Executive Insight

Reputation Capital - The New Currency of Collaborative Consumption

Rachel Botsman discusses the trust-powered marketplace empowered by new media. The importance of building a reputation trail and its value.

Globalization Not as Prevalent as Many Believe, a New Report on Global Connectivity Asserts

Globalization continues to feature prominently in political debates, business strategy deliberations, and in everyday life. The dialogue, however, is seldom backed up with hard data, the authors of a new report on global connectivity assert.

The new report from logistics giant DHL finds that the world is less globally connected today than it was in 2007, and global connectedness also falls far short of the levels commonly assumed by business executives and the general public.

Increasing global connectedness can be a powerful lever for improving prosperity, the report suggests and that limited and faltering global connectedness imply that strengthening countries’ connectedness offers large untapped potential to help accelerate economic recovery.

Global Connectedness is defined in the report as the depth and breadth of a country’s integration with the rest of the world as manifest by its participation in international flows of products and services, capital, information, and people.

Depth measures how much of a country’s activities or flows are international versus domestic by comparing the size of its international flows with relevant measures of its domestic economy. For example, to assess the depth of Hong  Kong SAR (China)’s merchandise exports, its exports are compared to its GDP: Hong Kong’s merchandise exports-to-GDP ratio is 187%, the highest in the world and 37 times higher than Nepal’s (the lowest – only 5%).

Breadth complements depth by looking at how broadly the international component of a given type of activity is distributed across countries. To illustrate the importance of incorporating breadth into assessments of global connectedness, consider inbound tourism in the Bahamas. While the Bahamas ranks first in terms of the number of inbound tourists per capita (a depth metric), more than 80% of those tourists come from the United States. Thus, while depth of inbound tourism in the Bahamas is high, its breadth is limited, especially when one notes that less than 15% of outbound international tourists worldwide come from the United States.

The 2012 DHL Global Connectedness Index measures and analyzes the global connectedness of 140 countries, covering 99% of the world’s GDP and 95% of its population.

Source: DHL

Read the Report

Education to Employment: Designing a System That Works

• Globally, seventy-five million youth are unemployed and young people are three times more likely than their parents to be out of work.
• Half of youth are not sure that their postsecondary education has improved their chances of finding a job
• Only 43 percent of employers can find enough skilled entry-level workers and estimates suggest that by 2020 there will be a global shortfall of 85 million high- and middle-skilled workers

Around the world, governments and businesses face a conundrum: high levels of youth unemployment and a shortage of job seekers with critical skills. How can a country successfully move its young people from education to employment? What are the challenges? Which interventions work? How can these be scaled up? These are the crucial questions.

A new report from McKinsey attempts to answer them. To do so, it developed two unique fact bases. The first is an analysis of more than 100 education-to-employment initiatives from 25 countries, selected on the basis of their innovation and effectiveness. The second is a survey of youth, education providers, and employers in nine countries that are diverse in geography and socioeconomic context: Brazil, Germany, India, Mexico, Morocco, Saudi Arabia, Turkey, the United Kingdom, and the United States.

The report’s findings include the following six highlights:

• Employers, education providers, and youth live in parallel universes – or to put it another way, they have fundamentally different understandings of the same situation.
• The education-to-employment journey is fraught with obstacles - not least of which are cost, work relevancy and job access.
• The education-to-employment system fails for most employers and young people – positive outcomes are the exception rather than the rule.
• Innovative and effective programs around the world have important elements in common – most particularly when education providers and employers step into each others’ worlds.
• Creating a successful education-to-employment system requires new incentives and structures – distributed information, collaborative endeavor and systems integration.
• Education-to-employment solutions need to scale up – leveraging interactive technologies and employer-valuable curricula.

McKinsey started this research recognizing the twin crises of a shortage of jobs and a shortage of skills. In the course of it, though, it realized the need to take into account another key shortage: the lack of hard data. This deficiency makes it difficult to even begin to understand which skills are required for employment, what practices are the most promising in training youth to become productive citizens and employees, and how to identify the programs that do this best.

The authors conclude, “The journey from education to employment is a complicated one, and it is natural that there will be different routes. But too many young people are getting lost along the way”.

