating the need for pricey developers, it makes it easier for companies large and small to produce great digital products with minimal effort. That said, developers will still have an important role to play in the future of developing apps and websites.
This makes them especially appealing for prototyping ideas relatively quickly, but unfortunately comes at the cost of lower levels of customization compared to traditional coding—the development is limited by the features offered by the chosen platform.
Nevertheless, because these platforms rely heavily on preconfigured components built by third parties, there’s always a risk that components may lack certain features or cause unexpected conflicts down the line if not properly configured correctly. These problems are less likely when building from scratch using traditional coding methods.
In conclusion, both traditional coding and no-code solutions have advantages when it comes to developing a solution, depending on what level of control and speed you need. While traditional coding offers maximum flexibility and customization, albeit at greater complexity and longer development times, no-code solutions provide rapid prototyping capabilities, which come at the cost of potential risks associated with relying on third-party components without sufficient control over their behavior.
2 key takeaways from the article
- No-code platforms are quickly becoming a game-changer for businesses of all sizes, from multinational corporations to small local shops. These platforms have the potential to revolutionize how companies create and deploy digital solutions, making them faster, easier, and more cost-effective.
- Both traditional coding and no-code solutions have advantages when it comes to developing a solution, depending on what level of control and speed you need. While traditional coding offers maximum flexibility and customization, albeit at greater complexity and longer development times, no-code solutions provide rapid prototyping capabilities, which come at the cost of potential risks associated with relying on third-party components without sufficient control over their behavior.
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Topics: Technology, Coding, Disruption
Leading & Managing Section
The Power of Options
By David Noble and Carol Kauffman | Harvard Business Review Magazine | January–February 2023 Issue
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When faced with unfamiliar or risky situations, leaders often rely on their familiar playbook. They act instinctively, falling back on behavior and postures that worked for them before. But should their operating environment experience a discontinuity, reflexes—which may still be right at times—can no longer be counted on. To be effective, leaders need to rise above their default reactions and generate more options for how to act in the very moments when they are needed most.
The authors’ experience shows that leaders’ success depends on their ability to MOVE—that is, to be mindfully alert to priorities, to generate options so that they always have several ways to win, to validate their own vantage point, and to engage with stakeholders to ensure that they are along for the ride. This article focused on the second component of the model and introduced four common leadership approaches and the scenarios in which each can be most helpful. These approaches are:
- Lean In. Take an active stance on resolving an issue. Actions in this stance include deciding, directing, guiding, challenging, and confronting.
- Lean Back. Take an analytical stance to observe, collect, and understand data. Actions include analyzing, asking questions, and possibly delaying decisions.
- Lean With. Take a collaborative stance, focusing on caring and connecting. Actions include empathizing, encouraging, and coaching.
- Don’t Lean. Whereas a Lean Back posture involves observing and analyzing, Don’t Lean is about being still and disciplining yourself to create space for a new solution to bubble up from your subconscious. This stance also serves to calm you if your emotions have been triggered. Actions include contemplating, visualizing, and settling through diaphragmatic breathing.
To win in any leadership moment, great leaders need to develop and be able to access all four stances.
As a general rule, it is best to Lean In when your team seems directionless and needs help getting organized or galvanized. Lean Back when more information will help ground you, your team, or stakeholders. Lean With when people need support, encouragement, or motivation. Don’t Lean when the team needs to work something out on their own and your presence would impede their progress. At the same time, inject calm and confidence if they seem frenetic. Whatever stance you adopt, be aware that you can use it with varying levels of intensity.
3 key takeaways from the article
- When faced with unfamiliar or risky situations, leaders often rely on their familiar playbook. They act instinctively, falling back on behavior and postures that worked for them before. But should their operating environment experience a discontinuity, reflexes—which may still be right at times—can no longer be counted on.
- To be effective, leaders need to rise above their default reactions and generate more options for how to act in the very moments when they are needed most.
- Leaders’ success depends on their ability to MOVE—that is, to be mindfully alert to priorities, to generate options so that they always have several ways to win, to validate their own vantage point, and to engage with stakeholders to ensure that they are along for the ride. With respect to options, a leader has are: lean in, lean back, lean with, and don’t lean options.
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Topics: Leadership, Decision-making, Negotiations
Entrepreneurship Section
3 Key Principles to Build and Keep Trust With Your Customers
By Sean Kim | Inc Magazine | January 18, 2023
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Customer service is everything – especially in a digital world that leaves more distance between businesses and their clients than ever before. If you are an entrepreneur trying to create meaningful change in your industry and serve customers with integrity, this is the facet of your business that you cannot afford to get wrong.
We’ve all been there: fully bought in on a product or service only to realize that the brand doesn’t care about us when push comes to shove. Nowadays, experiences like these seem more like the norm than the exception. As entrepreneurs, how is rising above this not just what’s best for our customers, but also for the long-term health of our brand? Three key principles are:
Customer Service In The Digital Age. Now, a business that’s even smaller could be capable of global ecommerce. The further your business grows geographically, the more distant the relationship between you and your customers will be. Instead of being able to walk over to the local mom-and-pop for a face-to-face discussion over a concern, call lines and hold music are a customer’s means for getting their needs met.
