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b27be3b4118d1f85cd48a4a62356aedd | https://www.forbes.com/sites/joecornell/2020/02/10/arconic-to-spin-off-arconic-rolled-products-on-april-1/ | Arconic To Spin-Off Arconic Rolled Products On April 1 | Arconic To Spin-Off Arconic Rolled Products On April 1
Photographer: Luke Sharrett/Bloomberg © 2017 Bloomberg Finance LP
On February 6, 2020, Arconic Inc. (NYSE: ARNC, $31.30, Market Capitalization $13.6 billion), a leading provider of high performance materials and engineered products, announced that its Board of Directors had approved completion of the Company’s separation into two independent, publicly-traded companies by way of a tax-free spin-off of its Global Rolled Products business. The Engineered Products and Forgings businesses will remain in the existing company, which will be renamed Howmet Aerospace Inc. and change its stock ticker from “ARNC” to “HWM” in connection with the separation. The Global Rolled Products business will be part of a new company that will be named Arconic Corporation at separation, and its common stock would be listed on the NYSE under the symbol “ARNC”. Each ARNC shareholder will receive one ordinary share of Arconic Corporation (Spin-Off) for every four ordinary shares of ARNC. Arconic Corporation will not issue fractional shares of its common stock in the distribution, and stockholders will receive cash in lieu of fractional shares. The record date for the distribution for common stockholders is March 19. ARNC expects that the ‘when issued’ public trading market for Arconic Corporation (Spin-Off) ordinary shares to begin on the NYSE on 3/18 under the symbol “ARNC WI” and will continue throughout the period leading up to and including the distribution date. The regularway’ trading of Arconic Corporation’ ordinary share is expected to begin on the NYSE on 4/1. Beginning on 3/18 till the distribution date, Arconic Inc (to be renamed as Howmet Aerospace Inc) expects that there will be two ways to trade its ordinary shares, either with or without the right to a distribution of Arconic Corporation ordinary shares. Ordinary shares will continue to trade on the NYSE on a ‘regularway’ basis until the distribution date. The shares will also trade without the right to receive the Arconic Corporation in the ‘ex-distribution’ market beginning on 3/18 under the symbol “HWM WI.”
Arconic and Price Performance Spin-Off Research
Spin-Off Details and Top 5 Shareholders Spin-Off Research
Valuation and Recommendation
We value Arconic Inc (ARNC) using 2021e EV/EBITDA methodology by valuing Howmet Aerospace (Stub) and Arconic Corporation (Spin-Off) separately. Our intrinsic value of $29.00 (Previously: $28.50) for Howmet Aerospace (Stub) is based on 2021e EV/EBITDA multiple of 9.8x. Our fair value estimate for Arconic Corporation (Spin-Off) stands at $7.00 (Previously: $7.50) per ARNC share based on 2021e EV/EBITDA multiple of 6.5x. We have factored in the cash distribution of approximately $700 million from SpinCo to Howmet Aerospace (Stub). We arrive at a target price of $36.00 per share for Arconic Inc, which implies a potential upside of 15.0% from the current market price of $31.30 as of 2/7. We thereby retain our ‘Buy’ rating on the stock.
In Connection with Spin-off, The Arconic Inc board further announced that Timothy Myers, William Austen, Christopher Ayers, Margaret Billson, Austin Camporin, Jacques Croisetiere, Elmer Doty, Carol Eicher, Fritz Henderson, E. Stanley O’Neal, and Jeffrey Stafeil are expected to join Arconic Corporation’s board, while Joseph Cantie, Robert Leduc, Jody Miller, and Nicole Piasecki are expected to join Howmet Aerospace Board following completion of the spin-off. Goldman Sachs and J.P. Morgan are acting as fi nancial advisors to Arconic Inc. in connection with the separation transaction, and Wachtell, Lipton, Rosen & Katz is acting as its legal advisor.
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Key Data Spin-Off Research
Distribution of Arconic Corporation shares to ARNC shareholders
ARNC shareholders will receive one ordinary share of Arconic Corporation (Spin-Off) for every four ordinary shares of ARNC held as of the record date. Arconic Inc will distribute all of the outstanding shares of Arconic Corporation common stock on a pro-rata basis to holders of ARNC common stock. The distribution remains subject to the satisfaction or waiver of the conditions described in Arconic Rolled Products Corporation’s Registration Statement on Form 10, as amended, including the U.S. Securities and Exchange Commission (SEC) having declared effective the Form 10.
Arconic Shareholders Spin-Off Research
Valuation
We value Arconic Inc by using the Sum of the parts (SOTP) methodology by valuing both RemainCo (Howmet Aerospace) and SpinCo (Arconic Corporation) using the EV/EBITDA valuation technique.
A] Arconic Inc (Stub) RemainCo (Stub) to be renamed as Howmet Aerospace at the spin-off completion, includes Engineered Products and Forging businesses.
EV/EBITDA Valuation: We value Remain Co (Stub) - Howmet Aerospace at $29.00 (Previously: $28.50) per share based on 2021e EV/EBITDA multiple of 9.8x. This multiple is at approximately 5% premium to median peer multiple of 9.3x. With its superior portfolio, Howmet Aerospace’s Key Data Ticker ARNC Primary Exchange NYSE Price ($ as of Feb 7, 2020) 31.30 52 Week Range ($) 17.30 - 31.99 Shares Outstanding (million) 432.9 Market Cap ($ billion) 13.6 Net Debt ($ billion) 4.2 Enterprise Value ($ billion) 20.3 Market Float 99.4% FY20 Estimated P/E (x)* 13.2 Dividend ($) / Div. Yield (%) 0.08/0.3 Fiscal Year Ending Dec 31 FY19 Revenue ($ billion) 14.2 Index Member NYSE Composite * P/E is calculated on the basis of Bloomberg Consensus estimates Source: Bloomberg, Company Reports and Spin-Off Research Source: Company Data 3 closest competitor was Precision Castparts Corporation (which was acquired by Berkshire Hathaway Inc in 2016). We expect 2021 EBITDA of $1,690 million for Howmet Aerospace factoring in spin-off related costs, net of corporate overheads. Our net debt incorporates cash distribution by SpinCo to RemainCo (Stub) at the time of spin-off to the tune of $700 million.
EV / EBITDA Valuation Arconic (Stub) and Peer Analysis Spin-Off Research
B] Arconic Corporation (Spin-Off) Arconic Rolled Products Corporation (which will be named as Arconic Corporation) at the completion of the spin-off, will comprise the Global Rolled Products (GRP) segment.
EV/EBITDA Valuation: We value Arconic Corporation (Spin-Off) at $7.00 (Previously: $7.50) per share by applying 2021e EV/EBITDA multiple of 6.5x. As the Company includes a more volatile metals-exposed end markets in the rolled-products business, we assign a lower EV/EBITDA multiple. The assigned multiple is at approximately 3% premium to median peer multiple of 6.3x. We expect 2021 EBITDA of $870 million for Arconic Corporation (Spin-Off) factoring in possible spin-off related costs, net of corporate overheads. Our net debt incorporates cash distribution from Spin-Off to RemainCo at the time of spin-off to the tune of approximately $700 million.
EV / EBITDA Arconic Rolled Products (Spin-Off) & Peer Analysis Valuation Comparison Spin-Off Research
C] Consolidated Valuation: Our consolidated target price for Arconic Inc stands at $36.00 per share, implying a potential upside of15.0% from the current market price of $31.30 as of 2/7. We thereby retain our ‘Buy’ rating on the stock.
Arconic Consolidated Valuation Spin-Off Research
Company Description
Arconic Inc. (Parent)
Arconic (to be renamed as Howmet Aerospace at the separation) is a global leader in lightweight metals engineering and manufacturing. Arconic’s innovative, multi material products, which include aluminum, titanium, and nickel, are used worldwide in aerospace, automotive, commercial transportation, building and construction, industrial applications, defense, and packaging. Arconic has two operating and reportable segments, which are organized by product on a worldwide basis: Engineered Products and Forgings (EP&F), formerly named the Engineered Products and Solutions segment and Global Rolled Products (GRP). The Engineered Products and Forgings (EP&F) segment develops and manufactures high performance, engineered products, and solutions for the aerospace, industrial gas turbine, and commercial transportation markets. EP&F offers unique, comprehensive capabilities, from advanced alloy development to advanced manufacturing and qualification expertise. The Global Rolled Products (to be spun-off), provides a range of highly differentiated aluminum sheet, plate, and extruded products for the aerospace, automotive, commercial transportation, brazing, and industrial markets. In FY19, the company recorded revenue of $14.2 billion. On completion of the spin-off transaction, Engineered Products and Forgings (EP&F) segment will be a part of the RemainCo and will be renamed as Howmet Aerospace Inc.
Arconic Rolled Products Corporation (Spin-Off)
Arconic Rolled Products Corporation (which will be named as Arconic Corporation) at the completion of the spin-off, will comprise the Global Rolled Products (GRP) segment. The segment offers a range of highly-differentiated aluminum sheet, plate, and extruded products for the aerospace, automotive, commercial transportation, brazing, and industrial markets. The company has invented the industry leads: Kawneer created the first modern storefront more than a century ago, and Reynobond® & Reynolux® products deliver innovative solutions for architectural and retail applications that seamlessly integrate with architectural systems to produce dynamic visual effects. Today, these brands hold leading market positions. The GRP segment recorded revenues of $7.1 billion in FY19.
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39a248ef6c733a69b6ba16c9032bca76 | https://www.forbes.com/sites/joecornell/2020/05/14/arconic-tackling-covid-impact-well/ | Arconic Tackling Covid Impact Well | Arconic Tackling Covid Impact Well
Photographer: Luke Sharrett/Bloomberg © 2017 Bloomberg Finance LP
On May 5, 2020, Arconic Corporation (NYSE: ARNC, $8.30, Market capitalization: $0.9 billion), a leading provider of aluminum sheet, plate & extrusions, as well as innovative architectural products, reported mixed 1Q20 results with a beat on adjusted EPS and a revenue miss versus consensus. Arconic Corporation’s 1Q results were included in Arconic Inc’s HWM (now Howmet Aerospace Inc) results. Previously, on 4/27, ARNC had announced preliminary 1Q20 results and had provided an update on COVID-19 impact. In 1Q20, ARNC’s revenue stood at $1.6 billion, down 12% YoY, as compared to revenue of $1.8 billion in 1Q19. Organic revenue was down 7% YoY, due to disruptions in the automotive, commercial transportation and aerospace markets driven by COVID-19 and 737 MAX production declines; somewhat offset by growth in the industrial market. Segment operating profit was $169 million, up 25% YoY, driven by net cost reductions, lower aluminum price, and growth in industrial volume partially offset by declines in Automotive, Commercial Transportation, and Aerospace. Segment operating profit margin was up 310 bps YoY to 10.7%.
Arconic Corp and Price Performance Spin-Off Research
Valuation and Recommendation
Our fair value estimate for Arconic Corporation stands at $10.00 per share (Previously: $11.00 per share) based on 2021e EV/ EBITDA multiple of 5.2x. Our assigned multiple for ARNC is at ~5% discount to median peer multiple of 5.5x. Our 2021 EBITDA estimate factors in the slowdown and disruption in the aerospace sector due to COVID-19 pandemic. However, given the Company’s leading position in the mid-stream aluminum industry with good liquidity and expected cost reductions, we retain our ‘Buy’ rating on the stock. The stock offers an implied upside of 20.5% from the current market price of $8.30 as on 5/13.
Key Data and Top 5 Shareholders Spin-Off Research
Business Updates
1. Actions to Mitigate COVID-19 Impact
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On 4/8, the Board of Directors took several measures worth $200 Million to mitigate COVID-19 impacts. This included reduction of operating costs by ~$150 million on an annualized run-rate basis and capital reductions of $50 million to improve the Company’s financial profile. Furthermore, the CEO’s salary and the Board of Directors’ annual cash retainer would be reduced by 30% as well as Senior-level management would incur a 20% salary reduction. Salaried employees would incur a 10% salary reduction with 401K match program suspension. Additionally, the Company would be restructuring its salaried workforce targeting a 10% reduction.
The Company’s Tennessee and New York facilities would be idled until the demand returns. All other US-based rolling and extrusion facilities would decrease production and operate with a reduced labour force through shortened work weeks, shift reductions, layoffs, and the elimination of temporary workers and contractors. All rolling mill facilities in Europe, China and Russia would modify schedules, adjust work hours, lower costs, and delay raises.
On 4/27, ARNC provided further update on COVID-19 impact and announced preliminary 1Q20 Results. The Chief Executive Officer, Tim Myers, noted that the Company is observing positive momentum at its Chinese facilities that were impacted due to COVID-19 pandemic in early 2020 and are now back to essentially normal production. The Russian packaging facility is running at full operations due to robust end-market demand. The Company resumed operations at New York facility on 4/20 and is expected to ramp back up operations at Tennessee facility which provides opportunities for growth.
2. Pricing of 6.00% first-lien notes due 2025
On 4/29, ARNC announced the pricing of its offering of $700 million aggregate principal amount of 6.00% first-lien notes due 2025. The sale of the Notes was completed on 5/13. Furthermore, the Company has replaced its existing cash fl ow revolver with a new asset-based credit facility and has received commitments totalling over $750 million for the new ABL facility from the Company’s existing bank group. Proceeds from the 1st lien senior secured notes are expected to repay the $600 million secured term loan B under the secured revolving credit facility and for general corporate purposes.
On 5/13, the Company announced the closure of its offering of first-lien notes with a maturity date of May 15, 2025. The Company also replaced its cash fl ow revolver with a new asset-based credit facility with aggregate commitments of $800 million. Deutsche Bank AG New York Branch is Administrative Agent for the ABL Facility.
3. Rating Actions
On April 29, Moody’s MCO assigned a Ba1 rating to ARNC’s 1st lien senior secured notes and downgraded the Corporate Family Rating (CFR) to Ba3 from Ba2 and the Probability of Default Rating to Ba3-PD from Ba2-PD. The Ba3 2nd lien senior secured notes rating was affirmed. The SGL-1 speculative liquidity grade rating is unchanged. The outlook was changed to Stable from Negative.
1Q20 Results Review
On May 5, 2020, Howmet Aerospace (formerly Arconic Inc) reported 1Q20 results. On a consolidated basis, the Company reported revenues of $3.2 billion, down 9% YoY. Organic revenue was down 6% YoY due to disruptions in the aerospace, commercial transportation, and automotive markets due to COVID-19 and 737 MAX production decline; somewhat offset by growth in defense and industrial. The Company reported adjusted operating income of $472 million, up 19% YoY, as against $397 million in 1Q19 with a marginal growth of 350 bps, driven by net cost reductions, favorable aluminum and raw material costs, and growth in defense and industrials; partially offset by lower volumes in aerospace, commercial transportation, and automotive, including the impacts of COVID-19 and 737 MAX production declines. For 1Q20, Net income was $215 million, up 15% YoY, as against $187 million in 1Q19. During 1Q20, Adjusted EPS was $0.62, up 44.2% YoY, as compared to $0.43 in 1Q19.
After the Spin-Off on 4/1, Arconic Corporation now includes Global Rolled Products business. In 1Q20, ARNC’s revenue stood at $1.6 billion, with a decrease of 12% YoY, as compared to revenue of $1.8 billion in 1Q19. Organic revenue was down 7% YoY, due to disruptions in the automotive, commercial transportation and aerospace markets driven by COVID-19 and 737 MAX production declines somewhat offset by growth in the industrial market.
Arconic 1Q20 Results Review Spin-Off Research
The sales mix breakup of Organic sales of Arconic Corporation in 1Q20 is Aerospace (18%), Automotive (27%), Building & Construction (18%), Packaging (11%), Industrial (19%), and Commercial Transportation & Other (7%). Segment operating profit was $169 million, up 25% YoY, driven by net cost reductions, lower aluminum price, and growth in industrial volume partially offset by declines in Automotive, Commercial Transportation, and Aerospace. Segment operating profit margin was up 310 bps YoY to 10.7%.
Organic Revenue by Market Spin-Off Research
Valuation
EV/EBITDA Valuation: Arconic Corporation comprises the Global Rolled Products (GRP) segment. We value Arconic Corporation at $10.00 per share (Previously: $11.00 per share) by applying 2021e EV/EBITDA multiple of 5.2x. As the Company includes a more volatile metals-exposed end market in the rolled-products business, we assign a lower EV/EBITDA multiple. The assigned multiple is at ~5% discount to median peer multiple of 5.5x. We expect 2021 EBITDA of $660 million (Previously: $740 million) for Arconic Corporation factors in possible spin dis-synergies, net of corporate overheads, and also the fall-out from COVID-19 pandemic. Our fair value is sensitive to change in adjusted EBITDA and EV/EBITDA multiples due to a higher proportion of debt (including pension liabilities). However, given the Company’s leading position in the mid-stream aluminum industry with a broad operating footprint and diversified end-market exposure with good liquidity and expected cost reductions, we retain our ‘Buy’ rating on the stock. The stock offers an implied upside of 20.5% from the current market price of $8.30 as on 5/13.
2021e EV-EBITDA - Arconic Spin-Off Research
Our fair value is highly sensitive to changes in adjusted EBITDA and EV/EBITDA multiples due to a higher proportion of debt (including pension liabilities). Our base case intrinsic value is $10.00 per share. If EV/EBITDA multiple is +/- by 0.5 the intrinsic value changes to the tune of $3 per share.
EV-EBITDA Multiple and Arconic Peer Analysis Spin-Off Research
Company Description
Arconic Corporation
Arconic Corporation comprises the Global Rolled Products (GRP) segment. The segment offers a range of highly-differentiated aluminum sheet, plate, and extruded products for the aerospace, automotive, commercial transportation, brazing, and industrial markets. The Company has invented the industry leads: Kawneer created the first modern storefront more than a century ago, and Reynobond® & Reynolux® products deliver innovative solutions for architectural and retail applications that seamlessly integrate with architectural systems to produce dynamic visual effects. Today, these brands hold leading market positions. The GRP segment recorded revenues of $7.1 billion in FY19.
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d84b8d5ae1a8bf7fd78f8f320e1b0d8c | https://www.forbes.com/sites/joecornell/2020/07/20/arconic-valuations-look-attractive-reiterate-buy/ | Arconic Valuations Look Attractive; Reiterate Buy | Arconic Valuations Look Attractive; Reiterate Buy
Photographer: Luke Sharrett/Bloomberg © 2017 Bloomberg Finance LP
On April 1, 2020, Arconic Corporation (NYSE: ARNC, $16.25, Market capitalization: $1.8 billion), a leading provider of aluminum sheet, plate & extrusions, as well as innovative architectural products, was spun-off from Howmet Aerospace Inc (then Arconic Inc). Since the spin-off, Arconic Corporation has rallied ~135%, due to improved sentiment in aerospace space and rising optimism of positive impact on ARNC’s end markets due to the reopening of the economies post-COVID lockdown. On May 5, 2020, Arconic Corporation reported a mixed 1Q20 results with a beat on adjusted EPS and revenue miss versus consensus. Arconic Corporation’s 1Q results were included in Arconic Inc’s ARNC (now Howmet Aerospace Inc) HWM results. Organic revenue was down 7% YoY, due to disruptions in the automotive, commercial transportation and aerospace markets driven by COVID-19 and 737 MAX production declines; somewhat offset by growth in the industrial market.
Arconic is in the process of upgrading its product mix with higher margin automotive and industrial business and debottlenecking to allow for future growth in other areas, such as North American packaging. A significant upgrade project was completed at the Tennessee plant, which provides for over 100kt of higher-margin downstream rolling capability in auto and industrial end markets. Hence, we are positive that ARNC will register profitable growth due to higher aluminization across sectors and create shareholder’s value in the long term. However, the demand is likely to be impacted in the near term due to the fall-out from COVID-19 pandemic.
Arconic Price Performance And Spin-Off Details Spin-Off Research
Valuation and Recommendation
Our fair value estimate for Arconic Corporation stands at $21.00 per share (Previously: $10.00 per share) based on 2021e EV/ EBITDA multiple of 7.3x (Previously: 5.2x). The assigned multiple is at ~14% premium to median peer multiple of 6.4x factoring in the Company’s leading position in the mid-stream aluminum industry with a broad operating footprint and diversified end-market exposure. Furthermore, our EV/EBITDA multiple is at a slight premium to its closest competitors Kaiser Aluminium KALU (7.2x) and Constellium SE (7.2x). Arconic has the most balanced rolled products business globally, with critical mass in the key end market segments. We retain our ‘Buy’ rating on the stock. The stock offers an implied upside of 29.2% from the current market price of $16.25 as on 7/17.
Key Data And Top 5 Shareholders Spin-Off Research
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Investment Thesis
1. Company to benefit from tailwinds of higher aluminization across sectors
Arconic Corporation is a global leader in manufacturing aluminum sheet, plate, extrusions, and architectural products, serving the ground transportation, aerospace, building and construction, industrial, and packaging end-markets primarily. Demand for aluminum and other lightweight products continues to grow at a steady pace. According to CRU International Limited, the projected annual growth rate from 2019 to 2023 of fl at-rolled aluminum products is 3.6%, and projected growth in the air and ground transportation market segment is 5.3%.
The Company is seeing interest in aluminum light weighting from a growing customer base, and the Company currently has material on more than 60 programs with eight automotive original equipment manufacturers as well as many of their tier-one suppliers. Although, vehicle production is likely to remain flat in the ground transportation market for fiscal 2020; we believe that the Company could continue to benefit from growth in automotive aluminum applications, with automotive body sheet forecasted to grow at a 9% annual growth rate from 2019 through 2026 in North America. The Company’s Tennessee plant is expected to increase exposure to highermargin, value adds industrial products. The Company is also expected to benefit from higher use of specialty metal alloys and components in modern airplanes. The Company has significant forward revenue under contract with major commercial aircraft OEMs or framers, such as Boeing BA , Airbus, Spirit AeroSystems SPR , and Embraer.
2. Reopening of economies would be positive for Arconic’s business prospects; although 2020 would be impacted by COVID-19 pandemic
Arconic Corporation’s 2Q EBITDA is expected to be weak, and the aerospace segment is likely to be under pressure and is expected to account for ~12% of its revenues. Boeing, ARNC’s major customer, has announced the restart of 737 Max production following a four-month shutdown, however, the overall aerospace sentiment could again take a hit if there is a second wave of coronavirus.
Reopening of economies and the impact of the fiscal stimulus would be positive for Arconic’s business prospects. Apart from aerospace and Building & Construction segments, Arconic Corporation’s other end markets such as Commercial Transportation, Packaging, Industrials and Automotive are likely to improve significantly starting 4Q20. ARNC has ~200k tonnes of idle capacity for which new auto/ packaging contracts are likely over the next 12 months, which could offset negative growth in the aerospace segment.
Valuation
EV/EBITDA Valuation: Arconic Corporation comprises the Global Rolled Products (GRP) segment. We value Arconic Corporation at $21.00 per share (Previously: $10.00 per share) by applying 2021e EV/EBITDA multiple of 7.3x (Previously: 5.2x). The assigned multiple is at ~14% premium to median peer multiple of 6.4x factoring in the Company’s leading position in the midstream aluminum industry with a broad operating footprint and diversified end-market exposure. Furthermore, our EV/EBITDA multiple is at a slight premium to its closest competitors Kaiser Aluminium (7.2x) and Constellium SE (7.2x). We expect 2021 EBITDA of $650 million (Previously: $660 million) for Arconic Corporation factoring in possible spin dis-synergies, net of corporate overheads, and also impact of COVID-19 pandemic. Our fair value is sensitive to change in adjusted EBITDA and EV/EBITDA multiples due to a higher proportion of debt (including pension liabilities). We retain our ‘Buy’ rating on the stock. The stock offers an implied upside of 29.2% from the current market price of $16.25 as on 7/17.
Arconic 2021e EV-EBITDA Spin-Off Research
Our fair value is highly sensitive to changes in adjusted EBITDA and EV/EBITDA multiples due to a higher proportion of debt (including pension liabilities). Our base case intrinsic value is $21.00 per share. If EV/EBITDA multiple is +/- by 0.5, the intrinsic value changes to the tune of $3 per share.
2021 EBITDA Spin-Off Research
Peer Analysis - Arconic Valuation Comparison Spin-Off Research
Company Description
Arconic Corporation
Arconic Corporation comprises the Global Rolled Products (GRP) segment. The segment offers a range of highly-differentiated aluminum sheet, plate, and extruded products for the aerospace, automotive, commercial transportation, brazing, and industrial markets. The Company has invented the industry leads: Kawneer created the first modern storefront more than a century ago, and Reynobond® & Reynolux® products deliver innovative solutions for architectural and retail applications that seamlessly integrate with architectural systems to produce dynamic visual effects. Today, these brands hold leading market positions. The GRP segment recorded revenues of $7.1 billion in FY19.
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37857006fc55956fc869c9de371beb19 | https://www.forbes.com/sites/joecornell/2021/04/20/microsoft-announces-acquisition-of-nuance-targets-completion-in-2021/ | Microsoft Announces Acquisition Of Nuance; Targets Completion In 2021 | Microsoft Announces Acquisition Of Nuance; Targets Completion In 2021
The Nuance Communications Inc. logo on a laptop computer arranged in Dobbs Ferry, New York, U.S., on ... [+] Tuesday, April 13, 2021. Microsoft Corp. is buying speech-recognition pioneer Nuance Communications Inc. in an all-cash deal valued at $19.6 billion, gaining artificial-intelligence technology aimed at helping doctors predict patients’ needs and upgrading hospitals’ digital record-keeping. Photographer: Tiffany Hagler-Geard/Bloomberg © 2021 Bloomberg Finance LP
Deal Overview
On April 12, 2021, Nuance Communications, Inc. NUAN (NASDAQ NDAQ : NUAN, $53.20, Market Capitalization $15.2 billion) announced a definitive agreement with Microsoft MSFT (MSFT) under which Microsoft will acquire Nuance for $56.00 per share, in an all-cash transaction valued at $19.7 billion, inclusive of Nuance’s net debt. The acquisition price represents a 23% premium to Nuance’s closing price of $45.58 as on Apr 9. The transaction has been unanimously approved by the Boards of Directors of both Nuance and Microsoft. The deal is intended to close by the end of this calendar year and is subject to approval by Nuance’s shareholders, the satisfaction of certain regulatory approvals, and other customary closing conditions. Upon closing, Microsoft expects Nuance’s financials to be reported as part of Microsoft’s Intelligent Cloud segment. Microsoft expects the acquisition to be minimally dilutive (less than 1%) in FY22 and to be accretive in FY23 to non-GAAP earnings per share, based on the expected close time frame. The acquisition will not impact the completion of Microsoft’s existing share repurchase authorization (~21 billion remaining). Mark Benjamin will remain CEO of Nuance, reporting to Scott Guthrie, executive vice president of Cloud & AI at Microsoft. Goldman Sachs & Co GS . LLC is acting as an exclusive financial advisor to Microsoft, while Simpson Thacher & Bartlett LLP is acting as its legal advisor. Evercore EVR is acting as an exclusive financial advisor to Nuance, while Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as its legal advisor.
We had dropped coverage on Nuance Communications, Inc. on March 31, 2021 and our last report was published on August 12, 2020.
Nuance Communications Price Performance and Spin-Off Details Spin-Off Research
Deal Rationale
Microsoft has accelerated its efforts to provide industry-specific cloud offerings to support customers and partners as they respond to disruption and new opportunities. These efforts include the Microsoft Cloud for Healthcare, introduced in 2020, which aims to address the comprehensive needs of the rapidly transforming and growing healthcare industry. Microsoft’s acquisition of Nuance builds upon the successful existing partnership between the companies that was announced in October 2019, where the companies had entered into a strategic partnership to help transform healthcare delivery for a more sustainable future. By augmenting the Microsoft Cloud for Healthcare with Nuance’s solutions, as well as the benefit of Nuance’s expertise and relationships with EHR systems providers, Microsoft will be better able to empower healthcare providers through the power of ambient clinical intelligence and other Microsoft cloud services. The acquisition will double Microsoft’s total addressable market (TAM) in the healthcare provider space, bringing the company’s TAM in healthcare to nearly $500 billion. Nuance and Microsoft will deepen their existing commitments to the extended partner ecosystem, as well as the highest standards of data privacy, security and compliance. Nuance is a pioneer and a leading provider of conversational AI and cloud based ambient clinical intelligence for healthcare providers. Nuance’s products, such as the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting, all leading clinical speech recognition SaaS offerings, are built on Microsoft Azure. Nuance’s solutions work seamlessly with core healthcare systems, including longstanding relationships with Electronic Health Records (EHRs), to alleviate the burden of clinical documentation and empower providers to deliver better patient experiences. Nuance solutions are currently used by more than 55% of physicians and 75% of radiologists in the U.S. and used in 77% of U.S. hospitals. Nuance’s Healthcare Cloud revenue experienced 37% year-over year growth in the Nuance’s fiscal year 2020 (ended September 2020). Besides healthcare, Nuance provides AI expertise and customer engagement solutions across Interactive Voice Response (IVR), virtual assistants, and digital and biometric solutions to companies around the world across all industries. This expertise will come together with the breadth and depth of Microsoft’s cloud, including Azure, Teams, and Dynamics365, to deliver next-generation customer engagement and security solutions. Therefore, Nuance’s acquisition represents the latest step in Microsoft’s industry specific cloud strategy.
Microsoft has held talks to acquire a number of large technology companies in the past year. Amazon AMZN , Appl AAPL e, Google and Facebook have been specifically targeted by Congress as abusing market power while Microsoft has avoided the same scrutiny. Microsoft’s CEO, Satya Nadella, had said that the reason why Microsoft has avoided scrutiny is that the company’s approach is purely about platform providers and not just some aggregation play. The Nuance acquisition comes about a month after Microsoft closed its $7.6 billion deal for ZeniMax, the parent company of video game publisher Bethesda.
Since the spin-off of Cerence, Nuance has outperformed S&P 500 by 215% and has been a multi-bagger. Nuance’s outperformance can be attributed to its shift in focus on Healthcare and Enterprise AAXN business since the spin-off and its consistent financial performance over the past two years.
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Key Data and Top 5 Shareholders Spin-Off Research
Company Description
Microsoft Corp
Microsoft is a technology company whose mission is to empower every person and every organization on the planet to achieve more. The company’s platforms and tools help drive small business productivity, large business competitiveness, and public sector efficiency. The company generates revenue by offering a wide range of cloud based and other services to people and businesses, licensing and supporting an array of software products, designing, manufacturing, and selling devices, and delivering relevant online advertising to a global audience. The company reports its financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. For FY20, the company recorded revenues of $ 143.01 billion.
Nuance Communications, Inc.
Nuance Communications, Inc. provides conversational artificial intelligence (AI). The company delivers solutions that understands, analyzes, and responds to people. The company provides healthcare AI solutions and services, omnichannel customer engagement, and Dragon consumer and Enterprise. The company works with various organizations across healthcare, financial services, telecommunications, government, and retail. The company operates through three segments: Healthcare, Enterprise, and Other. Its Healthcare segment is a provider in clinical speech and clinical language understanding solutions. The Enterprise segment is primarily engaged in using speech, natural language understanding, and artificial intelligence to provide automated customer solutions and services for voice, mobile, Web, and messaging channels. For FY20, the company reported revenues of $1.5 billion.
Price Performance vs S&P 500 Spin-Off Research
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a83d3848f9b593148e68082ed38b7dbd | https://www.forbes.com/sites/joeescobedo/2016/12/06/cotton-ons-best-kept-digital-marketing-secrets/ | Cotton On's Best-Kept Digital Marketing Secrets | Cotton On's Best-Kept Digital Marketing Secrets
What if you could pick the brain of the person heading up marketing in Asia for a fashion retailer with over 1,400 stores in 18 countries? I asked several professionals in the marketing and fashion industry that very question. Their queries and Cotton On Group’s Head of Marketing (Asia), Katharina Pohl’s responses are below.
Read more to find out how Pohl has helped Cotton On Group increase online sales by 50% year on year and reach 265,702 Instagram users through an online and offline campaign.
Is e-commerce a priority for the Cotton On Group? Why or why not? - Khyathi Nirmal Kumar
E-commerce is absolutely a key priority for the Cotton On Group.
Since relaunching our e-commerce platform in 2014, online sales have increased 50% year on year. Our existing e-commerce platform in the region currently services Singapore, Malaysia and Hong Kong. To reach more customers in the region’s multi-billion dollar e-commerce market, we have recently partnered with online platform, Zalora.
Traditional media, especially print, is still important in the region, but there seems to be a shift from many companies towards digital. Could you give an example of how you have successfully managed to integrate both offline and online marketing? - Theresa Pragasam-Sidhu
For Chinese New Year in 2016 we developed a campaign in major shopping malls across Singapore and on Instagram. Promoters dressed up as monkeys “going bananas” with our customers who then shared their “Cotton On Monkey Business” on Instagram.
Over the three-week campaign, 1,355 individual posts were uploaded with the #CNYCottonOnSG on Instagram, reaching an estimated 265,702 unique Instagram users.
Cotton On just received two Marketing Events Awards from Marketing Magazine for this campaign: Best Event Retail and Best Marketing Guerrilla Stunt.
Asian consumers have been exposed to multiple sales tactics that seem to use ever lower prices as baits. How does the Cotton On Group build brand loyalty online without resorting to discounts? - Vanessa Seow
We segment our messages per target audience to ensure we communicate with the customer in the right way, showing them products relevant for them. For certain events in the year we create capsule collections for the Asian market such as Ramadan or Chinese New Year. For the year of the monkey, we designed and produced a capsule collection with 140 options, exclusively available in Asia. Some styles sold out within a few days of the launch.
For the Cotton On Group, where would you begin to look at in terms of making improvements in conversion optimization? - Tristan Jinwei Chan
We try to remove anything that could interrupt the flow of the online shopping journey. Enabling multiple payment options is another critical success factor. Enabling this seamless experience requires vigorous A/B split testing, excellent copy and optimized site layout and browser compatibility. Ultimately, it’s all about understanding the customer journey and ensuring that the acquisition channels are driving traffic to the most appropriate pages.
Given the poor retail showing in Singapore’s brick and mortar stores, how can a brand's online presence translate to actual sales to make up for the shortfall in physical sales?
While we are a bricks and mortar retailer, e-commerce plays a critical role in our growth and expansion plans globally. As such, we are heavily invested in growing our online channel. This started with the relaunch in 2014 making it more user-friendly with improved mobile optimization, easier navigation and a more streamlined transaction process. The relaunch has been well received by our customers with online sales up 50% year on year.
Do you use tools like Google Analytics to gather customer insights? If so, how do you use this data in your marketing?
One of our focus is on understanding the mix between marketing channels and how they contribute to the overall conversion rate like key times of day and certain days of week on which we can maximize our conversion rate. We are looking into the behavior of new vs. returning customers, use search traffic information and overlay this with paid search activity.
One of our findings is that through paid search activities new customers convert at a slightly lower conversion rate and lower average order value than returning customers. In order to drive acquisition of customers through free activities and email channels, we normally exclude returning customers as well as customers who have previously engaged with us via email, through the use of segmented lists and via exclusion matching when applying paid search actions.
Furthermore, we are customizing our messaging by building audience types and are monitoring the audience behavior by device, including cross-device tracking. The goal is a seamless customer journey across channels that is on brand and will maximize the shopping experience, irrespectively on where this begins – mobile, desktop, tablet or in-store.
What has been your most effective digital marketing campaign? What made it so effective? - Rachel Ji
Overall organic search is our most successful activity and main priority due to the cost effectiveness in driving volume at scale. With regards to paid campaigns, we see the role of each channel is as per the following:
Paid search drives the strongest ROI based on user intent and strong sales messaging; Social activity drives activity to scale and low cost per impression rates to build brand awareness and consideration; Dynamic display is used to re-target customers who have already shown an affinity with the brand; Affiliate activity through Big Sala Malaysia, Shopback SG, and Cuponation Singapore drives brand awareness and acquisition with the price savvy shopper.
What digital marketing metrics do you use to measure success?
We primarily look at revenue, cost per acquisition, cost per click and cost per 1,000 impressions.
What do the next 5 years look like for Cotton On?
We believe the biggest opportunity for growth lies in our 17 international markets which together are almost as large as our Australian business which has been around for 25 years.
We are aiming to grow our global store footprint to well over 2,000 retail premises and drive online sales at +50% p.a., over the next three years. We see huge potential in Southeast Asia and have identified the region as an important part of our growth and expansion plans in the coming years.
We are still opening new stores in Malaysia and Thailand this year and have a number of locations in the pipeline for 2017.
Want more digital marketing and PR tips? Then follow me on LinkedIn and Twitter (@RealJoeEscobedo).
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d9ba52f7e005560bcce2a9c08b062fe7 | https://www.forbes.com/sites/joeescobedo/2017/07/01/meet-the-man-behind-hollywood-and-fortune-500-firms-transmedia-success/ | Transmedia Will Shape The Future Of Hollywood And Fortune 500 Firms | Transmedia Will Shape The Future Of Hollywood And Fortune 500 Firms
Jeff Gomez, founder of digital production company Starlight Runner Jeff Gomez
Can Jeff Gomez predict the future of media? The founder of digital production company Starlight Runner, who has worked with blockbuster films including Avatar and major brands such as Coca-Cola, is also a pioneer of transmedia storytelling.
“Transmedia storytelling is the process of telling stories across multiple platforms,” Gomez explains.
How can you use it to develop brand “story worlds” like Disney and Apple? .
Every Story Has Multiple Elements
Mega-productions like Disney’s Star Wars or the Marvel Cinematic Universe extend across movies, network TV, Netflix, comics and videogames.
Star Wars Disney transmedia Starlight Runner
According to Gomez, the secret to successful transmedia has less to do with understanding media technology and more to do with the impact of storytelling on each platform.
Gomez explains: “The first step is to break a story into its parts. This process involves determining themes (the core messages), archetypes (the qualities of the characters) and aspirational drivers (how the narrative sparks our innermost desires) in the story.
Other elements of successful transmedia narratives, according to Gomez, include stories with lots of characters, each of whom has a past, a rich life that extends beyond the borders of the screen.
Gomez says: “The world of the story needs to be highly detailed, conveying a sense of reality. No matter how complex, you need to communicate aspirational themes because we’re not likely to follow negative transmedia. And the producers of good transmedia have to validate and celebrate fan participation. I don’t mean they necessarily direct the story, but they need to feel heard.”
“In addition to being great storytellers, creators like Lucas, Tolkien and Rowling imagined entire cosmologies,” says Gomez. “They built alien cultures and convincing systems of magic. They placed their characters within the context of greater histories. Think of how we all asked ourselves what the Clone Wars was like back in 1977. Or was Darth Vader really Luke’s father in 1980? Transmedia storytellers set up mysteries and invite us to fill in the blanks,” says Gomez.
Transmedia Storytelling In Asia
It was inevitable that Asia would take an interest in transmedia, where early adopters like the Hong Kong Design Institute and Singapore Media Academy hold courses and seminars on transmedia storytelling.
Marco Sparmberg, Social Media Lead at Mediacorp, has been spreading the transmedia gospel across the network’s platforms since 2014. The Mediacorp TV series, The Dream Makers II (2016), proved Sparmberg’s point, boasting two web series spin-offs, online games and a social media campaign, resulting in 100 million impressions, breaking the network’s online viewership and participation records.
In India, Shobu Yarlagadda, CEO of Arka MediaWorks, announced a transmedia plan surrounding his epic Baahubali film series—a first for Bollywood. Fans can get the back stories of their favorite characters in graphic novels, explore distant parts of the story world in mobile games and purchase jewelry and other items featured in the films through an extensive licensing and merchandising program.
Models showcase a collection inspired by the upcoming Hindi film 'Baahubali 2' in Mumbai on April 7,... [+] 2017. (AFP/Getty Images)
In China, where transmedia extensions of homegrown properties are also still a rarity, Yang Zhenjian of Zhenjian Film Studio in Beijing is exploring a similar program surrounding the 2018 release of their $100 million fantasy movie Asura.
“Projects like these are becoming too expensive to be one-offs. They need to succeed as brands and that means that the audience has to be enticed to keep revisiting the story world,” said Isaac Wu of 62 Brands, a Beijing-based licensing agency. “Baahubali and Asura are wise to pursue transmedia because the technique offers expansion and exploration of these properties, rather than repetition.”
Successful transmedia storytelling often comes from listening to audiences. For example, when overcrowding at the South by Southwest Festival in Austin, Texas led to a hotel room shortage, Casper, a $13 million Series A startup mattress company, teamed up with the Standard Hotel to furnish dozens of extra mattresses and provide a unique evening “experience” for the weary crowds.
Complemented by traditional advertising and transmedia extensions such as 8-minute power naps, and “milk and cookie sessions” elsewhere across the festival, the personal and intimate interaction generated so much buzz that Casper is now well on its way to becoming a nationally recognized brand.
There is the Matter of the Truth
But as with all things that sound too good to be true, there are clouds on the transmedia horizon. Even Gomez anticipated a few in his TEDx talk in 2010. The big question is, “Can transmedia storytelling be used to obscure the truth?”
“I became worried when I learned about hikikomori and saw rising levels of isolation and depression among Japan’s young adults, who holed up in their parents’ homes and lost themselves in these pop culture fictional worlds,” says Gomez. “Even more alarming was how the Putin regime was purposefully pummeling the Russian people with an array of conflicting, often baffling stories, eventually causing everyone to just throw their hands up and give into authoritarianism,” he adds.
Now Gomez has devised a new narrative model that explains the chaotically orchestrated narratives used by Putin and more recently the Trump administration. But he also suggests that the model can be used to create more compelling content, while engaging audiences in more genuine ways. He calls this model the Collective Journey.
More on Forbes: Is Transmedia Storytelling The Future Of Recruiting?
The Collective Journey Model
The Collective Journey, as observed by Gomez, is an evolution of the Joseph Campbell Hero’s Journey model, which has been the narrative standard behind most every television show, movie, novel, and game for the past century.
Gomez believes that Collective Journey stories have given rise to remarkable—some say unexplainable and even frightening—developments in consumer behavior , media, politics, and world events.
“In the past few years, in both pop culture and in the real world, stories have become less about the single, often male hero saving the day for the helpless community and more about how we have become capable of taking our salvation into our own hands,” says Gomez. “My company began to notice how quickly stories have begun to move across social media and how much efficacy was now in the hands of the audience. Some of our clients were concerned because they were losing control of the narrative. Others wanted to understand how the sharing of stories was precipitating outlier events such as the Arab Spring, the rapid rise of ISIS, Brexit and Trump.”
The key to telling a Collective Journey story starts with listening. Millennials (people under 40) and Plurals (people under 20), Gomez says, now expect to be heard and acknowledged.
“The process involves deriving insights from social media and direct consumer feedback. We’re not as interested in the metrics as we are in the emotions. We examine the language they use in their interactions with, complaints about or advocacy of the brand,” Gomez says.
“ Today’s audiences don’t just want you to poll them or treat them like rating points or consumer dollars. They want you to take their language and integrate it into your story. They want you to understand what they like about you and what turns them off and then see that reflected in your product as quickly as possible. If you don’t evidence the fact that you’re intensely listening to them, they will call you on it and leave you for a company that does.”
Gomez cites the work that Salesforce is doing with its Social Studio as an example of tools being developed to elicit stronger, more specific and immediate consumer stories from social media and the blogosphere.
According to Gomez, consumers are no longer “individuals” on social media, but instead are projecting multiple iterations of themselves across a number of different social platforms, 24-hours a day.
So, if you fire up a fairly active young adult, they may be taking your content, modifying it with an endorsement or condemnation, and passing it on not just to multiple people but to multiple communities. This can compound into hundreds or thousands of people, any number of whom may decide to pass it on to their own circles and so on.
Gomez calls this Superpositioning, where instead of a funny meme that eventually burns itself out, people are (consciously or not) leveraging their multiple online selves to generate powerful waves of influence.
With a combination of authenticity and listening, savvy companies can promote this behavior. “If your story is well-crafted—truly keyed in to the audience’s emotions—and if your story is accompanied by technology and services that allow for the audience to express themselves and act on what they learn, then you can ultimately trigger a movement,” Gomez says. “Movements are what push concepts and ideas over the tipping point into reality.”
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b604123d53659063b9747e526bdf831a | https://www.forbes.com/sites/joeescobedo/2017/07/17/how-to-create-valuable-content-with-a-strong-voice-tips-from-shopify-buzzsumo-twg-tea/ | How To Create Valuable Content With A Strong Voice: Tips From Shopify, BuzzSumo & TWG Tea | How To Create Valuable Content With A Strong Voice: Tips From Shopify, BuzzSumo & TWG Tea
Your content looks and sounds like everyone else's. You’re struggling to stand out in a market where everyone and their grandma are producing content.
Sound familiar?
Don’t worry. You’re not alone. Many of the brands I advise face similar content marketing challenges.
So why are some brands better at content marketing than others? The answer is simple. They provide an insane amount of value to their audience and have their own unique voice.
Do you want to give your audience so much valuable content they’ll be begging for more? Want to create a voice so strong it’ll set you apart from the pack?
If yes, then keep on reading as BuzzSumo, Shopify, TWG Tea and some of the world’s best content marketers share their tips for creating valuable content with a strong voice.
Determine what is valuable content
The word “valuable” is subjective. What is valuable content to your internal stakeholders isn’t always valuable to your audience?
Matt Carter provides a visual of what you need to keep in mind when planning your content.
Content Marketing Venn Diagram Matt Carter
Note that while the top two circles are important from your audience’s point-of-view, you also need to tie your content back to what you sell. At the end of the day, you’re a business, not a non-profit.
So how can you determine what kind of content is valuable to your audience?
Use tools to find out what topics interest your audience
“Do research on questions your audience has and the problems they are having in their industry prior to writing,” says Aaron Agius, Managing Director at Louder.Online. “This way you know they will be eagerly awaiting your content and it takes the guess work out of it.”
Agius recommends two tools to identify the most commonly asked questions your audience may have about a particular topic: Answer The Public and BloomBerry.
Aaron Orendorff, content marketer at Shopify Plus suggests you conduct shallow quantitative research like, “What does Buzzsumo say are the most-shared topics on the sites they already love?” to deep qualitative research like, “What are people loving and hating in their reviews and comments on Amazon and YouTube?” That way, “you can actually crawl inside their heads.”
Speaking of Buzzsumo, their team knows exactly what their audience wants and gives them what they need. I asked Steve Rayson, Director at BuzzSumo to share how they create valuable content.
Rayson says, ask yourself: “Is your content better than anything else on the topic?”
According to Rayson, you need to offer something unique and valuable to ensure your readers benefit from investing time with your content. What will they learn that they didn’t know before or what can they apply?
Rayson suggests you could provide new insights from research or a case study; or curate a comprehensive list or guide. BuzzSumo is notorious for this. An example being their recent blog post: How We Went Viral: Lessons in Promoting Content with Influencers, Ads and PR. Within 24 hours, the article had been shared over 500 times on social media.
Rayson also suggests that you should promote your content by focusing on the benefits for the reader. For example, your headline could refer to new research insights mentioned in your article.
It’s clear that providing value doesn’t stop after you’ve created a piece of content, you need to convey how your audience will benefit during the promotion process.
For other brands, the content creation process is not usually about solving a problem, meeting needs or researching what your audience is looking for, explains Maranda Barnes, Director of Corporate Communications & Business Development, Co-Founder of TWG Tea. “Rather, the goal is to make customers long for something they didn’t even know they wanted. For us, we took a mundane product and made it precious, reaching back into historic traditions while creating content that is modern.”
TWG's Orchid Design Teapot campaign TWG Tea
Now that you know how to fill your audience’s life with value, how do you develop a strong, unique voice?
Give your brand a name and personality
A wise man once told me, if you can replace the logo on your content with someone else’s then you don’t have a strong, distinct voice. And if you don’t have a unique voice, you’re going to drown in the content sea.
So how can you convey a strong voice? Pretend your brand is a person. Give it a name. Let’s say, Jenny. Then ask yourself: “What is Jenny’s personality?” Is she cynical? Is she cheery?
Now that you’ve selected Jenny’s personality, it’s time to write as Jenny would - not a big, faceless brand. By doing so, you’ll instantly set yourself apart from the slew of robotic voices. Because at the end of the day, who is your audience more likely to trust and buy from - Brand X or Jenny?
Then there's the importance of localization and relevance as Venus Hew, senior journalist at Marketing Magazine points out. After you decide where your customers are located and which platforms they use, then you can give your audience simple localized messaging and offers.
Daniel Wallock sums it up from an audience’s perspective: “Be human. Your writing should sound like you’re speaking to us. Be quick. Be entertaining. Don't be afraid to show off your personality and make funny cultural references! We want to know the writer is human so show us! Just including these little references and telling statements about what you like will help build trust and keep us reading!”
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1291fc815f5226665aa3edbd50e0bd99 | https://www.forbes.com/sites/joefolkman/2013/12/19/the-best-gift-leaders-can-give-honest-feedback/ | The Best Gift Leaders Can Give: Honest Feedback | The Best Gift Leaders Can Give: Honest Feedback
Recently I was speaking to a large group of leaders and asked them the following question: How many of you would like your manager to tell you what you want you want to hear rather than what you need to hear? Not one person raised their hand. Everyone wants to know the truth, no matter how difficult it is to hear. But even though we want to hear honest and direct feedback, we generally don’t look on those occasions with much joy or pleasure.
Most people can come up with several traumatic stories from their pasts where they have given or received negative feedback. These negative experiences embed themselves into our psyche and become a source of anxiety. On the other hand, most people can also come up with an experience where a person gave them helpful feedback that contributed to a marked improvement in their effectiveness and influenced their success. I have always tried to help people see that whether the feedback is critical or positive it is a gift.
Strong employee engagement is closely aligned with the ability to give honest feedback in a helpful way. A recent study of 22,719 leaders showed that those who ranked at the bottom 10% in their ability to give honest feedback to direct reports received engagement scores from their subordinates that averaged 25 percent. It is quite obvious that these employees detested their jobs, their commitment was low and they regularly thought about quitting. In contrast, those in the top 10% for giving honest feedback had subordinates who ranked at the 77th percentile in engagement.
Giving honest feedback is a fantastic gift, but apparently people only experience it as a gift when it is delivered well. Giving honest feedback poorly, will, for most people, be viewed as a punishment—not a gift.
The Best Gift You Can Receive
The vast majority of people assume that when their Boss wants to “talk” it is negative or corrective feedback they’ll hear. In fact, this negative assumption about feedback causes many people to avoid feedback all together. Strangely enough, “feedback phobia” isn’t limited to people who have had a boss who predominantly criticized them. Nor is it limited to people who are generally insecure about their performance. It is widespread.
The advantage of receiving ongoing feedback is much like the advantage you gain from a GPS device as opposed to a paper map. Both provide directions about where you want to go. The GPS, however, provides the directions in the context of an accurate assessment of where you currently are.
In our research from more than a decade we continue to find that leaders who ask for feedback are substantially more effective than leaders who don’t. In a recent study of 51,896 leaders we discovered that those who ranked at the bottom 10% in asking for feedback were rated at the 15th percentile in overall leadership effectiveness. On the other hand, leaders who ranked at the top 10% in asking for feedback were rated, on average, at the 86th percentile in effectiveness. It appears that being open and willing to receive feedback from others is an essential skill for effective leaders.
What is your attitude and how skillful are you at receiving both positive and negative feedback? The best leaders appear to ask more people for feedback and they ask for feedback more often. Rather than being fearful of feedback, they are comfortable receiving information about their behavior from their bosses, their colleagues and their subordinates.
Situation 2: The Benefits of Giving Feedback
What is your attitude and how skillful are you at giving both positive and negative feedback?
The ability to give and receive feedback is one of the most important leadership skills. To that end, we have developed a feedback self-assessment that can measure your preference and desire for giving and receiving positive and negative feedback. In addition, we will assess your overall feelings of self-confidence, as it is a trait that correlates strongly with the desire to give and receive feedback.
Most people are not surprised by the results of this test. The assessment makes the impressions you have about yourself very clear. Gaining a grounded impression will often give people the motivation to change, as the assessment is an effective measure of a person’s aptitude and desire, but not necessarily of their performance or capability.
I invite you to take the self-assessment for yourself and share the results and insights you gain in the comment section below. Click HERE to take the Feedback Assessment. Remember that feedback given in a helpful way is a valuable gift, and it’s the ideal time of year to be giving.
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0af95ae847864bbca8c7e0b38148ba0f | https://www.forbes.com/sites/joefolkman/2014/03/06/seventy-percent-of-workers-not-engaged-what-about-the-managers/ | 70% Of Workers Aren't Engaged -- What About The Managers? | 70% Of Workers Aren't Engaged -- What About The Managers?
We recently read Gallup’s 2013 report on employee engagement, which reports that seven out of 10 workers in America are either actively disengaged or not engaged in their work. It triggered several questions, and one of the most basic is this: "Are we turning the spotlight on the right people?”
As an aside, we confess some deep-seated skepticism about this number. That stems from the fact that our own data on employee engagement diverge significantly from those of Gallup. Our numbers suggest that there are roughly twice as many engaged employees. Secondly, all HR executives with whom we talk believe they have evidence that far more than 30% of their workforce is engaged. Finally, our personal experience with a wide variety of workers does not support this dismal view of the American workforce. But let’s put aside the debate about the exact number of engaged employees or engaged managers and use the Gallup data to focus on the most important issues.
