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What now for governance?

September 14, 2016

Theresa May’s pronouncements on reforming the governance of big business, controversy over the failure of BHS, continuing revelations from the Panama papers and the publication of the Financial Reporting Council’s deliberations on corporate culture and the role of boards mean interesting times for corporate boards. The confluence of these events along with Brexit and the implications of a Trump presidency will challenge the best of them.

May is responding to a perceived public demand to address what some see as an unacceptable face of business. There is nothing new in the extraction of wealth from an established business by its directors nor in efforts to hide money or avoid taxes. The BHS story and the Panama papers simply remind us it is still happening. Nor is there anything new in attempts to prevent such things and unfortunately it seems unlikely that the latest ideas by our new prime minister and the FRC will be any more successful than previous efforts. Her words may remain just words, they might not become policy and if they do policy might not be implemented. She may think that talking tough is sufficient: perhaps, in political terms, it will.

May’s proposals at first sight seem like a breath of fresh air to those frustrated or angry with how big business seems, in their eyes, to benefit a few people at the expense of many so her intention to give more power to shareholders and employees will be appealing. Giving shareholders a binding vote on executive pay looks like a way to empower shareholders but would be difficult to introduce as it could require other legal changes and it could have unintended consequences in the relationships between boards and shareholders. Similarly the idea of having employees represented on boards would increase board diversity but would employees want to take on the potential legal liability that goes with board membership? And would it mean boards run companies better? Volkswagens employee representatives on its board did not stop the emissions scandal. The effectiveness of non-executive directors can be limited by a lack of detailed knowledge of the business. Employee will have a very detailed knowledge of their work area but could be equally ignorant about other parts of a company unless there is a process for other employees to inform them. It would be naive to think that employee representation would make boards better. But it could help if board Chairman use the change constructively – particularly in helping boards to be more aware what is going on with their companies.

What is needed is for reforms to change behaviour for the better. The FRC report on culture, in trying to turn culture into a process or set of tasks, fails to help people in understanding human behaviour – why people do what they do and when and in what circumstances. This is a pity as that surely is why any board should want to learn about culture. The FRC talks about the importance of values and ethics but does not seek to understand why employees might not heed values statements or ethical codes and, by extension, why attempts to establish a culture may not work or have unintended serious consequences.

For work on culture to have any value for companies it must address why people do things and when and that requires understanding what motivates and incentivises people. It is necessary to understand the business model and consider what its continuing success depends on and, within this, how people are motivated and incentivised. Most boards want to do the right thing for their companies, their shareholders and their employees. More instructions to be ethical will be less helpful than changes which remove incentives to cheat and improve incentives to do the right thing.

Some foresight would be also helpful including in making sense of the politics. Scenario planning brings rewards. It sensitises people to what might happen, and gets them thinking creatively in how to address issues. It also gets them doing systems thinking, understanding cause and effect better rather than incrementally simply reacting to one event after another. This prepares people for uncertainty so they can embrace it rather than recoil from it.

Doing these things – thinking about incentives, thinking about scenarios then acting appropriately-should make boards and their companies more resilient and better able to thrive in a post Brexit and possibly Trump environment.

Written by Paul Moxey, SAMI Fellow.

The views expressed are those of the author and not necessarily of SAMI Consulting.

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The Fourth Industrial Revolution and the Future of Work – Part 3 The Challenges for Government

August 31, 2016

In my blogs of 5 & 27 July, https://samiconsulting.wordpress.com/2016/07/05/the-fourth-industrial-revolution-and-the-future-of-work-part-1/, I previewed SAMI’s workshop on scenarios for the 4th Industrial Revolution, and reported on a workshop we held on the subject, https://samiconsulting.wordpress.com/2016/07/27/the-fourth-industrial-revolution-and-the-future-of-work-part-2/

The Road Ahead for Government

At the July Workshop, we asked participants what aspects of the 4th Industrial Revolution would keep the Prime Minister awake at night. We have gained a new Prime Minister since the discussion, but the issues have not changed.

First the Good News

The technological changes of the Fourth Industrial Revolution are potentially helpful to Government in achieving its aims:

  • Technology will encourage globalisation and a knowledge and skills economy that may well flourish outside the confines of traditional trading blocs (and may indeed undermine them)
  • Technology has the potential to improve the efficiency and effectiveness of health and social care systems – prevention of illness, helping people to stay healthy, connecting communities better; it will benefit other public services as well – enabling better services to be delivered at lower cost
  • There will be a revolutionary change in defence and security systems, offering a “first mover advantage” to those who can make best use of emerging technologies
  • The Fourth Industrial Revolution will reward those economies that are open, flexible, and have a skilled and adaptable workforce

But there’s another side

Governments could find themselves increasingly powerless against mega-corporations – the Exponential Organisations described in Salim Ismail’s book of the same name. Regulating the activities of these global behemoths (and raising taxes from them) may be beyond the grasp of a single country.