Listen Between The Lines For True Needs. Anyone who has vented their problems to a loved one or friend knows that sometimes we just want to be heard, rather than have our problems solved. One of the most common traits of bad customer service comes when a person leaves feeling like they weren’t listened to. And the first thing a customer says is usually not what they need. What’s the lesson here? Keep prying for the real root of their problems. We will never fully be in the mind of a customer, so hearing them out fully is the only way to parse out a real solution. That effort shows a person that they matter. Show up in that way consistently for your customers and you’ll be amazed at how many people want to do business with you.
Serve Customers Where They Already Are. Your customer service can’t just be good, it also has to be accessible. Depending on the demographics of people you serve, the way that you make your business available to your customers will vary. With so many different channels that customers are on today, we have to go where they are. If you don’t make it accessible for every customer to get in touch over a question they have, they will simply move on. It doesn’t matter what they’ve been marketed or sold, because your service (or lack thereof) has shown them what you’re made of.
3 key takeaways from the article
- Customer service is everything – especially in a digital world that leaves more distance between businesses and their clients than ever before. If you are an entrepreneur trying to create meaningful change in your industry and serve customers with integrity, this is the facet of your business that you cannot afford to get wrong.
- Three key principles are: call lines and hold music are a customer’s means for getting their needs met in a geographically disbursed market, Listen Between The Lines For True Needs of the customers, and Serve Customers Where They Already Are.
- The digital world may have created more space between you and your customers, but there is no divide so large that good-old-fashioned customer service can’t instill long-lasting trust for years to come.
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Topics: Entrepreneurship, Customer Service, Strategy
5 Effective Ways to Prepare for the Unexpected as a Founder
By Judah Longgrear | Entrepreneur Magazine | January 19, 2023
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Let’s face the hard truth: We are never fully equipped with adequate information to predict — for sure — what will happen in the next couple of days. When unexpected events happen, a business must adapt quickly or risk going under. Interestingly, the fate of a business — especially a startup — lies mainly on the shoulders of the founders. How many unexpected and unpleasant events can you endure, and how quickly can you navigate through them? That’s a difficult question to answer. Five ways that you can prepare yourself for the unexpected are:
Assess your capabilities objectively. As founders you’ve developed skills you never knew you had the abilities for. All these experiences can spark the belief that you’re single-handedly capable of handling anything that comes your way. Although this confidence in your abilities is good for entrepreneurs, it could lead to the Dunning-Kruger Effect – a cognitive bias whereby people with limited knowledge or competence in a given intellectual or social domain greatly overestimate their own knowledge or competence. Successful entrepreneurs have accurate knowledge of themselves and their capabilities.
Use “buffers”. Running a business is all about making plans, setting deadlines and pursuing them. Things don’t often go to plan, and deadlines are missed. These are quite expected, but at times, things may spiral in the wrong direction, and chaos could ensue. To avoid chaos, founders need to keep their heads high and remain on top of the situation. One way to do this is to create buffers. These could be social buffers (support of friends e.g.,) and time buffers ( consider increasing the timeline of each milestone by about 20%).
Maintain a healthy network. When quick, unpredicted market changes threaten business survival, founders often seek assistance from outside their organization. Most times, founders seek out other founders in similar situations to help themselves figure things out. You need to assess your direction against the other founders from time to time. If your industry is volatile and moving in a new unforeseen direction, it will do you a lot of good to know how your colleagues are going about it.
Always look at the big picture. Founders must recognize that unexpected events can be a good thing. It brings opportunities. Paradoxically, being fazed by the challenges that come with the unexpected can blind you to those opportunities. It’s best to paint a big picture of your business. Clearly define your grand mission. And keep an open mind as to how that mission can be accomplished. Things don’t always have to work out the way you planned them. But they will work out.
Finally, practice willful acceptance. Unpredicted changes in your business or industry may create new challenges. Sometimes, we are required to solve these challenges. But what can you do if you neither have the capabilities nor resources to solve them? You can simply accept the issue and commit to other things within your resources and capabilities. Studies have shown that acceptance and commitment can reduce your chances of acting anxiously when you’re fazed by a fortuitous event.
3 key takeaways from the article
- Let’s face the hard truth: We are never fully equipped with adequate information to predict — for sure — what will happen in the next couple of days. When unexpected events happen, a business must adapt quickly or risk going under.
- Interestingly, the fate of a business — especially a startup — lies mainly on the shoulders of the founders. How many unexpected and unpleasant events can you endure, and how quickly can you navigate through them? That’s a difficult question to answer.
- Five ways that you can prepare yourself for the unexpected are: assess your capabilities objectively, use “buffers”, maintain a healthy network, always look at the big picture, and finally, practice willful acceptance.
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Topics: Startups, Entrepreneurship, Uncertainty, Volatile
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