Place the responsibility where it belongs
The headline of the main body of the report reads: “U.S. WORKFORCE ENGAGEMENT STAGNANT: HOLDING BACK ECONOMY.” This implies that the fault is largely with the employee group, putting the blame on them for being a giant barnacle on the hull of the ship of our overall economy. We think this is misplaced blame. According to the report itself, here are the facts. In the year 2012, the engagement level of both professional workers and clerical and office workers was 30%. Service workers and government workers were just slightly lower at 29%. But here’s the key statistic that seems to be glossed over. Managers, executives and officials in these firms had an engagement level of (a drumroll please) 36%. Thirty-six percent! Imagine that, they are a whole 6% higher than the workforce. And this was a big jump.
Four years earlier, the managers, executives and officials’ engagement level was at 26%.
The problem becomes clearer. The people who are supposed to be leading the organization up the hill to conquer its competitors are just slightly more engaged than the soldiers. The leaders are the ones who should be providing the vision, direction, enthusiasm, commitment and passion for the work of the organization, but they are on average only 6% more engaged than those they are leading.
In Gallup’s defense, they state in this report: “Gallup’s research has found that managers are primarily responsible for their employees’ engagement levels. Organizations should coach managers to take an active role in building engagement plans with their employees, hold managers accountable, track their progress, and ensure they continuously focus on emotionally engaging their employees.” Yet, despite this disclaimer, the thrust of the report is all about the employees’ lack of engagement. Nothing is said about the fact that employee engagement is a close mirror of managerial, executive and company officials’ engagement.
Focus Engagement Improvement Efforts on Leaders
Workers follow the lead from the person above them. Effective leaders produce engaged employees. The chart below clearly shows the impact of leaders on employee engagement. Leaders don’t create high-performance teams primarily by recruiting only the most engaged employees. They take a variety of teams and individuals, and in short order, through their leadership efforts, they create highly engaged and productive groups. Broad-scale programs targeted toward the employees would appear to be a waste of time if the managers don’t provide appropriate leadership for them.
Everyone appears to agree that the primary problem of engagement is a management one, not a working one. If there is an employee engagement problem, it lies squarely at the feet of the managers and the organization that tolerates ineffective managers.
Replace or develop leaders?
So how does that problem get fixed? Here there are very different proposals for the optimum solution. Gallup’s recommended solution is to improve selection:
“Select the right managers. Whether hiring from the outside or promoting from within, organizations that scientifically select managers for the unique talents it takes to effectively manage people greatly increase the odds of engaging their employees.”
We question whether most organizations will replace their managers with a new set of leaders who are believed to have this talent. They will, instead, choose to help each leader use a natural and comfortable approach to inspiring and motivating subordinates. For some, this may be creating a clear vision. For others, it will be a relentless drive for results. For others, it will be extremely principled behavior, while others will respond to a leader who engages and listens to employees. For others, it may be their highly enthusiastic approach to the projects at hand. Varying approaches work. These are skills that can be developed. Leaders can learn to inspire subordinates and we contend that these are learnable skills, not inborn talents. Replacing managers is far more costly than developing the ones already in place.
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a0f32df953064a46bb3420b836600a84 | https://www.forbes.com/sites/joefolkman/2014/04/02/mood-and-engagement-are-contagious/ | Mood And Engagement Are Contagious | Mood And Engagement Are Contagious
I used to think that my attitude and engagement affected me, but not other people. I could come to work in a bad mood or frustrated with work and if I did not tell anybody, no one would know. In my experience, most people suppose that employees are simply required to perform their job well and not make any big mistakes. Some might say, “It’s not my employer’s business whether I am enthused and happy or depressed and despondent, as long as I do my job.” In many ways I thought my emotions were locked up inside. However, the evidence is compelling that emotions are as contagious as a cold or the flu. They spread freely to others in an organization.
Mood is Contagious
While it is true that job performance is important, there is a compelling body of research to show the ways a person’s mood impacts those around them. In a recent study by Fowler and Christakis, researchers looked at the impact of happiness or sadness on friends. They constructed a social network by connecting one friend to another friend and then measured the happiness or sadness of each person in the network. They found that:
If you have a friend that is happy, the probability that you will be happier goes up by 25%. Happy friends cluster together, sad friends cluster together.
The problem with a person who lacks energy and enthusiasm is that their mood impacts others. They can bring others down or pick them up. Most people who are sick work hard not to spread their germs and infect others. But moods are even more infectious than germs.
My own experience shows this is true. A few years ago I was scheduled for a meeting with a CEO. The group I was working with came in early to plan our presentation. After we started our meeting someone came to the door and announced that our meeting with the CEO had been canceled. I asked why. The answer was, “It’s not a good day!” I said, “how do you know?”, to which he replied, “everybody knows!”
Engagement is Contagious
Recently, I did some research where I looked at the level of engagement of leaders and compared it to the level of engagement of their direct reports. Intuitively one would assume that if my boss is unengaged it does not necessarily mean my own disengagement would follow. But it turns out that 38% of leaders in the bottom quartile for personal engagement have direct report groups who are also in the bottom quartile.
Thirty-six percent of leaders in the top quartile have direct report groups who are in the top quartile as well. It’s not a surprise that the attitude of a boss impacts my attitude in the same way I am influenced by the happiness of my friends.
Leaders’ Moods and Engagement are Highly Contagious
So let’s look at this fact from a leadership perspective. What we know about leaders is that on the whole they have far more influence on the moods of others than friends. When we looked at leaders who were uninspiring and who have Fatal Flaws, we found that employees who worked for them were only at the 9th percentile in terms of satisfaction and commitment. This basically means that they hated their jobs and were constantly frustrated at work. We also found that 51% of the people in that group were thinking of quitting.
Every Interaction Counts
Since doing this research, I have begun thinking about the fact that every interaction I have with other people can be inspiring and building, or discouraging and frustrating. We can build others up or tear them down. Many people have the impression that most of their interactions with others don’t really count, or that they are neutral. They believe there are a few times that something they say is important, and they only need to be on the top of their game for the special occasions that count. The more I look at the data and my own interactions with others, the more I am convinced that everything counts, and those neutral interactions actually negative impact results.
Leaders need to be aware that every interaction can make a difference, every meeting can be inspiring, and every discussion can create a stronger commitment. When leaders understand this, they start to take advantage of every interaction. They look for ways to encourage, support, build and inspire. They become aware of the mood they bring to the office and the implications of being discouraged, angry or tired. They understand they have tremendous influence with other people and that every interaction counts.
How is Your Mood Impacting Your Employees?
Do you have examples of how your mood has affected your employees? Or maybe a leader has affected your mood? Do you agree/disagree? Feel free to join the discussion on Twitter, Facebook, or LinkedIn.
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ae42b1261d54425170c219814cf47c83 | https://www.forbes.com/sites/joefolkman/2014/04/22/8-ways-to-ensure-your-vision-is-valued/ | 8 Ways To Ensure Your Vision Is Valued | 8 Ways To Ensure Your Vision Is Valued
Sarah was working at home in the evening. A friend of her husband came by to visit. As he visited with her husband he looked over at Sarah who was intently focused on her work. The friend wondered what Sarah was doing that drew her complete attention and asked, “For heaven’s sake, what are you doing working so hard this late in the evening?” Sarah looked up, a bit annoyed, and said, “I’m trying to cure cancer!” Sarah is not a cell and molecular biologist, she is an HR executive--but she saw a clear connection between the work that she was doing and the strategy and vision of the company.
Are your employees like Sarah? Are they helping to cure cancer or are they doing meaningless busywork because they see no connection to their work and the vision of the company? Our research shows there is a substantial positive impact to an organization when employees can see how their work contributes to the company’s vision.
We studied the impact of having a meaningful vision on the engagement of employees. The graph below provides some interesting insights. Employees who don’t find their company’s vision meaningful at all have average engagement scores of only 16 percent. These are employees who do not care about the future success of the organization. They work primarily for a paycheck and are willing to do very little beyond what is absolutely required to keep their jobs. Those who find their organizations’ vision meaningful have engagement levels that are 18 percentile points above average.
Making the Vision More the Words on Paper
We looked at data from over 50,000 employees to understand the key factors that made a vision more meaningful. In our research we found eight elements that are significant as follows:
1. The Vision is Inspiring and Motivating
Read any vision statement and ask yourself, “Is that inspiring to the employees?” It is not hard to tell. I believe the best vision statements will be inspiring to both investors and internal stakeholders. Effective vision statements tell a story of the benefit the organization creates, the impact the products and services have on others, and the kind of organization that is required to create that value.
2. Employees Engagement and Satisfaction is High
We found in our research that engaged employees are more likely to agree on the vision. We are not sure which comes first—the engagement or the agreement--but both sides create movement, we have found. Clearly, creating a vision that employees accept and value creates engagement, and engaged employees are more likely to resonate with the vision rather than fight against it.
3. The Vision is Communicated through Multiple Channels
In many organizations, the vision is not communicated often enough or through sufficient channels to stay present and familiar to employees. There appears to be a prevalent debate about who has the job of communicating the vision. Many believe it is the CEO’s job. But in the best organizations it clear that every leader and every function sees it as their responsibility to “own” and communicate the vision. When the communication comes from all leaders and from a variety of, the possibility of having the vision then embraced and executed increases substantially.
4. Innovation is used to Create Improvement
Excellent visions are aspirational and future-focused. When people feel the organization is stuck in the past and unable to marshal the fresh energy it requires to move into a new future they have a hard time taking the vision to heart. Employees need to see that the organization is capable of world-class innovation.
5. Managers’ Words Lead to Action
In organizations where words are rarely acted upon, vision statements become meaningless words with no reality attached. Employees need to have faith that the future reality described in the vision statement can be real.
6. Leaders are Open and Honest
When there is little trust in leaders and a feeling that leaders communicate only in sound bites designed to manipulate goodwill, the vision ends up being regarded as meaningless PR. Leaders need to be trustworthy and to demonstrate that they are willing to speak the truth. One of the key ways leaders can build this trust is by sharing the bad news along with the good when difficulties occur.
7. The Company is Quick to Respond
Because the vision is future-focused, employees need to feel the organization is agile, nimble and able to make changes quickly. If people doubt that desired change can come quickly, they are unlikely to embrace the vision.
8. People can see the “Greater Good” the Vision Creates
I think in our hearts we all want to be good guys. Employees want to be part of something that creates positive outcomes, that cares for the environment, that helps people succeed and that brings “Good things to Life.” In our vision, we need to highlight the positive “third tier” outcomes our organization creates. For example, a few years ago I worked for an organization that had a significant carbon footprint, but the company also made the effort to plant many trees. I found the employees tended to welcome the positive focus on a better future. The company’s effort to replenish the resources it had taken helped them to focus more of their attention on the trees than the carbon, which was highly beneficial in helping them to stay more fully engaged.
The Bottom Line
Does your company vision create highly motivated and strongly committed employees? The reality is that most of us could do more not only to improve our vision and but also to improve the way we communicate our vision to employees. And while some may say, “Yes, this is advice is important for the CEO,” I would maintain this is a focus that is important for all. When you go to lunch with your colleagues, can you describe the vision of your organization in a way that creates engagement for others? Can you translate your company’s vision into a corresponding vision for your immediate group that leaves them inspired? Your future success may depend on it.
To learn more about motivating employees attend my webinar, 7 Ways To Increase Employee Satisfaction Without Giving a Raise, tomorrow at 1pm EST. Join the discussion below or on my Facebook, Twitter, or LinkedIn.
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7d4bc868b3894c8cfe9ce855dfc66c70 | https://www.forbes.com/sites/joefolkman/2015/02/19/5-business-payoffs-for-being-an-effective-coach/ | 5 Business Payoffs For Being An Effective Coach | 5 Business Payoffs For Being An Effective Coach
As I look over the landscape of leadership development, here’s my conclusion: nothing much is new in the way of leadership principles. There are new tactics, but not many new principles. A good friend of mine used to say, it’s like “Old wine and new bottles.” And despite the sizable amount of research that exists on the tactics to improve leadership effectiveness, there are still many leaders who don’t feel compelled to learn.
This reminds me of a county agent who went out to a farmer to invite him to attend some classes on better farming techniques. He gave the farmer the times and place and said, “Will I see you there? “
“ Nope,” said the farmer.
“Well, why not,” asked the county agent.
“Well, you see,” said the farmer, “I’m not half as good a farmer as I know how to be. So why should I learn anything more? “
This describes us all to a large degree. We’ve been talking about the advantages of employee involvement and participation for decades, yet sizable portions of our leaders don’t follow through. Why should they be interested? From our research, here are at least a few of the payoffs feedback and coaching can bring.
Improved Employee Productivity
Zenger Folkman did a study with 1,884 leaders in a large energy organization. We had bosses, peers, direct reports, and others evaluate their leadership and coaching skills. One important attribute we find among employees who have great leaders is their “willingness to go the extra mile.” We also found a direct correlation between leaders’ coaching effectiveness and team productivity. As you can see in the graph below, better coaches have three times as many people who are willing to go the extra mile.
Greater Employee Engagement
In the same study, we found that employees were not only more productive, but good coaching also increased their engagement. Leaders in the 90th percentile for coaching effectiveness had employee commitment scores in the 88th percentile. But leaders in the 10th percentile for coaching had employees at the 15th percentile for commitment. Correlation is not always causality, but this is impressive data.
Improved Retention
Who likes trying to find new talented employees and get them up to speed? The loss of time and money spent on new hires causes harm. Our research is clear about the effect good coaches have on retaining employees. More than 60% of employees who report to managers who are not good coaches are thinking about quitting, versus 22% who report to the best. As we looked, we found the data differed slightly from company to company, but the pattern is consistent.
Employee Development
Employees who receive coaching and feedback feel they are given real opportunities to grow and improve. They want opportunities that will challenge them and coaching that will guide their success. Employee development is clearly related to retention, commitment, and satisfaction. Besides, it’s the right thing to do.
Supervisor Performance
From my experience, I have found that most people want to be liked. This study also shows that employees who received coaching and feedback rated their supervisors more positively as well. A boss who takes a little time out of their busy schedule to have a coaching discussion can greatly increase the positive relationships both ways.
Are you interested in improving your coaching effectiveness? Don’t be the farmer that knows he could be better, but doesn’t want to learn more. The first step is to evaluate yourself and then ask for some honest feedback. You have much to gain in the process, and nothing to lose.
To learn more attend our webinar, Dramatically Improve Your Organization By Training Managers to Coach and Give Feedback, by registering HERE.
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b294829093d4a8534e5226055665817a | https://www.forbes.com/sites/joefolkman/2015/10/28/would-your-boss-throw-you-under-the-bus-8-side-effects-of-irresponsible-managers/ | Would Your Boss Throw You Under The Bus? 8 Side Effects Of Irresponsible Managers | Would Your Boss Throw You Under The Bus? 8 Side Effects Of Irresponsible Managers
Several years ago I was having a one-on-one conversation with a leader in an oil and gas company. He seemed discouraged and I asked him what was going on. He said, “A few weeks ago I was invited to go to a meeting with our new CEO to present a proposal. I had frequent conversations with my boss about the proposal and I knew my boss was in full agreement. When the CEO heard my proposal he reacted negatively and even said some disparaging things about me. My boss who had worked with me to create the proposal and was in full agreement said nothing. I have never felt more embarrassed and alone. My boss threw me under the bus and then left me there bleeding. He did not say a word and he has not said anything since.”
Has a boss who wasn’t willing to accept responsibility ever thrown you under the bus? On the other hand, what success do bosses have who are willing to assume responsibility when things go wrong? When we look at innovative managers who rate highly in this area, the expression direct reports use over and over again is, “This person has my back.” When things go wrong they stand and say, “I am responsible! If you’re looking for someone to blame, it’s me.” This kind of behavior created highly innovative organizations and extremely satisfied employees because everyone was willing to take risks.
I was interested in the fallout from managers who act irresponsibly. To understand this issue I looked at assessments from more than 5,000 people on 339 managers. Two items measured the extent to which a manager was responsible:
Takes responsibility for problems and mistakes and encourages others to do the same. Takes responsibility and owns decisions that are made (whether mine or others).
To understand the impact of irresponsibility we looked at those who receive negative, low, average, good and top quartile ratings on responsibility. We then looked at overall leadership effectiveness and employee engagement. As the graph below clearly demonstrates, leaders who act irresponsibly are rated as very ineffective (5th percentile) and their direct reports have low levels of engagement (17th percentile). Looking further into the data on engagement we found that 59% of direct reports who worked for an irresponsible manager were thinking about leaving the company.
Negative Side Effects of Irresponsibility
Irresponsible managers who resist taking responsibility assume they are dodging a bullet. As my colleague Jack Zenger and I looked at the data it is clear they dodged nothing. In our opinion, the potential negative effects of taking responsibility would be far fewer than the negative effects that result from taking the blame. To understand these negative effects more fully I looked at leaders who scored poorly on responsibility and at the items rated lowest. They were clustered into the following eight themes.
1. Uninspiring
It’s one thing to not be very good at motivating employees, but in this case, managers created negative motivation. The employee felt so abused they were motivated to sabotage. Some felt they’d been taken advantage of and were looking revenge while others (and this is much more common) take out their revenge by doing as little as possible.
2. Lack of Personal Integrity
Irresponsible managers are not seen as honoring commitments or keeping promises. Direct reports question whether they speak the truth and feel these managers can’t be trusted. Often the irresponsible manager will be seen as taking credit for the accomplishments of others. While they resist taking responsibility for problems when successes occur they step in and take credit.
3.Hordes Information
Some people feel that information is power and that holding onto information puts them in a position of superiority above others. Whatever the motivation, the irresponsible managers were viewed as hoarding information.
4. Lack of Vision
The irresponsible manager was seen as having little vision or strategic perspective. Perhaps it is because their focus was not on the organization and its strategy but was self-centered on how they could survive.
5. Lack of Humility – No need for personal improvement
Some people believe that admitting a need for personal improvement makes a person look incompetent. They believe that asking others for feedback is a sign of weakness. Their personal insecurity about their competency keeps irresponsible leaders from asking for or accepting feedback and therefore they never learn about their strengths or weaknesses. Leaders who were most effective were most open and interested in feedback on their performance.
6. Low Effort
Often the irresponsible leaders were looking for the easy way out that would not put them in a position that required more work.
7. No Concern for Others
The bottom line here is that irresponsible managers show very little concern or consideration for others. Their focus is on themselves.
8. Untrustworthy
When I was young my uncle taught me how to catch the horses in a field. We would take a bucket with grain at the bottom. We would come to the edge of the field and shake the bucket. The horses were curious and would come to find the grain in the bucket and we’d put a rope around their necks as they were eating the grain. Once when I went to catch the horses I remembered the bucket but forgot the grain. I threw some sand and rocks at the bottom of the bucket and shook it at the edge of the field. The horses came, but you can only do that once. Horses learn fast. When an irresponsible leader throws a direct report under the bus their employees learn fast. Trust is easy to destroy and very difficult to rebuild.
The Bottom Line: Be Responsible
When people have the courage to stand up and say, “I’m responsible, the buck stops with me,” others are willing to stand with them. The fallout from irresponsibility is so huge that it can literally bring an organization to destruction. The truth is that those who say they are responsible are not 100% to blame. Others were involved, others created problems, but no individual was 100% of the problem. Willingness to take responsibility shows extreme courage that makes others want to rise and forge together as well.
Gallery: How To Approach The Boss When Conflict Arises 11 images View gallery
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7895245c51d14a792bcc56f6c7c8c058 | https://www.forbes.com/sites/joefolkman/2016/03/31/the-1-reason-most-personal-development-plans-fail/ | The No. 1 Reason Most Personal Development Plans Fail | The No. 1 Reason Most Personal Development Plans Fail
It is no secret that most individual development plans fail. I’ve been in the leadership development industry for over 40 years and I can tell you that statement is true. But after 40 years of teaching, training, observing and testing some of the best and worst leaders in the world I can also tell you with confidence that I know why so many fail.
Given that most employees appreciate development and organizations need to grow pools of talent, you could expect everyone to feel positively about the IDP process. However, the more I talk with individuals about the process, the more I realize that most see it as a paper-passing, bureaucratic practice with little real value. Worse, managers don’t see the process as doing much to really develop talent. For them, it’s another check-the-box exercise that siphons valuable time. But these aren’t the reasons these plans ultimately fail.
Some may believe failure occurs because employees don’t have time to accomplish their goals or lack a good follow up process. Others note terrible plans for development. These factors all contribute to the problem, but they are not the root cause.
Development plans fail because they are not driven by the individual.
In a recent article, Discovering and Developing Hidden Reservoirs of Talent, I discussed the research on this topic in detail. The typical IPD process assumes the individual will successfully develop a capability the employee and manager have agreed upon. But most often this plan ignores the importance of the individual’s personal energy and motivation and is not explicit about the value the organization places on the individual developing that very skill.
Most IDP conversations involve the manager convincing subordinates to develop capabilities the manager thinks are important. They address the organizational need, but neglect the individual’s interest. This process has the danger of becoming a chore in the mind of the individual.
Many managers fear that if they give individuals the choice of what to develop they will choose something of no value to the organization (what I refer to as a “hobby.”) Neither chores nor hobbies will bring much success to individuals or organizations.
How can this process change?
When creating development plans, managers and individuals should focus their goals around three areas: competence, passion, and organizational need.
• Your competence is areas of skill and ability in which you naturally do well.
• Your passion is things that energize you—those things you love to do, independent of how well you do them.
• The organizational needs are activities or service that are greatly needed and valued by your organization.
If individuals chose something they are competent in but not passionate about, their development will suffer. Likewise, if they are assigned to work on something the organization needs but they are not competent in or passionate about, success won’t occur.
We can represent the convergence of these three elements in a Venn diagram with three intersection sets. The result is the “CPO” model, which points out a vital truth about extraordinary performance: it isn’t based on competence alone.
CPO model ZFCO
This may seem simple, but it is the single greatest secret that will determine individual development success: People will be most successful if you focus your development on this magic triad—areas of competency the individual is passionate about and organizational need and opportunity exist.
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67150a4337b4d06ea6cc12590acb1c77 | https://www.forbes.com/sites/joefolkman/2017/11/10/its-all-about-me-what-happens-when-a-leader-takes-all-the-credit/ | It's All About Me! What Happens When A Leader Takes All The Credit? | It's All About Me! What Happens When A Leader Takes All The Credit?
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You may know a leader who has a habit of taking credit for others’ accomplishments. Their motive typically is to make themselves look more effective, hardworking, or intelligent than others. The reality is that in most situations at work it’s difficult to accurately assign who deserves credit. Even in situations where a leader does all the work on a new initiative, often their direct reports had to take care of many other assignments to allow the leader the time to produce the new work.
But does taking credit for the work of others, as a strategy to get ahead, help or hinder the leader using that approach? What is the impact of giving others all the credit? To evaluate the impact, I gathered Zenger Folkman assessments from over 3,800 leaders and measured their effectiveness using 360-degree evaluations from managers, peers, direct reports, and others. Each person was assessed on their tendency to take credit from or give credit to others. Their effectiveness was also evaluated on 49 additional behaviors. An average of 10 raters evaluated each person’s effectiveness, with each leader receiving feedback from different perspectives.
The graph below demonstrates the impact of taking or giving others credit on a leader’s perceived overall effectiveness. Those leaders whose tendency was to take credit were rated as very ineffective leaders (13th percentile), while those who tried hard to give the credit to others were rated as some of the most effective leaders (85th percentile). Overall leadership effectiveness measures the overall effectiveness of a leader on a broad set of behaviors. This data demonstrates the dramatic negative effect of taking credit, along with the positive impact of giving credit to others.
Taking Credit ZFCO
Impact Of Taking Credit For Others Work
Very few people doubt the negative impact of taking credit for another person’s work. The question then arises, are certain behaviors more affected by the taking—or giving—of credit? The graph below shows the effectiveness ratings for the top 10 behaviors most affected, for leaders who were rated the lowest in taking credit (bottom 10%) versus those who were rated the highest in giving credit (top 10%). As you read through the list of behaviors, the negative impact of taking credit for others’ work is clear. However, the focus should be on the extraordinary value that comes from giving others all the credit. Many people underestimate the tremendous impact that comes from making an effort to give credit to others.
Leader Effectiveness ZFCO
This graph clearly demonstrates the positive value created when all the credit is given to others. While those who assume that by taking credit for others’ work they are getting ahead at work may find that it creates a small temporary advantage for them, the negative impact it creates is like a tsunami wave—eventually it will come back and drown them.
Giving Others All The Credit Gives Back Tenfold
This data reflects the true impact of what happens when leaders work hard to give credit to others. The reality is, when a leader makes another person look good, it makes them look good too. The analysis on this data strongly suggests that by giving others credit a leader will be perceived in the following ways: more effective in their overall leadership effectiveness, fairer, committed to help others succeed, does what is best for the company, walks their talk, accepts responsibility, is trusted, lives their principles and core values, and values diversity.
If a leader sets a goal to recognize others for their accomplishments, and looks for opportunities to make others look good, their own effectives will improve. Your motto should be, “Don’t take credit for anything—give it all away.”
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af65acec907973c0c959d51d0edef949 | https://www.forbes.com/sites/joefolkman/2017/12/05/you-can-take-it-how-to-accept-negative-feedback-with-ease/ | You Can Take It! How To Accept Negative Feedback With Ease | You Can Take It! How To Accept Negative Feedback With Ease
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Most people assume that given a choice between receiving positive or negative feedback, the majority would choose positive. To test that assumption, my colleague Jack Zenger and I created a psychometrically valid assessment that measured preferences for both receiving and/or avoiding positive and negative feedback. The assessment used a series of paired comparison items to distinguish the participants’ preferences. After analyzing the results for a global sample of 8,715 respondents, we discovered that only 22% indicated that they preferred receiving positive feedback, while 66% expressed a stronger preference for receiving negative feedback. A small group, 12%, had an equal preference.
Does Your Preference For Getting Feedback Impact Your Effectiveness?
Regardless of your preference for one kind of feedback over another, and whether you want it or not, everyone receives feedback. The question that interested us was, does having a preference affect what you do with that feedback?
We combined the results from our self-assessment of feedback preferences with 360-degree evaluations of each leader’s effectiveness. The 360-degree assessment used was Zenger Folkman’s The Extraordinary Leader™ survey, which measures 16 competencies that are the key skills leaders need to transition from good managers to great leaders. Combining the data from both assessments gave us 588 leaders for whom we had responses for both assessments. We then broke the feedback preference data down into four groups. The table below shows each of the groups, and the percentage of population in each. (If you would like to take this feedback survey click here.)
% of Population Avoiding positive and negative 2.3% Avoiding negative - prefer positive 6.2% Prefer negative - avoid positive 18.0% Prefer positive and negative 65.8%
Note that only a small population of leaders didn’t want any feedback at all. Surprisingly, 18 percent of our population preferred negative feedback and actively avoided positive feedback — some people resist praise and recognition, feeling it to be disingenuous and mere flattery. Note that 7.7% of the respondents did not have strong preferences either way, and were not classified.
The graph below shows the overall leadership effectiveness score as broken down into the four groups. Note that those who avoid negative feedback have significantly lower scores that those who prefer to receive negative feedback. By combining the groups avoiding negative feedback and the groups preferring negative feedback we found a statistical significant difference (t = 2.444, Sig = 0.015).
Feedback ZFCO
Resistance Is Futile
Resisting receiving negative feedback does not make the feedback disappear, nor does it improve your effectiveness: Feedback is a gift, not a punishment. Resisting feedback keeps a person from improving.
For those who avoided positive feedback the impact was not significant; however, developing a preference for receiving negative feedback can have a profound positive effective on a leader’s effectiveness. We identified the top behaviors that separated those who had a preference for receiving negative feedback from those who avoid it.
An old Swedish proverb says, “With the eating, comes the appetite.” In other words, if you change the behaviors, the attitudes will follow. By practicing the following behaviors, a leader can change their preference for accepting negative feedback.
1. Ask For And Accept Feedback. Nothing can do more to convince others that you want feedback than to ask for it. Some worry that asking for feedback makes a person appear weak and incompetent, but it has the opposite effect. Asking for feedback makes a person appear confident and willing to do more to improve.
2. Be A Role Model And Walk Your Talk. Those who resist negative feedback tend to not be role models and fail to honor commitments. Often these are not big deceptions, but rather things like telling their direct reports they are doing fine and then giving them a lower rating on their performance review. Those who resist negative feedback never hear about their inconsistencies because everyone knows they don’t want the feedback.
3. Show Consideration For Others. Leaders who resist negative feedback are often thought of as inconsiderate of others. They care more about getting a project done than the personal needs or concerns of others. Because of their strong desire to resist negative feedback, they are often completely unaware of these issues. Staying in touch with the issues and concerns of others will open up feedback channels.
4. Build Trust. Those who resist negative feedback are usually not trusted. This extends beyond personal trust to trusting judgment, ideas, and opinions. Resisting negative feedback makes trust a one-way street, where others can never push back or question motives or judgment. Loss of trust has a significant negative impact on an individual’s ability to lead and garner the support of others.
5. Openness To Feedback. Those who resist negative feedback often prefer to work independently rather than collaborating with others. Being open to feedback from others is a basic requirement of collaborative relationships. Openness to feedback is a visible evidence of collaboration.
6. Develop Others. Demonstrate your concern and consideration for others by looking for opportunities to develop their skills and abilities. A key issue in developing others is providing honest and candid feedback, both positive and negative. Our data strongly suggests that those who resist receiving negative feedback also resist giving it to others. Begin by providing others with positive feedback and then, when appropriate, provide useful negative feedback.
The Impact Of Confidence On Feedback
There is a strong correlation between a person’s preference for accepting negative feedback and their level of self-confidence. Confidence usually increases as a person improves their skill. Most negative feedback is intended to help a person improve, especially when it is delivered respectfully. Not knowing key information does not help, nor does being in the dark about the impressions of others. Help comes in the form of good, honest feedback. Resisting negative feedback keeps people who often need it most from improving. Your career can flourish if you open yourself up to, ask for, and embrace negative feedback
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fd8503f6e2265ae7d3b03c53931c9fb8 | https://www.forbes.com/sites/joefolkman/2018/11/20/the-shocking-statistics-behind-uninspiring-leaders/?sh=3d1fd602b657 | The Shocking Statistics Behind Uninspiring Leaders | The Shocking Statistics Behind Uninspiring Leaders
“Be an inspiring leader.” You may have heard that before, with good reason. Research has shown that the ability to inspire and motivate others is the number one competency that differentiates poor from good leaders, and in predicting high employee engagement.
As my team at Zenger Folkman has worked with leaders over the years to improve their ability to be inspiring, occasionally we hear comments such as, “Being inspiring is not my style,” “I don’t want to be a cheerleader,” and “I’m not that kind of a leader.”
The truth is, there are a variety of different ways leaders can inspire. Not everyone needs to use the same approach. We all know why leaders should be more inspiring, but what is the impact when a leader is uninspiring? I defined an uninspiring leader as one who is rated by managers, peers, direct reports, and others at or below the 10thpercentile on their ability to inspire and motivate others.
Uninspiring leader ZFCO
Impact Of The Uninspiring Leader
As seen from the statistics above, being uninspiring is not a neutral event. Uninspiring leaders do damage in an organization. They destroy engagement and increase turnover of their direct reports. However, they do even more damage to themselves by being rated very negatively as leaders, with almost no chance of being promoted or being given a high-performance rating. Improving to an average level of effectiveness changes every one of these statistics significantly.
Six Simple Ways To Be More Inspiring
Bring a positive attitude to work. Attitudes are obvious and contagious to everyone around you. Coming to work positive and engaged will make a significant difference. Make every interaction as positive as possible. If you smile and say hello to a colleague as you walk down the hall, that is a positive interaction. If you ignore your colleague as you walk down the hall, that interaction may be perceived as neutral or negative. Have a goal to create as many positive interactions as possible every day. Communicate more often. Keeping others well informed will help you be more inspiring. When your team doesn’t know important information, they become frustrated and see you as uninspiring. Find a way to help direct reports or peers learn and new skill. People want to grow and develop new skills. Taking the time to understand the aspirations of others and help them develop new skills will cause them to view you as inspirational. Be a role model. Make sure you walk your talk. Don’t ask people to do anything you wouldn’t also do yourself. Create a positive team environment. Create a team that others want to be part of and join. When conflicts occur work hard to get them resolved quickly. No one wants to be on a team where people are fighting or competing aggressively with other team members. Plan team building activities that build greater camaraderie.
Not every leader can be an extraordinary inspirational leader, but every leader can be good at inspiring. The trick is to do so using a style that is comfortable to you. Don’t give up on inspiration. We all need some of that quality to make a difference in the world.
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915d4ef4c3913b1a9730d3ce59438655 | https://www.forbes.com/sites/joegose/2018/06/12/retail-apocalypse-put-the-blame-where-it-belongs-not-on-the-internet/ | Retail Apocalypse? Put The Blame Where It Belongs, Not On The Internet | Retail Apocalypse? Put The Blame Where It Belongs, Not On The Internet
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Shopping center landlords, investors and brokers have been pushing against the narrative that e-commerce – and Amazon.com in particular – is behind the so-called "retail apocalypse." Speakers at the International Councils of Shopping Center’s big trade show in Las Vegas last month provided ammunition for that argument.
In a session discussing how store closings were contributing to a healing retail industry, Suzanne Mulvee, director of research for CoStar Group, contended that years of unbridled expansion, demographic changes and stagnant wage growth were the primary culprits for the retail industry's woes. In another session that was half history lesson and half training on how to lease difficult spaces, Nick Egelanian, president of SiteWorks Retail Real Estate Services, pointed out that “electronic shopping & mail order” channels accounted for 9% of retail sales in 2017. But a break down of that figure revealed “pure play” e-commerce retailers contributed only 3.7% of those sales. And Amazon.com? It made up less than 1% of e-commerce sales.
“There’s a perception that Amazon is taking over the retail world, but Amazon and e-commerce have very little to do with what’s going on,” Egelanian told his audience. “How retail works in the U.S. today is very different than what many of you have come to believe.”
The forces disrupting retail took root 40 years ago and then morphed into a perfect storm that culminated with the Great Recession, Egelanian and Mulvee said. Here's where they place the blame:
Commodity Retail
Originally department stores served as downtown shopping hubs that offered a wide range of products, including fine china, auto supplies, housewares, apparel, toys and linens. As the automobile fueled suburban growth, department stores followed and at one time anchored some 3,000 malls. But around 1988, retail executives launched category killers in big boxes that specialized in one product line, which effectively deconstructed and doomed the department store, Egelanian said. Worse, the same real estate developers of department store-anchored malls cannibalized their business by building big box-anchored power centers, he added.
Oversupply
On average, developers built around 160 million square feet of retail space a year from 1984 to 2008, outstripping population growth. Over that time, the amount of retail space per capita in the U.S. grew to 55 square feet from less than 45 square feet, Mulvee said.
Demographics And Income
In the early 1980s, baby boomers were entering the peak earning-and-spending age range of 35 to 54, fueling the development wave. But the buying began slowing in 2001 as the cohort began aging beyond those prime years, and the following generation didn't have the numbers to fill the gap. At the same time, median income began to flatten. From 2001 to 2013, publicly traded retailers saw store sales plunge from nearly $425 per square foot to about $310 per square foot, Mulvee said.
Retailers are still riding out the turbulence. With some 95 million square feet of store closures already announced this year, it’s a good bet that 2018 will surpass the 105 million square feet of closings last year, Mulvee said. (Indeed, Mulvee cited this year's closings figure just days before Sears Holdings Corp. announced that it would shutter 63 Sears and Kmart stores in 2018.) The number of malls has fallen to 1,000 from 3,000, and 800 more will vanish in the next decade, Egelanian predicted.
Nevertheless, Egelanian and Mulvee were cautiously upbeat about the future of shopping centers as developers and retailers adjust to the new paradigm. New development plummeted when the Great Recession hit, and although it has rebounded since, it is still far below the previous high levels. Publicly traded retailers have seen their sales creep up since bottoming in 2013. In particular, retailers that have closed stores over the last several years, including The Children’s Place, Best Buy Co. and Gap, are witnessing a strong rebound in same store sales growth, Mulvee said. Meanwhile, millennials are reaching their prime earning years, and low unemployment is beginning to foster average annual wage growth of about 4%, an improvement over the last several years, she added.
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509442cbcebfa79852322ef8a2807a4f | https://www.forbes.com/sites/joegray/2019/09/11/phishing-not-just-for-criminals/?sh=692ec23a24b3 | Phishing: Not Just For Criminals | Phishing: Not Just For Criminals
Phishing attacks are increasingly sophisticated and businesses need to adapt. Photocredit: Getty Getty
Within concepts of cybersecurity revolving around the human element, often referred to as Social Engineering, criminals and authorized testers alike use email, phone calls, "dropped" USB devices with malware on them and in-person interactions to gain access. Phishing is the act of sending emails (both in-bulk and targeted) to an organization in an attempt to get victims to input information (such as user names, passwords or credit card information) or performing an action (such as opening a firewall port, launching an application or letting someone into the facility). In recent years, we have seen phishing work as a catalyst for the rise of ransomware, enable business email compromise (BEC) and various other online mischief.
Taking information from the 2019 Verizon Data Breach Incident Report (DBIR), we are presented with 3 leveling tidbits:
33% of reported breached involved social attacks 32% of reported breaches involved phishing 29% of reported breaches used physical actions (on-site)
Comparing 2013 to 2018, the DBIR measures that social attacks rose from 17% to 35% (effectively doubling by percentage breakdown) and physical attacks reduced from 10% to 4%. (Note: 2013 saw 2,501 breaches in the report, while 2018 saw 1,638). 94% of malware found it's way into execution via email. Phishing was the top method of Social Attacks. On a positive note, the click rates for sanctioned phishing exercises has dropped from 25% in 2012 to 2.99% in 2018. The social-phishing category accounted for 521 of the 2,013 breaches in the report (270 for server-mail and 251 f0r user dev-desktop).
Defensive Phishing
Just like penetration testing and threat hunting, there are proactive ways to test infrastructure before someone without authorization does. Conducting (or commissioning) phishing operations against employees of a company does not make them a bad employer, setting the employees up for failure through lacking training and/or terminating employment because an employee falls victim to a phishing attack (commissioned or not) is more likely to land a company on any "bad employer" list whether real or otherwise.
How is it done?
Start out by training your employees. Get them some form of phishing training. Most (if not all) of the automated phishing solutions offer this. SANS offers Securing the Human training at a cost. If you have any questions regarding where to find it, reach out to your local security groups such as ISSA, (ISC)², ISACA, OWASP, CitySec, 2600 or Defcon groups. These professionals are likely to know. If you have a partner that you use for general security consulting, incident response or penetration testing, ask them. They can either provide the services or point you to an organization they trust.
Alternatively, organizations could do it themselves. If they have the personnel and the capabilities, it is possible. The next question becomes automated or manual. As someone who does these social engineering attacks to help companies improve their security, I prefer manual due to the realism that can be injected. While the same can done in an automated setting, it doesn't feel the same and people tend to catch on faster. The cloud can also be leveraged to perpetrate these phishing engagements for a more realistic feel. For under $30, a criminal (or authorized tester) can stand up all the relevant architecture, buy 2 domains and get into the inboxes of most victims that they have been tasked with phishing or targeting for ill gain.
Measurement
An often-used metric is how many people open the email. This does not always provide the best measure of security. People are expected to open emails. Yes, some malware can come through this way, but systems should be built in a resilient manner to overcome this, malware protection is a technical problem with technical solutions, not a problem for the person in HR trying to do their job. How many people input information into the fields of the website that they are confronted with? How many people download the nefarious file they were sent? These are the second and third most important metrics. The most important metric is did it get reported? How long did it take to get reported? What actions were taken upon reporting? Were these actions sufficient or counterproductive (i.e. forwarding the email with the link in it and a note saying "Do not click the link?" Finally, measuring how many people click the links is important, but on a tremendously smaller scale.
Measuring the actions and outcome are the most vital parts of this engagement. As technologists and consumers, we need to measure our technology's response to problems that people face every day. As a support function, we must support the business in the most efficient yet secure way. We assess the outcome of this engagement, train the team again based on the adjustments recommended from this engagement and we move on.
Conclusion
In conclusion, we will never eradicate phishing (without eradicating outside communications coming in altogether). The best way to enhance our security on this is to train, test, retrain and repeat. The criminals of the world won't stop phishing, so we have to stay prepared and condition our employees to be suspicious of all emails that come through with a trusted point of contact to vet anything that does not make sense.
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2fdccccba128e79123365cf51d7ec9da | https://www.forbes.com/sites/joeharpaz/2013/12/17/brazil-ranked-most-time-consuming-tax-regime-in-the-world/ | Brazil Ranked Most Time-Consuming Tax Regime In The World | Brazil Ranked Most Time-Consuming Tax Regime In The World
The allure of emerging markets is hard to ignore for multinationals in mature economies.
With lower labor and R&D costs, and consumer economies that are expanding, places like Brazil, India and China are near the top of most multinational expansion plans. But global expansion comes with global complexity. Much has been said about the complexity of the tax codes in emerging markets, but just how complex are they?
PwC has attempted to figure that out, working with the World Bank and the International Finance Corporation (IFC), to produce a comparison of tax systems in 189 economies worldwide, ranking each in terms of overall complexity, time required to comply with tax codes, number of payments and total tax rate. The resulting report, Paying Taxes 2014: The Global Picture reaffirms much of what we’ve been hearing from our customers around the world. But it also contains some surprises.
Following were some of the most interesting data points from the study:
Tax Pros Spend 2,600 Hours Per Year Complying with the Brazilian Tax Code
I’ve just recently returned from a trip to Brazil and I can confirm that the tax complexity there lives up to the hype. The nation has developed so quickly that there is a dizzying array of tax codes from one region to the next, some of which contradict one another. This, combined with aggressive tax enforcement aided by the development of a new Public System of Digital Bookkeeping (SPED), which uses super computers to track every transaction in the country, has made tax compliance in the region a big issue for multinationals. So, while it’s hardly a surprise that tax professionals take a great deal of time to comply, 2,600 hours is a long time.
Average Total Tax Rate is 43% Globally
As debate continues to rage over the strategies multinational corporations use to mitigate their global tax exposure and sensational headlines continue to claim that big companies don’t pay their fair share of taxes, when you look at the big picture, the average total tax rate for the case study company in this analysis was 43%.
U.S. Ranked 64th (out of 189 economies) on Ease of Payment
While no one would expect the U.S. to be at the top of the tax complexity list, when compared with places like Brazil, Chad, Venezuela or Senegal, it is noteworthy that this study finds U.S. tax compliance to be more complex than Taiwan (ranked 58), Russia (ranked 56), France (ranked 52), the UK (ranked 14) and Ireland (ranked 6).
Will it Get Any Easier?
While the tax complexity equation outlined in the PwC analysis is certainly enough to keep the tax department up at night, the data seems to suggest that things are getting better, with the total time to comply figure trending down over the last several years.
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2d3ec1c2060471408ead30a2a90bc686 | https://www.forbes.com/sites/joeharpaz/2014/03/21/health-insurance-companies-arranged-marriage-with-the-irs/ | Health Insurance Companies' Arranged Marriage With The IRS | Health Insurance Companies' Arranged Marriage With The IRS
With just two weeks to go before the March 31 deadline for applying for health insurance on a government-run exchange, more than 5 million people have signed up for the new plans. When all is said and done, approximately 30 million previously uninsured Americans are expected to have health insurance, either through a government exchange, employer or Medicaid.
So, following that logic, the health insurers behind these plans should be raking in profits from millions of new customers, which, even at reduced rates, should allow them to reap huge rewards.
Not so fast. Along with the influx of new customers, the Affordable Care Act (ACA) is bringing health insurance companies new IRS obligations that could have a major impact on their profitability. While not all of these obligations are outright taxes, the ACA has effectively turned the IRS into a monitoring and enforcement mechanism for many of the health law’s administrative provisions. The cost of meeting these requirements will act as a tax of sorts.
Insurance Industry Excise Tax
Chief among these is an $8 billion fee, which, effective this past January, is levied on all health insurers based on their total market share of net premiums written for different health risk pools. As the recent Thomson Reuters Checkpoint special report Tax Changes in Health Care Reform Legislation explains, this fee will be allocated based on the risk pools each insurer covers. Those who take on more customers with higher levels of health risk will pay less, while those who take on primarily low-risk new customers will pay more.
This fee is essentially structured as an excise tax on insurance companies. The flat fee for the industry starts at $8 billion this year and will increase to $14.3 billion by 2018. To put that in perspective, the widely derided medical device tax, which imposes a 2.3% excise tax on several medical technologies, is only expected to generate about $2.9 billion in tax revenue per year.
This is a big number that will have a material impact on insurance company cash flows starting this year. In fact, the Congressional Budget Office has said that it expects the tax to result in an overall increase in premiums as the insurance companies pass along the increased costs to their members. Consultancy Oliver Wyman has taken the estimate one step further, suggesting that the tax will result in an increase in insurance premiums of $500 per covered worker by 2020.
New Forms: 1095-B Compliance
Another significant tax hurdle for insurance companies isn’t really a tax at all, but rather a new tax form called the 1095-B, which is required for all covered lives, starting in tax year 2015. Essentially, because the Affordable Care Act requires all U.S. citizens to have some form of insurance, the burden of proof of coverage now falls on the insurance providers who must file this new form with the IRS each year to document that each of their members has insurance.
That sounds reasonable enough, until you factor the herculean challenge of having to mail a copy of the IRS tax forms to policyholders, totaling 317 million Americans. As of December 2013, the two largest health insurers in the U.S., United Healthcare and WellPoint , had a combined 106 million members.
Ignore for a moment the filing requirements and organizational challenges of sending a new form with accurate identification information to every customer - and just focus on the postage. At 49 cents per stamp, it will cost approximately $52 million for United Healthcare and WellPoint just to mail the forms to their customers. Even if some consolidation of household forms is allowed, and bulk postage rates are applied, the administrative cost to insurers is still significant.
Now, factor in the implications of getting insurance company data systems ready to comply with IRS requirements that are based on Social Security numbers. In many cases, insurance companies have built their customer data infrastructure around account numbers, which may or may not be linked to underlying Social Security numbers. If that link isn’t already built into the system, this could trigger the need for major programming infrastructure changes across the industry.
Many insurers will outsource the 1095 function, ultimately creating a new layer of business opportunity in the service sector. However, when factoring the ultimate impact to health insurers, 1095 compliance will become a real cost that was nonexistent a year ago.
Behavioral Implications
History is littered with examples of industries overcoming challenging tax environments and still succeeding, but one has to wonder if the design of the Affordable Care Act will ultimately help or hinder its intended goal. What we do know is that there will be an increased cost to businesses to comply with the law. In the case of the health insurance industry, it has been made clear by the industry itself that these costs will ultimately trickle down to consumers in the form of higher premiums. We also know from speaking with our customers that there is an increased push for operational readiness to comply with the various reporting requirements that come along with the Affordable Care Act. These things come at a cost – one that will likely trickle down to the policy holder, unfortunately making affordable care even less affordable.
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7ff1371467701082b439c15cd34e8fdc | https://www.forbes.com/sites/joeharpaz/2014/05/07/airbnb-disrupts-hotel-economy-sends-regulators-scrambling/ | Airbnb Disrupts Hotel Economy, Sends Regulators Scrambling | Airbnb Disrupts Hotel Economy, Sends Regulators Scrambling
The “sharing economy” is not a new concept. Though companies like Airbnb, Relayrides and TaskRabbit, which let users share their homes, cars and chores, have become the darlings of the tech investment community in recent months, the idea of trading things you have for things you need traces its roots back to Mesopotamia. Back then, of course, you were more likely to trade a goat for salt than cash for a weekend in a studio apartment in Manhattan, but the base idea hasn’t changed much over 8,000 or so years.
What is new is the ability to instantly form global markets that support this type of bartering via the Internet. With the Internet, innovators have been able to create hyper-efficient markets where availability of resources and demand are synchronized in real time with clear price transparency. Add the cultural shift that has driven a generation of web-connected millennials to redefine traditional notions of ownership versus access, and you start to see the power of the sharing to catch the eye of investors, regulators and tax authorities.
The limitless potential of these growing digital marketplaces has put the hottest of the sharing economy start-ups, home rental service Airbnb, in the crosshairs of the New York attorney general’s office. Last month, New York Attorney General Eric T. Schneiderman brought a suit against Airbnb for refusing to provide the names of its New York customers. Regulators suspect that Airbnb hosts who rented their homes and apartments using the service may not have paid taxes on the income and, in some cases, may be violating New York housing laws.
At the center of the attorney general’s case is a New York state law that prohibits people from renting their homes for fewer than 30 days unless the occupants are also present. According to an affidavit filed in New York State Supreme Court, the attorney general’s office has analyzed Airbnb’s listings and has found that about 64% of them depict rental arrangements in which the hosts “presumably would not be present during the rental period.”
Recognizing that the New York case could set a precedent for how other municipalities try to limit these types of home rentals, Airbnb has fought back aggressively, criticizing the attorney general’s interpretation of New York housing laws, saying they were never meant to apply to New Yorkers occasionally renting out their homes. Airbnb’s head of global public policy explained in a blog post:
“Time and time again, the Attorney General has demanded personal information about thousands of New Yorkers. He professed to be interested in collecting more tax dollars for New York. Last week, we once again campaigned to change the law so our community can contribute $21 million in taxes to New York…
Taking on an Attorney General who is determined to fight innovation and attack regular people isn’t easy and we won’t succeed without standing together. We’ll do everything we can to keep you informed about this case and our work to fix the bad law that made it possible.”
The case is fascinating on both sides because it focuses on the tenuous relationship between innovation and regulation. This is a topic I’ve addressed before when talking about the disintermediation of traditional supply chains by firms like the web-based taxi service Uber, Tesla, Google and even high frequency traders. In all of these cases – Airbnb included – technology has removed the middleman, which creates real challenges for a regulatory system that’s been rooted in physical supply chains for a hundred years.
Regulators are correct to take note of this. Despite the current controversy in New York, Airbnb is valued at approximately $10 billion, which is about a billion dollars more than Hyatt Hotels Corporation . The fact is, innovators are moving faster than regulators can keep up, building businesses that have the potential to completely redefine traditional models of commerce. Without a strategy for developing a regulatory infrastructure to keep new business models like Airbnb’s in check, state and federal authorities expose themselves to the risk of regulatory obsolescence. However, by relying on dusty old laws that were developed at the turn of the century to police forms of business that don’t play by the same set of rules, governments could inadvertently stifle the very innovations they are so desperate to court.
Over the next ten years, which industry do you think will grow faster: old line hotels or web-based sharing services like Airbnb? This presents government officials with their own innovation challenge: how do you construct rules that support today’s and future business models? Regulators need to find a balance where they can maintain business and consumer protection without stifling market demand and innovation opportunity.
As the Airbnb drama continues to unfold in New York, what we’re really seeing is the much-needed shake-up of the country’s regulatory infrastructure. Over the short-term, there will be no shortage of resistance to change. Over the longer-term, if we’re lucky, we may look back on the mid 2010s as the starting point for a regulatory renaissance in which laws are written and enforced not at the expense of innovation, but to protect it.
This is a topic I’ll be keeping a close eye on, both in this blog and in my day job working with large corporations as they contend with a constantly evolving landscape of new regulatory challenges. Stay tuned for more as I start to dig into similar situations that are currently unfolding in the professional and medical services sectors, which have also seen a meteoric rise in innovative activity, creating a corresponding set of big challenges for regulators.
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319ffcf6cf0c785d1c8977393d87e096 | https://www.forbes.com/sites/joeharpaz/2017/10/31/looking-to-paul-ryan-for-insights-on-the-republican-tax-plan/ | Looking To Paul Ryan For Insights On The Republican Tax Plan | Looking To Paul Ryan For Insights On The Republican Tax Plan
Speaker of the House Paul Ryan (R-WI) answers reporters' questions during his weekly news conference... [+] at the U.S. Capitol October 26, 2017 in Washington, DC. Moments before Ryan conducted his news conference, the House passed a fiscal 2018 budget 216 to 212, beginning a process for the Senate to move forward on an overhaul of the tax code. (Photo by Chip Somodevilla/Getty Images)
The Republican members of the U.S. House of Representatives are just one day away from unveiling their highly anticipated tax plan, but news reports suggest there is still a great deal of wrangling going on over details such as state and local tax deductions, the estate tax and tax bracket details.
With President Trump pressing hard for a vote on the tax reform bill by Thanksgiving, lawmakers have their work cut out for them. Exactly what form the final proposal will take when it comes out of this pressure-cooker is still unclear, but I did have an opportunity recently to get some insight on the inner workings of the process with Speaker of the House, Paul Ryan, who sat down for an interview at a Thomson Reuters Newsmaker event last week.
Drawing an analogy to his personal pastime of whitewater rafting, Ryan described the current environment on Capitol Hill as a bit choppy:
“We’ve been going through Class 3 rapids, which is a pleasant ride. It’s nice. Everybody pretty much stays in the boat and it’s pretty good,” he said. “But we’re about to go through Class 5 rapids, which is the biggest rapid you can go through.”
Almost sounds fun!
In terms of more specifics about what he hopes to see come of the reform effort, Ryan explained that his goal is to grow the economy, a priority that far outweighs concerns about creating a larger budget deficit. He explained:
“We will broaden the base and lower the rates, plug loopholes and get faster economic growth. And those things combined – a broader tax base but a more internationally competitive tax system – those things combined, we believe, will give us faster growth and a more resilient tax code.”