Citizens as well, either individually or in communities of interest, will increasingly use technology to seek greater autonomy, which will challenge the norms of government and wider institutions – for example blockchain technology could foster new approaches to banking and personal finance. Renewable energy may erode the dependence people have on the national grid for energy; and skilled and knowledgeable people will seek to develop technology and communications systems independent of the global giants.

If Government agencies, whether HMRC or NHS Trusts, are too slow to adopt new technologies, they will both fail to generate the efficiency gains needed to keep public services going, and damage the reputation of government. Already, doctors report that one of the most common complaints from patients is the inability to access wi-fi in hospitals and clinics. A tech-savvy population will have no patience with analogue public services.

If the disruptive effects of technology are too great and too rapid, or if the Government fails to mitigate them, then rising employment and inequality could lead to serious social unrest – especially if the middle classes, who have a vested interest in the status quo, suddenly find that the status quo is working against them. In the most extreme event, when the middle classes turn on the Government, revolutions can happen.

So What is to be Done?

The Government needs to address four areas:

  • Understanding the future – knowing what the opportunities and the risks ahead are, and their application to the World, to the UK, and to the specific workings of government. Parliamentary Committees have for a number of years been pressing Governments to up their game on horizon scanning; the advent of the Fourth Industrial Revolution is a significant additional pressure on Government to become future aware.
    • Is the Cabinet Office’s Horizon Scanning Unit in the right place and adequately resourced to ensure this?
    • What lessons can be learned from other governments and from other sectors?
  • Ensuring that the UK has the infrastructure in place to benefit from the enormous advantages of technological change, and addressing the risks of cybersecurity – whether criminally or politically motivated: the Government needs to be an enabler of change.
    • How can Government get this focus – at national and local level, and in its service-delivery arms as well as policy?
    • As accountable officers for agencies that deliver services, what expectations should Permanent Secretaries have of the rate of change and adaptation in those agencies?
  • Understanding the potential impact of changes on the role of government, the extent of government, and the relationship between individual citizens and companies and other organisations in the future – including, critically, the scope for government to raise revenue through taxation – the UK has an analogue system of government, built largely on a template designed by Haldane in 1918.
    • What would digital government for a digital age look like?
    • Can the Government connect digital platforms to the existing structure, or is more radical reform needed?
    • What skills does Government need, and how can it get them in the most cost-effective and sustainable way?
  • Maintaining social cohesion at a time of potentially major disruption – for example instability in the labour market, and significant changes in wealth distribution – the riots of 2011 showed how quickly instability can spread (and digital communications certainly accelerated this). If the models of Osborne and Frey of the Oxford Martin School are anywhere near correct in stating that 47% of current UK jobs will be at risk, this presents a massive social challenge. Even OECD’s “more conservative” estimates of about 10% of jobs being at risk presents a major problem for national and local governments to manage.
    • What role does Government need to play in managing through the inevitable turbulence the 4th Industrial Revolution will bring?

The Government will need to address these areas within the context of its other activities and priorities – including redefining the UK’s position in the world post-Brexit, gearing up health and social care systems to meet the predictable challenges of an ageing population, defence against both terrorism and hostile states, and achieving economic growth.

Written by David Lye, SAMI Fellow

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog, sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

The Future of the Olympics

August 26, 2016

As the Rio Olympics wind down, amongst all the razzle and excitement of medal winners and achievement of all competitors, I wonder if this might be the end of an era? The athletes deserve all our congratulations and admiration. Nothing can take that away from them, or take away from us our appreciation of the Olympic spirit. But the world is changing on so many fronts —

For instance, what will be the impact of the transgender movement? We are seeing the impact in schools, universities and government. How can the traditional divide into men’s and women’s events evolve?

Will the line between para-olympic and Olympic competition blur as artificial legs and arms are developed which perform better than natural ones? Will there be a growth in implant technology which enhances natural limbs or circulation systems? How would these affect selection as an Olympian or Para-olympian competitor? How does this relate to doping, as new ranges of substances are developed which alter performance, but are perhaps not yet under regulation?