Read the report

Source: McKinsey Center for Government

New Study Finds Millennial Generation’s Power to Influence Is Increasing

Seventy-Four Percent of Millennials believe they influence the purchase decisions of their peers and those in other generations, a new study from PR firm Edelman finds.

The study provides updated insights around the ambitions and beliefs of the Millennial generation, born between 1980 and 1995, building on its 2010 benchmark study, 8095®. Encompassing interviews with 4,000 Millennials in 11 countries, 8095 2.0 revealed that 74 percent believe they can inspire the purchase decisions of peers and those in other generations. The new study was issued to better understand the evolving roles of brands in Millennials’ lives and how cultural changes like the global recession are impacting their behaviors.

8095 Refreshed from Edelman Insights

Global findings from the study include:

• The global recession has fundamentally changed Millennials: The economy is a key factor in Millennials’ lives and within their community. In fact, economic stability is the number one hope that Millennials have for their country. The troubling job market also has created a new breed of Millennial entrepreneurs, with 48 percent of Millennials saying that owning their own business is a top life goal (76 percent in Turkey and 65 percent in Brazil).
• Millennials are alpha-influencers:  Seven in 10 believe it is their responsibility to share feedback with brands when they have a good or bad experience.
• Millennials are surprisingly open to brand engagement and advertising, if brands have the right approach: Only 3 percent of Millennials thinks all advertising is boring, and 80 percent want brands to entertain them – the ability to co-create products and services (40 percent across 11 countries) being the most popular way.

Why Millennials Matter

According to the World Fact Book, the median age of the world population is 28, which falls within the Millennial generation and there are more than 1 billion Millennials around the globe. As the first generation to grow up inherently digital, it is also a group that has information at its fingertips and expects two-way dialog with preferred brands.

The Evolving Role of Brands for the Millennial Generation from Edelman Insights

While Millennials share many traits and behaviors, they are more diverse ethnically, economically and socially than any other generation in history. They are more connected by being grounded in a global network with perspective and purpose. They have instant access to one another and to information. They are aware of and believe in their own voice and power. They are each a unique and powerful member of a generation that by 2025 will amount to 70 percent of the global workforce. The time to pay attention to Millennials is now.

Source

More Information

Ostrich or Eagle? The Stark Choice Facing Organizational Leaders

Peter Drucker was once asked about the accuracy of predictions.

“I don’t predict,” he responded, “I look out of the window and identify what is most visible, but not yet seen.”

In 1987 the Hudson Institute published its seminal report, Workforce 2000. Ten years later it reprised the analysis with the publication of Workforce 2020. In between several important Harvard Business Review articles covered similar ground, though taking more of a global view. By the end of the decade, McKinsey’s War for Talent was capturing considerable executive attention.

Each took a long-term view of the confluence of societal trends, demographics, education sector deficiencies, globalization, technological advances and workforce supply & demand. Each warned advanced-economy government, business, labor and education leaders that, absent the collaborative development of fresh solutions, trouble lay ahead. In parallel, business thought-leaders like Peter Senge, Meg Wheatley, Charles Handy and Gary Hamel were challenging conventional wisdom and urging that new realities required fresh thinking.

The rest is history.

Fast forward to 2012. Several substantive and insightful new reports have been published this year that center on contemporary and impending global labor market discontinuities. They all cover somewhat related ground from different vantage points and paint a picture of the present that is quite consistent with that of the earlier forecasts. Importantly, each warns leaders in both advanced - and now also in developing economies - of the considerable economic and societal consequences of failing to act to solve the challenges ahead:

• Help Wanted: The Future of Work in Advanced Economies, The McKinsey Institute, March 2012
• Better Skills, Better Jobs, Better Lives - A Strategic Approach to Skills Policies, OECD, May 2012
• The World at Work – Jobs, Pay and Skills for 3.5 Billion People, The McKinsey Institute, June 2012
• False Summit – The State of Human Capital 2012, The Conference Board and McKinsey & Company, October 2012

This 2012 body of work is serious stuff. Its antecedents were serious too, but in the end issue-avoidance and short-term-ism - regretfully – brought the future home to roost.

Here’s the rub. Unless we pay attention and do something proactively to respond to these dynamics, organizations will increasingly struggle and competitiveness will continue to erode.  Form will follow function, we know this. The pivotal question is who will be ostriches and eagles this time around?