He added that he’s expecting a level of reform that will help jolt the economy to a 3% GDP growth rate, up from the anemic 1.6% we saw last year.
The stock market appears to agree with him. The S&P 500 is up over 14% so far this year due in large part to investor anticipation of corporate tax reform having a positive impact on the bottom lines of large, public companies. The phenomenon led U.S. Treasury Secretary Steven Mnuchin to comment in a recent interview with Politico that: “There is no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done. To the extent we get the tax deal done, the stock market will go up higher. But there’s no question in my mind that if we don’t get it done you’re going to see a reversal of a significant amount of these gains.”
In fact, the mere mention earlier this week that the House may be considering a gradual phase-in for the corporate tax rate cut, which would have the rate reach 20% in 2022, instead of immediately, sent the Dow Jones Industrial Average down more than 80 points.
That, of course, raises the stakes on tax reform for more than just the members of Congress. Should lawmakers fail to secure a deal, the recent stock market records we’ve been celebrating in the streets may not stay with us for long.
For his part, Ryan says the risks of not pursuing the tax reform effort are greater than the risk of failure, explaining:
“If we don’t do this, the flip side of (not) getting this reform done, is our code is going to be so punitive more and more companies are either going to leave or be bought by foreign firms, and their headquarters go as a result. That is not good for our economy, and we have to, in this 21st century global economy, make our code more competitive so we can have jobs and growth right here in this country.”
He illustrated this last point with a reference to Johnson Controls, the global industrial company once headquartered in Ryan’s home state of Wisconsin, which now calls Cork, Ireland its home base. The company merged with Tyco International in early 2016 as part of a tax inversion deal that moved its headquarters location out of the U.S.
Ryan said examples like this are bound to keep happening unless we change the U.S. tax code, adding: “We compete against Canada every day in Wisconsin, and we’re taxing Wisconsin manufacturers at like 40% when Canada’s taxing theirs at 15%. It is putting us at an enormous disadvantage. This is about jobs and competitiveness and growth and keeping your business in America and making things in America.”
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5380653d467cac1ad48ea1cc80fe0a9d | https://www.forbes.com/sites/joeharpaz/2019/05/17/price-transparency-why-are-drug-prices-such-a-bitter-pill-to-swallow/ | Price Transparency: Why Are Drug Prices Such A Bitter Pill to Swallow? | Price Transparency: Why Are Drug Prices Such A Bitter Pill to Swallow?
Prescription Price Transparency Joshua Coleman
When you leave the doctor’s office to pick up a new prescription, do you know how much you’ll pay out-of-pocket to fill it? If you’re like the vast majority of Americans, probably not.
Think about that for a second. In what other industry would you agree to purchase an item or service without knowing the cost? We’re so used to sticker shock at the pharmacy that it has taken over a decade of rising drug prices for the issue to make it under the national spotlight.
As the debate heats up, consumers, politicians, and even drug manufacturers finally agree on one thing: Something needs to change. But what that change should look like is still up in the air.
Aren’t Prescription Drugs Just Expensive?
America’s drug prices are high, and they’re expected to rise an average of 5.5% each year until 2027. High drug prices aren’t just uncomfortable for consumers -- they affect the quality of care and influence the nation’s overall population health. According to a review in Annals of Internal Medicine, “studies have consistently shown that 20% to 30% of medication prescriptions are never filled and that approximately 50% of medications for chronic disease are not taken as prescribed.”
To put America’s drug pricing problem in perspective, consider that we spend between three and 16 times as much as other countries for the exact same prescription medications. For example, the arthritis drug Humira costs about $822 per month in Switzerland. In Britain, it will run you about $1,362. In the U.S., however, Humira costs an average of $2,669. And Humira isn’t an outlier – nearly every procedure or drug costs significantly more in the U.S. than it does in other countries.
Generic medications face similar price discrepancies both abroad and domestically. Generic versions of the heartburn medication Nexium are available from wholesalers for about $20 a month. However, in 2018, Medicaid managed care plans in Arizona, Georgia, Nevada, and Ohio paid $130 for that same $20 bottle. A Bloomberg analysis from earlier this year found that 31 states saw similar price hikes for 90 generic medications and wide price discrepancies across state lines.
It hasn’t always been this way. Between 1997 and 2007, America’s drug spending tripled. Between 1960 and 2017, the average per capita spending on monthly drug prescriptions increased 11-fold, from $90 to a whopping $1,025 – and that’s after adjusting for inflation.
Keep in mind that these numbers come from Medicare spending because prices for medications provided through private insurers are not publicly available. Most Americans have private health insurance, however, making it unclear if medications available through private plans face similar price discrepancies – or worse.
Playing The Blame Game: It Isn’t That Simple
It has taken experts hundreds of pages and thousands of hours to bring some clarity to the drug pricing issue, and we’re still not in agreement on what went wrong. While it would be easy to try and place blame on pharmaceutical companies, primary benefit managers (PBMs), or health insurers, it’s just not that simple. While it would be overly optimistic to try and explain the industry in just a few short paragraphs here, shedding some light on the complexity of the issue is doable.
The complex drug pricing equation. Nefouse Health Insurance
First, we have to think about how drugs enter the market in the U.S. and what prescriptions are covered by health insurers. In places such as the United Kingdom, government money isn’t spent on a drug unless they are proven to return a certain value to the public. In the U.S., however, a lot of pressure is put on health plans to cover most, if not all, of prescription medications. Those medications covered by insurance are known as formularies. Ultimately, the vast number of formularies mean that insurers are stretched too thin, with little that they can do to rein in prices.
Then there are PBMs, who end up taking a lot of the blame for high drug prices. PBMs are organizations that act as intermediaries between insurers, pharmaceutical companies and other members of the healthcare industry. Because of their size, they can negotiate batch discounts and reimbursements for drugs at scale, resulting in savings that they pass on to consumers through their insurance companies.
While well-intentioned, there’s a hitch: There are many different payers -- health insurers -- who are all negotiating different prices for the drugs they cover. According to Dr. Mello, a Professor of Law and Health Research and Policy at Stanford University, “the fact that we have so many different payers means that there's not one price for a drug; rather there are many prices… if everybody's making their own deal for this drug, there is very little transparency in the supply chain about who's getting what deal and who's making what money off the drug as it gets passed along through the various middlemen. And the government, unlike most industrialized countries, does very little to set and regulate prices.”
Our for-profit healthcare model is what has brought countless innovations to market and is what makes the U.S. a leader in healthcare. Any changes we make to the system could affect the industry in unforeseen ways. With so many moving pieces, it’s hard to find a cure that doesn’t have drastic side effects.
What’s Being Done?
Many entities are working toward a solution, however. The Trump Administration’s report American Patients First proposes some strategies for lowering costs -- or at least making them more transparent. In fact, one of the report’s proposals was turned into law earlier this month. Secretary of Health and Human Services Alex Azar, announced drug companies must now include “a legible textual statement” with the price of the medication above $35 a month in all ads by July 2019. Whether or not this will encourage pharmaceutical companies to lower drug prices has yet to be seen, but most consumer and patient advocates have applauded the rule as a step in the right direction.
Other proposals are also in the works. For example, in late 2018, the Centers for Medicare and Medicare Services proposed a new regulation that would require the healthcare industry to implement price transparency tools at the point of care that would allow consumers to compare drug prices in the doctor’s office. The proposed rule would go into effect on January 1, 2020. Other proposals aim to prevent drug companies from implementing “gag clauses” that forbid pharmacists from telling patients they’d save money if they paid for a prescription directly instead of through insurance.
Other ideas include changing regulations surrounding how drug formularies are decided. Currently, expert committees whose members are kept secret to prevent influence from pharma companies decide which treatments should be covered by insurance. Decisions on which drugs become formularies are made based on other drugs in the market and the value the new treatment would bring. While these entities don’t have the ultimate say in drug prices, indirectly their decisions can affect change the landscape of the market. The number of drugs they approve or deny ultimately has an effect on the money available from insurers to cover prescription medications, and can therefore indirectly influence prices.
While this is just a shallow dive into a complex issue, it offers some perspective on the current state of the drug pricing problem.
What Now? Finding a “Cure”
If we’re ever going to lower the exorbitant costs Americans pay for healthcare in the U.S., we need to start looking at the problem holistically. While drug prices are often in the news, it’s not the only challenge American’s face. In fact, while nearly a quarter of the population has trouble paying prescription drug prices, medical bills are an even bigger issue, as they are now the leading cause of bankruptcy in the U.S. Identifying and treating one symptom of the problem isn’t going to cure the underlying epidemic.
Consider, for example, what happens when a patient skips filling their prescription. As former Surgeon General C. Everett Koop once said, “Drugs don’t work in patients who don’t take them.” By one estimate, lack of drug adherence causes approximately 125,000 deaths per year in the U.S. and least 10 percent of hospitalizations. Besides the loss of life, this is estimated to cost the American health care system between $100 billion and $289 billion a year.
Next time you go to the doctor, talk to your physician about your care plan and voice any concerns you have about paying for your medications. Drug comparison tools are finally reaching the mainstream. And while they don’t solve the underlying issues, they can help consumers ensure they’re getting the best value. Ideally, price comparison tools will be used at the doctor’s office, so you and your doctor know what you’ll pay out-of-pocket at the pharmacy counter. If a drug isn’t covered or is too expensive, it’s likely there’s a cheaper option in the same drug class or a generic version you can try instead.
While there’s no silver bullet to fix our healthcare system, the bottom line is that being engaged in your care can not only help reduce costs but make you healthier as well. When consumers are more engaged in their care, they can proactively advocate for the options that best fit their medical and budgetary needs that will ultimately result in better health outcomes.
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cfe0fd2511522ae57fb295aa660cd8b2 | https://www.forbes.com/sites/joelbackaler/2013/12/11/why-do-chinese-companies-want-to-go-west/ | Why Do Chinese Companies Want To Go West? | Why Do Chinese Companies Want To Go West?
This article is Part 1 in a six-part series about Chinese overseas investment. Read the introductory article.
What did you eat for breakfast this morning? You may be surprised to learn which country it came from…or at least who owns the company that made it. If you had bacon and eggs and live in the U.S., you likely ate Smithfield Foods’ bacon—now owned by China’s Shuanghui International after its $4.7 billion acquisition of the Virginia-based pork producer in September 2013. If you live in the U.K., perhaps you ate a bowl of Weetabix cereal, which was acquired in May 2012 by China’s Bright Food for £1.2 billion (approximately $1.9 billion). These examples illustrate how Chinese overseas investment has entered the everyday lives of global consumers in the U.S. and Europe—we’re typing on Lenovo computers, driving Geely-owned Volvo cars and buying movie tickets at Dalian Wanda-owned AMC theaters. What factors prompted these Chinese firms to leap beyond the walls of the Middle Kingdom? Is a Chinese government strategy pushing corporate champions to invest overseas or do straightforward commercial motivations explain this phenomenon?
The answer is both. Chinese companies go global because of government objectives as well as business necessity. It would take an entire book to do this topic justice, but the following sections offer a high-level overview of the multiple motivations for Chinese companies to expand into international markets.
Government Motivations
One simple phrase summarizes the Chinese government’s often complex stance on international investment: "请进来,走出去" qing jinlai, zou chuqu (welcome in, going out). Despite the current high-profile challenges faced by Western firms operating in China such as Eli Lilly, GlaxoSmithKline, and Merck, China’s qingjinlai or ‘welcome in’ policy has long intended to encourage foreign direct investment to foster economic development within China. In the other direction, China’s zouchuqu or "going out policy" encourages Chinese companies to expand into international markets for several reasons. First, the government seeks a low-risk channel to invest its 3.7 trillion dollars in foreign exchange reserves outside of China. Facilitating the investments of state-owned enterprises (SOEs) and other Chinese companies in emerging and developed markets through access to low-interest capital is one such way to achieve this. Second, the natural resources required to fuel China’s rapidly expanding economy far exceed its domestic supply. According to World Bank estimates, China leads the world in total demand for major metals--copper, aluminum, nickel, tin, lead and zinc--and alone consumes nearly a quarter of world production. Third, the internationalization of China’s top corporations has the potential to help build China’s soft power. The actions of Chinese national champions in overseas markets can help improve—or negatively affect—international perceptions of China.
Business Motivations
To attribute Chinese overseas investment exclusively to government initiatives overlooks the equally important economic motivations driving Chinese companies to go global. The increasing competitiveness of the domestic operating environment impels Chinese firms to consider overseas expansion for multiple reasons. First, Chinese companies seek advanced technology to bring superior products back home. For example, global top-ten wind energy firm Goldwind acquired Germany’s Vensys to gain technology, thereby boosting the efficiency of its wind turbines both at home and overseas. Second, Chinese firms may expand abroad to acquire established overseas brands. This was the case with piano manufacturer Pearl River Piano. Recognizing that pianos are often a once in a lifetime purchase, Pearl River’s CEO made the strategic decision to operate at the premium end of the brand-positioning spectrum where profit margins are highest. His firm purchased long-established high-end German piano brand Ritmuller to appeal to wealthy Chinese and global consumers. Third, Chinese firms may go global to build world-class management and technical expertise. When Lenovo purchased IBM’s PC division, it not only acquired American personal computer technology, it also gained expertise from the global management team and technical experts it inherited. Fourth, Chinese firms expand overseas to gain access to new markets for their products as was the case for Haier in the U.S. But rather than market existing products such as washing machines that double as potato-washers for Chinese farmers, Haier focused on marketing new products like mini-fridges for American college students and wine coolers. A fifth and final reason that Chinese firms may choose to go West is because that’s what large companies are supposed to do. Looking at the paths previously adopted by Asian corporate giants from Japan and South Korea, overseas expansion may seem like the logical next step for Chinese firms after becoming large players within China—even if their firms may not yet be prepared to do so.
It Takes More Than Ambitions Alone…
This article outlines many of the reasons why Chinese companies have chosen to go West—due to both government encouragement and commercial necessity. However, it takes more than international ambitions alone to succeed in developed markets. Are the majority of Chinese firms even ready to expand overseas in the first place? Come back next month to find out the answer.
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c1f1db6e61b1ce2e67ac8be22605f762 | https://www.forbes.com/sites/joeljohnson/2019/08/28/retirement-estate-planning-documents-you-should-have/ | Retirement, Estate Planning: Documents You Should Have | Retirement, Estate Planning: Documents You Should Have
Living will and power of attorney stock.adobe.com
The transition to retirement means different things to different people as does the actual age in which people turn the page to a new chapter in their life. Many factors contribute to this life-altering decision and many emotions are felt – everything from fear, stress and anxiety to the sheer excitement of being able to fulfill lifelong dreams.
During this time of life, while emotions are running high, it is also very important to make sure your financial matters are intact. Creating a well thought out financial plan as well as creating legal documents to ensure your personal, financial and health wishes are carried out the way you want. Managing your estate, regardless of the size, begins with working with an expert to help give you greater control, privacy and security of your legacy – the one you worked so hard to build. The documents you need to get started are outlined below:
Will
A will is a legal document that a person uses to express their wishes regarding the distribution of their assets and property as well as the care of any minor children. The American Association of Retired Persons (AARP®) reported in February 2017 that a Caring.com survey found only 4 in 10 American adults have a will. According to the same research, the number does jump significantly for those aged 53 – 71 (baby boomers). Of this age bracket, 58 percent have done estate planning and although this number is greater than half, it still indicates that over 40 percent of baby boomers have not completed will preparation.
A Power of Attorney
A power of attorney is a written authorization that gives a trusted family or friend the power and authority to act on your behalf in business, legal and financial matters. The rules and requirements differ from state to state but may be written to be effective immediately or only once, if it is deemed you are unable to act for yourself due to a mental or physical disability.
Health Care Directive (living will)
The health care directive is another legal document which specifies your health-care preferences should you become incapacitated or unable to speak for yourself. It also allows you to express how you would like your end-of-life care handled. If you haven’t made your preferences known, the state where you live will assign a close family member to make those decisions on your behalf. Having an advance directive may give you peace of mind.
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Information Document
Another important document is one that contains bank account information, passwords, insurance policies, contact information for attorneys, financial planners and any other significant data regarding your personal estate and final wishes. In the event of an emergency, it would be comforting for loved ones to have this important information at their fingertips.
For over 30 years, I have helped families with varying income levels and financial portfolios with their retirement planning. One of the most practical pieces of advice that I have given clients during this time is to plan for their future by ensuring their loved ones know and are able to carry out their final wishes.
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8407528a590dff2407819042a7c68c21 | https://www.forbes.com/sites/joeljohnson/2021/04/09/deciding-what-to-do-with-the-401ks-you-left-behind/ | Deciding What To Do With The 401(k)s You Left Behind | Deciding What To Do With The 401(k)s You Left Behind
If you’ve changed jobs throughout your career, chances are you have at least one or two 401(k)s with former employers. If you’re like most people, you’ve probably been unsure about what to do with that money and just left it in the plans. Now that time has passed and your financial decisions are more deliberate, you may be ready to determine the fate of those old 401(k)s. You have four basic options:
1. Leave your 401(k) exactly where it is
Doing nothing can be a conscious and very practical decision. Just because you can’t contribute to a former employer’s 401(k) doesn’t mean you have to take your money out of the plan. If you’re satisfied with the investment options and account performance, you aren’t required to make a move. If, however, you forget to monitor the account and you’re an “out of sight, out of mind” type person, then keeping your money with a former employer may not be the most suitable—and profitable—choice for you.
2. Rollover the money to your new employer’s 401(k) plan
There’s a lot to be said for consolidating your accounts, especially when you don’t have much time to manage your money. Having fewer account statements and balances to check makes it easier to keep track of your progress toward your retirement goals and monitor your asset allocation. And you’re more likely to make necessary changes promptly.
Before you attempt to move money into your current employer’s plan, check to be sure that the plan accepts rollovers. If it does, take a good hard look at the current plan’s investment offering. Is the core menu limited or is the range of choices broad enough to support proper diversification? Having a broad core investment menu is always important for a balanced, efficient portfolio, but it becomes even meaningful in the case of consolidated assets.
3. Rollover the money into a traditional IRA
Most of my clients choose this option and roll money into a new IRA rather than another 401(k) plan. They find that an IRA provides additional flexibility and control by allowing them to shop for investment options, including those with lower fees. When clients ask me if it’s risky to move into an IRA, I tell them that the answer depends on the type of investment they buy. If they’re investing their IRA in a short-term bond fund, then there’s very little risk; however, it’s a completely different story when their choice is an aggressive growth fund.
An easy way to execute a rollover is to open a new IRA account with a financial advisor or financial services company and have your 401(k) plan administrators transfer the funds directly to that new account. Direct rollovers escape the mandatory 20% tax withholding. If a plan administrator sends a check to you, you can enjoy the same tax advantages by having the check made out to your IRA account trustee or custodian (and not to you).
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4. Spend the money
As a financial adviser, I always counsel my clients against selecting this option. When you withdraw money from qualified retirement accounts, you sacrifice the opportunity for tax-deferred growth of your savings, increase your current tax bill, and jeopardize your future financial security. That’s a long list of cons and I cannot think of one pro.
It’s best to earmark 401(k) money for retirement and resist the temptation of withdrawing it or taking a loan to meet immediate needs. People get into trouble when they don’t have a source of emergency funds and have to turn to their retirement plans if they lose a job, have an uninsured medical problem, or face other unforeseen financial emergencies. It’s prudent to have a source of emergency savings you can tap in an instant to cover at least six months of living expenses.
There’s a lot to consider when it comes to making decisions about your older 401(k) accounts. Take the time you need to make a thoughtful decision and consider consulting a financial professional for information and personalized advice. A one-size-fits-all solution doesn’t exist. The right decision is the one that’s right for your individual situation.
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afc226ab679d8d7755a5ad350cc51066 | https://www.forbes.com/sites/joelkornblau/2014/06/27/abnormal-volume-stocks-to-watch-on-friday-11/ | Abnormal Volume Stocks To Watch On Friday | Abnormal Volume Stocks To Watch On Friday
Topping the list of stocks with abnormal volume in yesterday's trading is Brixmor Property Group (NYSE: BRX), with 28.2x normal volume. In the prior session, BRX traded 16.39 million shares, versus normal volume of approximately 581,705. Brixmor Property Group announced the pricing of a secondary offering of 29,950,000 shares of its common stock by certain selling stockholders affiliated with Blackstone Real Estate Partners at $22.50 per share. The underwriters have a 30-day option to purchase up to an additional 4,492,500 shares of common stock from the Selling Stockholders. The offering is expected to close on July 1, 2014, subject to customary closing conditions.
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Iron Mountain (NYSE: IRM) ranked #2 on the list, with 9.3x normal volume, based on the approximately 15.30 million shares trading in the last session, versus a calculated normal volume of 1.64 million. The board of directors of Iron Mountain, the storage and information management services company, has unanimously approved the company's conversion to a real estate investment trust for the taxable year beginning January 1, 2014, following the receipt of favorable private letter rulings from the Internal Revenue Service, including a ruling regarding the characterization of the company's steel racking structures as real estate for REIT purposes under the Internal Revenue Code.
Looking for abnormal volume stand-outs, we comb through the closing trading data for the Russell 1000 components, to find these stand-outs that traders will be interested to watch during Friday's upcoming session. To compile the list (see below), we first calculate "normal" volume for each stock by computing the average over the trailing three month period, and then we compare that figure against the volume seen during the session.
In the #3 spot, Bed, Bath & Beyond (NASD: BBBY) saw 6.5x normal trading volume, with 19.20 million shares trading in the session versus the usual 2.93 million. Bed Bath & Beyond reported net earnings of $.93 per diluted share in the fiscal first quarter ended May 31, 2014, compared with net earnings for the fiscal first quarter of 2013 of $.93 per diluted share. Net sales for the fiscal first quarter of 2014 were approximately $2.657 billion, an increase of approximately 1.7% from net sales of approximately $2.612 billion reported in the fiscal first quarter of 2013. Comparable sales in the fiscal first quarter of 2014 increased by approximately 0.4%, compared with an increase of approximately 3.4% in last year's fiscal first quarter.
Coming in at #4, Hilton Worldwide Holdings (NYSE: HLT) saw 4.5x normal trading volume, with volume of 15.54 million shares versus the usual 3.42 million. Hilton Worldwide Holdings announced the pricing of a secondary offering of 90,000,000 shares of Hilton Worldwide common stock by certain selling stockholders affiliated with The Blackstone Group L.P. at a price to the public of $22.50 per share. The underwriters have a 30-day option to purchase up to an additional 13,500,000 shares of common stock from the selling stockholders.
And finally, Lazard (NYSE: LAZ) ranked #5 on the list, with 3.6x normal volume, seeing about 2.73 million shares change hands, compared to normal volume of 754,227.
Comparing these stocks on a trailing twelve month basis, below is a relative stock price performance chart, with each of the symbols shown in a different color as labeled in the legend at the bottom:
Here's a table of the full top 10 stocks with abnormal volume:
Company Degree Above Normal Brixmor Property Group Inc (NYSE: BRX) 28.2x Iron Mountain Inc (NYSE: IRM) 9.3x Bed, Bath & Beyond, Inc. (NASD: BBBY) 6.5x Hilton Worldwide Holdings Inc (NYSE: HLT) 4.5x Lazard (NYSE: LAZ) 3.6x Intelsat SA (NYSE: I) 3.4x Weyerhaeuser Co. (NYSE: WY) 3.2x Dominion Resources Inc (NYSE: D) 3.1x Amdocs Ltd. (NASD: DOX) 3.1x Gannett Co Inc (NYSE: GCI) 3.0x
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4df60e9eef2ac93b4acbae17853d6617 | https://www.forbes.com/sites/joelkotkin/2011/01/24/why-affordable-housing-matters/ | Why Affordable Housing Matters | Why Affordable Housing Matters
Image via Wikipedia
Economists, planners and the media often focus on the extremes of real estate -- the high-end properties or the foreclosed deserts, particularly in the suburban fringe. Yet to a large extent, they ignore what is arguably the most critical issue: affordability.
This problem is the focus of an important new study by Demographia. The study, which focuses largely on English-speaking countries, looks at the price of housing relative to household income. It essentially benchmarks the number of years of a region's household income required to purchase a median-priced house.
Overall, the results are rather dismal in terms of affordability, particularly in what Wharton's Joe Gyourko dubs "superstar cities." These places -- such as London, New York, Sydney, Toronto and Los Angeles -- generally tend to be more expensive than second-tier regions commonly found in the American South and heartland.
Even with their usually higher incomes, these regions, for the most part, still have a ratio of five years median income to median house price; this is far higher than the historical ratio of three. In some areas the ratios are even more stratospheric. Sydney and Melbourne, for example, have ratios over nine; London, New York, San Jose and Los Angeles approach six or more.
Urbanists often assume that these high prices -- unprecedented in a tepid economy -- reflect the greater attractiveness of these regions. This is somewhat true, particularly for parts of London and New York, which can survive high ratios because their markets are less national and middle-income and more tied to the global upper classes.
In places like Mayfair or New York's Upper East Side, the buying "public" extends beyond the local market to high-income markets in places like the United Arab Emirates, Moscow, Shanghai, Singapore or Tokyo. Many owners are not full-time residents and consider a home in such places as just another expression of their wealth and privilege.
Yet such markets are exceptional. In most regions, the vast preponderance of homebuyers are either natives or long-term migrants. Their less glamorous tastes -- notably access to affordable single-family dwellings -- drives migration from one region to another. Over the past decade, and even since the crash, this has meant a general trend of migration from high-end, unaffordable markets to less expensive regions. In the U.S., for example, people have been flocking to the South, particularly the large metropolitan areas of Texas.
One factor driving this migration, the Demographia study reveals, is differing levels of regulation of land use between regions. In many markets advocacy for "smart growth," with tight restrictions on development on the urban fringe, has tended to drive up prices even in places like Australia, despite the relatively plentiful supply of land near its major cities.
More recently, "smart growth" has been bolstered by claims, not always well founded, that high-density development is better for the environment, particularly in terms of limiting greenhouse gases. Fighting climate change (aka global warming) has given planning advocates, politicians and their developer allies a new rationale for "cramming" people into more dense housing, even though most surveys show an overwhelming preference for less dense, single-family houses in most major markets across the English-speaking world.
Limits on the kind of residential living most people prefer inevitably raises prices. As the Demographia study shows, the highest rise in prices relative to incomes generally has taken place in wherever strong growth controls have been imposed by local authorities.
Perhaps the poster child for "smart growth" has been the U.K. Long before the climate change debate, both of England's major parties embraced the notion of strict constraints on suburban development -- not only in London, but across the country. As a result, even places with weak economies are not as affordable as they should be. Liverpool, Newcastle and the Midlands have affordability rates higher than Toronto, Boston, Miami and Portland -- and not much lower than those of New York or Los Angeles.
But the most remarkable impact of "smart growth" policies has been in Australia, which once had among the most affordable housing prices in the English-speaking world. Houses in Sydney and Melbourne, for example, are now less affordable than in London or San Francisco. Even secondary markets like Adelaide and Perth are more expensive than Toronto, New York, Los Angeles or Chicago. Most recently these policies have even caught the attention of the OECD, which linked overly regulated housing markets not only to the Great Recession, but to a continued slow economic recovery.
Compared with the U.K. and Australia, the U.S. housing market is more hopeful, with a host of regions -- notably Houston, Dallas, Austin, San Antonio, Phoenix and Kansas City -- with affordability rates around three and under. Low prices by themselves, of course, are no guarantor of success; in economically challenged places like Detroit and Cleveland, out-migration and high unemployment have driven prices down.
But in many, if not most, cases affordability has promoted economic and demographic growth. Generally speaking, affordable markets tend to draw migrants from overpriced ones, for example to Houston or Austin from Los Angeles or New York.
Nor is this necessarily a case of "smart" people heading to dense, expensive cities while the less cognitively gifted head to the low-cost regions -- as news outlets like The Atlantic have claimed. In fact, the American Community Survey reveals that between 2007 and 2009 college graduates generally gravitated toward lower-cost, less dense markets -- such as Austin, Houston and Nashville -- than to the highly constrained, denser ones. Overall growth in affordable markets -- with a ratio of three or four -- among college graduates was roughly 5%; in the more expensive places , it was barely 3%.
How could this be, if everyone with an above-a-room-temperature IQ supposedly favors hip, cool, dense cities? Perhaps it's because of factors often too small or mundane for urban pundits to acknowledge. Most people, particularly as they enter their 30s, aspire to a middle-class lifestyle -- and being able to afford a house constitutes a large part of that.
So what does this tell us about future growth? Clearly affordability matters. Areas that combine strong income and job growth, along with affordable housing, are poised to do best. This will be particularly true once the economy recovers and a new generation of millennial buyers, entering their 30s in huge numbers over the next decade, start their search for a place where they can settle down and start raising families.
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2cedc8bef5150002b0712695a657dc90 | https://www.forbes.com/sites/joelkotkin/2011/08/15/u-k-riots-global-class-war/ | The U.K. Riots And The Coming Global Class War | The U.K. Riots And The Coming Global Class War
Image by Getty Images via @daylife
The riots that hit London and other English cities last week have the potential to spread beyond the British Isles. Class rage isn't unique to England; in fact, it represents part of a growing global class chasm that threatens to undermine capitalism itself.
The hardening of class divisions has been building for a generation, first in the West but increasingly in fast-developing countries such as China. The growing chasm between the classes has its roots in globalization, which has taken jobs from blue-collar and now even white-collar employees; technology, which has allowed the fleetest and richest companies and individuals to shift operations at rapid speed to any locale; and the secularization of society, which has undermined the traditional values about work and family that have underpinned grassroots capitalism from its very origins.
All these factors can be seen in the British riots. Race and police relations played a role, but the rioters included far more than minorities or gangsters. As British historian James Heartfield has suggested, the rioters reflected a broader breakdown in "the British social system," particularly in "the system of work and reward."
In the earlier decades of the 20th century working class youths could look forward to jobs in Britain's vibrant industrial economy and, later, in the growing public sector largely financed by both the earnings of the City of London and credit. Today the industrial sector has shrunk beyond recognition. The global financial crisis has undermined credit and the government's ability to pay for the welfare state.
With meaningful and worthwhile work harder to come by -- particularly in the private sector -- the prospects for success among Britain working classes have been reduced to largely fantastical careers in entertainment, sport or all too often crime. Meanwhile, Prime Minister David Cameron's supporters in the City of London may have benefited from financial bailouts arranged by the Bank of England, but opportunities for even modest social uplift for most other people have faded.
The great British notion of idea of working hard and succeeding through sheer pluck -- an idea also embedded in the U.K.'s former colonies, such as the U.S. -- has been largely devalued. Dick Hobbs, a scholar at the London School of Economics, says this demoralization has particularly affected white Londoners. Many immigrants have thrived doing engineering and construction work as well as in trades providing service to the capital's affluent elites.
A native of east London himself, Hobbs maintains that the industrial ethos, despite its failings, had great advantages. It centered first on production and rewarded both the accumulation of skills. In contrast, by some estimates, the pub and club industry has been post-industrial London's largest source of private-sector employment growth, a phenomena even more marked in less prosperous regions. "There are parts of London where the pubs are the only economy," he notes.
Hobbs claims that the current "pub and club," with its "violent potential and instrumental physicality," simply celebrates consumption often to the point of excess. Perhaps it's no surprise that looting drove the unrest.
What's the lesson to be drawn? The ideologues don't seem to have the answers. A crackdown on criminals -- the favored response of the British right -- is necessary but does not address the fundamental problems of joblessness and devalued work. Similarly the left's favorite panacea, a revival of the welfare state, fails to address the central problem of shrinking opportunities for social advancement. There are now at least 1 million unemployed young people in the U.K., more than at any time in a generation, while child poverty in inner London, even during the regime of former Mayor "red Ken" Livingstone last decade, stood at 50% and may well be worse now.
This fundamental class issue is not only present in Britain. There have been numerous outbreaks of street violence across Europe, including in France and Greece. One can expect more in countries like Italy, Spain and Portugal, which will now have to impose the same sort of austerity measures applied by the Cameron government in London.
And how about the United States? Many of the same forces are at play here. Teen unemployment currently exceeds 20%; in the nation's capital it stands at over 50%. Particularly vulnerable are expensive cities such as Los Angeles and New York, which have become increasingly bifurcated between rich and poor. Cutbacks in social programs, however necessary, could make things worse, both for the middle class minorities who run such efforts as well as their poor charges.
A possible harbinger of this dislocation, observes author Walter Russell Mead, may be the recent rise of random criminality, often racially tinged, taking place in American cities such as Chicago, Milwaukee and Philadelphia.
Still, with over 14 million unemployed nationwide, prospects are not necessarily great for white working- and middle-class Americans. This pain is broadly felt, particularly by younger workers. According to a Pew Research survey, almost 2 in 5 Americans aged 18 to 19 are unemployed or out the workforce, the highest percentage in three decades.
Diminished prospects -- what many pundits praise as the "new normal" -- now confront a vast proportion of the population. One indication: The expectation of earning more money next year has fallen to the lowest level in 25 years. Wages have been falling not only for non-college graduates but for those with four-year degree as well. Over 43% of non-college-educated whites complain they are downwardly mobile.
Given this, it's hard to see how class resentment in this country can do anything but grow in the years. Federal Reserve Chairman Ben Bernanke claimed as early as 2007 that he was worried about growing inequality in this country, but his Wall Street and corporate-friendly policies have failed to improve the grassroots economy.
The prospects for a widening class conflict are clear even in China, where social inequality is now among the world's worse . Not surprisingly, one survey conducted the Zhejiang Academy of Social Sciences found that 96% of respondents "resent the rich." While Tea Partiers and leftists in the U.S. decry the colluding capitalism of the Bush-Obama-Bernanke regime, Chinese working and middle classes confront a hegemonic ruling class consisting of public officials and wealthy capitalists. That this takes place under the aegis of a supposedly "Marxist-Leninist regime" is both ironic and obscene.
This expanding class war creates more intense political conflicts. On the right the Tea Party -- as well as rising grassroots European protest parties in such unlikely locales as Finland, Sweden and the Netherlands -- grows in large part out of the conviction that the power structure, corporate and government, work together to screw the broad middle class. Left-wing militancy also has a class twist, with progressives increasingly alienated by the gentry politics of the Obama Administration.
Many conservatives here, as well as abroad, reject the huge role of class. To them, wealth and poverty still reflect levels of virtue -- and societal barriers to upward mobility, just a mild inhibitor. But modern society cannot run according to the individualist credo of Ayn Rand; economic systems, to be credible and socially sustainable, must deliver results to the vast majority of citizens. If capitalism cannot do that expect more outbreaks of violence and greater levels of political alienation -- not only in Britain but across most of the world's leading countries, including the U.S.
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32504c8e9065519abf585a3b96cde841 | https://www.forbes.com/sites/joelkotkin/2011/08/23/inside-the-sinosphere/ | Inside The Sinosphere: China's New "Diaspora" Economy | Inside The Sinosphere: China's New "Diaspora" Economy
Image via Wikipedia
This piece was co-written with Hee Juat Sim.
Avis Tang, a cool, well-dressed software company executive, lives on the glossy frontier of China's global expansion. From his perch amid tower blocks of Tianfu Software Park on the outskirts of the Sichuan capital of Chengdu, the 48-year-old graduate of Taiwan's National Institute of the Arts directs a team of Chinese software engineers who are developing computer games for his Beijing company, Perfect World Network Technology, for the Asian and world market.
A glossy software office in Chengdu seems a long way from the images of centrally directed, belching factories seeking to dominate the global economy. But a close examination of the emerging Sinosphere--or Chinese sphere of influence--shows an economy that is globally dispersed, multinational and increasingly focused on the high-tech and service sectors.
Yet if Tang came to China to work for Interserv, a Taiwan game developer, he would see that the future of his industry--including its creative side--lies not only in the coastal cities but, increasingly, in those stretching across the vast Chinese interior. "In ten years perhaps all these cities will follow the path of Shanghai," says Tang, as technology allows businesses that once had to situate themselves in coastal megacities to expand into the interior.
Widely considered one of the most "livable" of China's big cities, Chengdu seems to Tang something of an incipient Silicon Valley. The area's software revenues increased more than tenfold over the past decade, while an estimated 200,000 people are expected to be working in the city's software industry by 2012.
Like many of his fellow managers at the sprawling park, home to over 800 foreign-owned companies, Tang is not a citizen of China. He's from Taiwan and never set foot in the People's Republic before 2001. His wife remains in Taiwan (Tang flies there every month or two to see her).
Chinese capitalism has relied on diaspora entrepreneurs like Tang. In this sense, the rise of China represents the triumph of a race and a culture. Indeed for most of its history China's most important export was not silk or porcelain but people. To measure the rise of the Sinosphere, one has to consider not just China itself but what historian Lynn Pan has described as the "sons of the Yellow Emperor."
The Sinosphere's roots lie with the Han expansion into southern China during the Tang dynasty (618-907). By the 12th century, the newly Sinofied southern Chinese had started moving south. There they created trade-oriented colonies like Vietnam, Burma, Malaya and the island of Java. In the 1600s Chinese settlers overcame the aboriginal inhabitants of Taiwan, creating another powerful base in the South China Sea.
At its height, during the expeditions of the legendary eunuch Admiral Zheng Hein in the early 15th century, China's maritime "sphere of influence" extended all the way to the Indian Ocean and beyond.
Although ensuing Chinese regimes pulled back from expansion and all but abandoned their scattered children, the colonies, particularly in Southeast Asia, survived. They developed business and industries suitable to their new homes, but also maintained their cultural heritage and language. After the Chinese Communist takeover of the mainland in 1949, the diaspora colonies retained their capitalist orientation. Many established trading operations and sent their children to the United States, Canada and Australia, where they enjoyed remarkable success.
Hong Kong, Singapore, Taipei, Rangoon, Bangkok and Jakarta can be seen as the original testing grounds for Chinese capitalism. In the past few decades North American regions such as Silicon Valley, Southern California, Toronto, Vancouver and New York-New Jersey have been added to the mix. Overall the entire overseas Chinese population has risen to nearly 40 million. Taiwan, which is de facto independent, is home to an additional 23 million, and Hong Kong and Macau, officially part of China but governed under different laws, boasts some 7.5 million.
Even today the ties between overseas Chinese and their home country remain close. The original diaspora countries—including Hong Kong–remain principal sources of investment into China. Among the ten largest sources for inbound investment to the PRC are Hong Kong, by far the largest investor, fourth-ranked Singapore and ninth-ranked Taiwan. Each brings more investments into China than such major powers as Germany, France, India and Russia. The United States, home to the largest overseas Chinese population outside Asia, ranks fifth.
Other investments come from places like British Virgin Islands, the Cayman Islands and Samoa, which often act as conduits for investors who do not want to be too closely monitored. This seems to include many Chinese investors, particularly in Taiwan, who may not want too much scrutiny of their outlays into the PRC. This includes even Chinese government -owned firms such as China Mobile Communication Corp., which has established an investment HUB in the far away British Virgin Islands.
As China itself has become wealthier, financial flows from the diaspora have continued to increase. Hong Kong's investment into China grew from $18 billion in 2005 to $45 billion four years later. Singapore's investment surged from $2.2 billion to $4.1 billion in the same years. This has occurred while new investment from such powerhouses as the United States, Japan, Korea and Germany has stagnated or even dropped.
The second phase of the Sinosphere has been dominated largely by industrial projects, many of them financed or helped technologically by the diaspora. Much of trade, initially, was targeted to the rich consumer markets of North America, Europe and Japan. Between just 2007 and 2009 China's share of world exports expanded from 7% to 9%.
But today the Sinosphere's trade flow is shifting. An analysis of trade growth between 2005 and 2009 shows a significant change in focus away from advanced countries to the developing world. In the second half of the last decade, for example, trade with the United States, Japan, Germany, South Korea and the Netherlands grew by less than 50%. In contrast, commerce with key developing countries--including Afghanistan, Tajikistan, Mauretania, the Democratic Republic of the Congo, Liberia Turkmenistan, Iraq and Laos--grew ten times. Trade with large emerging economies, notably Brazil, India, Mexico and South Africa, increased five times during the same period.
China's thirst for resources is a big driver of this shift. Now the world's largest car market and consumer of energy, China is in great need of oil, gas, and other natural resources. It also requires vast amounts of foodstuffs, notably corn and soybeans, for its increasingly urbanized population.
Two of China's new trade thrusts follow historic patterns of expansion, the first being growing investment in the Mekong Delta and Southeast Asia (Laos, Vietnam, Myanmar, Thailand, Cambodia and Malaysia). For 2010, Chinese invested $7.15 billion in energy projects alone in Myanmar. On the military side, this also includes moves by China to secure offshore islands for energy development, which is a potential source of conflict with Vietnam, the Philippines and Japan.
The second big expansion is along the old "silk road" connecting eastern China to the energy and mineral rich "stans" of Central Asia. This shift enhances the importance of inland Chinese cities, such as Xi'an, Chengdu and Chongqing, which are natural entrepots for central Asian trade. Perhaps even more important may prove the role of Kashgar, which was designated last year as the Special Economic Zone. Sitting on the western edge of the Xinjiang Uyghur Autonomous Zone near the border of Tajikistan, the Chinese envision Kashgar as the main rail and air link to the stans. Recent disturbances by the local Muslim majority, however, could threaten these ambitious plans.
As China's economy and wealth has grown, it has moved from being merely a recipient of inbound investment into a major exporter of capital. China's outbound investment is growing much faster, rising 21% in just the past year; its overseas investment overall has grown from 53.3 billion in 2005 to 224.4 billion in 2009.
Although still the largest destination for foreign investment, the country has vaulted into the top four in terms of outbound outlays just behind the U.S., Japan and the U.K. It is not inconceivable that China could challenge the U.S. as the world's top foreign investor.
The country's investment strategy seems to be following two powerful trends. One has to do with the acquisition of resources to feed the Chinese industrial machine and its growing consumer market. This explains the rapid growth of investment into the Middle East, South America and Africa. Four of the five fastest-growing investment areas for large scale investments--South Africa, Canada, Nigeria and Australia--are all major commodity exporters. Chinese investment in these countries has been growing from three to five times as quickly as those in the U.S. or Western Europe.
The second, less obvious, trend relates to the idea that these countries, with generally faster growing populations, represent the most lucrative future markets for Chinese exporters. This may be best seen in the rapid growth of Chinese government grants as well as the provision of interest-free and concessional bank loans, such as those provided by the government's Exim bank, primarily to Chinese companies seeking to invest in developing nations, especially Africa, over the past decade. PRC financial backing for companies and projects in countries such as Angola, India, Equatorial Africa, Turkey, Egypt, the Congo and Algeria have grown over 100 times since 2005. Other key developing countries such as South Africa, Ethiopia, Somalia and Ghana all saw increases of tenfold or more.
These developments tell us something of the future of the Sinosphere. It will be largely funded by the Chinese and their diaspora, less focused on the West and more on developing countries, including increasingly those outside the traditional stomping grounds of Chinese entrepreneurs. The emerging Sinosphere is also likely to be somewhat less focused on manufacturing and more on services like real estate, finance and high-technology exports. This is partially due to the appeal, for manufacturers, of less expensive, more youthful countries like Bangladesh, Vietnam and Myanmar. Wages for manufacturing workers in the Philippines, Vietnam and Indonesia are now less than half of those in China.
These shifts are already evident by looking at recent trends in inbound investment to China, much of it from the diaspora and tax havens. Between 2005 and 2009, for example, industrial investment fell from 70% to barely 50% in 2009. The total investment in industry has remained stagnant while dollars into scientific research have grown almost five-fold. We can expect more of this as China prepares to challenge America, Japan and other advanced countries in basic research. At the same time investment into real estate has tripled, while both software and financial flows have more than doubled.
All this explains the importance Chinese officials place on expatriates like the Taiwan-born Tang. In the 1980s and 1990s Taiwanese and Hong Kong firms spearheaded the development of China's manufacturing prowess. Now the mainland leadership hopes that high-tech executives such as Tang will nurture and direct China's leap into the first ranks of the global digital economy, with Perfect World's Chengdu engineers epitomizing the future imagined by China's aggressive regional officials. The fact that the company's games are based largely on Chinese mythology makes the effort an even more natural fit. But Perfect World is not just looking at the Chinese or diaspora markets; it is also marketing aggressively to young gamesters in Europe and North America.
All this can be seen as a direct challenge to the long dominant software and entertainment industries of the West, heretofore largely unchallenged by China. In a world increasingly 'SINOFIED' there may be huge potential for Sinosphere companies to move beyond exporting tangible goods, and increase their trade in ideas and culture to the rest of the world.
"We are well on our way," Tang explains from his perch in Chengdu. "China's move into this kind of business is just beginning."
Joel Kotkin, a regular columnist for Forbes.com, is a presidential fellow in Urban Futures at Chapman University and an adjunct fellow for the Legatum Institute, which supported this research. He is a senior visiting fellow at the Civil Service College in Singapore.
Sim Hee Juat is currently a research associate with the Centre for Governance and Leadership at the Civil Service College of Singapore. The maps were created by Ali Modarres, Chairman of the Geography Department at California State University, Los Angeles.
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5513d373c4dfe8b309ea794e54c2af25 | https://www.forbes.com/sites/joelkotkin/2012/05/30/whats-really-behind-europes-decline-its-the-birth-rates-stupid/ | What's Really Behind Europe's Decline? It's The Birth Rates, Stupid | What's Really Behind Europe's Decline? It's The Birth Rates, Stupid
(Image credit: AFP/Getty Images via @daylife)
The labor demonstrators, now an almost-daily occurrence in Madrid and other economically-devastated southern European cities lambast austerity and budget cuts as the primary cause for their current national crisis. But longer-term, the biggest threat to the European Union has less to do with government policy than what is--or is not--happening in the bedroom.
In particular, southern Europe’s economic disaster is both reflected -- and is largely caused by -- a demographic decline that, if not soon reversed, all but guarantees the continent’s continued slide. For decades, the wealthier countries of the northern countries -- notably Germany -- have offset very low fertility rates and declining domestic demand by attracting migrants from other countries, notably from eastern and southern Europe, and building highly productive export oriented economies.
In contrast, the so-called Club Med Countries-- Greece, Italy, Portugal and Spain--have not developed strong economies to compensate for their fading demographics outside pockets of relative prosperity such as Milan. Spain was once one of Europe’s star performers, buoyed largely by real estate speculation and growing integration with the rest of the EU. Six years ago the country was building upwards of 50% as many houses as the US while having 85% less population. Roughly six million immigrants came to work in the boom, even as roughly seven to eight percent of Spaniards preferred to remain unemployment.
When the real estate bubble broke, there was only limited productive industry to step into the breach. In Spain, private sector credit has dropped for a remarkable eighteen straight months while industrial production has fallen precipitously--7.5 percent in March alone. Spain’s unemployment rate has scaled over 23%, more than twice the EU average. Unemployment among those under 25 in both Spain and Greece now reaches over fifty percent.
After decades of expansion, even fashionable Madrid is littered with store vacancies and ubiquitous graffiti; many young people can be seen on the street in the middle of the week, either doing nothing or trying to pick up an odd Euro or two performing for tourists.
'A Change In Values'
Economists tend to explain this decline in terms of budget deficits and failed competitiveness, but some Spaniards believe the main cause lies elsewhere. Alejandro MacarrónLarumbe, a Madrid-based management consultant and author of the 2011 book, Elsuicidiodemográfico de España, says today’s decline is “almost all about a change in values.”
A generation ago Spain was just coming out of its Francoist era, a strongly Catholic country with among the highest birth rates in Europe, with the average woman producing almost four children in 1960 and nearly three as late as 1975-1976. There was, he notes, “no divorce, no contraception allowed.” By the 1980s many things changed much for the better better, as young Spaniards became educated, economic opportunities opened for women expanded and political liberty became entrenched.
Yet modernization exacted its social cost. The institution of the family, once dominant in Spain, lost its primacy. “Priorities for most young and middle-aged women (and men) are career, building wealth, buying a house, having fun, travelling, not incurring in the burden of many children,” observes Macarron. Many, like their northern European counterparts, dismissed marriage altogether; although the population is higher than it was in 1975, the number of marriages has declined from 270,000 to 170,000 annually.
Falling Births, Falling Fortunes
Now Spain, like much of the EU, faces the demographic consequences. The results have been transformative. In a half century Spain’s fertility rate has fallen more than 50% to 1.4 children per female, one of the lowest not only in Europe, but also the world and well below the 2.1 rate necessary simply to replace the current population. More recently the rate has dropped further at least 5 percent.
Essentially, Spain and other Mediterranean countries bought into northern Europe’s liberal values, and low birthrates, but did so without the economic wherewithal to pay for it. You can afford a Nordic welfare state, albeit increasingly precariously, if your companies and labor force are highly skilled or productive. But Spain, Italy, Greece and Portugal lack that kind of productive industry; much of the growth stemmed from real estate and tourism. Infrastructure development was underwritten by the EU, and the country has become increasingly dependent on foreign investors.
Unlike Sweden or Germany, Spain cannot count now on immigrants to stem their demographic decline and generate new economic energy. Although 450,000 people, largely from Muslim countries, still arrive annually, over 580,000 Spaniards are heading elsewhere -- many of them to northern Europe and some to traditional places of immigration such as Latin America. Germany, which needs 200,000 immigrants a year to keep its factories humming, has emerged as a preferred destination.
Declining Population
As a result Spain could prove among the first of the major EU countries to see an actual drop in population. The National Institute for Statistics (INE) predicts the country will lose one million residents in the coming decade, a trend that will worsen as the baby boom generation begins to die off. The population of 47 million will drop an additional two million by 2021. By 2060, according to Macarron, Spain will be home to barely 35 million people.
This decline in population and mounting out-migration of young people means Spain will experience ever-higher proportions of retired people relative to those working. This “dependency rate”, according to INE, will grow by 57 % by 2021; there will be six people either retired or in school for every person working.
If Spain, and other Mediterranean countries, cannot pay their bills now, these trends suggest that in the future they will become increasingly unable or even unwilling to do so. As Macarron notes, an aging electorate is likely to make it increasingly difficult for Spanish politicians to tamper with pensions, cut taxes and otherwise drive private sector growth. Voters over 60 are already thirty percent of the electorate up from 22 percent in 1977; in 2050, they will constitute close to a majority.
Without a major shift in policies that favor families in housing or tax policies, and an unexpected resurgence of interest in marriage and children, Spain and the rest of Mediterranean face prospects of a immediate decline every bit as profound as that experienced in the 17th and 18th Century when these great nations lost their status as global powers and instead devolved into quaintlocales for vacationers, romantic poets and history buffs.
Long before that happens, today’s Mediterranean folly could drive the rest of Europe, and maybe even the world, into yet another catastrophic recession.
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f899dfc487603e80640ca394696483ae | https://www.forbes.com/sites/joelkotkin/2012/06/20/thunder-on-the-great-plains-once-written-off-region-enjoying-remarkable-revival/ | Thunder On The Great Plains: Once Written-Off Region Enjoying Remarkable Revival | Thunder On The Great Plains: Once Written-Off Region Enjoying Remarkable Revival
Gallery: The Best Big Cities For Jobs 11 images View gallery
They may not win their first championship against Miami’s evil empire, but the Oklahoma City Thunder have helped to put a spotlight on what may well be the most surprising success story of 21st century America: the revival of the Great Plains. Once widely dismissed as the ultimate in flyover country, the Plains states have outperformed the national average for the past decade by virtually every key measure of vitality -- from population, income and GDP growth to unemployment -- and show no sign of slowing down.
It's a historic turnaround. For decades, the East Coast media has portrayed the vast region between Texas and the Dakotas as a desiccated landscape of emptying towns, meth labs and right-wing “clingers.” Just five years ago, The New York Times described the Plains as “not far from forsaken.”
Many in the media and academia embraced Deborah and Frank Popper’s notion that the whole region should be abandoned for “a Buffalo commons.” The Great Plains, the East Coast academics concluded, represents “the largest, longest-running agricultural and environmental miscalculation in American history” and boldly predicted the area would “become almost totally depopulated.”
Yet a funny thing happened on the way to oblivion. Rising commodity prices, the tapping of shale gas and oil formations and an unheralded shift of industry and people into the interior has propelled the Plains economy through the Great Recession.
Since 2000, the Plains’ population has grown 14%, well above the national rate of 9%. This has been driven by migration from the coasts, particularly Southern California, to the region’s cities and towns. Contrary to perceptions of the area as a wind-swept old-age home, demographer Ali Modarres has found that the vast majority of the newcomers are between 20 and 35.
Oklahoma City epitomizes these trends. Over the last decade, the city’s population expanded 14%, roughly three times as fast as the San Francisco area and more than four times the rate of growth of New York or Los Angeles. Between 2010 and 2011 OKC ranked 10th out of the nation’s 51 largest metropolitan areas in terms of rate of net growth.
Nothing more reflects the changing fortunes of Oklahoma City than the strong net migration from many coastal communities, notably Los Angeles and Riverside, a historic reversal of the great “Okie” migration of the 1920s and 1930s. In the past decade, over 20,000 more Californians have migrated to Oklahoma than the other way around. OKC has even experienced a small net migration from the Heat’s South Florida stomping grounds.
The city’s transformation from a cow town into an attractive, modern metropolis has been fueled by some $2 billion in public investment and over $5 billion in private investment, says Roy Williams, president of the Oklahoma City Chamber of Commerce. Besides the arena for the Thunder, the city has engineered a successful riverfront development known as Bricktown, fostered a growing arts scene and become more ethnically diverse, largely as a result of immigration from Mexico.