Competitors in the Olympics represent their nations. Medal tables show medals per head of population, where New Zealand led, as well as overall, with the US at the top. The medal table is a source of national pride. But in 2016 we saw the first “refugee” team. In previous Olympics athletes have competed for countries they had only recently become a citizen of, but as migration continues, nationality becomes harder to define. Will the medal table become a less meaningful reflection of national capability?

What will become of the “high tech” sports like cycling, sailing, rowing, pole vault, where investment in sports science research into the equipment pays medal dividends? Will we see the sort of regulations covering Formula One which aim to reduce the difference that technology can make?

And what is the future of the equine events with different but also high cost barriers to entry, as the world tilts towards a population of 9 billion, mostly in Asia?

And what about the desire of countries to host an Olympic Games- politically and economically as Brazilians’ boos at the Rio Olympics opening ceremony were followed by, in many cases, the games playing at near empty stadiums?

So, trying to envision the Olympic Games in say 2052, the boundaries will have shifted in so many ways – “interesting times” indeed.

Written by Gill Ringland, SAMI Fellow and CEO.

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog, sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

The Fourth Industrial Revolution and the Future of Work – Part 2

July 27, 2016

In my blog of 5 July, https://samiconsulting.wordpress.com/2016/07/05/the-fourth-industrial-revolution-and-the-future-of-work-part-1/, I previewed SAMI’s workshop on scenarios for the 4th Industrial Revolution.

The Key Drivers of Change

Looking forward over the next 10-15 years, it is clear that rapid technological advances will drive significant change in the way we work, as well as the way we live. At the SAMI workshop on 6 July, we started by trying to identify the most significant influences – the “key drivers of change” in this period. Among the ones we identified were:

  • Generational differences – younger “digital Natives” will have very different attitudes, not only to IT, but also to work and organisational structures, and to how they share information online
  • Faster turnover in IT skills – need for constant education and re-education
  • Growing public awareness of the risks ahead – which will affect the take-up and use of new technologies
  • Increased inequality and polarisation – with the benefits of technological innovation not spread evenly
  • Artificial intelligence – AI’s influence growing, due to AI machines’ ability to “learn” from experience, and increase their autonomy
  • Immersive communications – new ways of using and interacting with technology
  • The effect of ICT – on all sectors of the economy, and the jobs and skills needed
  • Continued growth of the knowledge economy – trading in knowledge and information rather than physical products
  • Globalisation and blurring of political boundaries – likely to be increased by the ability of the knowledge economy to ignore physical boundaries and fiscal borders
  • Potential impact of terrorism and war affecting European cities

Scenarios

We went on to look at some possible scenarios for the future. Starting from the European Union’s current vision of the “Digital Single Market” – which envisages the EU, along with national governments improving digital access, designing “rules” for digital networks, and seeking to use digital as a driver for growth – we identified three similar, but slightly divergent alternative trajectories:

  1. A world in which strong government chooses to foster innovation and entrepreneurialism through a slightly more “hands-off” approach, leading to a disruptive and fast-changing economy within a managed infrastructure, with new market entrants and new business (and social) structures encouraged in the climate of innovation
  2. A more decentralised world in which governance and control is fragmented and/or delegated, and people have more choice and control over their own data, and alternate infrastructures exist
  3. A world where political boundaries and organisations weaken, and big corporations have increasing power, with smaller, local economies existing within the big corporates’ infrastructure

What was striking in each of these three scenarios – although they were developed by separate groups of people – was the degree of commonality across all of them. In every scenario, some key characteristics were evident, including:

  • The decline of traditional employment, and the rise of alternatives – self-employment, sessional employment, and the “gig” economy
  • Growing inequality, with more wealth accumulating in the top percentiles of earnings distribution, and downward pressure on the middle percentiles – possibly leading to…
  • greater social instability/loss of social cohesion
  • The difficulty of raising taxes to fund traditional government activities in a global knowledge economy, working against the desire of governments to manage transition in order to maintain social cohesion

Next Steps

We now plan to take the broad scenarios from the 6 July workshop and apply them to specific sectors of the economy and society. We will begin by looking at Government. We will blog on each of these scenarios as we develop them. Watch this space…….

Written by David Lye, SAMI Fellow

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog, sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

Post Brexit questions

July 20, 2016

This blog arises from asking the questions:

What sources of help are there for CEOs to think through the turbulence associated with BREXIT?

Traditional strategy assumes stability and predictability. The BREXIT world is better characterised by turbulence, uncertainty, novelty and ambiguity – conditions that contribute disruptive changes and trigger the search for new ways of coping. This means that CEOS need to explore more than one potential outcome before making decisions. So, the commentators discussing models such as “Canada”, “Norway” or “Switzerland” are useful in flushing out some of the potential choices, but these models alone are not a safe basis for decisions.