Clearly, we have a Point of View. We hope that executives earnestly examine the strategic implications of these forces and build out strategies and capabilities to future-proof their enterprise.

---

Charlesmore Partners International specializes in organizational strategy. We have a track-record of building high performance organizations and experientially-developed methodologies that help organizations get ready for the future.

More information:  +1 215.353.6472 or connect@charlesmore.com.

Why America Is Losing the Race for Entrepreneurial Talent

In 2005, immigrant entrepreneurs launched 52% of all startups in Silicon Valley. Today, the number has dropped to 44%, and America is not only losing the opportunity to create new jobs but also losing its competitive edge, argues Vivek Wadhwa in his short, passionately argued book, The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent. Unlike during the 1980s, when skilled immigrants could get green cards (that let them become permanent residents of the U.S.) in as little as 18 months, today it can take as long as 17 years. Failure to fix this problem, says Wadhwa in an interview with Knowledge@Wharton, is killing American innovation and entrepreneurship.

Source: Knowledge@Wharton

Additional Reading

BusinessWeek: Why More Immigration, Not Less, Is the Key to Economic Growth

Financial Times: U.S. Immigration Policy is Killing Innovation

The Economist: People Power -- America Needs to Rethink Its Immigration Policy

The Rise of the African Consumer

The single-largest business opportunity in Africa will be its rising consumer market. A new McKinsey report offers a detailed profile of African consumers, including their demographics, behavior, and needs.

The continent’s consumer-facing industries are expected to grow by $400 billion, representing its single-largest business opportunity, by 2020. In one of the first studies of its kind, McKinsey’s Africa Consumer Insights Center surveyed 13,000 consumers in ten African countries, with a focus on the largest cities. Five categories of consumption were covered: apparel, financial services, groceries, the Internet, and telecommunications.

Here are some highlights from the research.

• Cities offer the best opportunity: urban Africa is forecast to contribute nearly 40 percent of GDP growth. But companies may be wise to bypass high-profile megacities, such as Cairo, Johannesburg, and Lagos, for midtier cities, like Abidjan and Rabat, which are more accessible, have less competition, and offer better profit margins.
• Companies can better tailor products to local markets if they understand what quality means for African customers and know their preferences, lifestyles, and daily needs.
• Since affordability is critical, companies may have to reengineer products to hit a specific price point. The necessary moves may include offering lower-cost versions, smaller sizes, or alternative payment models.

Read the Report

Source: McKinsey & Company

The State of Human Capital

A new report by The Conference Board and McKinsey & Company concludes that human capital professionals are struggling to meet the needs of an-ever changing global business landscape. Specifically, as global markets and technology evolve, “people processes are failing to keep pace”. The authors go on to report that “while tremendous strides have been made over the past decade in areas like workplace diversity and flexibility, the human capital function has largely lagged behind in effecting organizational success. As a consequence, human capital leaders must work harder — and smarter — to cement their place as a key business partner on decisions central to the present and future success of their organizations”.

The State of Human Capital 2012 report examines four specific opportunities that HC executives must seize if they are to effectively manage the global talent pool in an unpredictable business environment. These include:

1. Look ahead: anticipate and plan for the human capital of tomorrow– From the increased presence of the highly connected millennial generation to the proliferation of the virtual office, tomorrow’s workplace will look very different from today’s.
2. Secure a steady, reliable pipeline for today’s skilled workers, and tomorrow’s leaders – The war for talent continues, spurred by relatively high growth in emerging markets and the mismatch between worker skills and jobs in most regions of the world.
3. Develop strategies to reenergize your employees about what they do, and about what the organization stands for – An engaged workforce can drive financial performance. Studies have shown that employees who are truly engaged are more likely to stay and contribute to the organization.
4. Ensure that the HR/HC function becomes more agile than the organization as a whole – Organizational agility is an essential response to the volatility of today’s business environment. An MIT study shows that agile organizations grow revenue 37 percent faster and generate 30 percent higher profits than non-agile organizations.

With many human capital departments today paralyzed in the face of seemingly monumental challenges — such as accelerating leadership development, acquiring talent, and retaining  key players  in a world of constant change across borders, cultures and challenges — the report offers a way forward.   Based on a survey of hundreds of practitioners as well as focus groups with senior leaders in human capital around the world, the report offers an overview of the current state of the human capital function, key strategies and approaches executives can implement immediately to reach the summit.