This pattern of revived urbanization can be seen in other Plains cities. World-class art museums grace Ft. Worth's Cultural District, and downtown in Omaha, Neb., has become a lively venue bristling with revelers on weekends. Even downtown Fargo, N.D., now boasts a boutique hotel, youth-oriented bars, interesting restaurants and a small, but vibrant arts scene.
Great Plains cities are doing well, however, predominantly due to their strong record of economic growth. Over a decade in which most large metropolitan areas lost jobs, Ft. Worth, Dallas, Oklahoma City and Omaha have created employment. Unlike many Bush-era boom towns, such as Las Vegas, Riverside-San Bernardino, Calif., or the major Florida cities, the Plains did not hemorrhage jobs during the Great Recession.
The Plains states enjoy some of the lowest unemployment rates in the country. There were seven states with unemployment of 5% or less in April; four are on the Plains: North Dakota, with the nation’s lowest jobless rate at 3%, South Dakota, Nebraska, Iowa and Oklahoma.
This is partly due to a booming energy industry. As U.S. oil and gas production has surged over the past decade, the Plains' share has grown from roughly a third to nearly 45%. The biggest two gainers, Texas and Oklahoma, together boosted their energy employment by 220,000.
But the Great Plains' economic dynamism extends well beyond energy. The region’s farms and ranches cover an area exceeding 500 million acres,or over 790,000 square miles -- larger than Mexico -- and account for roughly a quarter of the nation’s agricultural production. These farms have benefited from the long-term increase in food commodity prices -- notably wheat, corn, soybeans -- and record exports. Since 2007 the Plains share of food shipments abroad has surged from 20% to nearly 25%.
At the same time, the region’s industrial sector, notes research by Praxis Strategy Group’s Mark Schill, has withstood the recession better than the rest of the nation. Never a center of unionized mass manufacturing, the region has become a location of choice for expanding industries, in part due to low costs, cheap energy and a favorable regulatory environment.
They know all about this in Oklahoma . Last year the Sooner State led the nation in industrial growth. One major coup: a large Boeing facility moved last year from California to OKC. The Dakotas and Nebraska also sit in the top ranks of producers of new industrial jobs. Since 2007, the Plains states have boosted their share of U.S. manufactured good from 19% to 21%.
More surprising still has been the region’s surge in employment in jobs related to science, technology, engineering and math. This has been spearheaded, of course, by Texas, but most other Plains states -- North Dakota, South Dakota, Oklahoma -- also have enjoyed well above average tech job growth. North Dakota, remarkably, now boasts the second-highest percentage of people 25 to 44 with a post-secondary education, behind only Massachusetts; it also has one of the highest rates of high-tech startups in the nation.
Given their generally strong state budgets, the Plains states have continued to pour more resources per capita into university-related research than their counterparts elsewhere. North Dakota ranks number one here, but South Dakota, Oklahoma, Kansas, Montana and Texas all rank in the top 10.
None of this suggests that the Plains are ready to bid for primacy as high-tech centers with California or Massachusetts, or Ohio and Michigan as the country’s industrial bastions. For all their improved amenities, Omaha, Ft. Worth or Oklahoma City seem unlikely to surpass New York City as the nation’s cultural, restaurant or financial capital in our lifetimes.
Yet it seems clear that the region, long dismissed as irrelevant, will play a much larger role in the nation’s economic future. Like the young Thunder, the people of the Plains now have a prairie wind at their back.
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f4e7018c5300d0ea11bf5fe211ed0317 | https://www.forbes.com/sites/joelkotkin/2012/06/26/u-s-desperately-needs-immigrants-and-a-strategy-to-get-the-right-ones/ | U.S. Desperately Needs Immigrants And A Strategy To Get The Right Ones | U.S. Desperately Needs Immigrants And A Strategy To Get The Right Ones
Immigration-rights activists stage a rally calling for the government to act on immigration... [+] legislation, outside the venue of President Barack Obama's Democratic Congressional Campaign Committee fundraiser in Los Angeles on August 16, 2010. (Image credit: AFP via @daylife)
President Obama’s recent “do it myself” immigration reform plan, predictably dissed by conservatives and nativists, reveals just how clueless the nation’s leaders are about demographics. Monday’s Supreme Court ruling on Arizona's immigration crackdown also broke down along predictable lines, with both parties claiming ideological victories.
Yet the heated debates are missing the reality of immigration and its role in America’s future. In reality America needs more immigrants, but with a somewhat different mix.
Rather than an issue of “values” or political sentiment, we need to look at immigration as a matter of arbitrage, a process by which rapidly aging countries bid for the skills and energies of newcomers to keep their economies afloat.
Nowhere is this immigration arbitrage clearer than in the world’s most rapidly aging region, Europe. By 2050 the workforce there is expected to decline by as much as 25%. Yet this diminishing resource is now increasingly on the march as young Greeks, Italians and Portuguese flee to stronger economies in Europe’s Nordic belt and elsewhere. An estimated half million left Spain last year alone. Ireland, which in recent decades actually attracted new migrants, was exporting a thousand people a week last year. In recession-wracked Britain, a 2010 poll found nearly half of the population would like to move elsewhere.
Germany, with its ultra-low birthrate and rapidly aging population, has emerged as a primary migration beacon. Germany needs about 200,000 new migrants ever year to keep its economic engine humming. For decades, newcomers from Turkey and other Islamic countries have flocked there, but this migration has failed to deliver much added value due to their general lack of skills and divergent cultural values. So the Germans -- as they did back in the 1960s -- look to harvest the diminishing pool of skilled workers from equally aging states on the EU's southern periphery.
But it’s not simply a matter of a one-way south to north flow. Other EU countries, such as Italy, are playing the immigration arbitrage game by importing young workers from rapidly depopulating southeastern Europe. Milan, for example, added 634,000 foreign residents in just eight years (2000 to 2008), the largest share from Romania, followed by Albania. Over the period, more than 80% of Lombardy's growth has come as a result of international immigration.
But immigration arbitrage is more than a simple numbers game. As Europe learned through its bitter experience with immigration from North Africa and the Middle East, importing populations without necessary skills and attitudes useful for the modern economy can produce unhappy results. The key issue is how to attract and select immigrants likely to contribute to the national well-being and economic competitiveness.
Almost everywhere in the world, there are shortages of skills ranging from construction to advanced engineering. Much of contemporary immigration to East Asia reflects the need for workers -- largely from India, Bangladesh, Indonesia and Sri Lanka -- to perform tasks considered “dirty, dangerous and difficult” (or 3-D). Singapore and Hong Kong also have a bull market for high-end workers in order to maintain their increasingly financial and technology-oriented economies.
But skills should not be conflated merely with university degrees. Education is no longer a guarantor of productivity; the degree, once a sign of distinction, has become a commodity. Many disciplines have little net positive economic impact. Few countries likely suffer shortages of post-modernist literature graduates, performance artists or lawyers.
Opening the doors to undocumented high school graduates, many with no real marketable skills, as President Obama just did, may not have a great positive long-term effect on the economy. Perhaps it would be better if our immigration policies were less about politics, and ethnic constituencies, and more about gaining specific skills and abilities from other countries, including from Mexico’s growing ranks of educated and skilled workers.
Some countries, such as Canada, Australia and Singapore, already have made major accommodations favoring skilled or entrepreneurial immigrants. The United States, to its great disadvantage, has been slow in this regard. In 2011 barely 13% of all American immigrants came as a result of employment-based preferences, down from 18% 20 years ago. Family reunification should remain a cornerstone of immigration but needs to give way substantially to a more skills-oriented policy.
America’s approach is particularly baffling given our looming skills shortages. The reviving auto industry is already running short of craftspeople such as numerical machine tool operators. In fact, David Cole, chairman of the Center for Automotive Research, predicts that as the industry tries to hire upwards of 100,000 workers, they will start running out of people with the proper skills as early as next year.
This shortage is also intense in many engineering and technically oriented fields. The Pittsburgh area alone has 1,500 engineering job openings. The Great Lakes Metro Coalition, covering 12 states, is advocating for a federal immigration policy focused on attracting highly skilled talent. Government and business leaders in economically healthy parts of the Great Plains, Texas and Utah now consider persistent skilled labor shortfalls -- particularly in science and technical fields -- as the greatest barrier to continued growth.
Immigration policy should also look to bring in more entrepreneurs. As business start-ups overall have slowed, immigrants continue to launch new businesses. Today fully one-fifth of all American businesses are owned by immigrants, up from 12% two decade ago. Many of these are located in suburbs and small towns, where together a majority of immigrants see opportunities and a better quality of life.
These qualitative distinctions may be lost on many in the pundit class. As a decline in Mexican immigration has driven overall immigration down below 2009 levels, the number of Asian newcomers is once again growing. Their share of annual new arrivals has risen over the past two years from 36% to 42%.
Asians increasingly do not come for just economic opportunity -- there’s often more of that at home -- but to attain things almost impossible in their native countries such as a single-family homes with a backyard and less congested, tree-shaded neighborhoods. For some, like migrants from China, political and religious freedom also is often a major attraction.
This is good news for the future. As a Pew report recently pointed out, Asian immigrants tend to possess many of the characteristics this country sorely needs: a commitment to education, family and entrepreneurship. McKinsey suggests China and India will produce 184 million new college graduates over the next 10 years; this provides a vast pool of which the U.S. has only to pick up a small portion to boost its economy.
This is not to argue for a policy based on ethnicity or geography. There are hard-working, skilled immigrants to be had from the poorest countries in Latin America or Africa. If you want to see this, go to any strip mall around Houston, Los Angeles or northern New Jersey.
We need to target immigrants most likely to help our advanced industries, start businesses and families, and whose descendants will provide critical demographic vibrancy. There may soon be many such people looking to move from places like the Middle East, particularly Christians or liberal Muslims threatened by rising Islamism. There also should be policies to welcome restless young Europeans who may be seeking more opportunity elsewhere.
The age of immigration arbitrage will require critical shifts in all advanced countries to provide many more openings for skilled immigrants and entrepreneurs. But ultimately the best way to attract these people lies in boosting the kind of economic growth and opportunity that can attract this most valuable resource to a country.
Read more:
Supreme Court Rejects Most Of Arizona Immigration Law
California's Demographic Dilemma: A Class And Culture Clash
Photo Gallery: The Next Big Boom Towns In The U.S.
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d496c4596a05e8566b7eca9d08a57ed4 | https://www.forbes.com/sites/joelkotkin/2012/07/09/the-cities-where-a-paycheck-stretches-the-farthest/?sh=7344fbc65838 | The Cities Where A Paycheck Stretches The Furthest | The Cities Where A Paycheck Stretches The Furthest
Gallery: The Cities With The Highest Income When Adjusted For Cost Of Living 11 images View gallery
Editor's Note: This post is part of a new special section called "Reinventing America," which we launched Tuesday. As part of this effort, famed demographer Joel Kotkin and more than a dozen other Forbes contributors and staff writers will focus attention on the challenges facing towns, cities and traditional industries across the nation--and highlight the growing number of surprising success stories we're seeing, too. Over the coming months we'll have stories, rankings of who's doing it right (and wrong), and, we hope, great conversations with readers, so please join in.
When we think of places with high salaries, big metro areas like New York, Los Angeles or San Francisco are usually the first to spring to mind. Or cities with the biggest concentrations of educated workers, such as Boston.
But wages are just one part of the equation -- high prices in those East and West Coast cities mean the fat paychecks aren't necessarily getting the locals ahead. When cost of living is factored in, most of the places that boast the highest effective pay turn out to be in the less celebrated and less expensive middle part of the country. My colleague Mark Schill of Praxis Strategy Group and I looked at the average annual wages in the nation’s 51 largest metropolitan statistical areas and adjusted incomes by the cost of living. The results were surprising and revealing.
In first place is Houston, where the average annual wage in 2011 was $59,838, eighth highest in the nation. What puts Houston at the top of the list is the region’s relatively low cost of living, which includes such things as consumer prices and services, utilities and transportation costs and, most importantly, housing prices: The ratio of the median home price to median annual household income in Houston is only 2.9, remarkably low for such a dynamic urban region; in San Francisco a house goes for 6.7 times the median local household income. Adjusted for cost of living, the average Houston wage of $59,838 is worth $66,933, tops in the nation.
Most of the rest of the top 10 are relatively buoyant economies with relatively low costs of living. These include Dallas-Fort Worth (fifth), Charlotte, N.C. (sixth), Cincinnati (seventh), Austin, Texas (eighth), and Columbus, Ohio (10th). These areas all also have housing affordability rates below 3.0 except for Austin, which clocks in at 3.5. Similar situations down the list include such mid-sized cities as Nashville, (11th), St.Louis (12th), Pittsburgh, (13th), Denver (15th) and New Orleans (16th).
One major surprise is the metro area in third place: Detroit-Warren-Livonia, Mich. This can be explained by the relatively high wages paid in the resurgent auto industry and, as we have reported earlier, a huge surge in well-paying STEM (science, technology, engineering and math-related) jobs. Combine this with some of the most affordable housing in the nation and sizable reductions in unemployment -- down 5% in Michigan over the past two years, the largest such drop in the nation. This longtime sad sack region has reason to feel hopeful.
Only two expensive metro areas made our top 10 list. One is Silicon Valley (San Jose-Sunnyvale-Santa Clara), where the average annual wage last year of $92,556, the highest in the nation, makes up for its high costs, which includes the worst housing affordability among the 51 metro areas we considered: housing prices are nearly 7 times the local median income. Adjusted for cost of living, that $92,556 paycheck is worth $61,581, placing the Valley second on our list.
In ninth place is Seattle, which placed first on our lists of the cities leading the way in manufacturing and STEM employment growth. Housing costs, while high, are far less than in most coastal California or northeast metropolitan areas.
What about the places we usually associate with high wages and success? The high pay is offset by exceedingly high costs. Brain-rich Boston has the fifth-highest income of America's largest metro areas but its high housing and other costs drive it down to 32nd on our list. San Francisco ranks third in average pay at just under $70,000, some $20,000 below San Jose, but has equally high costs. As a result, the metro area ranks a meager 39th on our list.
Full List: The Cities Where A Paycheck Stretches The Furthest
Much the same can be said about New York which, like San Francisco, is home to many of the richest Americans and best-paying jobs. The average paycheck clocks in at $69,029, fourth-highest in the country, but high costs, particularly for housing, eat up much of the locals' pay: adjusted for cost of living, the average salary is worth $44,605. As a result, the Big Apple and its environs rank only 41st on our list.
Long associated with glitz and glitter, Los Angeles does particularly poorly, coming in 46th on our list. The L.A. metro area may include Beverly Hills, Hollywood and Malibu, but it also is home to South-Central Los Angeles, East L.A. and small, struggling industrial cities surrounding downtown. The relatively modest average paycheck of $55,000 annually, 12th on our list, is eaten up by a cost of living that is well above the national average. This creates an unpleasant reality for many non-celebrity Angelenos.
Many of the metro areas that rank highly on our list have enjoyed rapid population growth and strong domestic in-migration. Houston, Dallas-Fort Worth, and Austin all have been among the leaders the nation in both domestic migration and overall growth both in the last decade and so far in this one. In the past year, for example, Dallas led the nation with 40,000 net migrants while Austin’s population growth, 4 percent, was the highest rate among the large metropolitan areas.
In contrast, many of the cities toward the bottom of our list -- notably the Los Angeles and New York areas -- have led the country in domestic outmigration. Between 2000 and 2009, the nation’s cultural capitals lost a total of over 3 million people to other parts of the country. Although migration has slowed in the recession, the pattern has continued since 2010.
And how about the future? Income and salary growth has been so tepid recently that few large cities can claim to have made big gains over the past five years; there has been continued volatility as some regions that did worst in the past decade -- for example San Francisco -- pick up steam. Unfortunately any growth in such highly regulated areas also tends to increase costs rapidly, particularly for housing. In California, this is made much worse by both soaring taxes and a regulatory regime that drives up costs faster than income games.
Similarly these high prices seem to have the effect of driving out middle-class workers; places like New York, Los Angeles and San Francisco have extraordinary concentrations of both rich and poor workers but fewer in the middle. As we pointed out in our annual job and STEM rankings , many technology, manufacturing and business service jobs are heading not to the hotspots but more to the central part of the country.
Over time, it seems clear that, for the most part, the best prospects for the future lie in places that both experience income and employment gains but remain relatively affordable. These include some cities that didn't crack the top 10 of our list but appear to be gaining ground, such as Nashville, Pittsburgh, St. Louis, San Antonio and New Orleans, a once beleaguered city that has experienced the nation's fastest per capita personal income growth since 2005.
Maintaining affordability and a wide range of high-paying jobs many not be as glamorous a metric for success as the number of hip web startups or the concentration of educated people. But over time it is likely to be about as good a guide to future prospects as we have.
Full List: The Cities Where A Paycheck Stretches The Furthest
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efdf4c4bf2640f7e6f7eaf4d202c7070 | https://www.forbes.com/sites/joelkotkin/2012/07/25/the-rise-of-the-1099-economy-more-americans-are-becoming-their-own-bosses/ | The Rise of The 1099 Economy: More Americans Are Becoming Their Own Bosses | The Rise of The 1099 Economy: More Americans Are Becoming Their Own Bosses
Gallery: The Big Cities Where Self-Employment Is Growing The Fastest 13 images View gallery
Editor's Note: This post is part of a new special section called "Reinventing America." As part of this effort, demographer Joel Kotkin and more than a dozen other Forbes contributors and staff writers will focus attention on the challenges facing towns, cities and traditional industries across the nation--and highlight the growing number of surprising success stories we're seeing, too. Over the coming months we'll have stories, rankings of who's doing it right (and wrong), and, we hope, great conversations with readers, so please join in.
While the economy has been miserable for small business, and many larger ones as well, the ranks of the self-employed have been growing. According to research by Economic Modeling Specialists International, the number of people who primarily work on their own has swelled by 1.3 million since 2001 to 10.6 million, a 14% increase.
This rise is partially reflective of hard times, and many of the self-employed earn only modest livings in fields such as childcare and construction. However the shift to self-employment is likely to accelerate in the future, and into higher-paying professions, for reasons including the ubiquity of the Internet, which makes it easier for some types of business to use independent contractors, as well as the reluctance of large firms to hire full-time employees with benefits.
Urban analyst Bill Fulton, who has looked into this issue, concludes we may be seeing a fundamental change in how the economy operates. “Even though there may not be jobs in the conventional sense, there is still work,” Fulton notes. “That's the whole idea of the 1099 economy. It's just a different way of organizing the economy."
If the 1099 economy is the wave of the future, which regions and industries are currently at the forefront? We turned to EMSI for the data. We looked at the change in self-employment numbers for the nation's 30 largest metropolitan statistical areas from 2001 to the present, and also from 2008, when the economy first nosedived and people started to scramble.
The results of EMSI's research are fascinating, and somewhat surprising, perhaps giving us a glimpse of where the future of economic growth may be taking shape. The biggest changes have taken place in four metro areas where the number of self-employed workers expanded over 10% between 2008 and 2012. Two of them, Houston and Seattle, have done very well in our previous rankings of economic performance, and the other two, Phoenix and Riverside- San Bernardino, Calif., suffered grievously from the housing bubble.
In the case of Houston, its 12% rise in the number of self-employed workers reflects not only widening economic opportunity, but also structural changes in the energy industry, the metro area's prime economic driver. Since 2005, self-employment in the energy industry has grown 35% (and a remarkable 75% for support activities for oil and gas operations). At least part of this influx, EMSI suggests, could be attributed to land owners cashing in on royalties after leasing their property for drilling, but also to the demand for the increasingly specialized, and often high-tech, services required by that industry.
The entrepreneurial drive in Houston is clearly not a response to economic disaster – the city has a culture that encourages striking out on your own, and low costs and lighter regulation make it easier. Indeed over the past decade, the Texas powerhouse also led the nation in the growth of its 1099 economy, which expanded by a remarkable 51%.
Like the energy industry, the burgeoning high-tech sector also has become more dependent on the 1099 economy. Encompassing people writing apps, doing technical consulting, and working in the information sector, the numbers have surged over the past five years. This may help explain the double-digit increase in self-employment over the past five years in Seattle (up 10%) and San Jose (up 11%). In some cases this may be young people working on their own; in others it could be older techies who may have lost full-time jobs but are now consulting.
Perhaps the most intriguing shift to the 1099 economy can be found not in hotspots like Silicon Valley, but in areas pummeled in the “housing bust” that are only now showing signs of recovery. This includes two areas, Phoenix and San Bernardino-Riverside, Calif., usually disdained by “creative class” pundits as backwaters, that have seen their number of self-employed grow 12% since 2008.
One contributing factor may be the migration of people to these areas from Southern California, says Rob Lang, a leading expert on economic trends who teaches at the University of Nevada-Las Vegas. For much of the second half of the 20th century, Southern California was, as historian Fred Siegel of the Manhattan Institute aptly put it, the nation’s “capitalist dynamo.” Unlike Houston with energy, or Seattle and San Jose with technology, the Southern California economy was broad based, spanning everything from aerospace and garments to homebuilding and fast-food restaurants.
Over the past generation, many heirs to this entrepreneurial tradition have decamped to the Sonoran Desert region, which stretches from California into Arizona, Lang says.
Of course, Lang notes, Phoenix has long been disdained by urban aesthetes as environmentally “unsustainable”and doomed to economic decline. Its fate, according to accounts during the worst of the housing crash, was to be surrounded by “zombie sub-divisions” that would remain empty for years, perhaps permanently as the desert encroached.
Yet as the strong self-employment numbers demonstrate, Phoenix may well be on its way to recovery. Brookings recently estimated its rebound since the Great Recession to be the fifth best of the nation’s 100 largest metro areas. Its unemployment rate has dropped from 12% in 2010 to around 7.5% in May 2012. Bankruptcies have fallen dramatically and the housing market is clearly on the mend.
One clear sign of improvement is foreclosures have dropped 53% over the past year and are now below the national average. Meanwhile net migration into Phoenix as well as the rest of Arizona is once again on the rise.
This recovery, notes local economist Elliot Pollack, follows the typical cycle for Phoenix, led by entrepreneurial activity. “Greater Phoenix is a small business town," notes Pollack. ”Historically, during periods of growth, there is substantial new business and self employment formation."
Phoenix’s self-employment boom suggests that the Valley of the Sun is primed for a comeback. But not all of the top 30 metro areas are seeing anything like this level of new entrepreneurial activity. The 1099 economy has grown at less than half Phoenix’s rate in such “creative” hotbeds as New York, Los Angeles, San Francisco and Boston. Self-employment is flat in many cities, including St. Louis, Cincinnati and Cleveland, and as actually declined in Kansas City, Chicago and Atlanta.
It may be too early to declare which economies will finally rebound fully from the ravages of the Great Recession. But for my money, I’d look to those places where people are taking the leap to go out on their own as the ones most likely to reinvent themselves when the economy begins expanding robustly again.
Gallery: The Big Cities Where Self-Employment Is Expanding The Fastest
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72cb8ec4cbff6c495dd75fc094b24563 | https://www.forbes.com/sites/joelkotkin/2012/09/25/the-hollow-boom-of-brooklyn-behind-veneer-of-gentrification-life-gets-worse-for-many/ | The Hollow Boom Of Brooklyn: Behind Veneer Of Gentrification, Life Gets Worse For Many | The Hollow Boom Of Brooklyn: Behind Veneer Of Gentrification, Life Gets Worse For Many
While artisanal cheese shops serve the hipsters and high-end shops thrive, one in four Brooklynites... [+] receives food stamps.
After a decade of increasingly celebrated gentrification, many believe Brooklyn -- the native borough of both my parents -- finally has risen from the shadows that were cast when it became part of New York City over a century ago. Brooklyn has gotten “its groove back” as a “post-industrial hotspot,” the well-informed conservative writer Kay Hymowitz writes, a perception that is echoed regularly by elements of a Manhattan media that for decades would not have sullied their fingers writing about the place.
And to be sure, few parts of urban America have enjoyed a greater public facelift -- at least in prominent places -- than New York’s County of Kings, home to some 2.5 million people. The borough is home to four of the nation’s 25 most rapidly gentrifying ZIP codes, notes a recent Fordham study. When you get a call from the 718 area code these days, it’s as likely to be from your editor’s or investment bankers’ cell as from your grandmother.
Yet there's a darker side to the story. This became clear to me not long ago when driving with my wife and youngest daughter to a friend’s house in the Ditmas Park section of Flatbush, one of the finest exemplars of urban renaissance in the country. We encountered a huge traffic jam on the Belt Parkway, so we exited on Linden Boulevard. For the next half hour we drove through an expanse of poverty, public housing and general destitution that hardly jibes with the “hip, cool” image Brooklyn now projects around the world.
A look at the numbers shows this was not an isolated experience. Despite the influx of hipsters and high-income sophisto professionals, Brooklyn is home to one of New York State’s poorest populations, with over one in five residents under the official poverty line, roughly 50 percent above the state average. This likely understates the problem since the cost of living in the borough is now the second-highest in the nation to Manhattan, surpassing even high-tone San Francisco.
Overall, despite some job gains, the borough's unemployment rate stood at 11 percent this summer, up from 9.7 percent a year ago and well above the national average. Much of recent job growth has been in lower-wage industries, notes Martin Kohli, chief regional economist with the Bureau of Labor Statistics in New York City. Despite a much celebrated start-up scene, some 30,000 of the 50,000 jobs created since the recession have been in the generally low-wage health care and social assistance sector, with another 9,000 in the hospitality industry.
Poverty citywide, meanwhile, has been rising for three years running and the real Brooklyn, roughly half non-white, remains surprisingly poor. Brooklyn's median per capita income in 2009 was just under $23,000, almost $10,000 below the national average.
So what’s going on here? Urban historian Fred Siegel, a longtime Brooklyn resident, sees a classic tale of two cities. “Brownstone and Victorian Brooklyn is booming,” he says, due in part to uncle Ben Bernanke's inflationary policies, which have bailed out the Wall Street banks whose profits are the bedrock of New York City's prosperity. This money has now spread to those parts of “Manhattanized” Brooklyn closest to the core of the Big Apple, with bankers, lawyers and the like opting to settle in more human-scale neighborhoods.
But lower middle-class Brooklyn “is pockmarked with empty stores,” Siegel notes. With its once robust industrial- and port-based economy shrunken to vestigial levels, opportunities for Brooklynites who lack high-end skills or nice inheritances are shrinking. Some other areas, like Bensonhurst and Sheepshead Bay, have been revived through immigration.
Jonathan Bowles, president of the New York-based Center for an Urban Future, sees a divide between, on the one hand, “the creative class” and some immigrant neighborhoods, and on the other, “the concentrated poverty” in many other struggling areas like Brownsville (where my mother grew up) and East New York. “There are clearly huge swaths of Brooklyn where you don’t see gentrification and there won’t be anytime soon,” Bowles observes.
Part of the problem is structural. Many of Brooklyn's working-class commuters -- particularly in the eastern end of the borough -- depend on a transit system designed to funnel people into the giant office clusters of Manhattan. Those left looking for work in the borough, often in low-paid service jobs, face long commutes or have to get a car, a big expense in a city with ultra-high rents, taxes and insurance costs.
Mayor Michael Bloomberg’s administration identifies itself closely with Manhattan’s “luxury city” economy. Focused on finance, media and high-end business services, this approach does not offer much to blue-collar Brooklyn. New York over the past decade has suffered among the worst erosions of its industrial base of any major metropolitan area. Brooklyn alone has lost 23,000 manufacturing jobs during that time.
Inequality in the Bloombergian “luxury city” is growing even faster than in the nation as whole. In fact, the gap between rich and poor is now the worst in a decade. New York’s wealthiest one percent earn a third of the entire city’s personal income -- almost twice the proportion for the rest of the country.
So while artisanal cheese shops serve the hipsters and high-end shops thrive, one in four Brooklynites receives food stamps.
We see similar patterns across even the most vibrant of the nation’s urban regions. San Francisco gets richer with trustifarians, hedge fund managers and, for now at least, social media firms. Yet Oakland, just across the bay, suffers severe unemployment, rising crime and high vacancies. The cool bars and restaurants frequented by the creatives get the media attention, but as demographer Wendell Cox notes, roughly 80 percent of the population growth in the nation’s largest cities over the past decade consisted of people living below the poverty line.
High costs and regulatory burdens make changing this reality ever more difficult; what can be borne by Manhattan or an upscale Brooklyn neighborhood like Park Slope can devastate a grittier locale like East New York. A well-heeled banker or trust-funder may find the costs of higher taxes and regulation burdensome but still relatively trivial; such factors more strongly impact a struggling immigrant entrepreneur, or a small manufacturer, construction firm or warehouse operation. Upzonings and subsidies for real estate developers -- such as those around the new Nets arena -- tend to work to the benefit of high-end chains, rather than smaller, often minority-owned businesses.
Finally for all the talk, in Brooklyn and elsewhere, of a “great inversion” sending the well-to-do to cities, and what my mother would call shleppers to the suburbs, this is not the reality. Immigration and new births have supported Brooklyn's population numbers, up 40,000 over the past decade, but a rapid outflow of Brooklynites has continued: 460,000 more residents left than other New Yorkers or Americans moved in between 2001 and 2009, the largest loss of any borough.
These phenomena can be seen in almost every American city; anyone traveling from west Los Angeles to the east side can see the divide between the posh shops and restaurants nearer the beach and greater commercial vacancies, abandoned factories and empty offices further inland. That this is happening as well in “booming” Brooklyn is rarely acknowledged, but worth confronting. We need to learn not only how to hype “hip” cities, but think about how to restore them as aspirational places for those who aren't members of the privileged and cool set.
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933749f2e0a2bb58a7b01e959d35872b | https://www.forbes.com/sites/joelkotkin/2012/11/07/why-obama-won-hispanics-millenials-were-the-difference-makers/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social | Why Obama Won: Hispanics, Millenials Were The Difference | Why Obama Won: Hispanics, Millenials Were The Difference
Young supporters of President Obama celebrate his victory in Chicago.
President Obama won re-election primarily because he did so well with two key, and expanding, constituencies: Hispanics and members of the Millennial Generation. Throughout the campaign, Democratic pundits predicted that these two groups would be the key difference makers. They were right.
Let’s start with Hispanics, arguably the biggest deciders in this election. Exit polling shows Obama winning this group -- which gave up to two-fifths of their vote to George Bush -- by over two to one. In 2008, Obama improved his winning margin with Latino voters from 67% in 2008 to 69% in 2012. And for the first time they represented 10% of the overall electorate.
Obama and the Democrats went after this constituency hard, taking some risks along the way of sparking a backlash among whites. Obama’s move to not deport young illegals if they came to this country as a child and met certain other criteria blurred any negative impact from a still weak economy. In contrast, Romney’s platform of more or less making life so horrible that illegals leave canceled out all of the GOP candidate's credible economic and social proposals that might have appealed to this group.
To this Republican political malpractice there is an even greater threat: the loss of younger voters. According to CNN exit polls, millennials voted for Obama 60% to 36% and accounted for 19% of all voters, up from 17% in 2008. Although white male millennials turned slightly less enthusiastic, the President’s huge margin among white women as well as minority millennials -- roughly 40 percent of this huge generation -- more than made up the difference.
Why did this happen? Generational theorists Mike Hais and Morley Winograd attribute this to several factors. One is the intrinsic optimism of millennials, even in the face of very difficult economic challenges. This blunted Romney’s main argument. Other issues such as gay marriage, favored by most millennials, as well as a more tolerant attitude toward immigration drove them away from the GOP and towards the President.
When you combine millennials and minorities, especially Hispanics, the road to recovery for Republicans gets more and more difficult. If you win close to 60% of the white vote and lose the electoral college decisively, you are heading into very difficult territory. In addition, Hais and Winograd note, there are other constituencies -- women, particularly singles as well as those with graduate degrees broke strongly for the President.
Together, they conclude, these groups constitute what they describe as a “21st Century Democratic majority coalition for the next few decades at least.”
So where does this leave the now hapless GOP? Certainly they can’t blame evangelicals and white working-class voters who, for the most part, rallied to their cause. The problem now is based in history and demographics. The old Reagan coalition-- as has been evident here in California for a decade -- is literally too old, and too white, to overcome the combination of minorities, millennials and educated professionals that Hais and Winograd have identified.
What should the Republicans do now? They certainly will need to move away from the immigrant-bashing that cost them dearly among the key ascendant voting blocs of millennials and Hispanics. They will also have to turn their family friendly message into something more positive; Romney’s tragedy was to embrace Rick Santorum’s views on issues of gay marriage and contraception instead of embracing family, which is a core value among millennials.
Hais and Winograd add they will need to redefine their party as more open, and appeal to the millennial preference for local, grassroots solutions. In the coming four years, there will be an opportunity to challenge the “top-down” decisions made by Obama’s now empowered clerisy. But this opportunity could be lost if Republicans continue to run against the tide of history instead of shaping it to their own advantage.
Gallery: Americans Celebrate President Barack Obama's Victory 16 images View gallery
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60e94eaa6765b04b6859df00fb635d0d | https://www.forbes.com/sites/joelkotkin/2013/01/10/the-new-places-where-americas-tech-future-is-taking-shape/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social | The New Places Where America's Tech Future Is Taking Shape | The New Places Where America's Tech Future Is Taking Shape
Technology is reshaping the economic geography of the United States, but there's disagreement as to how. Much of the media and pundits like Richard Florida assert that the tech revolution is bound to be centralized in the dense, often "hip" places where “smart” people cluster. Some, like Slate’s David Talbot, even fear the new tech wave may erode whatever soul is left to increasingly family free, neo-gilded age San Francisco.
Such claims have been bolstered by the tech boom of the past few years -- especially the explosion of social media firms in places like Manhattan and San Francisco. Yet longer-term trends in tech employment suggest such favored media memes will ultimately prove well off the mark. Indeed, according to an analysis by the Praxis Strategy Group, the fastest growth over the past decade in STEM (science, technology, engineering and mathematics-related) employment has taken place not in the most fashionable cities but smaller, less dense metropolitan areas.
Gallery: America's New Tech Hot Spots 11 images View gallery
From 2001 to 2012, STEM employment actually was essentially flat in the San Francisco and Boston regions and declined 12.6% in San Jose. The country’s three largest mega regions -- Chicago, New York and Los Angeles -- all lost tech jobs over the past decade. In contrast, double-digit rate expansions of tech employment have occurred in lower-density metro areas such as Austin, Texas; Raleigh, N.C.; Columbus, Ohio; Houston and Salt Lake City. Indeed, among the larger established tech regions, the only real winners have been Seattle, with its diversified and heavily suburbanized economy, and greater Washington, D.C., the parasitical beneficiary of an ever-expanding federal power, where the number of STEM jobs grew 21% from 2001 to 2012, better than any other of the 51 largest U.S. metropolitan statistical areas over that period.
The question is whether the last two to three years, during which places like San Francisco, New York and Boston have enjoyed stronger STEM growth than their peripheries, represents a paradigm shift or is just a cyclical phenomenon. As with tech in general, the long-term trends are not so city-centric; over the past decade, the core counties nationwide overall have lost about 1.1% of their tech jobs while more peripheral areas have experienced a gain of 3.5%.
Today's urban tech boom looks a lot like a rerun of the dot-com boom of the late 1990s. In that period media-savvy dot-com startups proliferated in such places as South of Market in San Francisco and the Silicon Alley in lower Manhattan. At their height, these firms and their founders were as likely to be covered in the fashion and lifestyle sections as on the business pages.
Yet by the early 2000s, many of these dot-com darlings had merged, been acquired or simply gone out of business. Anchored largely on hype, they fell victim to flawed business models, and rapid industry consolidation. In San Francisco, for example, tech employment crashed from a high of 34,000 in 2000 to barely 18,000 four years later. Silicon Alley suffered a similar downward trajectory, losing 15,000 of its 50,000 information jobs in the first five years of the decade.
The peaking social media boom, marked by the weak performance of Facebook’s IPO last year, suggest another bust at the end of the “hype cycle.” Urban darlings such as San Francisco’s Zynga and Chicago’s Groupon have floundered in spectacular fashion. More are likely to join them.
These firms may have generated buzz, but they have done not so well at the mundane task of making money. One problem may be that the most avid users of social media are largely young people from the “screwed” generation who lack much in the way of spending power -- a clear turnoff to advertisers. Now , with venture capital flows declining overall, cooler heads in the Valley are shifting bets to more business-oriented engineering and research-intensive fields more grounded in marketplace realities.
And what about the future of the Valley -- still home to virtually all the Bay Area’s top tech firms? Its glory days as a job generator and economic exemplar seem to have passed. Between 1970 and 1990 the number of people employed in tech in the Valley more than doubled to 268,000, and then burgeoned to over 540,000 in the 1990s. At the peak of the last tech boom in 2001, the unemployment rate in Santa Clara County was a tiny 3%; the Silicon Valley Manufacturing Group confidently predicted there would be another 200,000 jobs by 2010.
Full List: America's New Tech Hot Spots
However, at what may be the peak of the current boom, the number of tech jobs in the Valley remains down from a decade ago and unemployment is over 7.7%, just around the national average. In reality, social media was never going to reverse the downward trajectory in the rate of job growth. Old-line companies like Hewlett-Packard or Intel, with over 50,000 employees in the U.S. alone, were capable of creating a broad range of opportunities for workers; in contrast, the social media big three of Facebook, LinkedIn and Twitter together have less than 6,500 employees.
As the social media industry matures and consolidates, employment is likely to continue shifting to less expensive, business-friendly areas. The Bay Area, where the overall cost of living is 68% higher than the national average and housing is the most expensive in the nation, may continue to attract and retain only the highest-end, best-paid workers. But for the most part they will follow the path of established tech firms such as Apple, Intel, Adobe, eBay and IBM to lower-cost places like Austin, Columbus and Salt Lake City. A similar phenomena also can be seen in other urban-centered industries, such as entertainment and finance where virtually all employment growth is in places like St. Louis, Des Moines and Phoenix, even as the largest centers, New York, Chicago, Boston, Los Angeles and San Francisco have suffered significant job losses.
Demographic forces may further accelerate these trends. The critical fuel for tech growth, educated labor, is now expanding faster in places like Columbus, Austin, Raleigh, Dallas and Houston than in Boston, San Jose and San Francisco. The old centers may still enjoy a lead in brains, but other places are catching up rapidly.
Companies may also discover that with many millennials starting to hit their 30s, some may seek to leave their apartments to buy houses and start families. In California new local regulations essentially ban the construction of new single-family homes in some of the state's biggest metro areas, pricing this option out of reach for all but a few, and forcing a key demographic group to seek residence elsewhere.
Under these conditions, Silicon Valley will be forced to rely increasingly on inertia and mustering of financial resources than innovation. As a result, the nation’s tech map will continue to expand from the Bay Area, Boston, Seattle and Southern California to emerging metropolitan areas in North Carolina, Texas, Utah, Colorado and the Pacific Northwest. In the future parts of Florida, Phoenix, and even Great Plains cities like Sioux Falls and Fargo could also achieve some critical mass.
Full List: America's New Tech Hot Spots
Ultimately, one of the main dynamics of the information age -- that even sophisticated tasks can be done from anywhere -- works against the dominion of single hegemonic industry centers like Wall Street, Hollywood and Silicon Valley. The tech sector is particularly vulnerable to declustering, due in large part thanks to the freedom from geography created by technologies of its own making. Silicon Valley may continue to reap riches from the periodic technology gold rush , but in the longer term, tech growth will continue its long-term dispersion to ever more parts of the country.
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b9e6d475bfcaea59d1548fc6a41c6b4b | https://www.forbes.com/sites/joelkotkin/2013/03/06/the-real-winners-of-the-global-economy-the-material-boys/ | The Real Winners Of The Global Economy: The Material Boys | The Real Winners Of The Global Economy: The Material Boys
Teams of men from Minard Run Oil Company (in green) and Superior Well Services (in blue) wait for... [+] pressure to subside during a fracing operation at a 2,100 foot natural gas well in Pleasant Valley, Pa.
Something strange happened on the road to our much-celebrated post-industrial utopia. The real winners of the global economy have turned out to be not the creative types or the data junkies, but the material boys: countries, states and companies that have perfected the art of physical production in agriculture, energy and, remarkably, manufacturing.
The strongest economies of the high-income world (Norway, Canada, Australia, some Persian Gulf countries) produce oil and gas, coal, industrial minerals or food for the expanding global marketplace. The greatest success story, China, has based its rise largely on manufacturing. Brazil has been powered by a trifecta of higher energy production, a strong industrial sector and the highest volume of agricultural exports after the United States.
Things are really looking up for the material boys here in North America. Over the past decade, the strongest regional economies (as measured by GDP, job and wage growth) have overwhelmingly been those that produces material goods. This includes large swaths of the Great Plains, the Gulf Coast and the Intermountain West, three regions that, as I point out in a recent Manhattan Institute study, have withstood the great recession far better than the rest of the country.
Today virtually all the “material boy” states now boast unemployment well below the national average; the lowest are the Dakotas, Wyoming and Nebraska. Texas, the biggest of the U.S. material boys, boasts an unemployment rate around 6%, well below California (nearly 10%) and New York (8%). One key reason: While Texas has created over 180,000 generally well-paid energy jobs over the past decade, California, with abundant energy reserves, has generated barely one-tenth as many. New York, despite ample potential in impoverished upstate areas, largely has disdained developing its energy sector.
These realities contrast greatly with the conventional wisdom that with the rise of the information age, the application of “brains” to abstract concepts, images and media would come to trump the "brawn" of producers, a thesis advanced influentially in 1973 by Daniel Bell in The Coming of Post Industrial Society. More recently Thomas Friedman has cited the East Asian countries such as Taiwan and Japan as suggesting that a lack of natural resources actually sparks innovation and economic health, while too great a concentration generally hinders progress.
So how is it that the rubes, with their grease-stained hands, reeking of the smell of manure or chemical fertilizers, have outperformed the darlings of the information age? The answer lies largely in the forces that are reshaping the world. This includes, most portentously, rising demand for fuel, food and fiber in developing countries, notably in East Asia and Latin America.
In the past commodity-based economies suffered frequent cyclical recessions whenever a handful of wealthy consuming countries -- the EU, Japan and North America -- experienced a recession or slow growth. Now a set of new consumers are fuelling strong demand even when high-income countries tank; this is keeping prices up far more reliably than in the past. Of course, a major global economic catastrophe, or some new breakthrough in energy or agricultural technology, could bring prices down precipitously, but for the most part demographic trends seem likely to favor commodity producers over the coming decade or two.
Arguably the biggest surprise has been the United States' strong advantages in the resource race. America has a far richer endowment of raw materials than its primary competitors, including the European Union, India, China and Japan. Only the Russian Federation is equally well-endowed: The Siberian periphery that was first conquered in the great period of Russian expansion between the 16th and mid-19th centuries remains one of the greatest resource regions on the planet and the base of that country’s economy.
Agriculture is perhaps the least appreciated of the new drivers of the U.S. economy. Farm exports have been surging; in 2011 the U.S. exported a record $135 billion worth of agricultural goods, with a net favorable balance of $47 billion, the highest in nominal dollars since the 1980s.What accounts for this boom? One key driver is China, which consumes almost 60% of the world’s soybean exports and 40% of its cotton.
Perhaps even more transformative has been the energy boom, largely sparked by new technologies such as fracking and deepwater drilling. This has transformed the Great Plains alone into the world’s 14th largest oil producer, roughly on a par with Nigeria and Norway. Unless stopped by regulatory constraints, this expansion may only be in its infancy. We can expect large increases in production not only in North Dakota;Texas’ Eagle Ford shale oil is expected to quintuple its daily production by 2014 . New finds in the Wattenberg Field north of Denver alone could contain more than a billion barrels of recoverable oil and natural gas, essentially matching the huge Eagle Ford or the Bakken Field in western North Dakota. Another find, the Green River formation in Wyoming, could contain an astounding 1.4 trillion barrels of oil shale.
The energy revolution already has been transformative in the material states. Between 2010 and 2011, according to an analysis by EMSI, all six of the fastest-growing job classifications were related to energy development. Since 2009 the industry, according to EMSI, has added some 430,000 jobs, with the largest share going to Texas, Oklahoma and Pennsylvania.
Perhaps even more important, the expansion of the energy sector is galvanizing manufacturing, hitherto the weakest link in the material boy economy. The energy boom could create more than a million industrial jobs nationwide over the decade both to supply the industry and as a result of lower energy costs, according to a recent PricewaterhouseCoopers study.This new industrial economy is already evident in those parts of the country embracing the energy revolution, notably Texas, Oklahoma, Louisiana, Pennsylvania and Ohio.
Some see the rise of the material boys as just another “bubble” soon to collapse. Derek Thompson at the Atlantic suggests that the North Dakota boom may have already crested. And to be sure, labor and infrastructure limits may slow the rate of growth compared to past years, but projections by JPMorgan Chase suggest that North Dakota will continue to enjoy GDP growth two to three times the national average for the next few years. And as for the labor shortages, help is also on the way; North Dakota now boasts the highest rate of domestic in-migration in the country.
To be sure, the material boys will face real challenges in the years ahead. The need to train skilled blue-collar workers -- something the country has neglected for generations -- presents a major challenge in places like Louisiana and Texas, where education levels remain below the national average, as well as the more literate but less populous Dakotas. Infrastructure needs like pipelines and electrical transmission lines will become more evident as production increases.
But even the most effete coastal denizens should appreciate what the rise of the “material boys” means for America's future. The growth of basic industries also creates demand for high-end business services -- everything from architects and investment bankers to data-miners, advertising and public relations firms -- concentrated in such places as San Francisco, Seattle, New York and Boston.
But clearly the biggest beneficiaries will be the cities of the commodity belt, starting with Houston, the epicenter of the energy industry, as well as Oklahoma City, Dallas-Ft. Worth, Omaha, Salt Lake City and Denver. Rapid growth is even evident in smaller places in the Dakotas such as Sioux Falls, Bismarck and Fargo.
Most importantly, the rise of the material boys expands the nation’s geography of opportunity in ways rarely imagined just a decade ago. It is a process that all Americans should appreciate and encourage.
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6c1472f23c53628303c96a5919ca2721 | https://www.forbes.com/sites/joelkotkin/2013/05/15/americas-manufacturing-boomtowns/ | America's New Manufacturing Boomtowns | America's New Manufacturing Boomtowns
Conventional wisdom for a generation has been that manufacturing in America is dying. Yet over the past five years, the country has experienced something of an industrial renaissance. We may be far from replacing the 3 million industrial jobs lost in the recession, but the economy has added over 330,000 industrial jobs since 2010, with output growing at the fastest pace since the 1990s.
Looking across the country, it is clear that industrial expansion has been a key element in boosting some of our most successful local economies. The large metro areas with the most momentum in expanding their manufacturing sectors also rank highly on our list of the cities that are generating the most jobs overall, including Houston-Sugarland-Baytown, Texas, which places first on our list of the big metro areas that are creating the most manufacturing jobs; Seattle-Bellevue-Everett, Wash. (third); Oklahoma City, Okla. (fourth), Nashville-Davidson-Murfreesboro-Franklin, Tenn. (No. 6); Ft. Worth, Texas (No. 9); and Salt Lake City, Utah (No. 10).
Our rankings factor in manufacturing employment growth over the long-term (2001-12), mid-term (2007-12) and the last two years, as well as momentum. They identify those places where the market tells us the best storylines for manufacturing are being written.
Gallery: The Big Cities Leading A U.S. Manufacturing Revival 11 images View gallery
The Energy Boom and Industrial Growth
What is striking about this revival is both its sectoral and geographic diversity. For Houston, the booming energy industry is driving job growth in metal fabrication, machinery and chemicals. Since 2009, Houston industrial employment has grown 15%, almost three times as fast as the overall economy. Of course, industrial growth also tends to create jobs in other sectors, notably construction and professional and business services.
Much the same pattern of energy-driven growth can be seen in Oklahoma City, where the number of industrial jobs is also up 15% since 2009. This dynamic is also occurring in smaller metro areas. Energy cities did particularly well on our ranking of mid-sized metro areas (those with between 150,000 and 450,000 jobs overall), including third-place Lafayette, La.; Tulsa, Okla (fifth); Anchorage (sixth); Baton Rouge, La. (eighth); Bakersfield-Delano, Calif. (No. 13); and Beaumont-Port Arthur, Texas (No. 14).
On our small cities list (under 150,000 jobs), two energy cities stand out, No. 4 Odessa and No. 7 Midland.
The Great Lakes Revival
The other big story in manufacturing has been the recovery of the auto industry. Essentially we see two parallel expansions, one based around the revival of U.S. automakers and their suppliers, particularly around the Great Lakes, and another that's keyed by foreign-based firms, particularly in the Mid-South and Southeast.
Among the larger metro areas, the star of the U.S.-led recovery is No. 5 Warren-Troy-Farmington Hills, Mich., an area that is widely known as “automation alley.” This region epitomizes the transition of manufacturing to more automated, high-tech production methods. After decades of losses, the area's industrial employment increased 26% from 2009 through 2012.
More hopeful still has been the industrial recovery of the quintessential factory region, Detroit-Livonia-Dearborn, No. 8 on our large metro area list. The Detroit resurgence is for real, with manufacturing employment up 18% since 2009. The industrial expansion has also sparked high-tech employment growth across Michigan that in 2010-2011 stood at almost 7% compared to 2.6% nationwide.
Another big winner from the auto rebound has been Louisville-Jefferson County, Ky., No. 2 on our large cities list. Industrial employment in the area has expanded nearly 15% since 2009. Smaller cities in the region have also staged an impressive recovery. Columbus, Ind., No. 1 on our small city list, is benefiting from the growth of auto suppliers such as PMG Group as well as the expansion of a nearby Honda facility.
Full List: The Big Cities Leading The U.S. Manufacturing Revival
The South Rises Again
Many “progressive” intellectuals love to hate the South. The region, industrializing rapidly for decades, took a big hit when the recession devastated the manufacturing sector everywhere.
But more recently many Southern areas have enjoyed considerable growth in a host of industries, from petrochemicals and autos to aerospace. This can be seen in two of the South’s largest metropolitan regions, Nashville, Tenn. (No. 6 on our list), and Virginia Beach, Va. (No. 7 ). In Nashville, much of the manufacturing job growth is auto-related, sparked in large part by the expansion of smaller plants and the nearby Nissan facilities.
In contrast, Virginia Beach’s manufacturing job growth has been very diverse, reaching into fields as broad as fabricated metals and autos. Expanding investment from abroad, notably in aerospace and autos, has paced growth in other southern cities, notably Mobile, Ala., No. 1 in the mid-sized category, which has become a major production hub for Europe-based Airbus. Similarly, in Florence-Muscle Shoals, Ala., No. 3 on our small city list, industrial employment growth has been paced by the expansion of Navistar, as well as a host of smaller specialized manufacturers.
Western Movement
The West is often identified as a key high-tech and lifestyle mecca, but it also includes some of the nation’s top industrial growth centers. At the top of the pile sits No. 3 Seattle-Bellevue-Everett, home to Microsoft , Amazon and Starbucks , but also the birthplace of Boeing and its primary manufacturing location. Although the aerospace giant has moved some production elsewhere, Seattle has enjoyed nearly 13% growth in manufacturing employment since 2009.
But the Emerald City is not the only western hotspot for manufacturing growth. Aided by low hydro-electric energy prices -- as much as a third less than historic rival California --Washington State boasts several thriving industrial areas. Kennewick-Pasco-Richland earned the No. 2 spot in our small city rankings while Wenatchee comes in at No. 11. Low energy prices helps attract firms in diverse industries ranging from metals to food processing.
The other western manufacturing hotspot is Utah, which also has low energy prices and a favorable business climate. Salt Lake City, which is becoming a perennial on many of our lists, has enjoyed a rapid expansion of technology-driven manufacturing, most notably a huge Intel-Micron flash memory plant, aerospace and recreation sports equipment industries. Also in the Beehive State, Ogden-Clearfield ranks No. 8 on our mid-sized list.
Who's Losing Ground?
The bottom of our list generally divides into two categories: long-declining industrial hubs and places that are starting to de-industrialize rapidly. In many ways California represents the antithesis of the other western manufacturing economies, with its lethal combination of high energy prices and strict regulation. According to the California Manufacturing and Technology Association, the Golden State lost a full third of its industrial base from 2001 to 2010, and has yet to participate in the nation’s industrial recovery. Since 2010, manufacturing employment nationwide has grown more than 4% while in California industrial jobs have barely grown.
With the exception of oil-rich Bakersfield, no California metro area approaches the top rungs of our manufacturing list. Most worrisome is the poor performance of Los Angeles-Long Beach, which ranked 46th out of 66 large metro areas. Still the nation’s largest manufacturing region, L.A. has lost some 4.7% of its industrial jobs since 2010, declining as the nation’s factory economy surged forward. Doing even worse is neighboring San Bernardino-Riverside, traditionally where L.A. firms expand, ranking a dismal 64th.
But not all the bad news is in California. The most poorly performing manufacturing metro areas include such old industrial hubs as Camden-Union, rock bottom at No. 66, which has lost 7% of its manufacturing jobs since 2009 and a remarkable 23% since 2007. Both No. 62 Newark-Union, N.J., and No. 56 Rochester, N.Y., are also rapidly becoming industrial has-beens.
Clearly America’s nascent industrial revival still has not reached many parts of the country. But given the evident relationship between growing economies generally and a vibrant manufacturing sector, perhaps more regions will place greater emphasis on industrial employment as they seek to recover from the Great Recession.