In the BREXIT world, we argue, foresight tools are the best weapon. These create and explore more than one potential future. By exploring more than one potential future, CEOs and organisations are better able to “see” early signs of these and so to take action earlier. The advantage of better decisions sooner can be measured on the bottom line.

There are a number of books which aim to provide CEOs with the mindset and methodologies to develop foresight.

One of these is “Strategic Foresight” by Patricia Lustig. The book explores how we think about the future, looking at ambiguity and uncertainty. It introduces a simple model of preferred thinking styles and talks about the ‘baggage’ and values that form our perceptions. Most of the book is devoted to the stages in foresight thinking, how to identify emerging trends, see what impact they may have, the strategic importance of early recognition, and how to apply the knowledge gained through foresight. This book builds on the 2010 book “Beyond Crisis” by Gill Ringland, Oliver Sparrow and Patricia Lustig which describes why our world will be turbulent over the next decades and how leaders need to respond. That book covered the reason for using and how to use scenario planning in turbulent times.

Another recent book is by Rafael Ramirez and Angela Wilkinson, “Strategic Reframing: The Oxford Scenario Planning Approach”, written in co-operation with Kees van der Heijdn, whose 1996 “Scenarios: the art of strategic conversation” was based on his lifetime experience at Shell. The new book is rooted in their joint experience at Shell, and their teaching and research at Said Business School. A key aspect of this book is the linking of every stage of scenario planning to dealing with Turbulence, Uncertainty, Novelty and Ambiguity (TUNA).

A classic that takes a detailed approach, reassuring to scientists and engineer in its style, is Bil Ralston and Ian White’s “Scenario Planning Handbook”. It is primarily a “how-to” book, and assumes that readers are convinced of the need for scenario planning in uncertain times, in order to bridge between our knowledge of the past and our decisions about the future.

In SAMI we are seeing a growth in the use of technology to support thinking about the future – Wendy Schultz talked about some of these tools in a blog https://samiconsulting.wordpress.com/2015/07/01/25th-anniversary-series-change-itself-changes-new-tools-for-futures-thinking/

In a later blog I will take a look at online sites that aim to help tackle this challenge, either directly or through providing guidance on sources.

Written by Gill Ringland, SAMI Fellow and CEO.

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog, sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

The Fourth Industrial Revolution and the Future of Work – Part 1

July 5, 2016

Yesterday was the Fourth of July. Let’s remind ourselves of the vision set out by the Founding Fathers in the US Declaration of Independence:
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”.
Noble sentiments indeed. Can they survive the impact of robotics and artificial intelligence on the world of work. Or can new technology actually enhance “life, liberty and the pursuit of happiness”?
On 22 June, Huw Williams blog about the March of the Robots https://samiconsulting.wordpress.com/2016/06/22/march-of-the-robots/ described some of the amazing new developments in the field of robotics, and the impact robotics is having in the world of work, citing the decision of Foxconn, Apple’s key supplier, to downsize its workforce in China from 110,000 to 50,000.
The Evidence
Tomorrow, SAMI will be meeting in workshop session to develop its own scenario set for the Fourth Industrial Revolution, and we will be blogging the results of that in due course. Ahead of that, it’s worth looking again at what might be happening. Here are a few points of evidence:
According to Frey & Osborne http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf 47% of UK employment is threatened over the next two decades, but according to OECD, the figure is “only” 10% – that’s still an awful lot of employment.
Experts seem to agree that the jobs most at risk are generally “routine” jobs: the FT’s Employment Correspondent Sarah O’Connor, speaking yesterday at a Resolution Foundation Conference on robotics, commented that it would be no bad thing if some of the jobs she had witnessed were to be lost – for example in call centres and large distribution warehouses, in which employees are utilised as “human robots”.
UK productivity has essentially flatlined since 2007. It desperately needs a boost. If robots mean that more output can be generated from the same amount of labour and capital, then wages can – at least in theory – increase.
Robotics will enhance our lives as well as changing the world of work: therapeutic robots are already in use and proving beneficial for people with alzheimer’s (a growing disease in an aging population) and children with autism. “Nano swarms” are being developed, which will “swim” through the human body (even through organs, such as the liver) to seek and destroy cancer cells. As well as worker robots, there will be household robots, as Huw’s blog described, and there will be games, toys and educational robots.
Developments in AI and technology will make us more connected than ever, and give us access to unprecedented amounts of information. In 5-10 years’ time, most IT will be artificially intelligent.
Change is coming fast. Even if the overall impact is beneficial, there will still be massive disruption, and consequent impacts on the economy and society. Policy makers will need to understand and be more rapidly responsive to change.
Watch this Space
The Brexit referendum on 23 June showed once more the dangers of making forecasts without exploring the range of possible futures.  Scenarios are safer. We will publish our scenarios following tomorrow’s workshop. But there is enough evidence to suggest that there are grounds for hope and optimism as well as fear.
Finally, and returning to the land of the free, let’s remember that there’s nothing new about “robot rage”. A headline in the New York Times ran
“March of the Machines Makes Idle Hands”.
The date was 1928.