Source: The Conference Board, McKinsey & Company

Download the report

China’s 12th Five-Year Plan – Implications for Human Capital

China’s 12th Five Year Plan (FYP) emphasizes the “human factor” in economic development more than any previous FYP. As such, the plan is important from a human capital strategy and planning perspective. A special briefing paper from the Conference Board’s China Center distills out the plan’s implications for human capital practitioners and executives concerned about human capital issues in China.

Some of the many key takeaways outlined in the report are:

• Planning should assume an increasingly tight labor market as powerful demographic forces take hold.
• Job creation targets remain paramount (even despite a tightening labor market), suggesting intensifying competition for labor and talent – in part due to the service sector becoming a key focus for development and expansion.
• Plans for education reform may gradually improve graduate workforce readiness – many leading MNCs are pro-active in contributing to the readiness process.
• Planning should assume that wages and welfare entitlements for rank and file employees will increase substantially and continually, via regulatory mechanisms, throughout the 12th FYP period. (It is assumed that increases at the managerial and senior ranks will be left to market forces, and will likely be less pronounced given China’s comparatively high remuneration levels at MNCs.)

The report also summarizes and enumerates the key data points, targets, and projections in the FYP related to human capital, providing a concise and easy-to-use reference resource

Source: The Conference Board

Strengthening the Global Leadership Pipeline

By 2030 more than one-half of the world’s GDP will be generated in what are currently classified as “emerging markets.”

In a new study of its membership base, CEB (previously the Corporate Executive Board) examined the leadership challenge of this intensifying reconfiguration of the global business marketplace. It found that 60% of its member companies plan on significantly increasing their global footprint during the next three years but that a lack of globally capable leaders was likely to become a significant impediment to growth and sustaining success.

In the study CEB analyzed the business performance of more than 12,000 senior global leaders at 90 companies and discovered a striking difference between businesses with what it termed “Great Global Leaders”—those who can successfully operate across multiple and diverse geographies—and those without. It reports that Great Global Leaders are almost three times more likely than their peers to be guiding a business that is achieving its performance objectives three years in a row. “Unfortunately, Great Global Leaders are rare, as fewer than one in five senior leaders in the organizations surveyed qualify as Great Global Leaders. Without an adequate pipeline of effective global leaders, most organizations will struggle to be successful—and many will ultimately fail,” the study concludes.

We are told that “understandably” organizations are rethinking, retooling, and (in some cases) reinventing their leadership development programs to create more and better leaders. Yet the review of organizations’ strategies for strengthening their global leader pipeline shows that most approaches are “deeply flawed”. CEB report that some organizations “mistakenly” assume global leadership is the same as other forms of leadership and produce leaders who lack the special skills required for cross-market management. “Others make the opposite mistake”—assuming global leadership is an entirely unique set of skills and capabilities— “producing leaders with profiles inconsistent with the organization’s overall leadership needs.” The survey found that the best companies build Great Global Leaders by striking a balance between these two extremes—identifying, improving, and building leaders’ important core skills and capabilities while also enabling them to be more effective in complex global environments.

Key findings include:

• Many great leaders do not want global roles. CEB finds that only 35% of successful global leaders aspired to be in global roles. Global leadership roles may be unattractive to many leaders for two reasons. First, the link between most global assignments and the long-term career opportunities for leaders is frequently unclear. Second, the relocation, travel, and personal disruption costs of taking on global roles are often significant deterrents, especially for rising leaders.
• Executives should challenge the long-held assumption that to be successful, leaders need to live in the markets they manage. A review of leader performance shows that relocation is not always necessary for success.
• With global leaders likely having responsibility for individuals and teams over which they lack direct authority, the leader’s success or failure often hinges on his or her ability to work through others. A leader’s capacity to influence—being a compelling force or producing effects on the actions, behavior, and opinions of others— increases the probability that someone is a Great Global Leader by 27%.
• Being a successful global leader does not require increasing time spent working; rather, it requires working in a different way. Great Global Leaders spend more time networking with two important groups—clients and peers.

Read the report

Source: CEB