Full List: The Big Cities Leading The U.S. Manufacturing Revival
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cc1d8d427fdc182c1967dad0fa803ee1 | https://www.forbes.com/sites/joelkotkin/2013/09/04/a-map-of-americas-future-where-growth-will-be-over-the-next-decade/ | A Map Of America's Future: Where Growth Will Be Over The Next Decade | A Map Of America's Future: Where Growth Will Be Over The Next Decade
By Joel Kotkin and Mark Schill
The world's biggest and most dynamic economy derives its strength and resilience from its geographic diversity. Economically, at least, America is not a single country. It is a collection of seven nations and three quasi-independent city-states, each with its own tastes, proclivities, resources and problems. These nations compete with one another -- the Great Lakes loses factories to the Southeast, and talent flees the brutal winters and high taxes of the city-state New York for gentler climes -- but, more important, they develop synergies, albeit unintentionally. Wealth generated in the humid South or icy northern plains benefits the rest of the country; energy flows from the Dakotas and the Third Coast of Texas and Louisiana; and even as people leave the Northeast, the brightest American children continue to migrate to this great education mecca, as well as those of other nations.
The idea isn't a new one -- the author Joel Garreau first proposed a North America of "nine nations" 32 years ago -- but it's never been more relevant than it is today, as America's semi-autonomous economic states continue to compete, cooperate ... and thrive. Click on the thumbnail of the map to see our predictions for growth in employment, population and GDP of these 10 regional blocks over the next decade, and read on below for more context.
INLAND WEST
The Inland West extends from the foothills of the Rockies to the coastal ranges that shelter the Pacific Coast. This is the West as we understand it historically, a land of spectacular scenery: ice caps and dry lands, sagebrush, high deserts and Alpine forests. From 2003 to 2013, it enjoyed the most rapid population growth in the nation at 21%. It is expected to continue to outgrow the rest of the country over the next decade, with the highest percentage of young people under 20 in the U.S.
Much of this population growth was driven by a combination of quality of life factors -- access to the outdoors and relatively low housing prices -- as well as strong economic fundamentals. Over the past decade employment expanded nearly 8% in this "nation," the strongest performance in the country, with the highest rate of STEM job growth. Boise, Denver and Salt Lake City have posted stellar employment growth due to the energy boom and an expanding technology sector. The western reaches of the region -- the inland parts of Washington, Oregon and California -- have not done as well. These areas suffer from being “red” resource- and manufacturing-oriented economies within highly regulated, high-tax “blue states.”
THE LEFT COAST
The Northeast may still see itself as the nation’s intellectual and cultural center, but it is steadily losing that title to the Left Coast. This nation sports a unique coastal terroir, with moderate temperatures, though it may be a bit rainy in the north. Less power is required than elsewhere in the country for heating and air-conditioning, making its residents' predilection for green energy more feasible.
Over the past 20 years, the Left Coast -- the least populous nation with some 18 million people -- has rocketed ahead of the Northeast as a high-tech center. It has by far the highest percentage of workers in STEM professions -- more than 50% above the national average -- and the largest share of engineers in its workforce as well. No place on the planet can boast so many top-line tech companies: Amazon and Microsoft in the Seattle area, and in the Bay Area, Intel, Apple, Facebook and Google, among others.
Over the next decade, the Left Coast should maintain its momentum, but ultimately it faces a Northeast-like future, with a slowing rate of population growth. High housing prices, particularly in the Bay Area, are transforming it into something of a gated community, largely out of reach to new middle-class families. The density-centric land-use policies that have helped drive up Bay Area prices are also increasingly evident in places like Portland and Seattle. The Left Coast has the smallest percentage of residents under 5 outside the Great Lakes and the Northeast, suggesting that a “demographic winter” may arrive there sooner than some might suspect.
CITY-STATE LOS ANGELES
Once called "an island on the land," Southern California remains distinct from the rest of the country. Long a lure for migrants, it has slipped in recent decades, losing not only population to other areas but whole industries and major corporations. Once youthful, it is experiencing among the most rapid declines in its under-15 population of any metropolitan area in the nation. Yet it retains America's top port, the lion's share of the entertainment business, the largest garment district -- and the best climate in North America.
THE GREAT PLAINS
The vast region from Texas to Montana has often been written off as "flyover country." But in the past decade, no nation in America has displayed greater economic dynamism. Since the recession, it has posted the second-fastest job growth rate in the U.S., after the Inland West, and last year it led the country in employment growth. The Dakotas, Nebraska, Oklahoma and Kansas all regularly register among the lowest unemployment rates in the country.
The good times on the Plains are largely due to the new energy boom, which has been driven by a series of major shale finds: the Bakken formation in North Dakota, as well as the Barnett and Permian in Texas. The region's agricultural sector has also benefited from soaring demand in developing countries.
Most remarkable of all has been the Plains' demographic revival. The region enjoyed a 14% increase in population over the past 10 years, a rate 40% above the national average, and is expected to expand a further 6% by 2023, more than twice the projected growth rate in the Northeast. This is partly due to its attractiveness to families -- the low-cost region has a higher percentage of residents under 5 than any other beside the Inland West.
But outside of the oil boom towns, don't expect a revival of the small communities that dot much of the region. The new Great Plains is increasingly urbanized, with an archipelago of vibrant, growing cities from Dallas and Oklahoma City to Omaha, Sioux Falls and Fargo.
Its major challenges: accommodating an increasingly diverse population and maintaining adequate water supplies, particularly for the Southern Plains. The strong pro-growth spirit in the region, its wealth in natural resources and a high level of education, particularly in the northern tier, suggest that the Plains will play a far more important role in the future than anyone might have thought a decade ago.
THE THIRD COAST
Once a sleepy, semitropical backwater, the Third Coast, which stretches along the Gulf of Mexico from south Texas to western Florida, has come out of the recession stronger than virtually any other region. Since 2001, its job base has expanded 7%, and it is projected to grow another 18% the coming decade.
The energy industry and burgeoning trade with Latin America are powering the Third Coast, combined with a relatively low cost, business-friendly climate. By 2023 its capital -- Houston -- will be widely acknowledged as America's next great global city. Many other cities across the Gulf, including New Orleans and Corpus Christi, are also major energy hubs. The Third Coast has a concentration of energy jobs five times the national rate, and those jobs have an average annual salary of $100,000, according to EMSI.
As the area gets wealthier, The Third Coast’s economy will continue to diversify. Houston, which is now the country’s most racially and ethnically diverse metro area, according to a recent Rice study, is home to the world’s largest medical center and has dethroned New York City as the nation’s leading exporter. Mobile, Ala., seems poised to become an industrial center and locus for trade with Latin America, and New Orleans has made a dramatic comeback as a cultural and business destination since Katrina.
THE GREAT LAKES
The nation's industrial heartland hemorrhaged roughly a million manufacturing jobs over the past 10 years, making it the only one of our seven nations to lose jobs overall during that period. But the prognosis is not as bleak as some believe.
Employment is growing again thanks to a mild renaissance in manufacturing, paced by an improving auto industry and a shale boom in parts of Ohio. The region has many underappreciated assets, such as the largest number of engineers in the nation, ample supplies of fresh water and some of the nation’s best public universities. With 58 million people, it boasts an economy on a par with that of France.
Yet we cannot expect much future population growth in the Great Lakes, the second most populous American nation. Its population is aging rapidly, and the percentage under 5 is almost as low as the Northeast.
THE GREAT NORTHEAST
The Northeast -- excluding the city-state of New York -- has been the country's brain center since before the American Revolution. This region is home to some 41 million people, and leads the nation in the percentage of workers engaged in business services, as well as in jobs that require a college education. With average wages of $76,000, $19,000 above the national average, the area boasts a GDP of $2.2 trillion, about equal to that of Brazil.
The Northeast is one of the country’s whitest regions -- Anglos account for over 70% of the population -- and one of the wealthiest. In many ways, it resembles aging Western Europe in its demographic profile. The Northeast is the most child-free region outside the retirement hub of south Florida. Coupled with sustained domestic out-migration, its population growth is likely to be among the slowest in the nation in the decade ahead.
Good thing its residents are highly educated -- diminishing numbers and the consequent decline in political power suggest that the Northeast may need to depend more on its wits in decade ahead.
CITY-STATE NEW YORK
The Big Apple's much heralded comeback has assured its place as one of the world's great global cities. But the city faces challenges in terms of soaring indebtedness, rapid aging, a weak technical workforce, expensive housing and high taxes. It also will struggle with competition from rising cities of the other nations such as San Francisco, Seattle, Washington, D.C., and Houston, each of which threatens New York's traditional role in key sectors of the economy.
THE SOUTHEAST MANUFACTURING BELT
At the time of the Civil War the southeastern United States was both out-peopled and out-manufactured. Today the Southeast, is the largest region in terms of population (60 million) and is establishing itself as the country's second industrial hub, after the Great Lakes.
It is attracting large-scale investment from manufacturers from Germany, Japan, and South Korea. Although most of the region still lags in educational attainment, the education gap with the Northeast and Great Lakes is slowly shrinking. The population holding college degrees has been expanding strongly in Nashville, Raleigh, Birmingham, Richmond and Charlotte.
More babies and the migration of families, including immigrants, to this low-cost region suggest an even larger political footprint for the Southeast in the decades ahead. Population growth has been more than twice as fast since 2001 as in the Northeast, a trend that is projected continue in the next decade. The region looks set to become smarter, more urban and cosmopolitan, and perhaps a bit less conservative.
CITY-STATE MIAMI
Greater Miami often seems more the capital of Latin America than it does an American region. Its population is heavily Hispanic, and trade, finance, construction and tourism tend to focus southward. But Miami faces the constraints of an aging, and largely childless, population--which means it will continue to rely on newcomers both from abroad and from the colder regions of the U.S.
Mark Schill is a researcher and consultant with Praxis Strategy Group.
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7b556479d00d5b1525565d0239492de8 | https://www.forbes.com/sites/joelkotkin/2013/12/26/the-metro-areas-with-the-most-economic-momentum-going-into-2014/ | The Metro Areas With The Most Economic Momentum Going Into 2014 | The Metro Areas With The Most Economic Momentum Going Into 2014
America’s economy may be picking up steam, but it remains a story of parts, with the various regions of the country performing in often radically divergent ways.
To identify the regions with the most momentum coming out of the recession, we turned to Mark Schill, research director for the Praxis Strategy Group, who crunched a range of indicative data from 2007 to today for the nation's 52 largest metropolitan statistical areas. To gauge economic vitality, we used four metrics: GDP growth, job growth, real median household income growth and current unemployment. To measure demographic strength we looked at population growth, birth rate, domestic migration and the change in educational attainment. All factors were weighted equally.
Gallery: The U.S. Regions To Watch In 2014 10 images View gallery
Our assumption is that strong local economies attract the most people and create the best conditions for family formation, which in turn generates new demand. Strong productive industries drive demand for such things as heath care, business services and retail, as well as single-family houses, a critical component of local growth and still the aspirational goal of the vast majority of Americans. This, of course, depends on economic factors, which drive perceptions of better times and provide the income necessary to qualify for a mortgage.
Our results are based on metrics often overlooked in assessments that are focused primarily on either asset inflation -- stocks or out-of-control housing prices -- or are built around anecdotal, cherry-picked data from, for example, just one part of a metropolitan region. Despite all the attention lavished on places like Manhattan or Chicago’s central core, virtually all the fastest-emerging economies coming out of the recession are either in the Southeast, Texas, the Great Plains or the Intermountain West. Of our top 10 metro areas, only one is on a coast: 10th-ranked San Jose/Silicon Valley.
Most of the strongest local economies combine the positive characteristics associated with blue states -- educated people, tech-oriented industries, racial diversity -- with largely red, pro-business administrations. This is epitomized by our top-ranked metro area, Austin, Texas, which has enjoyed double-digit growth in GDP, jobs, population and birthrate since 2007. The Texas capital has a very strong hipster reputation, attracting many of the same people who might otherwise end up in Silicon Valley or San Francisco, but it also boasts the low taxes, light regulation and reasonable housing prices that keep migrants there well past their 30s.
As has been the case for most of the past five years, Texas cities are clearly the place to be in terms of job creation, wealth formation and overall growth. All the other major Lone Star cities place highly on our list, including second-place San Antonio and Houston (fourth). Clearly many parts of the Sun Belt have not died off, as many Eastern pundits gleefully predicted during the recession. The migration of Americans southward, thought by the Eastern press to have petered out, has resumed, particularly to Texas and Sun Belt cities with strong economies.
One critical factor propelling growth has been the energy revolution, which is rapidly transforming big swathes of middle America into a production hub for fossil fuels and the best place to secure cheap electric power. Besides the Texas cities, other energy capitals doing well including Salt Lake City (No. 3) and Denver (No. 7) -- both of which also boast burgeoning tech sectors -- as well as Oklahoma City (No. 8).
One canary in the coalmine suggesting future dynamism is a rising share of highly educated people in the population. Places like Nashville, Denver and Salt Lake are all getting smarter faster, increasing their numbers of educated people faster than “brain” regions such as Seattle (14th), San Francisco (22nd), Boston (26th), New York (31st), Chicago (40th) and Los Angeles (44th). Another survey looking at areas that have gained the most young college graduates since 2006 found similar trends, with Nashville, New Orleans, Dallas, Austin, San Antonio and Houston among the leaders. More important still, in these high- growth cities, educated labor is not tethered to the current social media bubble, but to more diverse industries such as medical services, energy, manufacturing and business services.
Other evidence of these areas’ dynamism includes high rates of birth and family formation. After several years of declines, the nation’s fertility rate now appears to be rebounding somewhat, with some demographers predicting we may on the cusp of a “birth bounce,” in part as millennials start entering their 30s. Certainly this welcome trend will accelerate if the economy continues to gain strength.
So where will these new families likely settle? With the exception of Washington D.C. (12th), virtually all the areas with the fastest projected rates of household formation are in the Sun Belt, led by Houston, which is expected to add 140,000 new households by 2017, the largest increase in the nation, nearly twice as many as much larger New York. Indeed despite some of the most active homebuilding in the nation, the energy capital clearly needs more homes; sales have been so strong that it has now reached the lowest inventory in recent history.
Critically, most of these cities embrace growth, whether in their urban cores or suburban peripheries. In contrast, some strong economies, such as San Jose and San Francisco, are also among the most restrictive in terms of new construction, leading to ever escalating prices that tends to force 30-somethings and families out of the region. High housing costs also play a depressing role in always hyped New York, as well as Los Angeles and Chicago; all suffer high rates of domestic out-migration and depressed household formation. Chicago is now projected to have virtually no job growth next year, not a good sign in an economy that remains well below its 2007 employment level.
What other regions are likely to lag, even amid a strengthening recovery? The list includes Sun Belt metro areas where the housing bubble hit hardest and job growth has not revived, such as Las Vegas (51st) and Riverside-San Bernardino, Calif. (49th). In these cities real per capita household income remains almost 20% below 2007 levels. With fewer people able to afford new homes, these areas have roughly 8% fewer jobs than five years ago.
Other bottom-dwellers include several industrial cities where even a resurgence in manufacturing has failed to erase the catastrophic losses suffered in the recession. Detroit ranks dead last at 52nd; Providence, R.I., 50th; and Cleveland 48th. All three have fewer people than in 2007 and at least 5% fewer jobs than.
These differentials between regions could widen further in the future, as the impact of the energy revolution deepens and the current social media craze begins to die down. This happened after the first dot-com bust at the beginning of the last decade, sending roughly half of California’s tech workers out of the industry or out of the state.
Sky-high housing costs, coupled with stricter mortgage restrictions, could accelerate the development of new, less pricey tech centers, including Seattle, New Orleans (16th) and Pittsburgh (19th). Once the venture capital punch bowl is removed, it is likely the surviving social media firms will need to find more affordable places to locate, if not their leading researchers, at least much of their marketing and administration.
Looking across the board, it seems likely that the best places to look for work, or invest, will be those that have diversified their economies, kept costs down and attracted a broad cross-section of migrants from other parts of the country. These may not all be the favored cities of the media, or the pundit class, but they are the places offering a variety of positives to residents at every stage of life. These balanced regions are the places employers and families are most likely to flock to. Such places have not only transcended the worst effects of the recession, but seem primed to take advantage of a nascent expansion that could redraw the map of the country.
Full List: The U.S. Regions To Watch In 2014
Leading the Next Industrial Revolution | March 26-28, 2014 | J.W. Marriott | Chicago, Illinois
Forbes will host the Reinventing America Summit in Chicago from March 26-28, 2014, bringing together 300 top industrial executives, entrepreneurs, academics and elected officials leading the country’s next Industrial Revolution.
Please join us (information on how to apply is here).
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375c47039589fc33aff2e8e02215b40c | https://www.forbes.com/sites/joelkotkin/2014/04/28/methodology-for-2014-best-cities-for-jobs-list/ | Methodology For 2014 Best Cities For Jobs List | Methodology For 2014 Best Cities For Jobs List
By Michael Shires
To compile our list, we sought to measure the robustness of American metro areas’ growth both recently and over time. We looked at all of the metropolitan statistical areas (MSAs) for which the Bureau of Labor Statistics reports monthly employment data. They are derived from three-month rolling averages of U.S. Bureau of Labor Statistics “state and area” unadjusted employment data reported from November 2002 to January 2014.
The data reflect the North American Industry Classification System categories, including total nonfarm employment, manufacturing, financial services, business and professional services, educational and health services, information, retail and wholesale trade, transportation and utilities, leisure and hospitality, and government.
This year’s rankings use five measures of growth to rank all 398 metro areas for which full data sets were available from the past 10 years. “Large” areas include those with a current nonfarm employment base of at least 450,000 jobs. “Midsize” areas range from 150,000 to 450,000 jobs. “Small” areas have as many as 150,000 jobs. This year’s rankings reflect the current size of each MSA’s employment. Only one MSA changed size categories: Modesto, Calif., which moved up from small to midsize. In the instances where the analysis refers to changes in ranking order within the size categories, this MSA's changes are reported as if it had been included in its current category in the prior year.
The index is calculated from a normalized, weighted summary of: 1) recent growth: the current and prior year’s employment growth rates, with the current year emphasized (two points); 2) mid-term growth: the average annual 2008-2013 growth rate (two points); 3) long-term trend and momentum: the sum of the 2008-2013 and 2002-2007 employment growth rates multiplied by the ratio of the 2002-2007 growth rate over the 2008-2013 growth rate (one point); 4) current year growth (one point); and 5) the average of each year’s growth rate, normalized annually, for the last 10 years (two points).
This methodology varies slightly from 2013 in that long-term momentum (factor 3) is reduced slightly in importance and long-term consistency (factor 5) has been added to mitigate the distortions created by instances of huge swings in some MSAs associated with the Great Recession. The goal of the rankings methodology is to capture a snapshot of the present and prospective employment outlook in each MSA; these revisions allow the reader to have a better sense of the employment climate in each.
Gallery: The Best Midsize Cities for Jobs 2014 11 images View gallery
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947212d92ad76e3e64b33704983caad9 | https://www.forbes.com/sites/joelkotkin/2014/05/12/the-best-small-and-midsize-cities-for-jobs/ | The Best Small And Midsize Cities For Jobs 2014 | The Best Small And Midsize Cities For Jobs 2014
By Joel Kotkin and Mike Shires
In the classic television show “The Honeymooners,” many jokes were wrung out of bus driver Ralph Cramden’s membership in the International Brotherhood of Loyal Raccoons, headquartered in Bismarck, North Dakota. When Ralph mentioned in one episode to his wife, Alice, that among the privileges is that they could be buried at the “Raccoon National Cemetery” in Bismarck, Alice's reply was that it made her not know “if I want to live or die.”
That's worth a chuckle, but perhaps it’s time to reconsider Bismarck, which ranked first out of the 398 metro areas we considered for our annual roundup of The Best Cities For Jobs. A metro area of 120,000 located in the country’s fastest-growing state and near the vast Bakken oil fields, the number of jobs in Bismarck is up 3% over the last year and a sizzling 32.4% since 2002. You might not want to be buried there, but at least you can get a job before that.
Bismarck’s growth, although remarkable, is mirrored in many smaller places. When we look at economic growth in America, we tend to focus on large metropolitan areas (we draw the bar at 5 million people and up). However over 40% of Americans live outside these big cities and their much more populous suburbs, notes demographer Wendell Cox. They reside in smaller cities and towns, the destination of choice for many of the domestic migrants fleeing the largest metropolitan areas for the better part of the last decade.
Gallery: The Best Small Cities For Jobs 2014 11 images View gallery
These places are often seen by pundits as economic backwaters, but in fact small and mid-sized metro areas take up 16 of the top 20 spots of our overall list of The Best Cities For Jobs. For the most part, it is the smaller markets with under 150,000 jobs that are growing the fastest, but several mid-sized cities (between 150,000 and 450,000 nonfarm jobs) also are outperforming, including Boulder, Colo., which ranks first on our medium-sized cities list, and Provo-Orem, Utah, which ranks second. These areas are as varied as America. Some fit the resource-dominated archetype often associated with smaller cities and towns but others are driven by industry and even tech growth.
The Energy Hubs
As we saw with our large cities list, metro areas that are connected to the energy economy have been peak performers. Beyond Bismarck, our list of the Best Small Cities For Jobs includes Greeley (fifth) and Ft. Collins (17th), both located near the oilfields of northern Colorado; and near the west Texas oilfields, the cities of Midland (sixth), San Angelo (11th), Odessa (15th) and Lubbock (16th).
Energy jobs pay an average of about $80,000 a year according to BLS data. But this wealth is not only for geologists or those with oil stains on the hands. The money brought into these communities has also sparked strong growth in such fields as manufacturing, construction and business services in virtually all these towns. In Midland, for example, natural resources and construction employment has surged 50% since 2008, but wholesale trade, manufacturing, business and financial services have also expanded strongly.
Manufacturing Comeback Cities
Plenty of old industrial cities are at the bottom of the 240 MSAs we ranked for our small cities list, including 238th place Danville, Ill., which has lost 6% of its jobs since 2008, and second from last, Michigan City-La Porte, Ind., where employment has dropped 6.8% over the same span. But some of the highest fliers are also industrial towns. This includes second-ranked Elkhart-Goshen, Ind., which rose a remarkable 63 places from last year on our list, and from 233rd back in 2010. The recreational vehicle manufacturing hub suffered steep job losses during the Recession, but industrial employment has risen 24% since 2010.
Like energy, industrial jobs tend to pay more than most, and have a strong effect on other sectors. Since 2010 in the Elkhart-Goshen area, employment in wholesale trade and business services has expanded at double-digit percentage paces, while retail employment has shot up a healthy 7.4%. In Grand Rapids-Wyoming, Mich., which ranks third on our list of the Best Midsize Cities For Jobs, manufacturing employment is up almost 14.7% since 2010 while job growth has also been strong in medical services, education, and business services. Grand Rapids has 4.9% more jobs now than in 2002, a far sight better than larger industrial metro areas like Detroit, where employment has declined 16.2% over the same period.
Full List: The Best Midsize Cities For Jobs
But most of the comeback industrial towns are not in the Midwest but the Southeast, which has gotten the bulk of new investment from foreign automakers and steelmakers. This includes Auburn-Opelika, Ala., No. 7 on our small cities list, where there has been a surge in employment by auto parts suppliers. The home of 25,000-student Auburn University, it has also seen strong growth in business services and hospitality. Two South Carolina metro areas, Anderson (12th) and Spartanburg (13th), have also benefited from the industrial resurgence in the region.
College Towns
We may be approaching the end of a “higher education bubble,” as Glenn Reynolds and others have suggested, but at least for now many college towns in the Midwest, the southeast and the Intermountain West continue to show strong job growth.
In Columbia, Mo., home to the 35,000-student University of Missouri, employment has expanded 9.7% since 2008 and 4% in 2013, placing it third on our small cities list. In ninth-place College Station, Texas, the presence of Texas A&M (56,000 students) has sparked growth in the information and business services sectors, in which employment has expanded 18.2% and 14.2%, respectively, since 2008, while leisure and hospitality employment is up 29.5% over the same period. Higher education has continued to be a strong and growing industry for these small towns, although its long-term sustainability may be hampered by a lethargic economy and burgeoning student debt.
Places For The Rich And Famous
In this most unequal of recoveries, some of the biggest winners are cities that cater to the rich and aging baby boomers. People over 55 control upward of three-quarters of the country’s wealth and more than half all discretionary dollars. And unlike the millennials and Xers who follow them, this generation has generally profited more from the recent jump in equity and property prices.
Fourth on our small cities list is St. George in scenic southwestern Utah, a fast-growing community for retirees, where employment shot up 5.38% in 2013. Naples-Marco Island, Fla. (eighth), long a major lure to northern snowbirds, is home to a fast-growing economy built around hospitality and construction. Napa, Calif. (18th), has emerged as a major beneficiary of spending by wealthy retirees from the booming San Francisco Bay Area.
Full Lists: The Best Big Cities For Jobs | The Best Midsize Cities For Jobs | The Best Small Cities For Jobs
The Future For Smaller Cities
Big city mayors are wont to proclaim that they're on the cutting edge of economic life. Big cities are where “the action is,” Atlanta’s Karim Reed said at a recent confab in Chicago. But as our roundup of the cities with the strongest employment growth shows, many of the hottest economies in the country are in places that most urbanistas would write off as the boondocks. Some of them, may only do well as long the energy and agriculture booms continue, but many other will benefit as boomers continue to seek out comfortable, less congested, and often less expensive, places to retire. These smaller places may also benefit as millennials start seeking to buy homes and raise families. And with the expansion of communication technology, they may find it increasingly easy to perform sophisticated work from smaller places. America’s economy may still remain dominated by its giant metro areas, but it would be inaccurate to discount the role of smaller places in the evolving American economy.
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2aad2c777ef5b374a224543f7dc798c0 | https://www.forbes.com/sites/joelkotkin/2014/07/10/there-will-be-no-real-recovery-without-the-middle-class/ | There Will Be No Real Recovery Without The Middle Class | There Will Be No Real Recovery Without The Middle Class
What if they gave a recovery, and the middle class were never invited? Well, that’s an experiment we are running now, and, even with the recent strengthening of the jobs market, it’s not looking very good.
Over the last five years, Wall Street and the investor class have been on a bull run, but the economy has been, at best, torpid for the vast majority of the population. Despite blather about our “democratic capitalism,” stock ownership is increasingly concentrated with the wealthy as the middle class retrenches. The big returns that hedge funds, real estate trusts or venture capitalist receive are simply outside the reach of the vast majority.
A recent study by the Russell Sage Foundation suggests these patterns of inequality, which have been developing over the last several decades, have become more pronounced in the post-Recession years. In 2013 the wealth of those at the 90th and 95th percentiles was actually higher than 10 years ago. Everyone else is lower.
The labor market may be strengthening, with the unemployment rate falling to 6.1% last month, but too many of the new jobs are low wage or part time. They aren’t providing the kick the economy got in the last, more broad-based expansion from robust consumer spending.
Wage growth has been weak, rising 2.5% annually since 2009, according to Bloomberg, compared with a 4.3% annual rise from 2001 to 2007. Consumer spending, which makes up roughly 70% of the economy, has expanded an average 2.2% since the recession ended, behind the 3% advance in the prior expansion.
And many working-age people are still sitting discouraged on the sidelines – the labor force participation rate remains the lowest since 1979.
People in marginal or part-time jobs are not likely to drive consumer spending. Instead we have seen the emergence of a new, top-heavy consumer market. Since 1992 the top 5% of households have increased their share of total spending to almost 40%, up from 27% in 1992.
Former Citigroup economist Anjay Kapur has described this situation as a “plutonomy,” in which the economy is increasingly based on the global wealthy and their tastes and predilections.
Meanwhile broader consumer confidence remains weak. Last year some two-thirds of Americans polled by the Washington Post and the Miller Center said they felt life had become tougher over the last five years compared to just 7% who thought theirs had improved. Pollsters also have found almost two-thirds of parents felt their children would do worse in life, a stunning shift from far more optimistic readings back in 1999.
The Housing Market
Historically housing has been the primary asset held by the middle and working class. Despite government efforts to keep mortgages affordable, post-crash, growth has been slow, and much of the buying restricted to investors, including major financial interests. Particularly damaging, there has been a marked decline in the “trade up market” and even more so, sales to first-time buyers, whose share of the market has declined to under 30%, well below the historic average of 40%. This reflects the weak economy, tighter lending standards, and, for younger customers, the heavy burden of student loans.
Some on Wall Street hope to profit from a perceived shift in America to a “rentership society.” Housing more of the population in rental apartments would do little to improve social mobility, as people end up working not for their own equity but to pay the mortgage of their landlords. Nor can the economic payoff from apartment construction come close to that of single-family homes. According to the National Association of Home Builders, building 100 new single-family homes adds 324 jobs to the average metropolitan economy in the year of their construction and 53 jobs annually in the following years. This compares to 122 jobs per 100 new apartments in the year of construction and 32 in the following years. With home starts at less than a third their 2005 level, lack of construction employment also deals a body blow to one of the primary sources of higher-paying blue collar jobs.
The Emasculation Of Small Business
In previous recoveries, small businesses have provided much of the spark and job creation. Not so this time. Small business start-ups have declined as a portion of all business growth from 50% in the early 1980s to 35% in 2010, while its share of employment dropped down from 20% to 12%. Indeed, a 2014 Brookings report revealed that small business “dynamism,” measured by the growth of new firms compared with the closing of older ones, has declined significantly over the past decade, with more firms closing than starting for the first time in a quarter century.
Nor is the future prognosis too good. The rise of the regulatory state, including the Affordable Care Act and higher taxes, amplified in deep blue states such as California, has hit smaller businesses hard. The gradual culling of smaller banks, traditional lenders to entrepreneurs, and the growing concentration of assets in the “too big to fail” banks, historically unfocused on the needs of small companies or individual proprietors, suggests credit may remain tough for grassroots entrepreneurs.
Needed: A New Paradigm
The recession and the weak recovery have taught us you cannot have strong economic growth without the participation of the vast majority of Americans. We’ve run an experiment under Bernanke, Bush and Obama to pump up the economy from above, and what we’ve done is squash the aspirations of those middle orders, particularly small business and the self-employed.
This issue should be at the center of the political debate. I would welcome suggestions from the right and left about how best to restart a broad-based economic recovery. The best ideas may come from across the spectrum, such as flatter taxes, supported by many conservatives, as well as new spending on major infrastructure projects as improved roads, rivers and ports that generally come from more liberal groups.
The good news is the fundamentals for a broader-based prosperity, including the creation of high-paying blue-collar jobs, remain in place. Progress is already evident in the energy and some manufacturing-oriented regions. Restarting the housing sector -- particularly the single-family home component -- would do wonders for middle and working class people in many regional economies, as can be seen, for example, in Houston, where more homes will be built this year than in the entire state of California. Nationwide, the gap between between demand and potential housing, according to the NAB, is roughly 1 million homes, which translates into close to 3 million jobs.
How to drive growth to these and other productive sectors may require not only changes in government policy but also reacquainting the investor class with the virtues of long-term growth, productivity and the revival of the mass economy. Perhaps once they do investors might earn something other than intense dislike from the rest of the population.
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0c333c0ea3731521c1c2a5d540196302 | https://www.forbes.com/sites/joelkotkin/2014/11/05/the-demographics-that-sank-the-democrats-in-the-mid-term-elections/ | The Demographics That Sank The Democrats In The Midterm Elections | The Demographics That Sank The Democrats In The Midterm Elections
Over the past five years, the Democratic Party has tried to add class warfare to its pre-existing focus on racial and gender grievances, and environmental angst. Shortly after his re-election in 2012, President Obama claimed to have “one mandate . . . to help middle-class families and families that are working hard to try to get into the middle class.”
Yet despite the economic recovery, it is precisely these voters, particularly the white middle and working classes, who, for now, have deserted the Democrats for the GOP, the assumed party of plutocracy. The key in the 2014 mid-term elections was concern about the economy; early exit polls Tuesday tonight showed that seven in 10 voters viewed the economy negatively, and this did not help the Democratic cause.
“The Democrats have committed political malpractice,” says Morley Winograd, a longtime party activist and a former top aide to Vice President Al Gore during the Clinton years. “They have not discussed the economy and have no real program. They are offering the middle class nothing.”
Winograd believes that the depth of white middle- and working-class angst threatens the bold predictions in recent years about an “emerging Democratic majority” based on women, millennials, minorities and professionals. Non-college educated voters broke heavily for the GOP, according to the exit polling, including some 62% of white non-college voters. This reflects a growing trend: 20 years ago districts with white, working-class majorities tilted slightly Democratic; before the election they favored the GOP by a 5 to 1 margin, and several of the last white, Democratic congressional holdovers from the South, notably West Virginia’s Nick Rahall and Georgia’s John Barrow, went down to defeat Tuesday night.
Perhaps the biggest attrition for the Democrats has been among middle-class voters employed in the private sector, particularly small property and business owners. In the 1980s and 1990s, middle- and working-class people benefited from economic expansions, garnering about half the gains; in the current recovery almost all benefits have gone to the top one percent, particularly the wealthiest sliver of that rarified group.
Rather than the promise of “hope and change,” according to exit polls, 50% of voters said they lack confidence that their children will do better than they have, 10 points higher than in 2010. This is not surprisingly given that nearly 80% state that the recession has not ended, at least for them.
The effectiveness of the Democrats’ class warfare message has been further undermined by the nature of the recovery; while failing most Americans, the Obama era has been very kind to plutocrats of all kinds. Low interest rates have hurt middle-income retirees while helping to send the stock market soaring. Quantitative easing has helped boost the price of assets like high-end real estate; in contrast middle and working class people, as well as small businesses, find access to capital or mortgages still very difficult.
The Republicans made gains in states in New England and the upper Midwest where the vast majority of the population, including the working class, remains far whiter than the national norm of 64% Anglo, such as Massachusetts, where a Republican was elected governor, Michigan, Arkansas and Ohio. Anglos constitute 89% of the population in Iowa and 93% in the former working-class Democratic bastion of West Virginia, two states where the Republicans picked up Senate seats. In Colorado, another big Senate pickup for the GOP, some 80% of the electorate is white. In Kentucky, where Senator Mitch McConnell won a surprisingly easy re-election, only 11% of voters were non-white, down 4% from 2008.
A more intriguing danger sign for Democrats has been the surprisingly strong GOP performance among the educated professionals that embraced Obama early on. This can be seen in gubernatorial victories in deep blue Massachusetts and Maryland, and a close race in Connecticut; in all three states concerns over taxes have shifted some voters to the GOP. Voters making over $100,000 annually broke 56 to 43 for the GOP, according to NBC’s exit polls. College graduates leaned slightly toward the Republicans, but among white college graduates the GOP led by a decisive 55 to 43 margin.
In Colorado, Senator-elect Cory Gardner, like many successful GOP candidates, also did well with middle-income voters (annual salaries between $50,000 and $100,000), who basically accounted for his margin of victory. These are voters that some Republicans are targeting to instigate a new “tax revolt,” like the one that helped catapult Ronald Reagan into the presidency. The potential may be there if the Republicans can wake up from their blind instinct to protect large corporations and big investors. Certainly Obama’s call for higher income taxes on the wealthy has alienated small business owners and professionals, though barely impacting tech oligarchs, whose wealth is taxed at far lower capital gains rates.
It can be argued that changing demographics will make this year’s blowout a temporary setback. Among Latinos, a key constituency for the Democrats’ future, economic hardships and disappointment at the Democrats’ failure to achieve immigration reform have blunted but hardly reversed voting trends. This year, according to exit polls, Latinos remained strongly Democratic, but down from the nearly three-quarters who supported President Obama in 2012 to something slightly less than two-thirds.
One encouraging sign for Republicans: Texas Governor-elect Abbott won 44% of the Hispanic vote.
Perhaps the more serious may be shifts among millennials, a generation that, for the most part, stands most in danger of proleterianization. Once solidly pro-Democratic, this generation has become increasingly alienated as the economy has failed to produce notable gains. In states across the country, the Republican share of millennial votes grew considerably. According to exit polls, their deficit with voters under 30 has shrunk to 13%. The Republicans actually won among white voters under 30, 53% to 44%, even as they lost 30- to 44-year-olds, 58 to 40. If these trends hold, the generation gap that many Democrats saw as their long-term political meal ticket may prove somewhat less compelling.
If they are losing the middle and working classes, and even some millennials, what are the Democrats left with? They did best in states like California and New York, where there is a high concentration of progressive post-graduates and non-whites, and where many of the sectors benefiting most from the recovery have thrived, notably tech, financial services, and high-end real estate.
Yet these areas of strength could also prove a problem for the Democrats. A party increasingly dominated by progressives in New York, Los Angeles, the Bay Area and Seattle may embrace the liberal social and environmental agenda that captivates party’s loyalists but is less appealing to the middle class. Unless the Democrats develop a compelling economic policy that promises better things for the majority, they may find their core constituencies too narrow to prevent the Republicans from enjoying an unexpected, albeit largely undeserved, resurgence.
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5cf0aca811551c9daadb1141cc4e1405 | https://www.forbes.com/sites/joelkotkin/2014/12/10/suburbs-the-geography-that-wont-die/ | Suburbs: The Geography That Won't Die | Suburbs: The Geography That Won't Die
For a half century, suburbs have been blamed for just about everything --- from racial division to obesity and even global warming. Yet desperate as life in the burbs is said to be, the majority of Americans -- and roughly 85% of those in metropolitan areas -- still live in the classic, tree-lined, single-family house and auto-dominated communities that, whether in core city boundaries or not, are essentially suburban communities.
Increasingly, new urbanists, many greens and developers believe that the suburbs peaked, and face an irrepressible decline as the masses swarm into the inner cities. "We've reached the limits of suburban development: People are beginning to vote with their feet and come back to the central cities," said HUD Secretary Shaun Donovan in 2010.
Too bad Mr. Secretary didn’t talk to the people over at the Department of Commerce who run the Census. In fact, America’s population growth in the 2010 decennial Census was more suburban than in the previous decade. In the 2000s roughly 90% of metropolitan growth was in the suburbs, somewhat higher than in the previous decade. Overall, notes demographer Wendell Cox, since 1990 the country’s metropolitan regions have gone from 82 to 86% suburban.
But the anti-suburban crowd never allows facts, however recent, to stand in their way. Now, they insist, since the housing bust of 2008-2011, everything changes, and people have seen the light. And to be sure, in the pits of the economic slowdown, growth rates in suburbs slowed, and in many areas dropped below the urban cores.
More recently, however, the growth pattern towards suburban lifestyles has once again resurged. In the 2010-2013 period the percentage of growth in suburbs was basically the same as its overwhelming share of metropolitan population. In only six of the nation’s 52 metropolitan areas with over one million people did the core city grow more than the suburbs. Most rapid growth, it appears, is once again in the much disdained exurbs. "The suburbanization of America marches on,” concludes Trulia economist Jed Kolko.
So what of the future? One can expect some urban growth to continue, driven, in some places, by youth migration and a small cohort of empty nesters as well foreign investors. But the vast majority of millennials -- some 70% -- already live in suburbs. And although some boosters suggest millennials “hate” suburbs, a survey conducted by Frank Magid found that, in imaging their “ideal” place to live, more than twice as many picked the suburbs to the inner city. The desire for homeownership, among the older millennials, according to several surveys, was even stronger than among boomers.
Time is on the suburbs side, as long as the economy does not tank. An analysis of age cohorts done for Forbes by demographer Wendell Cox found that as people leave their twenties, as millennials are starting to do, they tend to move towards suburbs and to those regions, notably in the south and Intermountain West, where suburban-style living prevails. The other key source of demographic growth, immigrants, are already swarming into the cities; roughly 6o% of the population growth among Asians, the largest newcomer group in the last decade, took place in suburbia.
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514ffd405a04c9c5f59f01294517b318 | https://www.forbes.com/sites/joelkotkin/2015/03/22/lee-kuan-yew-dead-singapore/ | Singapore After Lee Kuan Yew: Future Is Uncertain For The Utilitarian Paradise He Created | Singapore After Lee Kuan Yew: Future Is Uncertain For The Utilitarian Paradise He Created
In this age of political Lilliputians, we must acknowledge the passing of giants. Although he ran only a small city-state, Lee Kuan Yew, along with late Chinese Premier Deng Xiaoping, ranks among Asia’s most pivotal figures of the past 50 years.
These two men -- a tall, aristocratic scion of a Hakka trading family and the diminutive Chinese revolutionary -- came from very different perspectives, but shared a pragmatic streak, and ultimately strategies that came to be widely copied. You can see their legacy today across the continent, in rapid urbanization and growing economic power.
But it was Lee who first formulated the essentials of the new Asian economic approach, blending capitalistic modernity with a state-directed economy and authoritarianism. Although repression of dissidents in both countries rightfully offends Westerners, particularly journalists, it has not deterred foreign capital, technology and capital from seeking to cash in on Asia’s growth.
American and British capital may have fueled global capitalism’s 20th century triumph, but Lee and Deng shaped its expansion in the 21st.
Lee’s Achievement
This is not merely a testament to Lee’s tenure as prime minister from 1959 to 1990, the longest of any in world history, but the singularity and durability of his accomplishment. From Singapore’s independence to the present day, Lee helped fashion what is arguably the most successful and best run city in the world.
In 1965, after Singapore's acrimonious exit from Malaysia, its outlook was far from promising. Unemployment was high and the fledgling city-state was wracked by internal dissension between its ethnic mix of Chinese, Indians and Malays, and between conservatives and communists, who seemed in political ascendancy as elsewhere in Southeast Asia. The then rough-edged Asian metropolis, an important trading center, boasted a per capita GDP of $2,667 in 1990 dollars, more than double the average for East Asian countries and trailing only Japan in the region, but well behind European countries and North America.
Faced with imminent disaster, Lee’s response was to create a new political system that blended a mildly socialist program with a development strategy aimed at attracting foreign capital and building up the manufacturing sector. Lee and his People’s Action Party (PAP) focused on developing a modern infrastructure -- from the port and roads to education -- that is second to none.
Perhaps PAP’s most remarkable achievement was the creation of the Housing Development Board, which turned the vast majority of Singaporeans from slum-dwellers to owners of apartments that were small but clean and modern. As Asian real estate markets have heated up, HDB has helped keep Singaporean housing costs far more reasonable than in China’s primary cities, or Hong Kong or Tokyo.
Lee believed widespread homeownership would make Singapore more stable, but it was not enough to make it rich. Under his guidance, everything -- from cleaning the streets to developing arguably the best primary education system in the world -- was calculated to attract foreign companies and skilled individuals; this at a time when China, India and much of Southeast Asia was either closed to investment, embroiled in lethal civic conflict or primarily dominated by crony capitalists.
And the world did come, making Singapore among the favored destinations for international corporations. In 1968 Texas Instruments established a chip-making plant there, the break Lee later credited with helping transform the city into a technology hotspot.
A 2011 Roland Berger study named Singapore as the leading location for European companies to establish headquarters in the Asia-Pacific region.Companies with regional headquarters include Microsoft , Google , Exxon Mobil , and Kellogg’s. Singapore now has more than twice as many regional headquarters as far-larger Tokyo, not to mention Asia’s less affluent megacities.
Lee’s Chinese Legacy
Cambridge-educated, and with the demeanor of a British aristocrat, Lee promoted English as the country’s primary language, a decision that made the city particularly attractive to foreign investors and workers. But in many ways he remained very Chinese. Lee’s People’s Action Party blended British parliamentary forms with a highly authoritarian, centrally directed system. Author Alex Josey compared Lee’s role in the PAP to Mao Zedong’s suzerainty over the Chinese Communist Party.
When Deng visited the city-state in 1978, he saw it as an appealing model for his poor country: a top-down, mandarin-led system that could appeal to global capitalists. Deng, Lee would later recall, was most captivated by Singapore’s modern prosperity: “What he saw in Singapore in 1978,” he recalled in his book Third World to First, “had become the point of reference as the minimum the Chinese people should achieve.”
Anyone visiting China today can see the results of Deng’s insight: gleaming cities, massive expansion of educational institutions, modern roads and transit systems, and most of a general prosperity that has lifted the mother country of most Singaporeans to almost unimagined heights.
The story is not so positive for those who believe in liberal democracy. Although Singapore is generally less repressive than China, it did show the Chinese communists that being “free” was not necessary for becoming rich. It’s a lesson that many developing countries around the world -- in the Middle East, Africa and Latin America -- have taken to heart.
Singapore After Lee
Lee bequeathed to Singapore prosperity and order, but the durability of his legacy is in question. To some extent, this reflects the technocratic cast of the Republic; Lee may have been a “founding father” of his country, but he did not leave behind a system of beliefs that can tie people together in the manner of George Washington & co. in the United States. Lee is revered simply for being effective.
Indeed despite massive government efforts to promote a sense of identity, a recent survey found half of all Singaporeans indifferent to their citizenship as long as their wealth could be maintained. Stabilizing forces like religion and family have also been weakened by the rush to embrace what former foreign minister S. Rajaratnam labeled “moneytheism.” The emptiness of this religion can be seen in the fact that residents of this highly successful city-state are now among the most pessimistic of peoples, alongside understandably dour residents of Greece, Spain, Cyprus, Slovenia and Haiti.
So even as the Republic prospers, there is growing disaffection, with the PAP’s support dwindling to the lowest level since independence. Fed up with government controls and the increasingly high cost of living, many Singaporeans are considering a move elsewhere. Already some 300,000 now live abroad, almost one in 10. As many as half of Singaporeans, according to a recent survey, would leave if they could.
The utilitarian paradise created by Lee will also have to face competition from Chinese cities like Shanghai and Beijing, notes Ravi Menon, the former head of the Ministry of Trade and Industry. Companies that might once have located operations in Singapore now feel pressure to locate in Asia’s dominant economy. Once Asia had few places where advanced technology and services could be developed; now it has many. China alone has 13 cities larger than Singapore, many of them with breathtakingly modern infrastructure and far less expensive workforces.
There is also widespread dissent about PAP’s policy prescription. One particularly unpopular proposal has been to boost the city-state’s population from 5 million to roughly 7 million by 2030, largely through immigration. To help accommodate this growth, planners have suggested building a vast underground city with shopping malls, public spaces, pedestrian links and cycling lanes. Even normally docile and sociable Singaporeans may recoil from spending their lives like Morlocks in H.G. Wells’ Time Machine.
Singapore also has become more dependent on imported labor, not surprising given that it has one of the world’s lowest birth rates. Many Singaporeans feel the foreign influx is turning them into strangers in their own city. In 1980, over 90% of residents were citizens. Today the percentage is 63% and, by 2030, if the government’s plans hold up, foreigners will outnumber the natives.
Yet despite these problems, Lee Kwan Yew’s accomplishments are undeniable. He took a struggling, ununified city and left it an urban jewel. That history has moved on is inevitable, but one has to wonder, among all the current chiefs of state, whether any will leave behind anything approaching Yew’s legacy when they pass from this world.
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459b16f93238d908e0f6bad2faef3df9 | https://www.forbes.com/sites/joelkotkin/2015/07/23/the-cities-leading-a-u-s-manufacturing-revival/ | The Cities Leading A U.S. Manufacturing Revival | The Cities Leading A U.S. Manufacturing Revival
By Joel Kotkin and Michael Shires
Manufacturing may no longer drive the U.S. economy, but industrial growth remains a powerful force in many regions of the country. Industrial employment has surged over the past five years, with the sector adding some 855,000 new jobs, a 7.5% expansion.
Several factors are driving this trend, including rising wages in China, the energy boom and a growing need to respond more quickly to local customer demand and the changing marketplace.
To generate our rankings of the best places for manufacturing jobs, we evaluated the 373 metropolitan statistical areas for which the U.S. Bureau of Labor Statistics has complete data over the past decade. Our rankings factor in manufacturing employment growth over the long term (2003-14), medium term (2009-14) and the last two years, as well as momentum.
Gallery: America's New Manufacturing Boomtowns 10 images View gallery
The Rust Belt Is Back
No part of America suffered more from the de-industrialization of the past 40 years than the Great Lakes states. Yet as manufacturing has come back, particularly the auto industry, many of the region’s economies have begun to resurge. Despite all the fashionable chatter over the question of whether we’ve reached “peak car,” the auto industry has enjoyed six straight years of increased sales, driven by low interest rates, the need to replace older cars and rising consumer confidence.
The epicenter of this trend is exactly where the industrial decline hit hardest: Michigan, which sweeps the top three places on our list of the big cities generating the most new manufacturing jobs. The state has now recovered about 40% of the manufacturing jobs it lost during the recession. The Detroit-Dearborn-Livonia metropolitan area ranks No. 1 among the country’s 70 largest metropolitan areas for manufacturing employment growth over the time period for our study. Since 2009 the Detroit area has seen a remarkable 31.3% rebound to 89,300 industrial jobs, including a 9.8% expansion last year. This growth has helped begin to reverse a long-standing decline in employment overall—still down 12.3% since 2003—with overall employment up 5.9% since 2009.
Detroit’s recovery is not just a matter of inertia, but reflects a unique combination of circumstances. The area is home not only to many skilled workers, but boasts the second largest concentration of engineers among the country’s 85 largest metro areas, behind only Silicon Valley.
In second place is Warren-Troy-Farmington, in the Detroit suburbs, where manufacturing employment is up 38.8% since 2009. In third place is Grand Rapids-Wyoming, a longtime furniture-making hub where an uncommonly high share of jobs is in manufacturing, one in five; the metro area has seen industrial employment rebound 27.9% since 2009.
Another Midwest hotspot has been Toledo, Ohio, only 60 miles from Detroit, which ranks first among the mid-sized cities we evaluated, with a 17.4% jump in industrial employment since 2009.
President Barack Obama looks at a turbine during a tour of the Schenectady General Electric plant... [+] with GE Chairman and CEO Jeffrey Immelt in 2011. (AFP/Getty Images)
Southern Cooking
The other big cluster of industrial hotspots is in the Southeast. Manufacturing has been heading to the region for several decades, recently primed by major investments from German and Japanese companies, among others. A prime example is Nashville-Davidson-Murfreesboro, Tenn., No. 4 on our list, where manufacturing employment has jumped 23.9% since 2009. Japan’s Nissan and Bridgestone have establishing manufacturing plants in Central Tennessee, which has also created opportunities for small domestic parts companies in the region. Nissan also relocated its U.S. headquarters to the area in 2006 from Southern California. And domestic auto makers are have become major players in the Southeast—Ford employs some 14,000 in the Louisville, Ky., area, which checks in at No. 7 among our largest MSAs. The South, notes a recent Brookings study, now has the highest number of workers in the country employed in “advanced industries,” which tend to be the higher paying, more technically oriented parts of the factory economy.
Full List: America's New Manufacturing Boomtowns
Other areas that have become primary places for new industrial investment include such Deep South locations as Savannah, Ga., No. 2 on our mid-sized list, as well as No. 8 Columbia, S.C., a major center for German car companies, and No. 10 Charleston, S.C., which has benefited from the expansion of Boeing and aerospace suppliers there. These areas missed much of the industrial revolution a century ago but are playing an impressive game of catch-up. Each has seen their industrial workforces grow over 20% since 2009. Other southern stars include Cape Coral-Ft Meyers, Fla., No. 4 on our mid-sized city list. Our small cities list also turns up Southern outperformers: No. 2 Naples-Immokalee-Marco Island and No. 3 Sebastian-Vero-Beach, Fla.
The Energy Belt
Falling oil prices may be causing the oil and gas industry to rein in exploration and drilling budgets, but it provides an enormous boon for downstream industries such as refining and petrochemicals. This could keep industrial job growth going in two of our top MSAs that are in the oil patch. Oklahoma City, where manufacturing job growth has soared 23.1% since 2009, ranks sixth, and Houston, where the industrial workforce has expanded 19.8% over the same time span, ranks ninth. Houston now is home to 257,300 manufacturing jobs, the third largest concentration in the country.
As in Detroit, Houston’s industrial rise is powered by more than by brawn. The area ranks sixth among the nation’s major metros in number of engineers per capita. If the Bay Area is master of the digital economy, Houston ranks as the technological leader of the material one; it is the capital for the energy-driven revival of U.S. industry.
Smaller energy-rich areas that have also experienced rapid industrial growth. These include two Louisiana metro areas, No. 3 Baton Rouge and No. 7 Lafayette, third and seventh, respectively on our mid-sized metro area list, as well as Midland, Texas, fifth on our small areas list. Perhaps most surprising, given its location in anti-carbon California, has been the steady growth in Bakersfield, which stands fifth on the mid-sized list and is home to some of the nation’s largest oil fields. With 20.3% industrial growth since 2009, the area, sometimes known as “little Texas,” is the only metro area in the Golden State to make it to the top 10 in either the large or mid-sized list.
A Shift To Smaller Cities
Once American industry was identified predominately with big cities: New York in 1950, according to economic historian Fernand Braudel, had the largest industrial economy in the world, employing a million workers, mostly at small manufacturers. In the 1970s and 1980s, the industrial zeitgeist moved increasingly to Los Angeles, which vied with Chicago as the largest center for factory jobs.
Today this pattern is changing dramatically. Besides the move toward the south and energy hotbeds, industry has been expanding in smaller cities as well as suburban areas beyond the core cities, says University of Washington geographer Richard Morrill. This is not unique to the United States; Germany, which has perhaps the most admired industrial sector in the world, also has dispersed its industrial base, largely to smaller cities.
The reasons for this shift vary, from strict environmental laws in Northern cities, as well as stronger unions, and cheaper land elsewhere.