Written by David Lye, SAMI Fellow

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog, sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

What might your house look like in the future?

June 30, 2016

Some thoughts on the RIBA exhibition about Designing the House of Tomorrow …….

In conjunction with the BBC, RIBA have created an exhibition on the House of Tomorrow, taking three archetypes – the cottage, the terrace and the apartment – as the basis of its analysis.   The BBC4 programmes, hosted by Dan Cruickshank, covered the history of these forms of housing and can be found on iPlayer here.

The Cottage

Originating in the need to provide accommodation for workers on grand estates, the cottage was basically a rural design. In the Domesday Book, most of the population were recorded as living in cottages – they were “cottars” (a new one on me).

By the early 20th century, cottage-living was becoming idealised. The exhibition shows the “Daily Mirror Cottage”, on the Sheerwater Estate, Byfleet from 1910.

Increasing urban encroachment and gentrification has meant that these areas are now very financially attractive. Resisting the call for wholesale demolition and fundamental rebuild, architects in Athis-Mons, near Orly, have been looking at “densification” (ugh!), while in West Barton, Yorkshire, “clustering” of gardens has been the approach.

In Port Sunlight, Lever Brothers, inspired by the Arts and Crafts Movement, looked to build a denser community with cottage-like style. This was a link to the next form of residence:

The Terrace

The terrace as a housing model has many forms, from Coronation Street to Royal Crescent in Bath. Common to both however, is the creation of communal space: from back alleys where children could play in safety to lovely Georgian Squares and the Belgravia private communal gardens. A sense of community is created and sustained by these physical forms.

“Custom build” terrace houses are now being explored. The concept goes back to the 1774 Building Act which defined 4 “rates” of terraced houses – different sizes and forms. Now you can select your house size and format online – just like specifying your new car’s features – and commission the developer to build it for you, within an overall design code.

One exploration in the exhibition is the “Party House”, the beginnings of an approach to communal living. If you are in “halls adjoining” semis, why not take down the wall and create a communal space? The “Granny flat” concept has been around a while – is this a wider approach to multi-generational, multi-family living?

Increasing home-working, where there is less need to commute or move to the city could also lead to more local community living, and need for local services.

Apartments/communities

The exhibition examines how communal living has evolved, from monasteries and colleges, taking as an example St John’s College, Cambridge moving from its 15th century origins to its 20th century Cripps Hall with roof terrace. Wolfson College Oxford was also highlighted for its communal staircase.

Art Deco apartments (à la Poirot), 1960’s tower blocks (with the Hinckley Point disaster noted) to Dolphin Square are among other examples explored. Communal living seems to be on the rise: from student halls, through young professionals flat/house sharing to sheltered housing for the elderly (and increasingly not quite so elderly – Pegasus Life do a range of housing for the over-60’s).

Dolphin Square is one of a number of examples in the exhibition where such communal spaces can incorporate shops, bars, and even swimming pools and squash courts.

Opinion

Is the trend from the individual to communal really that strong? Is the nuclear family unit declining and changing back into a multi-generational or more flexible format? The challenges of affordability and ageing are clearly drivers, but privacy and the concept of personal space surely remain a force. For much of the late 20th century, suburbs were largely dormitories for the central city activity: you worked and socialised in the city centre with colleagues or friends from other suburbs. Was that a passing phase?

I thought one failing of the exhibition was the lack of detailed consideration of the implications of many people working from home. The idea that it would create more local communities was there, but the space implications weren’t addressed – maybe there could be a model which integrated the communal residence with small business centres?

Personally I’ve always thought that a good way to end my days would be as a Fellow at a Cambridge College (if only!). No building or garden maintenance responsibilities, domestic services on hand, communal dining (with an excellent cellar!) with like-minded, interesting people, surrounded by lively young students with stimulating ideas in art and science – plus good medical support!

Written by Huw Williams, SAMI Principal.

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog, sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

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