For example, although the New York state capital Albany ranks fifth on our big metro area list, driven in large part by semiconductor manufacturing, New York City stands at a weak 62nd out of 70. Since 2009, New York has lost 3.3% of its manufacturing jobs; the city’s industrial workforce now stands at a paltry 74,700, a dramatic decline from some 400,000 as recently as the early 1980s.
Yet with its powerful array of media, business service and hospitality businesses, New York appears to be able to withstand deindustrialization more than the two largest industrial MSAs, Chicago and Los Angeles. The one-time “city of big shoulders“ and its environs has also lost industrial jobs since 2009, down to 278,000 from 286,500 in 2011, and a far cry from the 461,600 it had in 2000.
Full List: America's New Manufacturing Boomtowns
The decline has been, if anything, more rapid in 59th place Los Angeles. This process began with the loss of more than 90,000 aerospace jobs since the end of the Cold War. Los Angeles’ industrial job count stands at 363,900 -- still the largest in the nations but down sharply from 900,000 just a decade ago.
Does Industrial Growth Still Matter?
Clearly deindustrialization has a bigger impact in some areas than others. Cities like San Francisco and New York appear better positioned for the post-industrial transition than Chicago or Los Angeles, where manufacturing lingered longer and the elite service or tech industries are not nearly as predominant. Yet the impact of industrial decline — or resurgence — may be more important in the future than many suppose.
This is particularly critical for blue-collar workers, for whom industrial jobs tend to pay more. Welders and other skilled workers are increasingly in short supply, particularly as baby boomers begin to leave the workforce. Many of the cities which did well in our rankings are among the best in building new training partnerships with their industrial employers—these are skills that are decreasingly taught in the modern secondary and college curricula. In some places, vocational skills have recently been commanding higher post-graduation salaries than traditional college degrees.
Industrial growth also provides an opportunity for emerging cities, particularly in the South and the energy belt, to add to their employment base and, in some cases, their connections with international markets. Over-dependence on manufacturing, as the Rust Belt experience showed, can be dangerous, and the need to diversify employment remains critical. Threats to future growth include the strong dollar, the decline in the energy sector and economic weakness abroad reducing exports.
But factory jobs remain an important asset for many regions. They may not be the central force they once were, but these jobs seem likely to continue making a big difference in the fates of many economies, both big and small.
Full List: America's New Manufacturing Boomtowns
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2d345c7c1c4e59a4fc10a1c82f2a8b55 | https://www.forbes.com/sites/joelkotkin/2015/11/19/the-cities-where-your-salary-will-stretch-the-furthest-2015/ | The Cities Where Your Salary Will Stretch The Furthest 2015 | The Cities Where Your Salary Will Stretch The Furthest 2015
NICE TO VISIT -- San Francisco may boast high salaries, but its high cost of living sinks it to the... [+] bottom of our list. (George Rose/Getty Images)
Average pay varies widely among U.S. cities, but those chasing work opportunities would do well to keep an eye on costs as well. Salaries may be higher on the East and West coasts, but for the most part, equally high prices there mean that the fatter paychecks aren’t necessarily getting the locals ahead.
To determine which cities actually offer the highest real incomes, Mark Schill, research director at Praxis Strategy Group, conducted an analysis for Forbes of the 53 largest metropolitan statistical areas, adjusting annual earnings by a cost factor that combines median home values from the U.S. Census (20%) with a measure of regional price differences from the U.S. Bureau of Economic Analysis (80%).
The takeaway: When cost of living is factored in, most of the metro areas that offer the highest effective pay turn out to be in the less glitzy middle part of the country.
Gallery: The Cities With The Highest Income When Adjusted For Cost Of Living 16 images View gallery
Ranking first is the Houston-the Woodlands-Sugar Land metro area, followed by one high-cost outlier: San Jose-Sunnyvale-Santa Clara, Calif., aka Silicon Valley. Although average wages in the San Jose area are $38,000 higher than Houston’s $60,096, the much lower cost of living in Houston means residents there are effectively slightly better off. Adjusted for costs, Houston’s average real income is $62,136. A big contributing factor is Houston’s low home prices: the ratio of the median home price there ($215,000 in the third quarter) to median annual household income is 3.1, compared to 7.5 in the San Jose area (median 3Q home price: $795,000).
San Jose’s high ranking is somewhat of an anomaly: the very high salaries paid by the tech industry in a metro area made up of largely affluent suburban communities go a long way to make up for the high prices. San Jose’s prices were the third highest among major U.S. metro areas in 2013, the most recent year for which the BEA has data -- 21.3% above the national average -- while the average annual wage of $98,247 as of this year ranks first.
Another example of a higher-cost success story is the Hartford, Conn., metro area, which ranks fourth on our list with adjusted annual real earnings of $54,590. One of the lowest-density regions in the country, it boasts many small, prosperous communities with high housing prices surrounding a largely impoverished but small core city (population: 125,000 ). In 2011, the Harford metro area was ranked by Brookings as the most productive metropolitan region in the world.
But for the most part, it’s the low-cost heartland that dominates the top 15 of our ranking of Cities Where Your Salary Stretches The Furthest. Manufacturing powerhouse Detroit-Warren-Dearborn ranks third with cost-adjusted annual earnings of $55,950. The metro area is comfortably affordable, including an average home price value of $136,400, but also boasts strong wages given the area’s high concentration of factory and engineering jobs, which tend to pay better than other industries, particularly for blue-collar workers.
Full List: The 15 Cities Where Pay Stretches The Furthest
Low costs are an advantage that unites a number of the top-ranked heartland metro areas, including Cleveland-Elyria (seventh), where prices of goods and services are 10.5% below the national average, and Cincinnati (ninth), where prices are 9.5% below the national average. In all these areas, the cost of a house is about 20% of what passes for normal in Silicon Valley.
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Hip, But Increasingly Not Worth It
Perhaps the biggest surprise in our survey is the low rankings of the “cool” cities that are widely discussed as the places that offer the best economic opportunities.
Take for instance San Francisco, a city that has become the epicenter of “disruptive” tech companies Uber, Lyft, Airbnb, Salesforce.com that are changing our service economy, as well as Twitter . With an average annual salary of $74,794, you would think people would be fat and happy in Baghdad by the Bay. But soaring home prices -- median value, $657,300 -- have raised costs so high that the area ranks a poor 41st on our list.
The tech boom has also raised prices in Austin, which ranked fifth when we last did this ranking in 2012, but falls to 19th this year. Over the past year, the average home value in the Texas capital has risen by $24,000, twice the increase experienced in the rest of the country. Median prices now average $217,9000, well above the national median of $188,000 for all large metropolitan regions. This is still not ridiculous, but costs do seems to be eroding some of Austin’s still powerful advantage.
Similarly, greater New York City also fared poorly, ranking 33rd, in large part due to high housing prices and the overall cost of living: prices there are 22.3% above the national average, according to BEA data, making it the second-costliest metro area in the nation.
Some of the biggest gaps between cost of living and salary are in Southern California, which has experienced significant house price gains without the income growth that makes San Jose more competitive. Already high, prices in San Diego-Carlsbad (51st), Los Angeles-Long Beach-Anaheim (52nd) and Riverside-San Bernardino (last among the 53 largest metro areas) have all risen considerably above the national average.
Long-Term Implications
Our paycheck analysis does not impact everyone equally. Given the central role of housing, for example, long-term residents who bought their homes before prices began to rise dramatically can keep a bigger portion of their take-home pay, and if they decide to sell, they'll benefit greatly from inflated values. More directly impacted may be young adults and immigrants, most of whom do not own their own homes, and often lack the resources to buy in the more expensive markets.
Over time this could influence where young families and singles chose to migrate. Since 2010, according to an upcoming study by Cleveland State’s Center for Population Dynamics, there has been a marked shift of college educated workers aged 25 to 34. While between 2008 and 2010, metro areas like San Francisco, New York, Los Angeles, San Jose and Chicago enjoyed the biggest upticks in this coveted population, over the most recently studied period, 2010-13, the leaders were generally less expensive places like Nashville, Pittsburgh, Orlando, Cleveland, San Antonio, Houston and Dallas-Ft. Worth.
This suggests that areas that have both high-wage jobs and low costs are likely to gain momentum in coming years, particularly if the economy expands. This is not to say that people do not like the excitement and culture associated with San Francisco, Los Angeles or New York, but many may be finding that the price of admission to these fabled places may be too high.
This could be a great opportunity for less-heralded communities, from Arizona and Texas to Ohio, to gain more educated workers and the companies that require them.
Full List: The 15 Cities Where Pay Stretches The Furthest
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6c2949e85acd5f8e25af7916fe60d057 | https://www.forbes.com/sites/joelkotkin/2017/01/13/heres-what-could-trip-up-trumps-quest-to-make-the-u-s-economy-great-again/ | The Irony That Could Trip Up Trump's Quest To Make The U.S. Economy 'Great Again' | The Irony That Could Trip Up Trump's Quest To Make The U.S. Economy 'Great Again'
President-elect Donald Trump speaks the Giant Center on December 15, 2016 in Hershey, Pa. (DON... [+] EMMERT/AFP/Getty Images)
Perhaps no president in recent history has more pressure on him to perform economic miracles than Donald Trump. As someone who ran on the promise that he could fix the economy -- and largely won because of it -- Trump faces two severe challenges, one that is largely perceptual and another more critical one that is very real.
To start, Trump must cope with the widespread idea, accepted by much of the media, that we are experiencing something of an “Obama boom.”
He is widely portrayed as inheriting a very strong economy, notes MSNBC, in which the U.S. is “the envy of the world.” Fortune sees Trump inheriting “the best economy in a generation.”
Yet this is more a matter of perception than reality, a kind of “fake news.” To be sure, President Barack Obama inherited a disastrous economy from George W. Bush and can claim, with some justification, that on his watch millions of jobs were restored and the economy achieved steady, if unspectacular, growth. Under Obama average GDP growth has been almost twice as high as under his predecessor, but roughly half that of either President Reagan or Clinton.
Less appreciated, however, are the fundamental long-term weaknesses in the U.S. economy that Obama and Bush have left for Trump. A recent report from the U.S. Council on Competitiveness details a litany of profound, lingering flaws -- historically slow growth, rising inequality, stagnant incomes, slumping productivity and declining lifespans. As the report concludes: “The Great Recession may be over, but America is dangerously running on empty.”
These make for challenging conditions for Trump to make good on his promise to “make America great again.”
Since 2005 the vast majority of new jobs created have been part-time, and most have been in low-end service professions. Full-time middle-class employment, particularly in fields like manufacturing, construction and energy, has recovered some, but not enough to rekindle a broad sense of economic opportunity. Both the numbers of the rich, and those of the poor, grew markedly under our now departing President. There are now 16 million more people on food stamps than in 2008, and homeownership is down to the lowest level in nearly 50 years.
Trump may have lost the popular vote but given his awful approval numbers, it’s a testament to how deep the distress is for millions amid this economic malaise that he managed to come even close. Perhaps more importantly House Republicans, also running against the economy, outpolled their rivals by 3.5 million votes. Their constituents differ from that of the blue states won by Hillary Clinton. These states, whose economies depend more on financial engineers, real estate speculation, media and technology development, did well – or at least those who worked in these industries did.
Trump’s Biggest Challenge
Trump won because of Middle America -- largely white, suburban and small town, mainly in the vast region between the Appalachians and the Rockies. To consolidate his grip on power, and that of his unruly party, he needs to extend the weak, but long-lasting Obama recovery into something that drives up higher wage employment in manufacturing, energy and services.
This is where Trump’s emerging nationalist policies could come into play. Conservatives and liberals alike sneer at his needling of big corporations, foreign and domestic, over jobs, but what is the job of a President? Shouldn’t he be on the side of average citizen in Podunk, USA? If Trump can bring good jobs back to Middle America, notes analyst Aaron Renn , a native of southern Indiana, they’ll appreciate it. Trump, he notes, is “sending a powerful message to workers that they matter and he will fight for their interests. “
His jawboning of Carrier, Ford, GM and Sprint, and even the mighty Apple, could all be dissected as dependent on subsidies, incentives and intimidation. But people in Indianapolis, southeast Michigan and Kansas City are not theoretical beings waiting for the welfare leavings of the coastal super-rich. Their desires matter as much as those of sensitive souls in San Francisco or Brooklyn.
There are certainly ways -- tax policies, regulatory reform, infrastructure investment -- that might spark growth and get companies to create more jobs here.
Is Trump Up To The Job?
There is nothing better for an economy than mass prosperity, which is something now sorely missing. That means people buying houses, getting married, having babies, the essentials of a strong middle class economy. Anyone who delivers those goods -- last accomplished by Bill Clinton and Ronald Reagan -- seems certain of re-election. This is particularly critical for the roughly seven in 10 Americans who have less than $1,000 in savings.
Of course, Trump seeks to achieve this goal is using a very different approach than either Clinton or Reagan. He has chosen to follow an economic nationalist course that, in some ways, seek to reverse the approach embraced by both of these successful Presidents and much of the nation’s establishment. In contrast to virtually everyone who has held the White House since the 1940s, Trump did not run for leader of the world; he ran, very purposely, as the candidate of Americans. Clinton, like the European Union have offered more complexity, notes the Guardian; Trump, like many effective leaders, boiled everything down to simple memes.
Whether this populist course will work is not clear. Critics in the Democratic Party have pointed out, correctly, that Trump’s cabinet hardly fits a populist mold. It’s full of Wall Street financiers and high level corporate executives. He also will face opposition within his own party, which remains largely chained to big business interests and includes many advocates for ever expanding globalization. Similarly many “routine” jobs that paid well have fallen not simply to foreigners, but to automation and technology.
Yet ultimately Trump has proven himself something of savvy politician -- far more than anyone suspected -- and seems, at least for now, to be keeping his eye on the ball. The specter of tax, regulatory reform and more infrastructure spending is already ramping up projections of long lagging investment from businesses. And the general population, however deeply divided, seems more optimistic than in previous years, which could further stimulate the economy.
This could reinforce the notion that Trump’s hectoring of executives, and pushing economic nationalism, could prove effective in creating broad based economic growth for the emerging post-globalization era. Now it’s a matter of whether he can pull this off without sparking a trade war, an international meltdown or another recession that could turn him not into the new Reagan, but the latest version of Herbert Hoover.
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ab5fa18340511d3f0a573dea69879761 | https://www.forbes.com/sites/joelkotkin/2017/05/15/move-over-san-francisco-dallas-tops-our-list-of-the-best-cities-for-jobs-2017/?sh=3bd1439abde7 | Move Over, San Francisco: Dallas Tops Our List Of The Best Cities For Jobs 2017 | Move Over, San Francisco: Dallas Tops Our List Of The Best Cities For Jobs 2017
The reflecting pool at the Winspear Opera House in the Arts District of Dallas photo by Carter Rose, courtesy of AT&T Performing Arts Center
By Joel Kotkin and Michael Shires
Dallas is called the Big D for a reason. Bigger, better, best: that’s the Dallas mindset. From the gigantic Cowboys stadium in Arlington to the burgeoning northern suburbs to the posh Arts District downtown, Dallasites are reinventing their metropolis almost daily. The proposed urban park along the Trinity River, my Dallas friends remind me, will be 11 times bigger than New York’s Central Park.
Here’s something else for them to boast about: the Dallas-Plano-Irving metropolitan area ranks first this year on our list of the Best Cities For Jobs.
It’s a region that in many ways is the polar opposite of the San Francisco and San Jose metropolitan areas, which have dominated our ranking for the last few years. (They still place second and eighth this year, respectively, among the largest 70 metropolitan areas, though San Jose is down sharply from second place last year.)
Dallas skyline Shutterstock
Unlike the tech-driven Bay Area, Dallas’ economy has multiple points of strength, including aerospace and defense, insurance, financial services, life sciences, data processing and transportation. Employment in the metro area has expanded 20.3% over the past five years and 4.2% last year, with robust job creation in professional and business services, as well as in a host of lower-paid sectors like retail, wholesale trade and hospitality.
According to Southern Methodist University’s Klaus Desmet and Collin Clark, Dallas’s success stems in part from the fact that it isn’t looking to appeal to the elite “creative class,” but to middle-class workers and the companies and executives who employ them. Dallas attracts both foreign and domestic migrants, particularly from places like California, where housing is, on an income-adjusted basis, often three times as expensive. This has had much to do with the relocation to the area of such companies as Jacobs Engineering, Toyota, Liberty Mutual and State Farm.
Gallery: The Best Big Cities For Jobs 2017 16 images View gallery
Methodology
Our rankings are based on short-, medium- and long-term job creation, going back to 2005, and factor in momentum — whether growth is slowing or accelerating. We have compiled separate rankings for America’s 70 largest metropolitan statistical areas (those with nonfarm employment over 450,000), which are our focus this week, as well as medium-size metro areas (between 150,000 and 450,000 nonfarm jobs) and small ones (less than 150,000 nonfarm jobs) in order to make the comparisons more relevant to each category. (For a detailed description of our methodology, click here.)
The Rise Of Low-Cost Meccas
Dallas is far bigger (particularly if you add the neighboring 28th-ranked Ft. Worth-Arlington area to the mix) than any of the other metro areas that have prospered by offering cheaper alternatives to coastal cities, with lower taxes and generally more friendly business climates. Among them is No. 3 Nashville-Davidson-Murfreesboro-Franklin, Tenn.
Nashville skyline Shutterstock
The metro area has seen rapid job growth, nearly 20.6% since 2011. Last year job growth was across the board, including a 4.1% expansion in manufacturing employment, 5.2% in business professional services, and 2.9% in the information sector.
Like Dallas, Nashville has become a mecca for companies looking to relocate operations. Some, like UBS, are fleeing the high cost of places like New York or London. Others, like Lyft, are escaping high costs in coastal California. CKE Restaurants, owner of Carl’s Junior and Hardees, is moving operations from coastal California and St. Louis to set up shop in Nashville. All are bringing a diverse new range of jobs to the Music City.
Other low-cost migration meccas include fourth-place Charlotte-Concord, Gastonia, No. 5 Orlando-Kissimmee-Sanford, and No. 6 Salt Lake City. All boast growing tech centers with rapidly expanding STEM employment, as well as business and professional service growth.
Boom Towns Get Pricier
Some thriving metro areas on our list are becoming increasingly expensive, but they still don’t pack the tax and housing punch associated with blue state economies. No. 7 Austin-Round Rock, No. 9 Seattle-Bellevue-Everett and No. 11 Denver-Aurora-Lakewood have been big beneficiaries of the tech boom, and continue to attract migrants from areas like the Bay Area, where housing prices are still twice as high.
San Francisco skyline Shutterstock
It’s possible for older large cities with strongholds in key industries to generate strong job growth. New York’s population growth in 2016 may be half of what was in 2010, but financial sector job growth and associated professional service firms enable the Big Apple to rank a respectable 25th. Another high-cost area, Boston-Cambridge-Quincy, with its unparalleled concentration of elite colleges, ranks 30th.
The picture is not so pretty in Los Angeles-Long Beach-Glendale, a region whose housing costs are almost as high as the Bay Area, with the same onerous state regulatory and tax burdens. It ranks 40th this year, with anemic 1.2% job growth in professional and business services over the past three years and 4% in financial services. The L.A. area continues to bleed manufacturing jobs, down 2.1% in the last year and 4.6% since 2013. Even retail and wholesale trade showed weakness in 2016, growing at a lowly 0.7% and 1.7% rate, respectively. The Information sector, highlighted by Snapchat’s splashy IPO, made the best showing for Tinseltown, with employment rising 4.2% in the last year. The sector, which includes entertainment, has seen employment expand an impressive 20.9% since the bottom of the recession in 2011.
Full List: The Best Big Cities For Jobs 2017
As has been the case almost every year in this millennium, the super-sized metro area doing worst is Chicago. It ranks 51st this year, down four places. Since the Great Recession, Chicago has managed modest job growth of 8.3%, and only a weak 0.7% expansion in 2016. Despite an uptick in financial services jobs over the past two years, and some ballyhooed relocations of corporate headquarters, the metro area has been losing jobs in information, manufacturing, and wholesale trade. Business services was up a scant 0.5% in the last year.
Demographic Change And Changing Momentum
The resurgence of expensive areas -- notably New York and the San Francisco area -- has been propelled largely by demographic trends, notably the movement of highly educated millennials to these areas. Yet as millennials begin to enter their 30s, and seek to buy homes and raise families, the momentum may be turning decisively to regions that are both less expensive but still have considerable appeal to educated workers. Most of the big gainers this year – Dallas, Orlando, Salt Lake, Raleigh, and No. 24 Indianapolis – have developed better inner-city amenities in recent years while keeping housing costs low.
This shift is being driven in large part by unsustainable housing costs. In the Bay Area, techies are increasingly looking for jobs outside the tech hub, and some companies are even offering cash bonuses for those willing to leave. A recent poll indicated that 46% of Millennials want to leave the San Francisco Bay Area.
It seems that some areas located in pro-business, low-tax states are increasingly attracting the educated millennials that we usually associate with places like San Francisco, Brooklyn or West L.A. Since 2010, among educated millennials, the fastest growth in migration has been to such lower-cost regions as Atlanta, Orlando, New Orleans, Houston, Dallas-Fort Worth.
Over time, this migration could restructure the geography of job growth. As the middle class, particularly those of child-bearing age, continue moving out of states like California and into states like Texas. Utah or The Carolinas, the geography of skills changes. New families, a critical engine of job growth, are far more likely to form in Salt Lake City, the four large Texas metropolitan areas, or Atlanta, than in the bluest metropolitan areas like New York, Seattle, Los Angeles or San Francisco , where the number of school-age children trend well below the national average.
Ultimately, we may be on the cusp of a new economic era in which the cost of housing and living becomes once again a key determinant in regional growth. This trend has been developing for years, but both demographics, notably the aging of millennials, and out of control costs could accelerate it. Many areas may wish to somehow emerge as “the new Silicon Valley,” just as they wished once to be the next “Wall Street” or “Hollywood.” Yet these iconic economies are difficult, to impossible, to duplicate. It might make more sense instead to look the success of places like Dallas --- where lower costs are luring companies and talent at a level unrivaled in the nation.
Full List: The Best Big Cities For Jobs 2017
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6b3bddf339bc8acd6860bce823746f53 | https://www.forbes.com/sites/joelmoser/2018/03/08/why-invest-in-infrastructure/ | Why Invest In Infrastructure? | Why Invest In Infrastructure?
Shutterstock
Infrastructure continues to attract attention and capital as an investment asset class even as it defies easy definition. Why invest in infrastructure? Let’s start with a more basic question. What is infrastructure?
Like its investment asset class close relative real estate, infrastructure is a “real asset.” Indeed, infrastructure usually exists in the physical world as real estate—a physical asset permanently attached to the ground. But the similarity mostly ends there. While real estate ownership can be forever, its current value at any given time is often linked to larger economic forces: correlated to the economy, so that a buyer’s interest is related to economic outlook, will things get better or worse, widely or at least for this particular piece of earth.
By contrast, infrastructure’s value is less correlated, that is to say its value may neither strongly increase nor decrease based upon larger economic trends. So what is infrastructure when viewed as an investment target? The answer to this question is annoyingly tautological: real assets whose value is less correlated to economic movements.
This definition differs somewhat from dictionary definitions or commonly held notions which would make it out as “the basic physical structures essential to the operation of a society.” This isn’t a bad starting point as an investment definition, but the key to understanding the investor’s take is the word “essential” and not the word “physical.” A toll road may be physical, but its essentiality is the more important and the more nuanced question: are there other surface transportation options. Moreover, it’s degree of correlation to economic trends is the issue where the investor looks beyond the dictionary: who rides this road, pays the tolls and why?
The key to understanding infrastructure as an investment is to stop thinking of it in the way a member of the public would. An infrastructure asset may be a good idea but not a good investment. Indeed, mass transit is certainly a good idea, moving people more efficiently, but it is often a bad investment as most mass transit systems can’t cover capital and operational costs with tolls, tickets or similar user charges. They are good public policy but not good investments: to attract private capital, governments add revenue guaranties of one form or another.
Indeed, just about any civil infrastructure project can become an attractive infrastructure investment with a little government financial safety blanket. And some things that have nothing to do with government can be perfect infrastructure investments such as power plants with long-term purchase agreements, port facilities with location make them constructive monopolies, power transmission grids that serve stable population centers.
So why invest in this unsexy stuff? This is also tautological: because it is less correlated. All portfolio investment starts with an asset allocation and every asset allocation is specific to the investor. A large pension fund will have a different asset allocation than an individual retiree, a sovereign wealth fund will have a different asset allocation than a day-trader. Infrastructure is not the sexy part of any portfolio—that might be small cap, tech or even high-end real estate. Infrastructure occupies a place almost to the extreme other end of that spectrum, not as far to the other side as treasury notes, but closer to it, an investment bucket designed to provide a better yield than government bonds, perhaps even a bit of inflation protection, but not be at risk of a loss of any capital as a result of all but the most extraordinary events, and not subject to the ongoing fluctuations of markets or the economy.
Utilities used to be called “widow’s and orphan’s stocks” and the modern infrastructure asset class is a grown-up version of that: something to trust the future upon, suitable for individual investors as a counterbalance to broadly indexed listed investments and perfect for long-term institutional investors such as pension funds, insurance companies and sovereign wealth funds.
But don’t be fooled by labels. Lots of “infrastructure” assets can be dicey. Operating assets without long-term substantial use agreements, revenue-based transportation systems—tolled roads—along unproven routes, even core assets like mature highways but lacking binding noncompetition agreements from the government, stable assets in unstable countries. Each of these may be “infrastructure” but its investment thesis may be decidedly not infrastructure, more like start-up risk, a gamble on future government decision making, developing country risk or even currency risk.
The role of an infrastructure investor is to spot and then hedge risks or move on. By contrast, a hedge fund investor risks capital on the basis of an expectation of a movement in listed markets and a private equity investor risks capital upon the expectation that a particular strategy will create value. An infrastructure investor is primarily focused upon preserving value and providing moderate returns.
As markets continue to converge to the point that most everything else is becoming correlated, the emergence of a range of infrastructure investment vehicles for investors both large and small is a welcome trend from a financial services industry still seeking redemption from its role in the global financial crisis.
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823cf1e1b5fdecd6f8df90b9d793c1e6 | https://www.forbes.com/sites/joelpeterson/2012/11/13/just-what-are-you-trying-to-say/ | Just what are you trying to say? | Just what are you trying to say?
“I would not give a fig for the simplicity this side of complexity; but I would give my life for the simplicity the other side of complexity.” – Oliver Wendell Holmes
At jetBlue, an early attempt to craft a pithy, meaningful mission statement came out sounding like our auditors drafted it. The key line of the statement declared that we would become “the premier value-based carrier in the Americas.”
It didn’t take us long to realize that not a single customer, crewmember or shareholder would ever know what we meant by “premier value-based carrier.” So we went back to the drawing board.
When jetBlue was founded in 1999, airplanes had come to feel like crowded, expensive buses in the sky. We had wanted to change that. More than just making flying more affordable, we wanted to transform it into an enjoyable and inclusive experience – in the words of our founder, David Neeleman, to “bring humanity back to air travel.”
JetBlue Embraer 190 (Photo credit: Wikipedia)
We realized that we wanted jetBlue to become “Americas’ Favorite Airline,” a rallying cry that has been our inspiration ever since for delivering customer-friendly flying.
Reflecting on this story got me thinking about the mission statements of many companies where I’ve served on boards over the past 40 years. Unlike jetBlue’s mantra, many mission statements are long and flowery, full of buzzwords and the language of lofty virtue. I’ve seen lots of businesses claim that, through their inviolable integrity, they’re going to change the world. What they don’t realize is that these attempts at being aspirational and even inspirational can often come off as vague, interchangeable and irrelevant.
Serving your customers well is the only sustainable way to run a profitable business. Thus, if you spend too much time straining to prove your nobility, you risk spinning your mission into oblivion. Mission statements written with business-speak or lofty rhetoric tend to engender cynicism rather than clarity and focus. Here is one such example: “It is our responsibility to assertively administrate timely deliverables in order to solve business problems”. Or another: “We aspire to be the premier provider of tasty take-out food while maintaining uncompromising principles”.
Whether a marketing slogan, a speech, or the design of a smartphone, boiling down what you’re about is essential to long-term success. The famous Supreme Court Justice Oliver Wendell Holmes put it nicely: “I would not give a fig for the simplicity this side of complexity; but I would give my life for the simplicity the other side of complexity.”
The simplicity Justice Holmes admires is the kind that captures complex ideas in a sentence – or an image, or a product – that anyone can understand. If you’ve achieved this kind of simplification, you know it’s rooted in the hard and often frustrating work of deep thinking, false starts, and trial and error. But the simple ideas that result can be the most powerful and inspiring, both to you and your customers.
At Peterson Partners, a small growth capital firm, we decided our business was going to be all about the entrepreneurs we backed. We figured if we put entrepreneurs first, our investors would see the best returns in the long run – and so would we. Our mission became to “help entrepreneurs achieve their dreams.” We knew that this was the essence of putting together good deals, attracting capital, and hiring the best partners.
When you write a good mission statement – or a good business plan or pitch – you’ll know how well you did by the number of heads nodding in agreement.
This is the art of saying what you mean. Once you’ve done that, it’s time to mean what you say. That’s all about execution, a topic for future posts.
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76d3667fc5397557016046849f320e8e | https://www.forbes.com/sites/joelpeterson/2013/02/19/winning-customers-without-trying/ | Winning Customers Without Trying | Winning Customers Without Trying
I don’t know Captain George Force; and he doesn’t know me. But last week I began jetBlue’s quarterly board meeting by reading an email I’d received the night before – it was from a customer eager to share her experience after traveling on a plane flown by Force, a veteran airline captain:
“Since I was traveling with my baby, it took me a few extra minutes to get off the plane. Thus, I walked out behind the Captain, George Force. He saw me wearily carrying baby Helena. So, he took it upon himself to find my car seat and stroller amidst a mountain of gate-checked bags. Then, he put all of my baby gear together for me so I could pop her right in! I could’ve hugged him on the spot, but I refrained. Just thought you’d like to know that I’m now a loyal jetBlue customer.”
When Captain Force put the stroller together, no one was looking. No one was filling out an employee evaluation or a customer survey. He’d already done his job by landing the plane safely. But he still took a few minutes to help, when it mattered to a customer.
English: jetBlue plane: Airbus A320-232 N594JB (Photo credit: Wikipedia)
I don’t tell this story to plug jetBlue (although I do think jetBlue crewmembers generally do a remarkable job). The point of this anecdote is that George’s decision to lend a hand personifies one of the most important pillars of any great business – making your customer happy.
There’s a whole “values training” industry that tries to teach employees how to do the right thing in a variety of business situations. But good customer service doesn’t come from following a checklist, saying “yes ma’am,” or returning phone calls quickly. It’s not showing eight teeth every time you smile or shrugging off a customer’s harangue.
Great customer service starts with hiring great people – people like Captain Force, who don’t have to be taught how to treat others with respect, because it’s already second nature to them.
Of course, hiring a company full of people like that takes a lot of work and a long time. Strong business cultures are the result of years of painstaking effort – hire by hire and dismissal by dismissal. But the final result is something your competitors will find almost impossible to duplicate.
Twenty-five years ago at a gathering of young executives in San Francisco, I asked Jim Nordstrom to tell me about the way Nordstrom had developed its legendary customer service, starting with his grandfather and continuing to this day to become one of the nation’s largest fashion retailers. At the time, he was being mobbed by others and couldn’t give me a complete answer. Instead, he gave me his business card and hand-wrote a phone number on it.
When I called a week later, Jim himself answered. He spent the next 15 minutes telling me about the Nordstrom philosophy of customer service. To be honest, I don’t remember the particulars of what he said; but I’ll never forget that he gave me the number to his personal line and made time to speak to me about an issue that was this important to him and to his company. I’ve been a Nordstrom customer ever since.
Needless to say, Jim Nordstrom and Captain Force have at least one quality in common, the kind of attitude you’d like to bottle. It’s one that moves people to write letters of thanks—and one that makes it easy for people to become lifelong customers.
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d0c01d29e7ceee816fdbdb15189547e2 | https://www.forbes.com/sites/joelrush/2021/04/22/alex-english-nikola-jokic-on-track-to-be-the-greatest-nuggets-player/ | Alex English: Nikola Jokic Is ‘On Track To Be The Greatest Nuggets Player’ | Alex English: Nikola Jokic Is ‘On Track To Be The Greatest Nuggets Player’
Denver Nuggets legend Alex English says that star center Nikola Jokic is 'on track to be the ... [+] greatest Nuggets player,' and that he's 'okay with relinquishing the role and letting him take over because he's earning it.' ASSOCIATED PRESS
In his sixth NBA season, Denver Nuggets superstar center Nikola Jokic is the odds-on favorite to win the league’s Most Valuable Player award, with both the Las Vegas oddsmakers and a recent ESPN straw poll of actual MVP voters pointing to the Serbian big man as the most likely winner.
It would be the first time in franchise history for a Nuggets player to win the coveted prize, one of many signs that Jokic is ascending to the ranks of Denver’s all-time great players – if he has not arrived there already.
As such, there seemed no better person to ask about where Nikola Jokic fits into Denver’s overall legacy than Hall of Famer, eight-time All-Star and three-time All-NBA player Alex English, Denver’s all-time leader in points, assists and many other categories, and the man who many consider to be the greatest Nuggets player in franchise history.
Jokic’s stat line of 26.4 points, 11.1 rebounds and 8.8 assists per game places his performance this season in historically elite territory. According to Stathead, the only other centers in the NBA to ever average at least 26 points, 10 rebounds and 5 assists a game were Wilt Chamberlain and Kareem Abdul-Jabbar, and while both of them outrebounded Jokic by a large margin, neither could touch his prolific playmaking, nor were they close to his shooting efficiency – which is made all the more impressive by the fact that nearly 20% of Jokic’s field goal attempts are on three-pointers.
The complete list of penters In NBA History Averaging at least 26 points, 10 rebounds and 5 assists ... [+] in a season includes just three players: Wilt Chamberlain, Kareem Abdul-Jabbar and current MVP favorite Nikola Jokic. Data via Stathead
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When it comes to the advanced basketball metrics of overall player efficiency and production, Jokic is blowing every other player in the league out of the water. Nikola Jokic is first in player efficiency rating (PER), win shares, win shares per 48 minutes, box plus-minus (BPM), value over replacement players (VORP), FiveThirtyEight’s RAPTOR metric and more. That may sound like a mouthful of jargon to those uninitiated in the somewhat arcane statistical terminology, but the important takeaway is that while each of those metrics has its limitations, for a single player to line up as the leader in all of those categories is highly significant as an indicator of transcendent performance on the court.
Jokic’s elite play has already led to his name being smattered across the Nuggets’ all-time leaderboard even at this early stage of his career. That said, he has a long, long way to go to catch up with English and other Denver greats in some of the more cumulative categories such as points, while in others such as rebounds, he is rising quickly enough to be on track to reach the top in just a few seasons.
In several key categories, Nikola Jokic still has a way to go to catch up with Hall-of-Famer Alex ... [+] English on the Nuggets' all-time leaderboard. Data via Basketball-Reference
In this first installment of my exclusive interview with Alex English, I ask him about how Jokic’s MVP-caliber season and career up to this point fit into the larger scope of Nuggets history, how Denver should adjust following Jamal Murray’s season-ending injury, and much more.
Joel Rush: Considering the question, 'Could Nikola Jokic become one of the greatest Nuggets players ever?' naturally took me in your direction since you are the greatest Nuggets player ever in the eyes of many including myself, so I first wanted to ask you about that.
Alex English: I would think that he's been there long enough to be verified as one of the greatest players, if not the greatest player. I think that longevity plays a part as well. But so far, he's on track to be the greatest Nuggets player because of the numbers that he puts up, as well as how he has played with the team. So I'm okay with relinquishing the role and letting him take over because he's earning it. He's doing a lot of stuff for that squad that if he wasn't there, they would not be in the position. He's a bona fide superstar. And his numbers prove out, his individual numbers as well as the team numbers, the winning percentages.
Rush: You mentioned longevity, and that was actually one of the issues I was juggling, just thinking about the topic: What constitutes greatness? In your eyes, how do you kind of measure or evaluate what greatness is?
English: Well, you have to look at the production of the player, you have to look at his contributions to the team. But you also have to include longevity as well. Because I've seen players that have been great for two years, three years on the squad. And to be able to say they've been the greatest player on the squad when you've got other players that have done, not as well, but have been as strong.
But I think that his work over the five years being a Nugget qualifies him. He's done what he needs to do. And he's in that longevity range now where he can say, 'Well, I've been here, I've done this, I've done that." He's made the All-Star team now I believe three years, and that's the beginning of putting down the marks that people will judge him on. So he's well within range now.
Rush: Last season Jokic was All-NBA, but this season he's elevated to the MVP leader role at this point. What do you see as the most significant step forward he's taken this season that's kind of lifted him to that higher tier?
English: Well, he elevated his game last year in the playoffs. He's kind of carried the squad. Jamal Murray's been out a while, and he has been a model of consistency. You don't see a bad game from him. If he's got a bad game scoring, he makes up for it with his defense or his passing skills. He's just got a lot of things that are going for him. And if he gets to be the NBA player of the year, which I think he should be, that just sets down another mark that's something I never had. I don't think any Nuggets player has ever been an NBA MVP for the year.
Rush: You tweeted support for Jamal Murray following his knee injury. What do you think the goals or expectations should be for the Nuggets after his injury? Of course they still have championship hopes, but obviously that realistically changes the parameters to some degree.
English: Well, it changes the parameters, but that means next man up. Michael Porter Jr. has been wanting to be considered that superstar as well. This is his chance to step into that role, and give the team the things that Jamal Murray gave the team that they'll be missing. And there are other players on that squad that will have to step up, too.
I can remember in my career, when a player went down, other players elevated their game. And you may see another star being born. Certainly, I hope my alumni P.J. Dozier steps up and participates in that as well. But I wouldn't say that they're out of the championship race. Jamal Murray means a whole lot. He's a bucket waiting to happen. He's one of those players that you have to guard, you have to always have attention on him, which the Nuggets will not be presenting that to other teams now.
But other players should be stepping up, Michael Porter Jr. JaMychal Green, those players. And I think Michael Malone will find a way to help that team win. You just have to do things a little different when you lose a star. When you lose a very important part of your team, you can't just say, 'Okay, we're not gonna win, we gotta do this now.' You still got your number one player. You got a player that, if Jokic stays healthy, you got a player that can kind of dictate how far you go. I believe he's that good.
Rush: How would you say that this current era of the Nuggets stacks up against, say, the Melo era, or your multiple eras in the 80s? In the context of Nuggets history, how do you see this team fitting in?
English: This team, with Jamal Murray I would say they had a better shot at winning the championship. And it depends on how they retool. I still think they've got a good shot at winning, of being there because of Jokic and the players that are around him and the emergence of Michael Porter Jr. As for stacking up against my squad, I think we made the playoffs maybe nine straight years. We got to the Western Conference Finals one year. And the Nuggets did that last year, so they've gotten to our level of play.
They've got a squad that continues to be considered one of the top squads in the NBA. So they'll be in the playoffs, they'll continue to get to the playoffs. And I think they've got a good shot of winning. If they're there, they've got a good shot of winning because of Jokic.
Rush: So circling back to Jokic, you mentioned that you do think he's the MVP. But just to boil it down, why do you think Jokic is the MVP?
English: I think he's been consistent. I think the value that he adds to his team, and his stats, you know? His stats are not just 20 rebounds a night, or 30 points a night. But it's also another 10 assists, it's a few blocks. It's a total all-around game. And I don't think there's another player in the NBA, including LeBron, that's got that type of impact on his team, you know? The things that he does on the floor defensively as well as offensively.
The conversation has been edited and condensed for clarity.
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b95de9081bcb608fb758d21f18c4c116 | https://www.forbes.com/sites/joeltrammell/2013/12/12/why-virgin-ceos-are-at-a-distinct-competitive-disadvantage/ | Why Virgin CEOs Are At A Distinct Competitive Disadvantage | Why Virgin CEOs Are At A Distinct Competitive Disadvantage
Tim Cook, Apple CEO (Photo credit: Wikipedia)
I often make the comment that most CEOs are first-time CEOs. This is mostly an educated guess on my part, but I do have a corroborating data point: I recently had someone review a random sample of 1,200 U.S. tech company CEOs on LinkedIn (with 51-500 employees). Looking at their prior career history, we found that more than 73% of these are first-time company heads.
I would propose that this is indicative of the general population of CEOs across the U.S. Why is this the case? The answer may not be obvious, but because the CEO position is often the last stop in someone's career, most CEOs even in large companies are first timers. The proliferation of start-ups is another factor.
No matter the causes, it is disturbing that at any one time, the people running the majority of our companies have never held the role before: First-time CEOs face major disadvantages that are difficult to overcome and often lead to failure.
For one thing, no matter how successful they’ve been in their careers, most CEOs are not prepared to take on this unique role unless they’ve been specifically groomed for it. Exacerbating this problem is the fact that they are often walking into companies that are not run well and do not have effective management systems in place.
Whether they have started their own company, been hired to replace a failing CEO, or, least commonly, gotten the job as part of a clearly planned transition (often a forced retirement camouflaged as a transition), the new CEO comes into a situation where they must create their own management systems. Either there are none or the ones in place have failed and must be rebuilt. This is extremely difficult for anyone with no experience running an entire business.
When I say management systems, I mean a wide range of things that the CEO must define and implement. This starts with defining or reaffirming the vision and strategy. After a clear direction is in place, then the organizational structure should be optimized to support that vision. Then the operational metrics and management cadence must be established. Finally, the CEO must implement an ongoing process of goal setting and review that ties to the strategy and completes the cycle. As employees experience all of these changes, the CEO will also need to ensure that the culture adapts well to the new leadership. Many of these tasks are unique to the CEO role and will be new for most executives.
What I have described is a lot of work for any new CEO and will require many months if not a year or more to fully develop. All of the areas require significant thought and effort, since you can't just go out and buy a great vision or strategy that is appropriate for your company. This is where an experienced CEO has a major advantage over most first timers: Having run a CEO-level management system before, they can leverage much of their experience. While all parts may need to change in substance, the structure is the same.
These concepts have significant implications for boards that are hiring replacement CEOs. If the company is already run well and there will be a smooth transition period, then a first-time CEO will have fewer problems making the transition. Often, this means that an internal candidate will be the best choice. Apple went through this CEO transition when Tim Cook gradually took over as Steve Jobs' health failed. While there were changes made, and the management system is different under Cook than Jobs, the company did not stumble dramatically after the change.
If however, the company is replacing the CEO because of a failure, the best candidate will almost always be an experienced CEO, and this nearly always means someone from outside the company. The CEO job in these cases is tough enough without having a newbie who is learning how to build their management system for the first time. Very few business executives without previous CEO experience will have the ability to hit the ground running in these turnaround cases. While I don't have any inside knowledge of the situation, my guess is that this was at least part of the problem Ron Johnson experienced at J.C. Penney. Not having experience as a CEO, he tried to change everything at the same time and didn't build the organization necessary to make the change.
None of these are easy questions, which is why the CEO gets the big bucks. Part of my mission in life right now is to help CEOs – both first timers and experienced ones – better prepare for the role. This includes having the right management system to guide them. Many experienced CEOs fail too, and I would argue that even if they have a management system they use and can implement quickly, it may not be adequate to run an effective modern-day organization.
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d196e5f889fa5fd4147433ab10e1f9d3 | https://www.forbes.com/sites/joeltrammell/2014/10/07/7-ceos-give-advice-to-first-timers/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social | 7 CEOs Give Advice to First-Timers | 7 CEOs Give Advice to First-Timers
“There are absolutely no free lunches in being a first-time CEO,” says Alan Knitowski, CEO of Phunware, in answer to my question for the third and last installation of this CEO advice series, “What advice would you give to professionals about to take on the CEO role for the first time?” He sums up the challenge for new CEOs nicely. Rookie CEOs have less time than ever to show results, with little to no on-the-job training. Getting input from current and former CEOs is invaluable.
The answers from our seven intrepid tech CEOs focus on the importance of establishing two-way honesty and transparency, building a business for the long haul, listening more than you speak, choosing and committing to a leadership model, and knowing what you are getting into, among other insightful ones. You may read more about all seven CEOs in the article about what surprised them most about the CEO role.
Scott Abel, Founder & CEO, Spiceworks (CEO experience: Nearly 9 years): “Be open and honest with your employees. Truly be approachable. Build a culture where people are comfortable coming to you and telling you bad news. When startups go perfectly they’re hard - and they never go perfectly. We shouldn’t do anything that makes them harder. The more open and honest you are with your team about how you’re doing – with product traction, sales, and money in the bank – the more honest they’ll be with you about what’s working and what’s not inside your company.”
Dean Drako, President, CEO & Founder of Eagle Eye Networks (CEO experience: 22 years): “Build for success, not for an exit. You can be open to selling the company, but planning for it as your goal is a flawed strategy as it detracts from your customer focus. Most acquirers are interested in a successful company. Build one.
Measure results and adapt quickly. Smaller companies can change and move fast - use that to your advantage.”
Thomas Ebling, President, CEO & Chairman of the Board, Demandware (CEO experience: 14 years): “Always remember this old adage: 'You have two ears and one mouth for a reason.' It is really important to avoid rushing to judgment; spend time listening and learning from people already at the company. I’ve always found that your new team will often have the answers to the challenges that led to the CEO transition, but they just weren’t being heard.”
Gregory S. Gilmore, CEO, Planview (CEO experience: Less than one year): “Don’t be an accidental leader. In other words, be intentional about your leadership model. So many times CEOs end up in the chair but don’t follow a model of leadership. If you are not providing the leadership your organization needs, people will seek it elsewhere, undermining your influence and credibility. You cannot allow that to happen. There are lots of resources available on leadership, but here’s what people miss: No model will work well unless you apply your specific talents and gifts – as well as your weaknesses and shortcomings – to it. This requires a clear assessment of your leadership abilities.
Culture is an important aspect of the organization. You have to be intentional in driving and permeating the culture you want your company to have. You do this by taking every opportunity to instill the value system you have established in your organization. You reveal and reinforce your value system by how you handle crises, incentives, recognition, and many other factors. All those things are critically important.
As a CEO you must be willing and able to embrace ambiguity. CEOs must understand that there is always some part of the job that they can’t control. Even if you take a command and control approach, you will not be able to regulate everything and may end up alienating your employees and other constituents. Those who cannot embrace ambiguity end up being demoralized and damaging the very culture they are trying to create.”
Alan S. Knitowski, Chairman & CEO, Phunware (CEO experience: 8 years): “The best advice that I can provide for a first-time CEO is to really, really understand what you are getting yourself in to before you say ‘yes.’ This is not only about ensuring that you are ready to accept the reality that you will be ‘on’ 24x7x365 from the day that you start until the day that you stop, but also that your family will be front and center to those most impacted when the inevitable intrusions of your business take priority over everything else in your life.
You need to have complete alignment at home with the realities of what you are going to be doing, and the sacrifices that will need to be collectively made by all of those involved and impacted. There are absolutely no free lunches in being a first-time CEO, for either you or your family, and you have to realize that your learning curve and the impositions of your business on your life should not be underestimated.
Finally, you should realize that you have to be the visionary, the evangelist, the brand ambassador, the operator and the fundraiser all in one. The glass needs to be half full, not half empty, and you need eternal optimism in your goal and quest to achieve the impossible. You will consistently have less resources, less money and less maturity than your peers, so you will need to make up for it with aggression, confidence, work, planning, commitment and a tireless pursuit of excellence in every facet of your business. But enjoy it, because it is the most amazing and rewarding experience in business life.”
Mark McClain, CEO & Founder, SailPoint (CEO experience: 14 years): “Learn the difference between organizational health and organizational strategy. In business school, they teach you that the focus needs to be on organizational strategy. I’m completely on board with the thesis Patrick Lencioni puts forth in his book The Advantage: While strategy is important, organizational health is an even more critical long-term advantage.
Organizational health is more about making a company effective by creating a unified leadership team, aligning goals and having a clear purpose, and then communicating that vision to everyone within the organization. Just like we all do with our own physical health, we have regular company check-ups to ensure our company is healthy from the inside out. That way we can effect change before it affects us. I believe this is one of the primary reasons we’ve been able to attract and keep some of the best people in the industry, while fostering innovation and building exceptional customer relationships.”
Brian Tervo, President & CEO of North American Operations for TIE Kinetix (CEO experience: 6 years): “Understand that you do not know everything about the business no matter how much of a subject matter expert you may be. Build out a team of various disciplines that challenge each other to come up with the best idea, not just people who agree with your every word. Start with a communications survey to get a real picture of how your employees communicate and where they put their trust. Operate with total transparency (and hold yourself to the highest moral and ethical standards!).”
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c7162cab91f2012fbd4893248d909a9b | https://www.forbes.com/sites/joeltrammell/2015/02/09/what-are-the-right-criteria-for-selecting-a-new-ceo/ | What Are The Right Criteria For Selecting A New CEO? | What Are The Right Criteria For Selecting A New CEO?
Selecting a new CEO is the most important thing a board does. Choose the right one and everything else will be easier. Choose the wrong one, however, and it can be a catastrophe. Here’s how to select the right criteria and weigh the candidate’s qualifications for a successful hire.
Why Hiring CEOs Is Hard
Boards face several challenges in the task of hiring a new CEO. First, there is very little objective data on how to hire a great CEO. Second, few people have hired more than a handful of CEOs during their careers, limiting their experience. Third, few agree on what the CEO’s responsibilities are and what they want him or her to accomplish. Obviously, the board wants the CEO to increase shareholder value, but that is as helpful as telling a football coach you want him to win.
Every board would love to hire a CEO who has run a similar-sized company in the same industry and delivered exceptional returns. But even if the board can find this ideal CEO, he or she is unlikely to want to do the same thing again. People who want to keep moving up in their careers will look for a new challenge and a bigger opportunity. Therefore, a board will usually have to compromise on their ideal candidate and hire someone who doesn’t check all the boxes.
The Criteria: Depends on the Company’s Situation
First, the board should discuss openly what they want the new CEO to accomplish, and ideally come to some agreement. The question then becomes: What criteria predict the success of a candidate for this role? The answer depends on the company’s situation. Let’s assume for this discussion that the board is replacing the current CEO and looking for the new leader to make significant changes in the organization. In this case, they should almost always look outside the organization for the next leader. Leading significant change is a difficult challenge and usually requires an experienced leader with a fresh perspective on the company.
Company size: The first criterion most people look at is size of the organization the candidate has run in the past. Has he or she led a company of a similar size? The question is how you define “similar.” I think many boards define this much too narrowly. For example, if a board is hiring for a $500 million company, some would not consider a CEO who ran a $200 million company. I think this is too restrictive.
While boards would never hire a person who ran a $50 million company to run a $10 billion company, I think they should think in terms of powers of ten. If the company is less than 10 times the size of the CEO’s prior experience, he or she probably won’t be overwhelmed by the change. The less difference the better but knowing the need to compromise, this rule makes sense.
Public vs. Private: There are two other size-related considerations. One is whether the CEO candidate has experience running public companies or private companies. This is a significant difference, and I would want any potential public company CEO to at least have experience working with a public company board.
Number of Locations/International Business Size: The second consideration related to size is the number of locations and particularly how big the international component of the business is. If a CEO has not had international business experience, this is a big hurdle if he or she is moving to a company that operates worldwide.
Relevant Industry Experience: Once a candidate has met the size-related criteria, the next issue is his or her experience in the industry (or similar industries). The first responsibility of a CEO is to own the vision of the company, which is difficult to do if he or she doesn’t have a good understanding of the company’s industry. There are two key areas to explore with potential candidates that cover the initial strategic challenges a new CEO will face:
Does the candidate have experience with how the product is produced and delivered? Does the candidate understand how and why customers spend money with the company?
Prior Experience in the CEO Role: I saved my favorite criterion for last: Should you hire someone who has never been a CEO? The chance to get a CEO title is highly appealing to many talented executives and often attracts people who would never consider working for a new company in any other role. The challenge I have found is that very few other roles in a company adequately prepare someone for the CEO role.
Often, boards select someone who has had a GM title at a larger company, thinking that role is comparable to the CEO role. While some GM jobs are similar, in my experience most are closer to a sales executive role and don’t provide much additional preparation for the CEO responsibilities. It is rare to find a large company sales executive who can transition well to the role of CEO at a smaller company.
Following my rule of ten in terms of size, I would much prefer finding a successful CEO at a smaller company to run a bigger company. The transition will be much easier as the learning curve will be much shorter.
Hiring a new CEO is one of the biggest challenges boards face. They need to understand and agree on what the CEO’s role is, what situation the company is in, and what they are trying to accomplish. Then it will be much easier to choose the right criteria for selecting a candidate who will be successful.
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2dd877283c981964a735abcf7b239f86 | https://www.forbes.com/sites/joelyork/2016/08/09/5-project-management-software-pitfalls-for-marketing-managers/ | 5 Project Management Software Pitfalls For Marketing Managers | 5 Project Management Software Pitfalls For Marketing Managers
As a career software CMO, I have always been frustrated, and indeed embarrassed, by the fact that there is no decent enterprise software for managing the marketing department. While sales, engineering, manufacturing, finance, and support all have managerial systems of record; most marketing departments are managed using some gobbledygook of spreadsheets and project management tools. As a result, marketing is messy, misunderstood and always reinventing the wheel.
I’ve tried multiple times to bend generic project management software to the unique needs of marketing, and every time it has failed to scale, because it wasn’t designed to handle the diverse challenges of marketing project management. Now as CEO of my own marketing project management software startup, I’ve had to think long and hard about what went wrong in my CMO past in order to tackle these challenges head on at Markodojo. This short article attempts to distill those learnings, so that other CMOs and marketing managers can benefit from my misfortunes, and avoid these five common pitfalls.
Marketing Projects Come In Bewildering VarietyMarketing Project Management Software Pitfall #1
Marketing managers come in a bewildering variety, including product marketers, online marketers, channel marketers, event marketers, market researchers, public relations managers, and so forth. They manage an even more bewildering variety of marketing projects from blog posts to trade shows to integrated global campaigns. Yet project management software treats them as if they are all the same, just users and projects, respectively. Never mind that the work and information required to produce a trade show is completely different from the work and information required to produce a brochure or a story pitch.
Project management software presents many pitfalls for marketing managers, because it isn’t designed to handle the diverse challenges of marketing project management. (Source: iStock)
Let’s compare two common marketing project management scenarios: event management and online marketing. Most project management software tools do a halfway decent job with event management, because the hierarchical, one-off nature of events closely mirrors the simple project-task hierarchy of most project management software tools. By the same token, most project management software fails miserably at the cross-functional, agile, metrics-driven world of online marketing. New online marketing projects pop up every day; they often require real-time collaboration that spans the entire marketing department; they have very specific data requirements and very specific metrics; and each individual project is often just an optimization to a larger, ongoing campaign. This leads us to the next project management software gotcha for marketing.
Marketing Management Is A Process, Not A ProjectMarketing Project Management Software Pitfall #2
A project is by definition a one-off. But even that most one-off of marketing projects, the trade show, happens over and over. And, we marketers always want this next show to be better than the last one. If the variety of marketing projects doesn’t crash your project management software, the repetitive, cross-functional workflows of marketing process management will. Marketing management is fundamentally process management, not project management, because marketing is an endless quest for growth. Sustainable revenue growth requires continuous innovation to optimize new marketing programs and increasing production efficiency to scale mature programs, but you can’t optimize or scale a one-off.
Successful marketing management software must sew individual marketing projects together into flexible, cross-functional processes that can be continuously improved. Consider a typical marketing project for creating a new website section: a product marketer submits a communications brief to a creative team; the creative team creates images and copy and hands them off to a web team for implementation; finally, an online marketing team incorporates the new content into an email campaign. At each hand-off, we encounter an iterative review and approval cycle. These kinds of functional hand-offs are extremely common in marketing management, but they are nowhere to be found in project management software.
Marketing Projects Extend Outside The Marketing DepartmentMarketing Project Management Software Pitfall #3
Perhaps the most fatal flaw of most project management software is the exclusive focus on the isolated project team to the detriment of the larger marketing organization and the extended group of collaborators and stakeholders outside the marketing department. People outside the project team can’t see what’s going on unless some privacy permissions are changed. Ad hoc collaboration with people outside the project team is difficult and may even require additional license fees. Strategic managerial reporting across project teams is nonexistent.
Marketing project teams are very dynamic. They cross functions, departments, and divisions. They can change daily. They can include industry influencers, customers, sales reps, engineers, support managers, finance staff and executives. The ability to collaborate with people outside the marketing department is a critical, but overlooked marketing project management requirement. Without it, most project management software is reduced to a to-do list for small project teams. Marketing managers are forced to fall back on spreadsheets and presentations for everything else—instead of simplifying things, the result is just one more software tool to manage.
Marketing Projects Should Roll Up To Marketing StrategyMarketing Project Management Software Pitfall #4
While working across diverse marketing project teams is hard with typical project management software, managing across them is even harder. As a CMO, one of my biggest concerns was whether marketing strategy was being accurately translated into marketing work. Every quarter we’d have a strategic pow-wow and agree on key initiatives, such as targeting a new customer or launching a new product, but day-to-day distractions always conspired to derail them. “We just couldn’t get to a, b and c last quarter, because we had to do x, y and z instead.”
Marketing managers need to know if the work that is getting done aligns with marketing strategy. They need to know if their teams are truly overloaded, or simply distracted. To scale marketing programs, they need standardization, metrics and benchmarks over time and across functional groups. From the marketing project management software perspective, they need total visibility and strategic managerial reporting that spans the entire marketing organization. Work plans, calendars, roadmaps and performance charts that can be viewed by team, segment, initiative and every other important strategic dimension should be easy to generate. Managers shouldn’t have to fall back on spreadsheets when the information is already inside the project management software. They just need to be able to get it back out.
Marketing Projects Should Be Tied To Marketing ResultsMarketing Project Management Software Pitfall #5
For most project management software, success is measured by whether a project is completed to plan, on time, and under budget. Marketing success is measured on volume and ROI. Trade shows are always on time, what matters is how many new customers you get. Optimizing a web form can have 10x the impact of an entirely new campaign. The scope, timing and cost of marketing projects are entirely flexible as long as you bring in the leads and sales to justify them.
Project management software focuses on inputs, not outcomes. As a result, the vast majority of metrics and reports available are absolutely useless for marketing management. Marketing projects must be linked to results. Marketing managers need to ask questions like these: “What where the results the last time we did a project like this?”, “Will our current plans meet our strategic goals?”, and “Did 10% of our projects produce 90% of our results?” I’ve yet to see a project management software tool that can answer them.
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41a25cad120c03e562d17b5dfae0f4b4 | https://www.forbes.com/sites/joemckendrick/2012/05/14/cloud-computing-a-game-changer-for-your-company-6-questions-to-ponder/ | Cloud Computing a Game Changer for Your Company? 5 Questions to Ponder | Cloud Computing a Game Changer for Your Company? 5 Questions to Ponder
Are we there yet? Think of cloud computing as a continuum that stretches all the way from one-off projects -- that is, companies simply moving some IT assets to the cloud to gain cost savings -- all the way up to a game-changer that strategically leverages online resources to open up new markets or ways of doing business.
Photo: NASA
What does it take, then, to become a "player" in the emerging cloud space? Two experts in the cloud trenches – HP's E. G. Nadhan and Switch's Mark Thiele – recently provided some working ideals on evolving into a strategic cloud business. Nadhan expanded on my recent post about running 100% of your businesses in the cloud, while Thiele elaborated on the strategic vision vision necessary required to make cloud computing successful.
Consider these 5 essential questions to ask to assess how far along you are on the journey to becoming a strategic cloud business:
How service oriented are we? Clouds are collections of services, and if built or purchased without oversight or a plan across the enterprise, could end up being duplicated and far more expensive than the traditional on-premises systems they were meant to replace. Applications need to be broken down into callable services that can be delivered within and across businesses – a fundamental foundation known as service-oriented architecture. "Absence of a SOA strategy is likely to result in the uncontrolled proliferation of unstructured services across the enterprise,” Nadhan explains. Are we capable of managing a variety of clouds? Let's face it, no one is going to settle on one type of cloud to do everything across the enterprise. Typical enterprises will likely to be managing their own private or hybrid clouds, as well as procuring services from third-party services. And there will be multiple outside services from multiple providers. Issues that arise include vendor lock-in, retrieving data in a usable format, and finding the appropriate cloud platform for the expected workload and location, says Theile. “Depending on the business you’re in you may use partnerships and or competitive concerns as a decision factor in your multi-cloud strategy,” he says. In addition, the movement to these various cloud formations is part of the business transformation strategy. Do we have an information strategy? Cloud can help companies take advantage of Big Data, but that data “must be secure and compliant with various regulations,” says Nadhan. “Such considerations are fundamental to the Information strategy which also addresses the timely availability of the right information at the right time presented in the right fashion.” Information security, of course, is a very important consideration for many companies, and often has been a show-stopper for cloud engagements. Theile also raises a number of key security issues that need to be addressed: “Do your systems administrators have access to corporate strategy around locations and data privacy requirements?” HIPAA or other regulatory concerns also need to be part of the equation in cloud engagements. Well-developed role-based security is also critical, he adds. Do we have a cloud governance strategy? This is a matter of the control businesses have over their cloud services, says Nadhan. Who decides what services are employed? How are these services paid for? Who sets the standards for these services? “Cloud computing governance is vital to ensuring streamlined operation, interaction and ongoing evolution of the ecosystem of services and solutions pertinent to the business,” says Nadhan. An essential part of governance also addresses the lifecycle of services, from creation to retirement. “Unfortunately, most of us in the trenches don’t think about whether the images we create today should be reviewed six months from now,” Thiele points out. “Ensuring you have a solid life cycle approach will help you develop a more efficient use pattern and reduce the risk of inappropriate resource use.” How is policy management across our clouds addressed? This is fundamental to the way cloud services interact with business processes. “Your architects and engineers might be terrific, but are you sure they are the best ones to determine the value of having a common and simplified set of tools for managing policy and governance across your images and across different clouds?” Theile asks. “Policy considerations can take into account everything from privacy to security, to performance and lifecycle depending on the platform you choose.”
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4573ec1662777b56c78cc7a3527a16f9 | https://www.forbes.com/sites/joemckendrick/2012/06/08/could-cloud-computing-help-restore-our-trust-in-banks/ | Could Cloud Computing Help Restore Our Trust in Banks? | Could Cloud Computing Help Restore Our Trust in Banks?
Could cloud computing help restore our trust in the banking system? That's a tall order, since the responsiveness and stability of our financial system rests on many factors, from adroit management practices to proper and measured fiscal and monetary policies. But some financial technology experts say technology -- particularly cloud computing -- can help repair some of the damage wrought in recent years and advance the banking sector into a new realm.
Cloud computing’s disruptive impact on banking will affect how institutions transform how consumers research, learn about and buy financial services and products, and manage their personal finances. That's the view in a new report out of Accenture, authored by Emmanuel Sardet of Accenture Financial Services, and Emmanuel Viale of Accenture Technology Labs. No company in any industry can afford to ignore cloud computing, they write, but it's impact will be strongly felt within the financial services sector.
Sardet and Viale observe that banks in mature markets "can use cloud computing to enter and scale up in emerging markets more quickly and at lower cost and risk. And banks in emerging markets will use cloud computing to reach their unbanked populations by leapfrogging physical branch networks and moving straight to electronic and mobile banking." Interestingly, the authors treat social media and mobile as a single, converged force reshaping the market.
Of course, we've heard this before -- back in the dot-com heyday of the late 1990s comes to mind, when many consultants and analysts proclaimed that online financial services products would render banks obsolete. It didn't quite turn out that way, and for a while, the world forgot about this new model as it was consumed with the banking and credit crisis -- which drove home the point that we still relied on institutions that were "too big to fail." Sardet and Viale also add that banking won't entirely go to the cloud by any stretch. "Adoption of cloud models generally has greatest impact in areas of the value chain with the most variability. Banks that manage higher transaction volumes with little variation might find the best financial option is to balance offshore labor arbitrage with the use of cloud computing."
The rise of cloud-based financial services is a threat to the existing banking model "at a time when investments in customer service are tightly constrained and when consumer trust has been damaged by the financial crisis. Also, regulatory, market and customer pressures on their interest-based revenue (e.g., loans) mean they need to rebalance away from interest-earning revenues and towards revenues from services (e.g., fee-based)."
But Sardet and Viale say the impact of cloud is highly pervasive this time around, noting that the market is open to new, technology-driven players who take advantage of the lower barriers to entry cloud provides. "Cloud enablement makes new and bundled products and services easier to develop and provide, whether on a stand-alone basis or through partnering with cloud-enabled specialist providers," they point out.
Sardet and Viale point to a number of ways cloud is reshaping the way financial services are delivered:
Cloud-based offerings are transforming the customer banking experience. "Already, a new generation of cloud-based online personal financial management applications—mint.com, Geezeo and BankSimple to name a few —are gaining traction among customers," Sardet and Viale write. "At the same time, cloud-based applications such as peer-to-peer lending and crowd sourcing of loans (often microloans) are gaining momentum, especially in emerging markets. And banks’ role in payments—including in the emerging area of m-commerce and mobile wallets—is being challenged by online heavyweights PayPal, Google and Facebook." Banks that don't enhance their two-way relationships with customers, they add, run the risk of being relegated "to a back-office utility running bank accounts behind these third-party cloud-based front-ends, to serve merely as regulatory gatekeepers for activities such as anti-money laundering."
Smart cloud-based bundling puts the customer in control. "Banks need to see their services not from their own point of view, but from the customer’s—and then innovate to deliver against that view," the authors observe. "The key to this innovation is bundling. Core banking products such as checking accounts are increasingly undifferentiated. The real differentiation lies in the pricing and bundling for consumers. Some banks might locate their product engine in a cloud, while retaining a unique and sophisticated bundling capability that pulls together and combines cloud-based components in responsive, collaborative and dynamic bundles relevant to specific customers. Further opportunities exist when providing customers with digital storage 'safes' in the cloud, bundled with value-added services like tax, financial and wealth management advice."
Private clouds will dominate core banking. Security concerns, of course, may deter moving some critical banking applications to the public cloud. "As cloud-based offerings come to dominate the financial services marketplace, the ability for banks to integrate multiple cloud-enabled service and product providers will become the industry’s 'new normal.' This new normal, the report states, will also "dramatically reshape the role of the IT function, requiring a new governance model, new skills, new behaviors, and new ways of sourcing IT infrastructure and services."
Public cloud will dominate non-core and non-differentiated banking activities. "While security concerns mean many banks are reluctant to use public cloud services in core banking, public cloud has a big role to play in banks’ horizontal and back-office processes not directly involving sensitive customer data. Today, these processes include email, office/workforce productivity, internal collaboration and knowledge-sharing. In the future, public cloud use could also potentially extend to activities such as credit card processing, check clearing, and analytics on aggregated data."
Non-banking cloud-based competitors will keep up the pressure. "Rather than being technologically innovative, the emerging generation of cloud-based, socially-driven money management tools are customer services and experience innovators," say Sardet and Via. "They will continue to ramp up efforts to win customers not just from banks, but from each other. Banks must, therefore, continue to respond to these competitive pressures in order to avoid disintermediation, by investing in capabilities around social media, analytics, and targeted product and service."
Collaborative cloud-based shared services will emerge between banks. In a similar way to telcos sharing network infrastructure, "banks will start to collaborate to pool non-differentiated activities into joint ventures using private clouds within a closed group of banks," the authors predict. These joint cloud-based ventures could provide shared services that interact with customers in more engaging ways while simultaneously freeing banks from the burden of routine transactions."
Cloud-enabled collaborative bundling will expand across and beyond financial services. Banks may also apply their cloud skills and assets to even move into non-bank services. As I've mentioned previously at this site, cloud is blurring the lines between IT providers and consumers. Sardet and Viale point out that a bank could potentially operate as "an integrator and aggregator of a diverse array of products, using its differentiated cloud-based bundling capability as the glue. To join this ecosystem, third-party specialists within and outside financial services—from charge cards to concierge services to entertainment and sports—will migrate their offerings to the cloud so banks can integrate them more easily."
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0c5e069fdf53961980d80bdd914d61e6 | https://www.forbes.com/sites/joemckendrick/2012/07/24/majority-of-companies-expanding-cloud-computing-skills-survey/ | Majority of Companies Expanding Cloud Computing Skills: Survey | Majority of Companies Expanding Cloud Computing Skills: Survey
Expect to see new categories of jobs arising from cloud computing, as well as new breeds of IT vendors.
The rise of cloud computing in firms of all shapes and sizes means faster and broader access to computing resources. But it also means changes in job descriptions, and a need for vendors and enterprises alike to reconsider the type of working relationships they have.
These are the conclusions of a new study of 500 IT and business professionals and 400 IT firms just released by CompTIA, the IT vendor industry association. This is the association's third annual study of cloud patterns.
More than three out of five companies report they are adding new types of skillsets to their IT departments to keep up with growing cloud requirements. Skills now in demand include private cloud developers and administrators, departmental liaisons, integration specialists, cloud architects, and compliance specialists, the report states. Expertise in these areas is also being sought from IT vendors and consultants, the CompTIA study finds.
In addition, three fourths of the IT service suppliers in the study say they are seeking to beef up their vendor-neutral credentials showcasing knowledge and expertise in cloud computing.
Types of Skills/Roles Companies Have Added to IT Departments Skills to build private clouds 69% Departmental liaisons 64% Integration specialists 63% Cloud architect 61% Compliance Specialist 44% Source: CompTIA
At the same time, end-user companies affirm that the rise of cloud is generally having a positive effect on IT employment. While some CompTIA’s data also reflects that the net effect on IT jobs tends to be positive overall. For the second year, “reductions in IT headcount” was one of the least popular reasons that companies chose as a motivation to move to the cloud. Only 20% of businesses indicated that they had reduced IT headcount as a result of a cloud transition. In contrast, 32% indicated that they had done some restructuring of the IT department, and nearly half of those companies had built new roles related to cloud computing, such as workers skilled in building private clouds or departmental liaisons who understand the needs of various lines of business.
IT managers are taking action to build these new skills, the study confirms. Two -thirds of companies in the survey who reported undergoing an IT department restructuring also reported that their IT staff had taken training to build new skills. “This training may often be initiated by the employees,” the study states.
At the same time, the IT department is undergoing a major transformation -- from coding and monitoring to more of a consulting role. IT managers are being called upon to work with the business on designing go-to-market strategy, and identifying technology resources that will help the strategy materialize in the fastest and most efficient way possible. "While this may start with simply purchasing new tools for monitoring cloud environments," CompTIA notes, "ultimately the new roles that are being created are leading to a new function, where the IT team is more tightly integrated with lines of business and understands business strategy as a primary objective, then uses technology to achieve that objective.”
Outside players will also have a role to play in moving organizations to cloud. Currently, about 21% of enterprises have contracted with a third party for cloud transitions, CompTIA notes -- a 23% each, large companies and medium-sized companies were the most likely to have contracted with an outside firm. In contrast, only 11% of micro firms and 19% of small firms have worked with an outside company. “These are the firms that would have the greatest need since they lack internal expertise, but they are also the firms that may not have experimented with cloud solutions beyond simple applications," the study concludes. "As these firms explore more advanced uses of cloud computing, the demand for cloud services from solution providers will rise.”
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b7d8c900bd870f478e236d04f5eecd5e | https://www.forbes.com/sites/joemckendrick/2012/07/26/who-ultimately-pays-for-cloud-computing-it-depends/ | Who Ultimately Pays for Cloud Computing? It Depends | Who Ultimately Pays for Cloud Computing? It Depends
When the department or user group of a company decides it wants to use a cloud-borne service, who ponies up the money for the service? In the case of outside services from a providers such as Amazon Web Services or Salesforce.com, there may be discretionary funds within a line of business that are transferred via credit-card transaction. If there's an internal service within a private cloud, well, the question of who pays gets cloudy as well. How much should the owner of a service carry the costs of design, maintenance, server provisioning and upgrades if other departments are tapping into said service?
Photo: Alyssa McKendrick
Questions of cloud service funding and financial justification were explored in a new study of 500 IT and business professionals and 400 IT firms just released by CompTIA, the IT vendor industry association. In my previous post here at Forbes, I explored the staffing issues and opportunities identified in the survey that are arising as a result of cloud.
In most cases, it appears that information technology departments end up paying the tab for everyone's cloud indulgences. Fifty-six percent of companies are paying for cloud solutions through the IT department’s budget, and another 28% are specially requesting funds for a cloud transition.
Demonstrating the business drive to obtain services outside of IT departments, 48% of companies report they are paying for cloud solutions through line-of-business budgets. (Percentages add to greater than 100% since companies may be paying for multiple cloud solutions in different ways.)
The diversity in financing for cloud services means organizations are still exploring how cloud investments will be made. Ultimately, the ways and means cloud will deliver value may track back to decisions on who pays.
Whether the funds come through IT or line of business, justifying cloud expenses has become elevated to that of other operational expenses -- in other words, more business financial executives are demanding to see where the payoff will occur. Fifty-three percent of respondents who calculate potential return on investment say that a "high level of detail is needed," and 47% need a moderate level. "It is likely that cloud solutions procured with standard operating budgets follow similar procedures," the CompTIA report states.
Of course, ROI is a two-phase process -- there's the estimation before the project to justify funding, then there's the follow up after implementation to see if things are actually delivering as promised. There's good news here for cloud advocates -- 79% of companies that track ROI say that cloud cost savings "have been on par with original estimates or even exceeded original estimates."
Cost savings is only one piece of the cloud ROI puzzle -- and often not the best measure of cloud computing. In fact, the CompTIA report observes, "the number of firms that have found cost savings to be lower than original estimates steadily grows from year two of cloud adoption and beyond. Channel firms also find that hidden costs add up over time, even though the initial entry into the market is not cost prohibitive."
There are other potential benefits that may ultimately delivery far greater ROI, but are difficult to measure -- agility, flexibility, employee and customer satisfaction, and time to market. Such factors require careful baseline measurements before, during and after cloud projects are introduced. A company that employs cloud proactively and judiciously likely has a corporate culture that supports a wide range of innovation -- from analytics to good employee relations -- and thus, it may be difficult to parse the impact of cloud computing initiatives on positive impacts to the bottom line.
An analogy might be leading an orchestra playing beautiful music. How much of a contribution are the strings making to the overall result? What about percussion? Everyone needs to pull together to deliver. In the case of an orchestra, it takes a superior conductor to make things happen. In companies, it takes enlightened and forward-looking management.
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acf157feda8ae895cba129a5225c7742 | https://www.forbes.com/sites/joemckendrick/2012/08/29/most-americans-dont-understand-cloud-computing-does-it-really-matter/ | Most Americans Don't Understand Cloud Computing: Does It Really Matter? | Most Americans Don't Understand Cloud Computing: Does It Really Matter?
The ideal underlying the cloud computing approach is that end-users -- and even IT professionals -- can run computing jobs with no awareness of what servers or networks are making it all happen. So, it's not surprising that a new survey shows there isn't a lot of awareness of what, exactly, the cloud is all about.
While understanding cloud isn't necessary, it's advisable for career planning. Photo: Joe McKendrick
The survey of more than 1,000 American adults, conducted by Wakefield Research for Citrix, shows that few average Americans know what cloud computing is.
The survey was obviously designed to extract some cute sound bites. For example, it is reported, when asked what “the cloud” is, a majority responded it’s either an actual cloud (specifically a “fluffy white thing”), the sky or something related to the weather (29%). Only 16% said they think of a computer network to store, access and share data from Internet-connected devices. (That's the right answer.) The clincher is that 95% actually already use cloud in some form, from online banking for social networks.
So, does it really matter that many people don't understand cloud computing, since a lot of it is or will be behind the scenes anyway?
Yes, it does matter, and here's why: many peoples' jobs are being or will be reshaped by cloud. Not just IT professionals, but professionals from a range of disciplines will be expected to know what computing resources they can leverage to get their jobs done. Take marketing professionals, for example. Already, if you want to get ahead in marketing, you need to understand social media management and tracking. Anyone still focusing on printed direct mail is woefully behind. Cloud adds a new dimension to marketing, as well as sales, operations and finance.
Many respondents , in fact, are aware of the changes about to sweep through their organizations. Three in five (59%) believe the “workplace of the future” will exist entirely in the cloud. This finding alone "indicates people feel it’s time to figure out the cloud or risk being left behind in their professional lives," Citrix reports. In addition, most Americans (68%) recognize the economic benefits after learning more about the cloud. The most recognized benefits are that the cloud helps consumers by lowering costs (35%), spurs small business growth (32%) and boosts customer engagement for businesses (35%). Millennials are most likely to believe that the cloud generates jobs (26% Millennials, 19% Boomers).
Some "fake it until you make it" is also at play. One in five Americans (22%) admit that they’ve pretended to know what the cloud is or how it works. Some of the false claims take place during work hours, with one third of these respondents faking an understanding of the cloud in the office and another 14% doing so during a job interview. Interestingly, an additional 17% have pretended to know what the cloud was during a first date. (Cloud computing is the topic on a first date? Yikes...)
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c6f0eb8dced38b22c74e759a2b87bd79 | https://www.forbes.com/sites/joemckendrick/2013/01/28/5-skills-that-should-be-part-of-every-cloud-job-description/ | 5 Skills That Should be Part of Every Cloud Job Description | 5 Skills That Should be Part of Every Cloud Job Description
It doesn't matter if you are a technology wizard or a non-tech business professional. Cloud computing is impacting your job, and the ability to be savvy with cloud resources can mean career advancement. For business professionals, it means better understanding information technology. For IT professionals, it means better understanding the business.
Photo: Joe McKendrick
There is a rising number of IT jobs that require the ability to either build or interface with cloud computing services and systems. One report estimates that only about five percent of the IT workforce is "cloud ready." Whether or not this is accurate, it does point to a market that is accelerating faster than the skills available to keep up with it.
Emerging cloud jobs, identified in an article by Network World's Christine Burns, include cloud software engineer; cloud sales executive; cloud engineer; cloud developer; cloud systems administrator; cloud consultant; cloud systems engineer; cloud network engineer; and cloud product manager. Those are just a few examples, and they are seen both in tech service providers, as well as end-user companies.
For designing the cloud computing-related jobs of today and tomorrow, there are certain qualities that should be written into every job description:
1. Innovation skills and vision. This is perhaps the most important, and the most overlooked. Cloud is more than simply a swap from an in-house computer to an outside service. It's more than a monthly charge versus a capital investment. It represents a whole new way of doing business. An entrepreneur launching a new company needs to understand how to embrace cloud computing resources to launch and build his or her venture. A marketing manager can access resources and run simulations on cloud platforms to design and test new promotions. An IT manager can build hyper-flexibility into business technology, enabling the business to partner, merge and rapidly expand without being encumbered by system limits. An entire business can be built on the cloud.
2. Business communication, leadership and project management skills. A job description that calls for cloud proficiency also needs to establish the key reason for going to cloud in the first place: to improve the business. Cloud needs to be sold to the business, resources need to be marshaled, and support needs to brought in across the organization.
Here is how leadership skills are explained in one cloud-oriented job description: "Handles complex long-term focused projects involving multiple disciplines or business units. Provides leadership and direction to high priority or special projects undertaken by the business. area. Recommends to client and IT management appropriate technological alternatives. Evaluates new technological developments and evolving business requirements. Provides high-level specialized technical support and consultation to business and IT management."
3. Vendor relationship and negotiating skills. Alas, as with anything the business world, business is business. Cloud and Software as a Service vendors need to stay in business, and are not likely to cut customers slack in many areas. As shown in a recent survey of cloud buyers, published in Stanford Technology Law Review, buyers need to be prepared to assert their organizations' best interests on the questions of service interruptions, service-level agreements, data availability and physical location, and intellectual-property rights.
Vendor negotiating skills, as described in an online job listing: "Responsible for the negotiation, relationship management, tracking, troubleshooting and reporting of all technology related contract commitments made within the information services and various other departments. Tracks and monitors data necessary to ensure compliance to negotiated contracts on an ongoing basis and provides ad hoc reporting as required by enterprise systems. Provides and presents ad hoc analyses such as contract terms, dollar spend, process compliance."
4. Business architectural, analysis and planning skills. Cloud computing services shouldn't spring up in a vacuum. In the long run, having a tangle of cloud services ordered without rhyme or reason off a thousand corporate credit cards ends up being far, far more expensive than the on-premises systems they are meant to replace. Call it a classic example of JBOCs architecture -- or just a bunch of cloud services. The architecture that should be in place is based on enterprise and service-oriented architecture, in which IT and the business sit down together to plan out their requirements, and how technology purchases will fit into that road map.
Here is how cloud architectural skills are explained in one job description: "Leads in the development of the technical solution or offering, in translating the business needs into technical requirements. Identifies gaps, strategic impacts, financial impacts and the risk profile in the technical solution or offering, and provides technical support."
5. Technical proficiency. While this is the final category on the list, every manager or professional who consumes or delivers cloud services needs some level of technical savvy. Technical-level jobs require software engineering proficiency at developing cloud-ready applications, such as those built on open standards, network development and monitoring skills, and security skills.
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7f0b9a9230736c591467cf4b25f1c088 | https://www.forbes.com/sites/joemckendrick/2013/02/19/in-the-rush-to-cloud-computing-heres-one-question-not-enough-people-are-asking/ | In the Rush to Cloud Computing, Here's One Question Not Enough People are Asking | In the Rush to Cloud Computing, Here's One Question Not Enough People are Asking
Many business and IT leaders get consumed in many questions: Should we go with private cloud? Public cloud? Hybrid model? What about our legacy systems? Where do we find the skills to make cloud happen?
Photo: Joe McKendrick
But there is another, even more important question that needs to be pondered before asking these questions, however. What are we actually trying to accomplish? In the headlong rush to cloud, not enough people are asking this question.
That's the view of Dan Kusnetzky, founder of Kusnetzky Group and former IDC analyst, in a recent webcast at VIRTu Alley (sponsored by Dell). Too many organizations are jumping into cloud for cloud's sake, and not thoroughly evaluating where the business value may be, he cautions.
In some ways, there really isn't anything that new about cloud, he says. Rather, it's “an outgrowth of several longstanding trends and, only a small amount of new technology in a slightly new way." If anything, cloud is actually a new phase of IT outsourcing, Dan says, adding that "cloud computing is nothing more than the next step in outsourcing your IT operations," the culmination of years of attempts to offload technology management to specialized third parties. All forms of outsourcing -- including cloud -- are intended to run IT in someone else's data center.
But once the business begins to recognize the advantages cloud provides, it opens up new possibilities that may have not even considered before. And these potential advantages extend well beyond simple cost reduction, Dan continues. For example, organizations with limited over over-stretched technology resources find the cloud option appealing.
There's another dimension to business that cloud makes possible beyond the data center door -- and that is agility. Organizations "may need extensive increase of computing resources only certain times," Dan points out -- such as a retail operation that only needs high levels of computing capacity in the months running up to the holidays. Or, he adds, "a research institution may need enormous amounts of resources to test out an idea, where they’re planning, they’re thinking, they need to test out some new model that requires quite a bit of computational resources."
For some organizations, such as financial services, cost may not be the issue at all. Rather, it's time to market that is key, and here's where cloud can shine. "In financial services, sometimes a new service might produce millions or perhaps billions of dollars of revenue," Dan points out. "The fact that they pay a few hundred dollars for one resource or another isn’t as important to them as how quickly and reliably they can develop that workload bring it online and sell that product."
There are three key considerations in launching a cloud effort:
Ask: is this trip really necessary? "It's good to start with asking the business, 'what are you trying to accomplish?' before we try and select which tool will help that process along, Dan advises. “Do they really to move what they’re doing somewhere else? Or is what they’re doing good enough? Information technology often centers on what is 'good enough.' By trying to reach for excellence, what you’re doing may no longer be needed. Good enough is often good enough.” Know where you’re going. “Or you’re likely to end up somewhere else," Dan points out. "If you just start with a tool or start with a service and build and build and build, without knowing what you’re architectural requirements really are, you might end up with a total mess on your hands that is very hard to manage, and may actually be more costly." Always be thinking about security, reliability and manageability when you are making your plans. “Don’t expect you can just add this on afterwards as a product purchase, it really has to be baked in, or its not going to work very well.”
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228da40e82f5cb17d31f83659c174466 | https://www.forbes.com/sites/joemckendrick/2013/03/07/the-10-best-countries-for-cloud-computing/ | The 10 Best Countries for Cloud Computing | The 10 Best Countries for Cloud Computing
Japan, Australia and the United States take the lead as the countries with the most cloud-friendly policies and laws, a new study shows. The study, covering the technology environments of 24 nations, finds mixed progress.
The study, released by BSA-The Software Alliance, an industry group, finds that while many of the world’s biggest IT markets have stalled or slid backwards, others are embracing laws and regulations conducive to cloud innovation. The second annual "scorecard" also finds that policy fragmentation persists, as some countries, aiming to promote local cloud markets, adopt laws and regulations that inhibit cross-border data flows or skew international competition.
The BSA ranked nations on the basis of their support for data privacy; security; cybercrime prevention; intellectual property rights; free trade; industry-led standards; information technology readiness; and broadband deployments.
Here are the 10 top-ranked countries in terms of cloud environments:
Japan Australia United States Germany Singapore France United Kingdom South Korea Canada Italy
BSA says this year's biggest mover in the rankings is Singapore, rising from fifth from 10th place a year ago. The city-nation adopted a new privacy law "that recognizes people’s right to protect their personal information and companies’ need to use data for reasonable purposes," the report notes. While not in the top 10, Singapore's neighbor, Malaysia, is demonstrating progress in the right direction, bolstering cybercrime and IP laws and opening itself for increased digital trade, BSA adds.
The U.S. has edged into third, pushing Germany down to fourth. BSA credits "useful advances in standards development for cloud computing and infrastructure improvements rather than major policy improvements" within the U.S.
Canada, Russia, and India all also moved up the rankings by implementing international IP agreements.
Policy improvements in many of the world’s biggest IT markets have stalled, BSA adds. Notably, all six European Union countries covered in the study have lost ground in the rankings. Others are "effectively unplugging themselves from the global market — with especially counterproductive policies in Korea, Indonesia and Vietnam."
Trade agreements are an important component of a nation's cloud competitiveness, and should encourage the free movement of data and applications across borders, BSA says. "Governments must work to establish a framework that is rigorous enough to meet individual countries’ privacy concerns but flexible enough to ensure the free flow of cross-border data transfers. To ensure the growth of cloud computing, the obligations in forward-looking trade agreements should: explicitly prohibit restrictions on the provision of cross-border data services; prohibit requiring the use of local computing infrastructure, such as servers, as a condition for providing, or investing in the provision of, cloud services in the country; prohibit the use of standards and licensing requirements in ways that restrict trade; and cover purchase by private businesses and consumers and government procurement, including by state-owned enterprises.
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2b45cd9a97c3e6a80eeb6c5f5d48e7be | https://www.forbes.com/sites/joemckendrick/2013/03/11/big-data-plus-cloud-call-it-weird-data-but-in-a-good-way/ | Big Data, Plus Cloud: Call It 'Weird Data,' But in a Good Way | Big Data, Plus Cloud: Call It 'Weird Data,' But in a Good Way
We have the cloud, we have big data, we have social networks and we have mobile computing. The sum total is more than the parts; it's amounting to a big data cloud that is surrounding and defining businesses of all types and sizes, providing interesting opportunities for those who engage it.
That's the gist of a recent panel, hosted at BusinessNext, which explored what the implications of the big data cloud on today's organizations. The panel was moderated by Michael Krigsman, enterprise market strategist, who was joined by well-known tech pundit Robert Scoble and Vala Afshar, chief marketing officer/chief customer officer at Enterasys. (YouTube video posted below.)
Citing the rapid pace of new innovations -- thanks to the convergence of cloud, big data, mobile and social -- Scoble points out that he never liked the term "big data," preferring to refer to it as "weird data." As he noted, "the number of databases is going up exponentially. It's 'weird data' because there are new database technologies coming out every month lately to let people build new kinds of systems."
For example, there are online services and apps coming on the market that are delivering "highly personalized and highly predictive products," Scoble says. Google Now, for example, is a feature available on Android phones that "tells you you’re next meeting is an hour and its across town and you better leave right now traffic is getting bad," he illustrates. The intelligence comes from integrating emails and personal calendars with online information such as weather and traffic reports.
The advantages of the big data cloud aren't just limited to consumers, Scoble continues:
"On the enterprise side, this means an enterprise has a perfect view of what their business is right now. You get to see every truck at FedEx, every customer, every financial transaction -- in real time, on a cell phone. As an executive, you have perfect knowledge of what your business is doing, and you have increasingly perfect knowledge of who your customer is and what drove them in your virtual front door."
Within a couple of years, every every product is going to have algorithmic customer support, Scoble adds. Starting with very big products. "General Motors, they are seeing a world where your car is going to be highly personalized. You’re going to walk in with your phone, and it's going to know who you are, where your next meeting is. It's going to do things to serve you to make your life better."
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7a1532c309ee1fb28af2daf6902bc6df | https://www.forbes.com/sites/joemckendrick/2013/03/17/cloud-and-big-data-together-a-huge-springboard-to-innovation/ | Cloud and Big Data, Together: A Huge Springboard to Innovation | Cloud and Big Data, Together: A Huge Springboard to Innovation
"Big data is the new cloud computing."
This sentiment was recently expressed in an interview with Motley Fool analyst Tim Beyers, who analyzed the zeitgeist coming out of the South-by-Southwest (SXSW) conference and observed that cloud computing and big data were now one in the same phenomena, converging on enterprises of all shapes and sizes.
US CIO VanRoekel: "We're at the verge, the tipping point of the data economy." Photo: US CIO Office.
Beyers may have meant that the level of industry interest and innovation in big data parallels that seen in the cloud computing space in recent years. But in many ways, the two are becoming one in the same -- cloud resources are needed to support big data storage and projects, and big data is a huge business case for moving to cloud. The innovations and buzz around big data and cloud at SXSW represent a "tipping point," Beyers relates, as it is now apparent that both cloud and big data are huge springboards to innovation.
Tech-cultural confabs such as SXSW are not the only place where the convergence is being discussed. The potential these two converging forces was not lost on a more button-down affair, a recent workshop sponsored by the U.S. government's National Institute of Standards & Technology (NIST).
Steven VanRoekel, U.S. chief information officer, says the combined initiatives to open up federal data, along with cloud computing, have the potential to create entire new industries. As an example, he cites the opening up of geographic positioning systems data in the mid 1980s, which now is embedded in a range of commercial applications. "As a free open data stream, we almost overnight created $100 billion in value to the marketplace," he says. Reaching back even further, he noted how the U.S. Weather Service, first launched in the Smithsonian Institute, provided an open-source approach to collection and reporting of weather data from across the country -- another amazing "big data stream."
"The government is sitting on a treasure drove of data," VanRoekel continues. "We're opening data, and looking at what we can do. We can greatly impact the lives of every American by just unlocking simple prices of data." A key building block to this effort is the FedRAMP program, he says, in which the agencies pursue a "cloud-first" policy for any IT engagement. This is a key part of the government's digital strategy -- built on shared, open platforms. "Government agencies are ordered to look at the data they produce, catalog data, start to publish data, and think about machine-readable as the new default inside government. Any time we're building a new system, or amending a system, we focus on machine readability both on the collection, as well as getting agencies to develop [application programming interfaces] around their data."
"We're at the verge, the tipping point of the data economy," VanRoekel adds. "We're just now starting to seeing companies founded on government data. The combination of cloud and big data can not only create useful insights, but also can create incredible value -- not only the value we provide downstream in areas such as public safety and GPS, but real value in the way we think about decision making, the way we think about creating mission-based systems. There’s a definite multiplier effect at that intersection."
In his interview, Beyers provides some perspective on what exactly big data is to most organizations these days. It may have already been around for some time now, either in the cloud or within on-premises systems, but tools were not available to capture or analyze it. What has changed is that organizations now have tools to make sense of this data, he says. "We were talking about sort of the cast-off stuff, things are that are unstructured, doesn’t fit in the database. There was so much of it -- registration logs on a website; all of these addresses would come in, and they’d have just bazillions of lines of data. It was of kind of like the cast-offs, the garbage, the stuff that's sort of just left to the side, because we didn’t have the tools the analyze that stuff."
But there's more than the cast-off data now capable of being analyzed as well. Commercial, scientific and government organizations are figuring out ways to collect new types of data and bringing them into a new type of cloud. At the NIST conference, Dr. Thomas Cynkin, VP and GM of Fujitsu Ltd.'s Washington office, talked about the applications under development that take advantage of big data on a cloud platform. "We accumulate a wide variety and a massive amount of data, data collected from areas as diverse as the human body, automobiles, video, internet services," he says. Potential applications include "analysis of customer behavior, community energy management systems, building energy management systems, and information analysis in smart cities."
The most prominent application of big data on cloud, Cynkin predicts, will be in support of agribusiness, employing "big data inputs such as environmental conditions, thus enabling farmers to manage their production more effectively." Another potential area includes "prediction of machinery failure in multi-function printers," he adds. "By using a cloud platform and mobile technologies, big data analysis can provide meaningful real-time results that give businesses further insights into their actual operations," Cynkin says.
(Disclosure: the author has performed compensated work for Fujitsu, a company mentioned in this post.)
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e67e4ed23f0e818f43059141f08b6a29 | https://www.forbes.com/sites/joemckendrick/2013/06/10/more-choices-or-more-dependencies-cloud-computing-cuts-both-ways/?ss=strategies-solutions | More Choices Or More Dependencies? Cloud Computing Cuts Both Ways | More Choices Or More Dependencies? Cloud Computing Cuts Both Ways
While cloud computing has many advantages, too few organizations weigh the long-term impact of over-reliance on vendors providing cloud services. The goal of cloud computing should be to reduce dependence on vendors -- but the opposite seems to be happening.
Thomas Erl, co-author of Cloud Computing: Concepts, Technology & Architecture, and CEO of Arcitura... [+] Education. Photo credit: ThomasErl.com
I recently had the opportunity to chat with Thomas Erl, co-author of the just-released book, Cloud Computing: Concepts, Technology & Architecture, about these concerns. Erl's latest book is intended to explore the building blocks, or “concrete, well-defined, models, architectural layers, and technology mechanisms” of cloud.
Vendor lock-in is "something that organizations need to have their eyes open to, to assess the dependencies they form on cloud provider environments,” says Erl, who is also CEO of Arcitura Education. This should be a key financial metric in any cloud engagement, which would include factors such as "how much will it cost, and what will be the impact be to actually move to another cloud provider if you end up being unhappy with the cloud provider were looking at now, or if other circumstances require you to do so,” he explains.
Along with vendors' contractual obligations, executives engaging cloud providers should also be aware of “the impact of tearing their environments away from clouds, migrating them to other environments, and bringing them back in-house." Cloud users need to have "a clear understanding of dependencies ahead of time to know what that means, and to understand the commitment we make when moving to that cloud environment.”
Erl also spoke of an impending radical shift in IT jobs as a result of cloud. "It's a field now that is often viewed as an area of specialization, but I think it will become an intrinsic part of IT," he says. "Opinions we have and decisions we have to make about whether we want to incorporate cloud technologies or platform or third-party services to what extent, and the implications of that, are just going to become a natural part of how we approach IT. Another generation of computer science graduates will have that as part of their default understanding of what contemporary IT has become.”
For non-it professionals need to understand cloud, the impact may not be as noticeable – at least not yet. Business users involved in big data analysis and business intelligence do need to understand the cloud paradigm. But, overall, "what IT strives for is making a transition to cloud environments as transparent as possible," Erl says.
Ultimately, there is no right way or wrong way to build and manage cloud computing, Erl continues. “Cloud computing does not impose a design paradigm per say,” he says. “It imposes certain design preferences and features and potential based on technology innovations. But, its how you design your solutions, how you standardize them, how you leverage cloud technology is completely up to you. So if you want to continue to build silo-based solutions in the cloud like many organizations used to in-house, there’s nothing preventing you from doing that.”
Cloud computing is “kind of like IT outsourcing on steroids,” he adds. “There are organizations out there that basically don’t have much of an IT presence at all, especially startups. It improves the chances of immediate success because they can divert finds they would have normally had to put into a proper IT enterprise. Just build what they need automation-wise within the cloud, pay on a per-user basis, and focus on other priorities. It's healthy to have options.”
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8ccb6b9b56f2bf9214980355426b756a | https://www.forbes.com/sites/joemckendrick/2013/07/11/cloud-computing-market-may-become-an-oligopoly-of-high-volume-vendors/ | Cloud Computing Market May Become An Oligopoly of High-Volume Vendors | Cloud Computing Market May Become An Oligopoly of High-Volume Vendors
Oligopoly: A market in which there are a limited number of providers providing the same service. Its political counterpart, oligarchy, means rule by a few.
Image by Norman Kuring, NASA/GSFC/Suomi NPP, from NASA Visible Earth
Is the cloud computing marketplace becoming the domain of a few big vendors? With large players including Amazon, Microsoft, Google and IBM coming online with similar types of services, we may be starting to see a consolidation of the primary cloud computing market into the hands of a few powerful vendors.
This may herald the emergence of an IT oligopoly, Owen Rogers, senior analyst at 451 Research, suggests in a recent research note. Actually, he goes further to say what is emerging is both an oligopoly and monopoly at the same time. With identical services comes commoditization, and only big vendors that can deliver huge economies of scale with margins will survive in this space.
He adds that perhaps the "oligopoly would be used for bursting of virtual machine requirements, whereas the monopolistic market would be used for performance-based workloads that demand a service-level agreement (such as a database)."
Is this where the cloud marketplace is going?
It's not surprising that Infrastructure as a Service (IaaS) offerings -- raw compute power and storage -- would be limited to a few who can effectively compete in what is a high-volume commodity business. To compete in this space, providers need to rent entire counties to build gigantic data centers that can service hundreds of thousands of users 24 x 7.
At first blush, it would seem the barriers to entry to compete as a Software as a Service (application) vendor would be relatively low. But the cloud requires that software developers now not only be good software developers, but also data center operators as well. And these developers aren't going to attempt to build and run their own data centers -- they're going to lease capacity from the big IaaS vendors. So again, the path leads to the big, well-financed providers who can compete in a commodity marketplace.
Rogers predicts that the pricing for cloud services from the oligopoly group will need to reflect supply and demand -- that is, if a data center is running close to full capacity, user prices will go up. Likewise, a data center most idle will mean low unit pricing for cloud consumers. There's actually quite a bit of risk for cloud providers, as they need to be able to forecast demand and invest appropriately to meet it.
Rogers doesn't factor in corporate data centers that are underpinning private clouds, which could also potentially be extended out in a more public way to partners and customers. Statistics often show that corporate servers are only utilized at a fraction of capacity, and therefore leasing out excess capacity as compute services (even if its to another unit to the same business) -- or as less-commoditized SaaS -- would merely be icing on the cake for many of these organizations. Perhaps a grid-type marketplace could develop to handle the buying and selling of such capacity.
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7158cd29710039d7f7476fe31e5978db | https://www.forbes.com/sites/joemckendrick/2013/07/11/looking-for-a-cloud-evangelist-try-the-executive-suite-not-it/ | Looking For A Cloud Evangelist? Try The Executive Suite, Not IT | Looking For A Cloud Evangelist? Try The Executive Suite, Not IT
It's rare that non-tech types get more enthused about a technology approach than tech types. But that's exactly what's happening with cloud computing. What's the world coming to?
Photo: Joe McKendrick
A new survey of 1,182 executives conducted by Evolve IP, a cloud services company, finds that at least 70% of C-level executives and directors see the value of the cloud and consider themselves to be "believers." In contrast, only 53% of the people that will need to roll up their sleeves to make cloud happen -- IT managers -- are entirely sold on the cloud concept.
Typically, to paraphrase a travel ad, what happens in the IT department stays in the IT department. Business users want information and applications available when they need it, and bother them with the technical plumbing details it takes to get it. But cloud computing is one of those concepts that's easy to grasp, unlike, say, "service oriented architecture" or "enterprise application integration" or "object request broker." I don't recall executives banging on IT's door demanding more SOA or EAI or ORBs anytime in recent memory.
At the same time, many respondents across the board acknowledge that cloud is changing things -- one-third say the cloud is the most disruptive technology in 20 years. It looks like most initial cloud migrations within the next three years will involve efforts to optimize the IT infrastructure -- on top of the cloud service list are servers and data centers (27%), Microsoft Exchange (22%), and co-location/backup infrastructure (22%).
Less likely candidates for cloud include enterprise systems, such as financial applications/ERP systems (12%) and CRM solutions (11%).
The survey also finds that of those in the cloud, 70% say they have realized improved flexibility and scalability while six in ten have experienced disaster avoidance/ business continuity benefits.
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1160c028f13962dd47cb61fca978d440 | https://www.forbes.com/sites/joemckendrick/2013/07/17/hidden-costs-of-cloud-computing-revealed/ | Hidden Costs Of Cloud Computing, Revealed | Hidden Costs Of Cloud Computing, Revealed
The business case for cloud is compelling. Even after all the numbers for the obvious things get crunched, one has to ponder what "gotchas" could result in higher costs than originally planned. Business interruptions and outages are obvious risks, but there's an even more insidious set of issues that could drive up costs.
A couple of years ago, I helped conduct a survey of e-commerce application managers, and one of the key questions we asked was how they find out about slowdowns or glitches that customers may be experiencing. The answer, overwhelmingly, was that these managers didn't find out about web glitches at their sites until a customer phoned in or emailed a complaint. When you get hung up at a website, the people at the other end usually aren't aware of your troubles.
Photo: Joe McKendrick
So, as organizations move more and more operations to the cloud, the situation gets even more complicated. And, potentially costly to the business. It's well known that consumers won't stay at a site too long if it gets hung up -- they'll go to a competitor's site.
These are some of the costs that concern many CIOs. Rather, they are concerned about a range of hidden costs that may only surface after things are up and running -- such as poor performance, or issues with service availability. What happens when the service runs slow, and transactions back up? What happens when end-user customers get frustrated at slow Website performance? (Again, many will bolt to a competitive site.) How much does it cost for staff to sit by and wait while you get on the phone with the providers' technicians to sort through an issue that arises on their end?
Some of these hidden costs were explored in a new survey of 468 CIOs, conducted by Research In Action and underwritten by Compuware Corporation. There's no question a lot of money is going into cloud projects -- two-thirds of the respondents say that cloud is their top investment area for 2013. Many have crunched the numbers for the up-front costs of cloud computing, which typically include subscription fees, combined with some level of staff time required for set-up, user training and integration.
The study found that the majority of CIOs (79 percent) actually think a lot about potential hidden costs, and what they may mean to the business.
From a management perspective, the top cloud computing concerns are:
Poor end user experience due to performance bottlenecks (64 percent). This goes right to the customer end-user experience as well, since e-commerce is the leading cloud application area, the survey finds -- 78 percent of respondents are already using cloud resources to support e-commerce. The impact of poor performance on brand perception and customer loyalty (51 percent). Loss of revenue due to poor availability, performance, or troubleshooting cloud services (44 percent). Increased costs of resolving problems in a more complex environment (35 percent). Increased effort required to manage vendors and service level agreements (23 percent).
Of course, these costs are difficult to quantify and measure. An outright outage or system failure is easy to quantify, and can be relatively simple to address. But a slowdown or partial glitch somewhere in the process is more challenging; and can eventually add up to real money lost.
The survey also finds that 73 percent of companies are still using outdated, or even manual, methods to track and manage cloud application performance. The most common metric used to track application performance in the cloud is simple availability or uptime, rather than more granular end-user metrics such as response time, page rendering time and user interactivity time.
In a related white paper, the study's authors make some recommendations for preventing hidden cloud computing costs from slowing down business transactions. (Bear in mind that Compuware is an application performance vendor, so the survey was intended to make their case). Key is the ability to monitor applications and run analytics to measure their performance, as well as provide visibility to what end users are seeing and experiencing. It doesn't make sense to wait for the phone calls to come in.
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74bdbaa73883c7b0414861e3a595829e | https://www.forbes.com/sites/joemckendrick/2013/08/31/what-top-business-leaders-really-think-about-cloud/ | What Business Leaders Really Think About Cloud | What Business Leaders Really Think About Cloud
Cloud computing means more than cheaper and better-run IT resources. It means new ways of doing business, many of which have yet to be discovered. But some solid examples of cloud-enabled transformation are now surfacing.
Photo: Joe McKendrick
Recently, research firm Saugatuck Technology reached out to 53 very senior IT and business leaders using social media tools to gauge how important and impactful cloud (and related technologies such as mobile, social, big data, advanced analytics and sensors) are in driving business innovation.
In a part quantitative, part qualitative study, executives provided views on technologies paving the way for business innovation. About 75% of the respondents are CIOs or CTOs, and more than two-thirds in companies with greater than $1 billion in revenue.
The main takeaway: Executives recognize the cloud means more than very efficient IT. As Saugatuck CEO Bill McNee explains it, top executives recognize that cloud and its related disruptive technologies "is not only about cost savings and internal process improvement, but about innovating the way that companies engage with customers and partners, and in terms of their ability to deploy profitable new business models."
Some highlights from the study:
Executives recognize the potential opportunities cloud is creating for their organizations. More than two-thirds, 68%, of the C-level executives ranked cloud as “very important” or “extremely important,” while none rated cloud as "not important." As the CFO of a large manufacturing company put it: Cloud adoption favorably “impacted our ability in manufacturing traceability and quality with our cloud ERP system to meet customer requirements for the better. Also, gave employees better access and control with electronic workflow and mobile.”
The most disruptive forces affecting businesses the most these days include mobility, cloud and advanced analytics, Saugatuck finds. Separately, they're having an impact, but when combined, the impact is even stronger, executives say. As the CTO of a large hospitality company related: “Transforming available data into collective awareness is a primary goal for us. The mobility solutions our team uses when meeting clients around the world has enabled our sales directors to function at their best. A smart infrastructure must support the different roles that users might play and private cloud for us has been a great support. Public Infrastructure has not been as reliable and adaptable yet.”
Cloud is facilitating speed to market. "In particular, several executives cited cloud’s role in the creation of new information-based products and services, and its role in helping to distribute them," McNee says. As the CTO of a large media company said: "As a media company cloud-based delivery platforms have been key for our distribution needs (e.g. what the postal service last century, cloud is performing now). Especially as it pertains to rich content and content that's reformatted for various devices. All our digital delivery platforms – web, tablet, smartphone rely on infrastructure, services and software to provide rapid innovation and delivery.”
Corporate culture -- not technology -- is the greatest obstacle to business cloud. The executives also expressed the view that cloud-based innovation may take time within their organizations -- funding and culture are seen as the greatest impediments to innovation. This is especially the case within older and heavily regulated industries. (Ironically, the U.S. federal government has been extremely aggressive about cloud adoption across its agencies.) Few saw technology itself as a hindrance.
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8e4496de943c63a6337de538e592fbc1 | https://www.forbes.com/sites/joemckendrick/2013/10/24/what-cutting-edge-enterprises-want-from-cloud-analytics-analytics-and-more-analytics/ | What Cutting-Edge Enterprises Want From Cloud: Analytics, Analytics, And More Analytics | What Cutting-Edge Enterprises Want From Cloud: Analytics, Analytics, And More Analytics
For inspired or forward-thinking organizations involved in cloud computing, cost savings and efficiency are just the icing on the cake. What they really are pursuing is something deeper to the business-- to develop high-powered analytical capabilities. They look at cloud and see analytic opportunities.
Photo: Joe McKendrick
That's the key point surfaced in a new survey of 802 executives (evenly split between IT and business roles) was conducted by the IBM Center for Applied Insights in collaboration with Oxford Economics. The survey found that one out of five organizations is ahead of the curve on cloud adoption and achieving competitive advantage – not just cutting costs and driving efficiency – through cloud computing.
That 20% comprised of leading organizations are 170% more likely to use analytics extensively via cloud to derive insights for better business decisions, the study finds. These leaders are looking to the cloud to differentiate them from their competitors. In fact, they are 136% more likely to use cloud to reinvent customer relationships.
I like the way the report's authors put it: "For leading organizations, cloud provides an escape route from the status quo." That's a status quo that consists of rigid and stagnant approaches to customer relations, product innovation and new business development.
Compared to more cautious cloud adopters, leading organizations are:
117% more likely to use cloud to enable data-driven decisions 79% more likely to rely on cloud to locate and leverage expertise anywhere in the ecosystem for deeper collaboration 66% are using cloud to strengthen the relationship between IT and lines of business and the majority are using cloud to integrate and apply mobile, social, analytics and big data technologies.
The secret to successfully competing on analytics is making insights accessible to all decision-makers across the organization -- not just the quants and C-level executives. Cloud increases the accessibility of data. Two-thirds of the cloud leaders say cloud plays a pivotal role in helping them make data-driven decisions.
Examples of cloud-based analytics cited in the report include TP Vision, a joint smart TV venture of Hong Kong-based TPV Technology and Royal Philips Electronics, that is storing data on customer preferences in the cloud to deliver insights that will provide personalized programming experiences for customers. Target Corporation is also cited for its use of cloud-based analytical services to make merchandising and marketing decisions. "The retailer can now see patterns – guest segments with very different wants and needs, such as health and wellness or feeding their families or satisfying high-end, gourmet tastes."
These "Pacesetter" companies at the intersection of cloud and data analytics also are looking for even greater capabilities. The top three most valuable capabilities in their “cloud of the future” would be:
Product/service building blocks: Easy-to-assemble industry or business service components they can use to construct new products or services. (Even bigger) big data: Access to– and management of – vast data stores they can’t get to now. Industry-specific platforms: Cloud platforms with applications and computing environments designed specifically for their industry.
The survey also finds that the cloud’s strategic importance to decision-makers, such as CEOs, CMOs, finance, HR and procurement executives, is poised to double from 34% to 72% – vaulting over their IT counterparts at 58%.
The survey also finds that organizations gaining competitive advantage through high cloud adoption are reporting almost double the revenue growth and nearly 2.5 times higher gross profit growth than peer companies that are more cautious about cloud computing.
IBM also calculated the value drivers for the three levels of cloud adopters, and the differences between leaders and laggards:
"Chasers" "Challengers" "Pacesetters" Gap between chasers and pacesetters Use analytics extensively to derive insights from big data 20% 44% 54% 170% Reinvent customer relationships 25% 46% 59% 136% Share data seamlessly across applications 27% 51% 59% 119% Make data-driven, evidence-based decisions 30% 62% 65% 117%
Source: Under Cloud Cover: How Leaders are Accelerating Competitive Differentiation, IBM Center for Applied Insights, October 2013.
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5fbd421b9f06ed5e3ddc623cf27a60be | https://www.forbes.com/sites/joemckendrick/2014/02/23/government-as-a-platform-how-cloud-computing-is-progressing-inside-the-beltway/ | 'Government as a Platform': How Cloud Computing Is Progressing Inside The Beltway | 'Government as a Platform': How Cloud Computing Is Progressing Inside The Beltway
Cloud computing is more than just the latest in a series of attempts to pare down government spending -- it's a gateway to unprecedented innovation in a sector known more for bureaucratic inertia. That's the view of Dr. Rick Holgate, president of the American Council for Technology (ACT), an independent advisory group and community of government managers and employees. In his view, cloud is one of three forces of innovation sweeping U.S. federal agencies, along with restructuring and opening up to private industry partnerships.
I recently caught up with Holgate, who is CIO of the Bureau of Alcohol, Tobacco, Firearms & Explosives, to talk about the disruptive forces that are reshaping the federal government. Cloud computing is the first and foremost of such forces – “bringing about more modern and more flexible, agile ways of delivering services and technology to our customers,” he says. “We’re really thinking different about we build services and build solutions.”
How is the adoption of cloud progressing inside the Beltway, among government agencies? While launched with great promise several years ago, a recent Accenture survey of 286 federal IT executives suggests that progress has been slow to date. The initial effort, the 2011 Federal Cloud Computing Strategy known as “Cloud First,” required federal agencies to consider cloud-based solutions anytime new solutions are sought. More recently, a Government Accountability Office (GAO) report found that only one of of 20 cloud migration plans submitted by agencies to the GAO in 2012 was complete, and only 10 percent of agencies had migrated the bulk of their IT assets to the cloud. The Accenture study shows about 30 percent have implemented cloud strategies.
Holgate says there is a sizable degree of momentum toward cloud computing at the federal level, but agrees progress has been uneven. Progress with cloud has "depended on agencies' missions and the level of comfort they can achieve with cloud computing," he says. "Many agencies, plus the General Services Administration, have moved a number of their traditional internal IT services, including email and customer relationship management, to cloud-based commercial providers.” A notable cloud consumer has been the Central Intelligence Agency, which is "contracting with cloud providers to meet their needs for huge amounts of infrastructure on demand," he continues.
Cloud is part of a growing 'Government as a Platform' initiative that has been developing since those earlier days of Cloud First. "Government has been opening up access to its data, allowing others to innovate using that data.," says Holgate. "Some examples of that are weather data and GPS data, which have really fostered huge amounts of innovation in the private sector."
Cloud lowers the barrier to standing up new capabilities, he continues. "We can start looking at huge volumes of data, and be more thoughtful and analytic about the way we do business. Cloud-type and shared environments enable us to stand up those types of capabilities much more easily."
Opening up access to data is also helping government agencies improve their internal operations as well. “Technology can shine a light on what had been historically inefficient business practices within the federal government," he explains. This spans a range of government activities, from procurement costs to healthcare to student loans. "Previously, we didn’t have an easy way to see into those transactional data sets. Now we can look at that data and we can understand where were seeing inefficiencies and where we're incurring expenses." In addition, cloud makes it easier for agencies to deliver commodity-level services, such as email, to users -- areas "we don’t want to spend a whole lot of effort and capital and attention to delivering, while allowing us to shift our focus to some of those things that are more transformative and innovative."
The ability to focus more on value-added activities is a key selling point of cloud, Holgate states -- it's part of the transformative effect technology is having on the way government agencies are run. "Innovation comes from all sorts of places in the organization," he says. "You need to make sure you have a way to surface the great ideas that occur within all organizations, and make sure that you bring all of those voices of creativity and innovation to the table. More and more, they’re coming from many different sources -- because everyone has exposure to mobile capabilities and cloud-based platforms."
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717d64e23abd6ae38bc33319b2d5b6a6 | https://www.forbes.com/sites/joemckendrick/2014/03/20/most-cloud-computing-is-under-the-radar-in-enterprises-survey-shows/ | Most Cloud Computing Is Under The Radar In Enterprises, Survey Shows | Most Cloud Computing Is Under The Radar In Enterprises, Survey Shows
Cloud is a popular option for many enterprises, and most are diving into cloud at some level. However, on-premises systems still dominate, and are still the preferred choice for most applications, a recent survey shows.
Unless people are simply going ahead and using cloud without getting permission.
This is one of the takeaways from a recent survey of 2,041 executives across the globe, released by Microsoft and conducted by 451 Research. The survey finds more than 45 percent of organizations consider themselves to be beyond the pilot phase, with 32 percent with a formal cloud computing plan as part of their overall IT and business strategy. At least 24 percent consider their enterprises to be "heavy" cloud users at this time. The survey examined various forms of enterprise computing, from adoption of public Software as a Service to private cloud to hosted applications.
Some interesting data really jumped out of the study. For example, at this point, only six percent of respondents would consider cloud to be the "default platform" for new applications. There are many vendors -- particularly startups -- who are offering nothing but cloud-based solutions, so this suggests there is still a ongoing vibrant market for on-premises systems. At the same time, only 18 percent rely "heavily" on cloud for new projects. The picture is decidedly mixed -- enterprises aren't afraid of cloud, but they're only likely to subscribe or apply cloud-based solutions in selective situations. Ultimately, however, executives anticipate that at least 39 percent of their application portfolio will be touching the cloud within the next two years.
Perhaps heavy cloud adoption is still in the minority because business and IT leaders simply don't know who is adopting cloud in their organizations. In fact, a lot of cloud adoption is going on under the enterprise radar, the survey shows. Forty-four percent of executives admit that there are a lot of off-budget purchases or implementations of cloud taking place within their enterprises. One in five indicate that there is even a "significant" amount of shadow IT spending on cloud resources taking place under their noses.
While not explored in the survey, it's likely many business users are signing on to services such as Dropbox, Box and Salesforce.com for much of their own work. If they use mobile at work, they may be taking advantage of mobile cloud services such as Apple iCloud. Windows users, of course, have access to Office 365-based services such as OneDrive (formerly SkyDrive) for quick, accessible storage outside the IT department's storage capability. Google's array of cloud services, such as Google Docs and Google Drive, also are readily available. Or, they may even be tapping into the innumerable APIs that cover every business process from purchase orders to lunchroom services. Developers and IT people themselves also may be using a range of outside services to build and test their applications, such as Amazon Web Services and RackSpace -- not to mention the cloud-based development environments now available.
Which may explain why, when asked for their leading best practices when it comes to cloud-based implementations, executives put a heft emphasis on security. Here are the top-ranked best practices mentioned in the survey:
Have a well-defined architecture for security Understand who the end-users are Train users to be cautious with access and security Have a well-defined architecture for performance Have a phased approach starting with pilot testing
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af10e250ecf744086f2c0e1e5717ae77 | https://www.forbes.com/sites/joemckendrick/2014/05/27/5-questions-to-ask-before-leaping-into-digital-business/ | 5 Questions To Ask Before Leaping Into Digital Business | 5 Questions To Ask Before Leaping Into Digital Business
In light of the avalanche of trade press articles, analyst reports and vendor pronouncements, one can be forgiven for thinking the whole business world already exists entirely in digital form. But most products and services still reside in the physical realm, and most companies are just starting to explore what it means to become a "digital enterprise." For the sake of argument, let's define a digital enterprise as one that is wholeheartedly embracing cloud, data analytics, mobile, embedded devices, and social platforms as a major part of its strategy, operations and revenue streams.
Adopting and understanding the business potential of these digital-enhancing tools is step one in the march to digital. What also needs to be understood is digital is not a one-for-one swap of current business processes, products and services for more virtual renderings. Moving digital means new ways of doing business, and new avenues of opportunities. Rather than swaps, going to digital means trade-offs. And asking the tough questions up front.
A new report written by Martin Hirt and Paul Willmott, both with McKinsey & Company, outline what some of the tough questions are, which need to be asked by decision makers at all levels in enterprises poised to make the head-first dive into digital:
1) Should we lead or follow our customers? It's often said that in the digital era, customers -- with their assorted devices, cloud service access, and social networks -- are in charge, and it's up to businesses to keep up. However, companies need to not only stay out in front of the digital revolution, but also recognize when the time is right, Hirt and Willmott state. "The right decision may be to forgo digital moves—particularly in industries with high barriers to entry, regulatory complexities, and patents that protect profit streams. Digital efforts risk cannibalizing products and services and could erode margins. Yet inaction is equally risky."
2) Should we cooperate or compete with new attackers? The software and IT industry itself has long been characterized by "coopetition," in which businesses compete to the death on one level, yet hold hands and whisper sweet nothings into each others' ears at another level. (Remember who was Microsoft's biggest software reseller back in the early days of the PC? It was IBM, also an arch competitor on many fronts.) Today's digital world also may spawn the same types of alliances. "While in the past, there may have been one or two new entrants entering your space, there may be dozens now—each causing pain, with none individually fatal," Hirt and Willmott point out. "However, it’s not feasible to defend all fronts simultaneously, so cooperation with some attackers can make more sense than competing. Digital technologies themselves "are opening pathways to collaborative forms of innovation."
3) Should we diversify or double down on digital initiatives? As with all the good things in life, digital isn't free, and often, substantial investments are required to get things rolling. The question is how to allocate funds and resources -- should small-scale innovative efforts be encouraged, or should the enterprise put all its money into one grand, comprehensive plan? "One answer is to think like a private-equity fund, seeding multiple initiatives but being disciplined enough to kill off those that don’t quickly gain momentum and to bankroll those with genuinely disruptive potential." The alternative, Hirt and Willmott add, "is to double down in one area, which may be the right strategy in industries with massive value at stake."
4) Should we keep our digital businesses separate or integrate them with current non-digital ones? This is a question that boils down to corporate culture. If you have a culture that is already highly innovative and open to new ideas, adding digital may be relatively seamless. However, in a more hidebound hierarchical culture, it may be best to spin digital efforts off separately. "Integrating digital operations directly into physical businesses can create additional value—for example, by providing multichannel capabilities for customers or by helping companies share infrastructure, such as supply-chain networks," Hirt and Willmott state. "However, it can be hard to attract and retain digital talent in a traditional culture, and turf wars between the leaders of the digital and the main business are commonplace."
5) Who should own the digital agenda? Delegating digital enterprise initiatives may depend on how the previous questions were resolved; whether the digital agenda is in the hands of a more entrepreneurial spinoff, is part of various business units, or is part of a more centralized, global effort. Of course, as the authors warn, the less hands-on influence top decision makers have, the less influence the digital initiative may have across the entire enterprise. Top-level executives, including the CEO, can help make things happen in a more holistic way.
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4e672cb989eb9e9bf7ca563b581c9db1 | https://www.forbes.com/sites/joemckendrick/2014/08/15/four-out-of-five-small-businesses-soon-will-be-run-on-cloud/ | Four Out Of Five Small Businesses Soon Will Be Run On Cloud, For Many Reasons | Four Out Of Five Small Businesses Soon Will Be Run On Cloud, For Many Reasons
A while back, I had the opportunity to chat with Will Gregerson, controller for Schaeffer Manufacturing Company, a producer of synthetic motor oils headquartered in St. Louis. Schaeffer is a customer of NetSuite, a cloud ERP provider, and I was struck by the enormous degree of flexibility the cloud was providing the company's managers.
Gregerson said that it didn't matter where he was -- traveling, at home, or in the office -- all he needed was a tablet computer or laptop and he had access to all his work, and information on the company's operations. Overall, in recent years, thanks in large part to its use of cloud-based services, the company grew from $85 to $130 million in sales (a 53% increase) with no additional staffing needs in customer service, order entry or accounting.
Achieving growth without assuming some of the risks involved in scaling a business -- such as expanding the workforce, acquiring more office space, and adding sales channels -- has long been unrealistic and unthinkable. However, many small to medium-size businesses are doing just that, with the help of the built-in automation, economies of scale, and flexibility afforded by cloud. Expect to see a lot more businesses launch or move key operations to the cloud in the coming years, a recent survey finds. Nearly 80 percent of U.S. small businesses intend to be fully adapted to cloud computing by 2020, more than doubling the current 37 percent rate, according to the survey report from Emergent Research and Intuit Inc.
These aren't just techie businesses such as app development shops or ecommerce startups. These are mainstream, traditional businesses that produce tangible goods and services, such as Schaeffer Manufacturing, that are evolving into cloud-based operations.
The Emergent-Intuit survey also observes that the impact of cloud technology shifts as it is adopted by businesses. It starts out with an initial focus on efficiency gains, then goes on to stimulate entire new business models. The report notes cloud provides advantages to smaller businesses on a number of fronts, such as making it cheaper and easier to start and scale a business, enhancing customer acquisition, service and support, and providing access to technologies once only available to large organizations.
The study's author, Steve King of Emergent, also observes that there are four ways small to medium-size businesses are making use of cloud:
Plug-in players: "Small businesses will increasingly adapt to the cloud by taking advantage of specialized services that can be integrated into back-office operations. Instead of spending time and effort on the nuts-and-bolts of finance, marketing and human resources, cloud-adapted small businesses will plug into cloud-based providers who deliver comprehensive, tailored solutions, giving small business operators the ability to focus on mission-critical areas of business." Hives: "Cloud-adapted small businesses will increasingly be made up of individuals who share talent to form a team. These businesses will operate virtually, with employees working in different locations, and staffing levels will be increasingly flexible, rising and falling to meet project needs. For example, independent contractors will use virtual spaces to connect and market themselves. Small manufacturers and producers may share a commercial facility." Head-to-headers: "A growing number of cloud-adapted small businesses will compete head-to-head with major firms, using the growing number of platforms and plug-in services to reach markets once only accessible to large corporations. This is already being seen with platforms such as AirBnB, which provide individuals with the ability to reach a mass market through community infrastructure." Portfolioists: "Successful cloud-adapted freelancers will bring together multiple income streams to create a career portfolio. These largely will be people who start with a passion, or specific skill, and are motivated primarily by the desire to live and work according to their values, passions, and convictions. They will increasingly build personal empires in the cloud, finding previously unseen opportunities for revenue generation."
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26c77f7428c748ca77fdb41f1c92934d | https://www.forbes.com/sites/joemckendrick/2015/06/15/survey-number-of-all-cloud-companies-will-grow-five-fold-by-2020/ | Survey: Number of All-Cloud Companies Will Grow Five-fold By 2020 | Survey: Number of All-Cloud Companies Will Grow Five-fold By 2020
By 2020, 62% of organizations in a recent survey say they will be running 100% of their information technology in the cloud. But younger startup companies are already close to that point.
That's the prediction from BetterCloud, which surveyed 1,500 of its customers to determine what direction they will be taking cloud in the next few years. Of course, all of the participants in BetterCloud's survey already use cloud, so that should be kept in mind in reviewing these results. Still, it points to a continuing acceleration toward cloud-based systems, which has ramifications for both IT and business leaders alike. Currently, 12% of companies run all of their IT in the cloud, so it looks like this number will quintuple over the next five years.
This means IT leaders and professionals will see their roles shift dramatically in the next few years -- from running server rooms, overseeing coding and scheduling maintenance to higher-level, more consultative tasks for the business. Organizations are increasing relying on digital initiatives for growth and competitive edge, and it will be up to IT leaders to guide, recommend and link their businesses to the best technology solutions on the market. For business leaders and professionals, it means having a wider understanding of the variety of online resources available to help them do their jobs and run their companies better. Competitive advantage will go to the most agile and forward-looking.
Not everyone is throwing everything they have into the cloud just yet. For starters, the survey shows somewhat of a divergence between what it calls more "smaller, younger, and Google-based" organizations versus their "larger, older, and Microsoft-based" counterparts. By 2020, two-thirds of Google Apps customers expect to run 100% of their IT in the cloud by 2020, versus 49% of Office 365 customers.
Not surprisingly, one is most likely to find all-cloud enterprises in the startup sector. In fact, close to 40% of the newest enterprises (around for five years or less) run everything they have in the cloud. In just two years' time, two-thirds of startups will be entirely cloud-borne. Within a few years, that number will be 96% of today's startups.
On the other hand, older, more established organizations are less likely to be using cloud on such a widespread basis. Right now, only about two percent of the older group runs everything in the cloud, a number that only climbs to 20% by 2020. "Contributing factors to the slow growth for older organizations are likely infrastructure complexities, dependencies on legacy systems and the cemented business processes built around them, number of employees, and even the employees themselves, who may not be accepting of a cloud-based work environment," say the report's authors.
Those companies in their adolescent to young adult years, between six and 20 years old, are also more likely than their more established counterparts to be embracing cloud in full. Eighteen percent already say they do so, and 42% will be entirely cloud-borne by the year 2020. And 2020 is as far as we can see at this point.
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9697e98bca3a5961ad66263515e9576c | https://www.forbes.com/sites/joemckendrick/2015/07/30/cloud-mobile-and-data-providers-being-scarfed-up-at-record-rates/ | Cloud, Mobile And Data Providers Being Scarfed Up At Record Rates | Cloud, Mobile And Data Providers Being Scarfed Up At Record Rates
Any companies dealing with approaches to cloud, mobility, big data analytics, or the Internet of Things are hot commodities these days. So much so that it is driving the rates of mergers and acquisitions to sky-high levels not seen since the dot-com frenzy. Every company out there with a little bit of extra cash is looking to add these capabilities to their portfolios. Everyone -- including companies outside of the tech space -- wants a piece of the digital dream.
As a result, it looks like 2015 is going to be another record year for mergers and acquisitions, and the factors driving the mania are a corporate hunger for anything cloud, mobile, data, and Internet of Things.
That's the word coming out of EY’s latest global technology M&A update (April-June 2015), which finds "technology disruption continues to accelerate as corporate technology buyers seeking broader solutions." Corporate deals during the second quarter of 2015 totaled a record $127.2 billion, which EY is higher than any quarter since 2000, and up 65% over the first quarter of this year. This also represents 142% growth over the same quarter a year ago.
What's behind all this record buying? Cloud, mobility, big data analytics, and anything related to the Internet of Things are the big attraction, the report's authors point out. That's because everyone recognizes that competitive advantage is coming through digital channels, and those companies not embracing these channels fast enough risk falling behind. "Technology-enabled digital transformations are disrupting multiple industries," the report observes. " There were a total of 1,014 deals during this time.
Megadeals by corporate technology buyers fueled the biggest increase, "as semiconductor and communications equipment companies positioned themselves for a foreseeable future of explosive growth in Internet of Things (IoT) devices, continued smart mobility expansion and the need for super-performing cloud data centers."
Purchases or mergers with cloud and Software-as-a-Service providers were most prevalent, numbering about 350 deals during the quarter. Another 225 focused on smart mobility providers, and close to 100 were about the acquisition of big data capabilities. Big data analytics topped the chart in average value per deal in 2Q15 -- averaging more than $500 million each-- on the strength of the largest technology take-private deal so far this year.
The average value per deal, which even during the dotcom bubble never quite reached US$400 million, soared to a new all-time high of $563 million.
"The tech industry is transforming, fueled by cross-industry blur, IoT and digital transformations and enabled by universal cloud adoption and a growing need to add cybersecurity to a wide range of products and services. It’s clear 2015 will be another blockbuster year for tech M&A."
Deals that took place in the recent quarter include the following:
Avago Technologies Ltd. acquired Broadcom Corporation ($37 billion) Permira Funds/Canada Pension Plan Investment Board acquired Informatica Corporation ($5.3 billion) Beijing Jianguang Asset Management Co., Ltd. to acquire RF power business of NXP Semiconductors NV ($1.8 billion) Raytheon Company acquired Websense, Inc. ($1.3 billion) Continental AG to acquire Elektrobit Automotive GmbH from Elektrobit Oyj ($687 million) MasterCard Inc. acquired Applied Predictive Technologies, Inc. ($600 million)
(Disclosure: The author has conducted project work in the past 12 months for EY and Informatica, mentioned in this article.)
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8b0f2ac7094f2b56c654dd663e424d5f | https://www.forbes.com/sites/joemckendrick/2015/08/08/will-cloud-computing-lead-to-too-much-homogenization/ | Will Cloud Computing Lead To Too Much Homogenization? | Will Cloud Computing Lead To Too Much Homogenization?
When I drive my car, and it's time to stop at a gas station for a fill up, location and price are everything. Either there is a gas station on the way to where I'm going (in which price isn't as great of a consideration), or I go to a combo convenience store/station near my house that apparently uses lower-than-average gas prices as a loss leader to get people into the store.
One thing I don't spend a lot of time thinking about -- and I assume I'm like most other drivers -- is what oil sources were tapped for the gasoline that arrives at the pump of the service station I select, what refineries were used to make it, or what kind of methods were used in refining. To the average consumer, there's little to differentiate the product from station to station, or the companies providing the product for that matter. It's all the same stuff. The oil/gas industry is highly complex and an industrial marvel, but at the retail end, gas is gas.
So, let's extend this thinking across other industries, be it financial services, manufacturing, retail, you name it. If everyone is using the exact same processes and facilities to create products, do they lose their uniqueness? As cloud becomes the "it" thing and companies use the same big providers, is there some element of uniqueness and competitive differentiation that gets lost? Will companies become a bunch of homogenous clones as they all adopt the same plain-vanilla offerings of cloud providers?
The insurance industry is still a big user of mainframes, running some applications and systems that were first designed three decades ago. Why do these legacy systems stay in place? Because there is still competitive formulations built into the older code, custom-written for these companies that are hard to extract. If these companies all scrapped their mainframes tomorrow, and shifted everything to cloud providers, would their competitive differentiation go with it?
These are some of the questions that come to mind in reviewing the results of a new survey published by Harvard Business Review's research arm, and sponsored by Verizon. A key takeaway from the study is cloud adoption has become so ubiquitous that it no longer has anything unique to offer its users. InformationWeek's Charles Babcock, correctly interprets the HBR results as showing that since everyone is moving to cloud, there's no longer competitive advantage in doing so. There may be some deeper implications as well. In subscribing to the same one-size-fits-all platform that everyone else is, does this mean your businesses may that much less distinguishable from others in the same industry, using the same platforms?
The HBR study's authors note as much, observing that "as more companies adopt cloud, doing so will naturally become less of a source of competitive advantage." In their survey of 452 enterprises, they found fewer claiming "significant" competitive advantage as a result of cloud adoption -- 16 percent this year versus 30 percent last year.
Since everyone is now doing cloud, that means everyone is using common platforms and common sets of applications. Presumably, this is for commoditized tasks that are not central to businesses. There is a lot of evidence that cloud is delivering operational advantages as well -- collaboration is easier, speed to market is greatly improved. But, as more core applications are moved to the cloud, is there a risk of homogenization? Competitive advantage comes in several basic forms: a company can do something cheaper, better, faster, or offer better services around it.
Some would argue that the standardization offered by cloud platforms is a good thing that will heighten efficiency and increase productivity. In an extremely thoughtful piece published a couple of years back, Sam Sena, a global technology manager, credits homogeneity with the advances of civilization, as well as success of many companies in their markets. There are plenty of good reasons to pursue standardization.
The plain-vanilla effect may happen when management is too dependent on technology. The bottom line, as it has been for decades, is that technology alone doesn't deliver competitive advantage. It's how technology ultimately gets used. Everyone now has the ability to make crisp, highly professional-grade films now with a camera, laptop and some software such as Final Cut Pro. But that doesn't mean there are going to be millions of Steven Spielbergs emerging from the ranks -- it still takes skill, imagination and an ability to deliver innovation to make a great film. Likewise, just because every company now has easy access to supercomputer power and artificial intelligence doesn't mean they are going to be a million Apples suddenly emerging.
The HBR report's authors said it well:
"Advantage in the future will come from how well organizations adapt to the new, much faster, and more collaborative way of doing business that cloud makes possible. Cutting the time between identifying a need and filling it—and doing that in a secure and cost-effective way—is increasingly the goal of IT as a service. Success will depend on how well organizations manage not only their use of cloud but also the changes required in skills, processes, business models, and relationships—both inside and outside the traditional walls of the enterprise."
The greatest risk with cloud may not be security or cost overruns. It comes from mistaken assumptions that technology alone will somehow deliver growth and profitability. As the HBR study shows, adopting cloud means simply keeping up at this point. Differentiation comes out of the way clouds are deployed and assembled into compelling services and offerings for customers, employees and partners. The oil companies understand this, and the leaders take pains to provide sparkling customer experiences at the pumps, with clean, well-lit facilities and adjacent products and services. Differentiation comes from being a well-run, inspired and forward-thinking business, with technology as the tool to get there.
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54d804b93da200793d484fb4d06fabc1 | https://www.forbes.com/sites/joemckendrick/2016/02/09/typical-enterprise-uses-six-cloud-computing-services-survey-shows/?ss=cio-network | Typical Enterprise Uses Six Cloud Computing Services, Survey Shows | Typical Enterprise Uses Six Cloud Computing Services, Survey Shows
More company technology workloads are shifting to both public and private clouds, with a notable emphasis on hybrid cloud adoption. At this time, organizations are using or piloting at least six different clouds, on average. Also, the epicenter of public cloud appears to be the Seattle area -- while Amazon Web Services (AWS) continues to dominate the public cloud market, Microsoft Azure continues to gain ground.
These are some of the findings in a recent survey of 1,060 technology managers, released by RightScale Inc., a cloud management provider. This is the fifth year this survey has been conducted.
The survey finds that organizations are employing at least six clouds, on average. Multiple cloud adoption -- a hedge against vendor lock-in, as well as a strategy for drawing multiple sources of outside expertise -- is now commonplace. Multiple cloud strategies are also evenly divided between public and private services -- organizations, on average, are using cloud are leveraging three public clouds and three private clouds. This breaks down further to an average of 1.5 public clouds and 1.7 private clouds currently running applications, while experimenting with an additional 1.5 public clouds and 1.3 private clouds.
Overall, the percentage of enterprises that have a strategy to use multiple clouds held steady at 82 percent, with 55 percent planning on hybrid. There was a slight increase in the number of enterprises planning for multiple public clouds (up from 13 percent to 16 percent) and a concurrent decrease in those planning for multiple private clouds (down from 14 percent to 11 percent).
Looking at the split of cloud workloads between public and private, enterprises with more than 1,000 employees are skewed toward private cloud, while small to medium-sized businesses (SMBs) with fewer than 1,000 employees lean toward public cloud. Most SMBs (53 percent) run a majority of cloud workloads in public environments, compared to 32 percent of enterprises.
Lastly, the survey shows enterprises are getting increasingly comfortable with cloud. The proof is security, which no longer tops the list as a cloud challenge. Now, the thing that worries managers the most is a lack of resources or expertise -- cited as the number-one cloud challenge by 32 percent, supplanting security (cited by 29 percent). Worries about cloud security disappear with experience. Only 17 percent of the advanced cloud deployers in the RightScale survey are worried about cloud security, compared to 35 percent of companies starting out with cloud.
Another 26 percent of respondents identify cloud cost management as a significant challenge, a steady increase each year from 18 percent in 2013. While the initial appeal of cloud has been the impressive cost savings over buying systems up front, these savings erode as unused or under-used subscriptions and workloads can build up over the months and years.
In terms of the vendor market, AWS still is the 800-pound gorilla in this space, but Microsoft's Azure (Iaas and PaaS), still in distant second place, are advancing. Overall, AWS is used by 57 percent of respondents, flat from last year. Another 17 percent use Azure IaaS, up from 12 percent. Azure PaaS adoption has grown from nine percent to 13 percent.
Other contenders in the public cloud race include VMware VCloud Air, with adoption growing from five to seven percent; Google App Engine (PaaS), which remained steady at about seven percent; and IBM SoftLayer, which grew from five to seven percent.
In the private cloud space, VMware vSphere/vCenter dominates, growing from 33 percent to 44 percent over the past year. OpenStack followed, growing from 13 percent to 19 percent adoption. VMware also was a major leader with its vCloud Suite, which saw adoption increase from 13 pervent to 19 percent.
(Disclosure: In my work as an independent research consultant, I have conducted project work within the past 12 months for VMware, mentioned in this post.)
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fed03fa7020c1bca86dd7cbb1f64d02a | https://www.forbes.com/sites/joemckendrick/2016/03/02/data-security-is-both-the-appeal-and-the-achilles-heel-of-cloud-computing/ | Data Security Is Both The Appeal And Angst Of Cloud Computing | Data Security Is Both The Appeal And Angst Of Cloud Computing
It's almost a paradox. The number-one reason to stay away from the cloud -- security -- has also become the number-one reason to go into the cloud. Private clouds are seen as the best havens for secure data, but public cloud services are also seen as more secure than traditional on-premises systems.
A recent survey of 1,080 executives pretty much says it all: eight in 10 IT professionals and executives believe that when facing hardware malfunctions and environmental disasters, their organization’s data is safer in the cloud than with an on-premises system. In addition, six in 10 believe having data in the cloud will keep it safer from malicious attacks than maintaining data within an on-premises environment.
Aaron Levie, CEO of Box, says as much at a recent panel discussion. As reported by Heather Clancy in Fortune, Levie is seeing interest from corporate IT departments in cloud-based services, which keep up to date with the latest security technologies and best practices. “Many organizations are unable to keep up with the security requirements,” he said.
The survey, released by Evolve IP, found that 91 percent of all organizations now have at least one service in the cloud.
Still, the paradox continues. The top concern/barrier in moving to the cloud is security – noted by 55 percent of respondents -- essentially unchanged from previous surveys. The cloud may put data at risk, but offers greater security. For example, 50 percent of executives in the survey believe that a private cloud is safer than public clouds, or an premise data center for that matter. When asked about physical disasters (environmental or hardware failure), 55 percent felt their information was safest in a private cloud compared to 28 percent in a public cloud and 18 percent on premises. When it comes to malicious attacks, 52 percent preferred a private cloud to safeguard their data, versus 38 percent on premise and 10 percent public cloud.
Faith in the cloud is on the rise in many ways. Today, about seven in 10 of executives see the value of cloud computing and consider themselves to be "believers." In a previous survey conducted in 2013, about 53 percent considered themselves to be believers. At the opposite end of the spectrum, one out of four respondents in 2013 felt that the cloud was an immature technology. Today, just one in 10 -- 12 percent -- feel the same.
On average, those surveyed have an average of four services in the cloud – up from three services in last year's survey. Servers, data centers, Exchange, Office, and disaster recovery were cited as the top deployed cloud services. Approximately three out of 10 respondents indicated that sales, marketing, operations, HR, customer support and finance all have deployed some form of cloud services. The top services respondents expect to deploy in the cloud over the next three years are servers/data centers (23 percent), phone systems (22 percent) disaster recovery (21 percent), Finance/ERP (19 percent) and co-location/backup (17 percent).
Interestingly, there’s a good chance that IT wasn’t involved in the cloud implementation process. Only about half of respondents indicated that IT was involved in another department’s decision-making process regarding using the cloud. Of course, this may have ramifications for security as well -- having departments set up their own cloud services may mean having elements falling outside of IT's domain.
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b57779a5ef85ad6e384b3a87a14086c6 | https://www.forbes.com/sites/joemckendrick/2016/04/20/9-roles-that-really-matter-in-cloud-computing-today/ | 9 Roles That Really Matter In Cloud Computing Today | 9 Roles That Really Matter In Cloud Computing Today
While it seems cloud computing is everywhere and anywhere, the fact is it is still only the early stages of its advance into the cores of enterprises. That's one of the key points I raised in my opening keynote at the Collaborate 2016 event in Las Vegas, hosted by the three primary independent Oracle user groups - Quest International Users Group, Oracle Applications User Group (OAUG) and Independent Oracle Users Group (IOUG). (OAUG is the user group for Oracle E-Business Suite users, Quest consists of PeopleSoft and JD Edwards users, while IOUG members are Oracle Database managers.)
The keynote was based on the results of a survey conducted across the three user groups, which finds only one in five enterprises are looking at cloud -- even to a limited extent -- for their core enterprise application suites, and even fewer see cloud as an option for their enterprise databases.
This scenario may change dramatically, and soon. A recent survey of 1,200 IT decision makers by Intel Security find a vast majority of organizations’ IT budgets being spent on cloud services in less than a year and a half. Survey respondents said they expect 80% of their organization’s IT budget to be dedicated to cloud computing services in that time.
The Wall Street Journal's Steven Norton recently observed that "corporate spending on the cloud, whose rate of growth fell in 2015, is expected to pick up this year, even as overall IT expenditures are projected to decline. The increase reflects a new willingness among big companies, even those in particularly security-minded industries such as finance, to move beyond the corporate data center and run their software applications, data storage and processing in the public cloud."
Consider another budding development: As reported by InformationWeek's Charles Babcock, in a new U.S. federal government analysis, "19 out of 24 agencies reported that they had achieved a savings of $2.8 billion in operating costs and had avoided capital expenses between 2011 and 2015 by moving workloads into the cloud and not building more data center space." This is an example sure to catch fire. So the world's largest IT consumer, the U.S. government, is on the verge of cloud.
Who is going to take charge and lead this transition? Who's going to seize on the coming rising tide of cloud adoption? IT executives are natural roles for this, but they can't do it alone. It takes a team to build a cloud. Here are the roles of today's and tomorrow's cloud computing leaders who are leading the cloud revolution within their enterprises:
CIOs, CTOs, IT leaders and IT professionals. Even if an organization is 100% in the cloud, it will still need skilled managers and professionals who understand what the right solutions are for their enterprises.
Marketing and sales executives. These people are at the front lines of enterprises, and already are voracious users of solutions such as Salesforce. They are directly feeling the sting of the global economy, and want solutions that are quick and easy to learn. Time to market is everything.
Security managers. An understanding of security protocols is essential, no matter what type of cloud is being deployed. Related to this is an understanding of mandates and regulations – such as Sarbanes-Oxley, HIPAA, and the myriad of data-handling laws from the European Union to states within the United States.
Data managers and analysts. Having actionable information on which to base business decision requires consistency and timeliness of data. Will data generated through cloud-based systems mesh seamlessly with on-premises ERP, data warehouse or other systems? Data professionals are in strong demand, and those who can design systems that can ingest Big Data from the cloud, or use the cloud to provide analytical environments.
Enterprise architects, planners and analysts. These people are essential for laying out a roadmap of what services – whether they are coming from IT or an outside provider – will be needed. They're the ones able to work with the business, speak the language of business, as well as work with IT professionals.
Procurement or purchasing managers. Cloud makes vendors omnipresent in day-to-day operations, so individuals with training or savvy with vendor negotiating skills will be a must. Needed are people who know how to work with cloud providers, and are able to negotiate service-level agreements, availability. They need to be able to read the fine print in vendors’ contracts and call them on the carpet when things aren’t performing as planned. These are the people who can step up to the plate and make the right noise when a cloud service goes down or is habitually underperforming.
Human resource managers. The ability to manage cloud environments -- from building solutions to integrating data to managing operations -- requires an ability to identify, recruit and train talent with the right skills.
CEOs, CFOs and other C-level executives. These are the people that need to be on board with any major cloud movements.
Employees -- at all levels. Cloud computing services are empowering roles at all levels of organizations, providing a range of online productivity and collaboration services. Employees know what services they need to help them do their jobs and reach customers. Cloud decisions -- and acceptance -- will succeed or fail on employees' embrace of services.
(Disclosure: Quest, IOUG and OAUG, mentioned at the beginning of this post, compensated me for my work with their survey project.)
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14642d714a3ce008b9df6dfc06ce5e28 | https://www.forbes.com/sites/joemckendrick/2016/06/29/for-employees-workplace-technology-stirs-up-both-angst-and-exuberance/ | For Employees, Workplace Technology Stirs Up Both Angst And Exuberance | For Employees, Workplace Technology Stirs Up Both Angst And Exuberance
For today's employees, the increasing digitization of enterprises is a mixed bag. The threat of automation is real, yet technology is also putting employees in greater control of their careers to a degree never seen before. So, from an employee perspective, technology giveth and technology taketh away.
The technology paradox was highlighted in a recent study from ADP Research, which found both angst and exuberance about workplace technology. The study, which covered 2,403 employees across the globe, found that while most workplace changes are perceived positively, there is fear that automation and smart machines will replace work being done by humans. Ninety percent of people believe technology will allow for deeper connections across distance and time. However, 45 percent fear that automation, smart machines and artificial intelligence will replace people for repetitive work.
The ADP study also finds job security is a concept that has taken on a different meaning -- it is no longer provided by employers, but is managed by employees themselves. Previously, individuals defined security by tenure. "Today, with shifts in the workplace – especially increased automation – employees define security by the reach of their professional network and the ability to tap into relationships to find non-linear jobs that can extend a career," the report's authors report. In addition, 89 percent of respondents will choose to work on personal interests or things that impact society and 82 percent will define their own work schedule.
This new sense of technology-enabled, do-it-yourself career security also is extending productive worklives well beyond any artificial cut-off points. Sixty percent of employees, the survey finds, believe a standard retirement age will eventually cease to exist.
I recently had the chance to talk with Dermot O’Brien, chief human resources officer at ADP, about the implications of the rising digitization of the workplace. The key is to tie individual performance to the overall performance of the organization, and the technology is available to do this, he says.
There are a number of forces driving this, he says, but the most pervasive force is the abundance of consumer technology, which has altered expectations about the workplace. "One of the biggest and newer things is the personal technology experiences that people have in their real lives -- not just their worklives," he says. Employees have higher expectations, "but still find their companies still dealing with mainframes. The advancement of the technology experience in peoples personal lives is forcing organizations to adapt faster than otherwise." Again, technology -- with the immediate availability of cloud-based resources and data, accessible via mobile -- brings about a do-it-yourself ethic that promotes self-management and innovation. It's a matter of organizations being able to tap into that energy.
One of the most striking contrasts seen in the ADP Research study is the gap between employee and management awareness of the impact of workplace digitization. "Employees feel a lot of advancement are already here, while their employers think it's still way off in the future," O'Brien says. "There seems to be a very big gap, with organizations behind the awareness curve."
Because of their access to technology and networks, the power of choice has shifted to talent, and away from hiring organizations, O'Brien says. So how is the world's largest workforce management services firm addressing this new way of working? ADP itself has been undertaking a concerted effort to digitize its talent management approaches, and make staffing decisions based on data and analytics. "We’re bringing in a lot more processes and measurement about the human capital impact on our competitiveness," he explains. For example, business leaders "have access to a dashboard that actually measures the impact of human capital in a much more quantitative way. You need both great business results and great people results to get long-term sustained performance."
The challenge for ADP -- a far-flung global organization with 60,000 employees -- was to find and identify the data that was relevant to organizational performance. "A lot of systems are not connected naturally," O'Brien says. "We figured out the ones that could connect, the ones that couldn't -- and created a common data layer, comprised of performance data, compensation data, and other key pieces of data."
To enable this digital workplace, ADP relies on a range of technology approaches -- including cloud, mobile, and big data. "At the end of the day, we need to get to a place quickly," O'Brien says. "In the world of work, all decisions and transactions can can be done on a mobile. That's the way we operating in our personal lives, and this is accelerating what's going on in the workplace."
The bottom line is that the workplace is no longer a four-walled environment that people were confined to on a 9-to-5 basis. Technology has opened it up, offering new vistas for both employers and employees to expand their productivity and networks.
Organizations "need to be better at sensing outcomes that sense the human value to the business," O'Brien says. "At the end of the day, growth for most of us is done through people."
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38d2112214126b6110eea16c65f572f1 | https://www.forbes.com/sites/joemckendrick/2016/12/22/my-one-big-fat-cloud-computing-prediction-for-2017/ | My One Big Fat Cloud Computing Prediction For 2017 | My One Big Fat Cloud Computing Prediction For 2017
This is the time of year when people issue their "Top 10" lists for what's on the horizon for our organizations, workplaces and careers in the year ahead. By now, you likely have "Top-10" fatigue, so I'm not going to pile on here. Rather, let's look at the one big megatrend that's shaping our world over the next 12 months, and try to figure out the why and how.
Photo: Joe McKendrick
In the year ahead, the Internet of Things (IoT) is the major force that will drive the role of cloud in our organizations, workplaces and careers. It will also work the other way around as well -- cloud will move IoT forward. I'm sure you have been hearing plenty about IoT and its implications, but let's face it -- most organizations don't have the capacity to handle what's coming down the pike. Terabytes and terabytes of data streaming in, demands for analytical power at all stages, and a search for ways to leverage it to deliver responsiveness to the customer.
The rise of wearable computing devices has been well-documented. But that's only one small piece of the IoT data surge, Look at the ways IoT will be part of our businesses:
Through connected cars and vehicles. Auto manufacturers already are transforming cars into computers on wheels. (The ultimate "mobile device," right?) Insurers are aggressively adopting telematics, in which policyholders agree to discounts in exchange for having their driving habits monitored. Fleet managers can also monitor the movements and driving habits of their drivers. Companies in the travel and entertainment business can track and analyze customer preferences, even while they're traveling. For example, a recent Google paper describes how Red Roof Inns has been matching flight delays and cancellations to trigger mobile ads on travelers' phones to offer nearby lodging. Manufacturers are monitoring products, post-sale, to help customers save on energy costs and provide predictive maintenance services. For example, Rolls Royce, a producer of jet engines, now provides monitoring services for its engines in flight. Healthcare is being disrupted in a major way, thanks to the rise of monitoring devices and new forms of connectivity between healthcare providers, administrators, facilities, and patients -- not to mention injections of artificial intelligence from online systems such as IBM's Watson. This is all made possible by the convergence of IoT and cloud computing -- no medical facility could do it alone with on-premises systems.
These are just a few outstanding examples from the many ways IoT data is being leveraged for new types of services, and, indeed, whole new business models.
It also means lots and lots and lots of data. As we explored in a post here at Forbes last month, Cisco predicts that soon, 92% of all workloads will be cloud-borne, and IoT and associated big data is the driving force behind this evolution. To recap what we reported then, database, analytics and IoT workloads will account for 22% of total business workloads by the year 2020, up from 20% in 2015. The total volume of data generated by IoT will reach 600 zetabytes (zetabytes!) per year by 2020, 275 times higher than projected traffic going from data centers to end users/devices (2.2 ZB); 39 times higher than total projected data center traffic (15.3 ZB).
Gulping down all this data requires executives to take their IoT-charged enterprises to the next level. They have a choice: keep buying and installing on-premises servers and storage arrays to try to stay ahead of the data surge, or contract with cloud providers to worry about it. Or, if they stick with on-premises systems, at least contract with the clouds to handle surges or workload spikes -- more of a hybrid arrangement.
The question is, is a typical organization ready to start supporting the storage, processing and analytics associated with terabytes of data surging through? How about the capacity needed to replicate or back up all this data? In the year ahead, cloud will be the foundation for an abundance of innovative use cases and new forms of business arising from IoT across all industries.
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71d3d71035181ef6249566ac461f0972 | https://www.forbes.com/sites/joemckendrick/2017/04/09/digital-transformation-means-jobs-especially-the-cloud-variety/ | Digital Transformation Means Jobs, Especially The Cloud Variety | Digital Transformation Means Jobs, Especially The Cloud Variety
The rise of digital enterprises is seen as opportunity to streamline and eliminate calcified processes, as well as build new business opportunities. Unfortunately, many jobs could be at risk as well.
However, a recent survey of 505 executives suggests digital enterprises may be creating more work that can be handled. The YouGov survey, commissioned by Appian, 72% of executives expect their organization will add jobs over the next three to five years due to new digital projects, and 69% anticipate new hiring to handle new technologies. Seventy-seven percent even say outright that digital transformation is a job creator.
Skills building Photo: Joe McKendrick
Is the notion of digital creating jobs just pollyannish dreaming, or do these executives recognize something that is going on?
Listen to the executives in the survey, and it appears that digital job growth will occur past the IT departments. At least 85% of IT leaders report investments in digital transformation are expanding past the front lines (such as marketing and sales) and into core operations (such as business operations and operational agility). At least 77% of IT leaders agree investments in digital transformation to improve operational agility are top of mind for senior leadership. Another 83% believe digital transformation investments are key to improving employee productivity
Where things begin to fall down is finding people with the right skills to make digital a reality. The Appian survey identified several challenges, such as machine learning, which require specialized application development and data mining skills which are increasingly expensive and hard to find. "This proves to be a real concern given the demand is increasing and the skills shortage is not shrinking fast enough to meet company needs," the survey's authors opine. At least 76 percent cited a growing lack of IT skills in deploying emerging technologies is hindering digital transformation.
The need is critical. A total of 93% of IT leaders report the demand for new and innovative business applications will increase over the next three to five years. In addition, the majority of IT leaders surveyed (88%) believe organizations not deploying new and emerging technologies* risk losing potential revenue.
So where are these skills going to come from? Look to the cloud. Cloud skills are at the foundation of many digital efforts, as documented in a recent survey of 250 executives from Microsoft explored the skills demand. A majority, 57%, agree that having the right cloud skills be critical to their organizations' digital transformation.
The survey finds that 38% of those who had been involved in recruiting people with cloud skills in the past 12 months said it was difficult to find the right skills. Where gaps exist, companies are looking close that gap by a combination of three methods: retrain their existing staff (60%), use external partners (53%) or recruit new people with cloud skills.
"Even as the number of people with the right skills grows, the demand for those skills will increase at a faster rate," the report states. "This means it will likely become more difficult to find people with the right cloud skills, and with the rules of supply and demand being what they are, companies competing to recruit that smaller pool of talent can expect to pay a premium to hire people with these very in-demand skills."
At least 63% of respondents look for formal cloud certifications, and almost half (48%) expect to pay more for these premiums.
Part of the issue is gender imbalance, the survey's authors observe. "On average, the gender mix among technical IT staff was 20% female, 80% male. Only 21% of respondents said the female mix within their organization was 40% or greater.
While there's a difficult road ahead for many organizations seeking to compete digitally, it means great opportunities for anyone pursuing cloud careers. "With demand outstripping supply, those equipped with cloud skills can be confident that their talents will be required for the foreseeable future. Furthermore, organizations with appropriate accreditations and employees that are able to furnish their CVs with the latest certifications can also expect to command a premium for their services."
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f88ac1fe80b31c6d2a81bbf2697e1766 | https://www.forbes.com/sites/joemckendrick/2017/04/29/cloud-first-policies-are-creating-the-first-generation-of-all-cloud-enterprises/ | Cloud-First Policies Are Creating The First Generation Of All-Cloud Enterprises | Cloud-First Policies Are Creating The First Generation Of All-Cloud Enterprises
There's a lot of movement toward "cloud-first" policies among all organizations large and small, in which they first look at online services before considering any onsite hardware or software. A recent survey of 2,009 IT managers and professionals from Intel Security finds at least 80% of enterprises are now following such a strategy.
When cloud is a good place to land. Photo: Joe McKendrick
The U.S. federal government actually led the way with "cloud-first," instilling the policy across all its agencies back in 2010. Of course, that means a lot of transformation for an organization with an $80-billion-a-year IT budget. Recent reports indicate the federal government still maintains more than 10,000 of its own data centers.
Still, optimism reigns. In the Intel survey, those with cloud-first strategies anticipate running just about everything in the cloud within a year. The survey's authors note that this same level of optimism was seen in last year's survey, so it's taking longer than expected for cloud to become the de facto platform for enterprises.
It's instructive, then, to look at larger organizations that have successfully made the transition under a cloud-first policy -- to the point in which they are "cloud-only" enterprises. Mary Cecola, CIO of Antares Capital, recently spoke with CXOTalk's Michael Krigsman on her company's journey, via cloud-first to cloud-only, and what that has done for the business. What's interesting, Krigsman observes, is that financial services companies, long cautious about cloud due to security and data protection, are embracing cloud in a big way.
Cecola's challenge was modernizing Antares' systems, much of which dated back to its days as a GE subsidiary. (The company was spun off in 2105.) "We needed to migrate out of GE under this timeframe, and bring up all of our systems and create an entirely new infrastructure," she explains, noting that the unit ran 35 different legacy applications on the GE platform. "The technology was not as well-integrated. There was a lot of gaps in manual input on the other side."
However, she also had an additional challenge -- as a result of the spin-off, all core teams had to be built up from scratch, including the IT department. "I had no staff. I was the first IT employee as part of Antares Capital." With so much greenfield, Cecola saw an opportunity to dive right into cloud computing.
Moving to the cloud is more than simply swapping out resident data center systems for cloud-based systems. Antares' main cloud provider is Microsoft Azure, and Office 365 is rolled out as productivity tools to the workforce. "As we started moving more and more things into the cloud, we did choose Azure to be extremely mobile. The Antares deal teams and the employees here are mobile. They’re fast. They’re dedicated. They can move through and close a deal in six to eight weeks." The Microsoft platform included Skype, virtual desktops and cloud-based OneDrive, which was key for mobile employees.
At this point, Antares is 100% cloud based, Cecola relates. "We are fully in the cloud, 100%. We have our desktops, we have all of our servers, domain controllers are out in the Azure cloud."
The move to all-cloud "changes your business model with your business," Cecola finds. For starters, Antares has gotten out of the data center business. She and her team no longer have to go to management to make the case for specific technology items, such as storage area networks or servers. The pitch to move to cloud, she says, was "the last major infrastructure project I ever had to come talk to them about.” Now, her team "can focus on the applications. We can focus on the change-the-business stuff and not worry about the run-the-business things. It really changes my relationship with the business. I don’t have a data center to worry about." Disaster recovery is another headache off the CIO's plate as well, she adds.
The all-cloud platform offers Antares blindingly fast speed to market as well. "The speed we can bring a region up with we can change very quickly," she says. "Now we're rolling out all our applications at the same time we're doing the network, and suddenly they need another region for something. That could be built in a day."
The financial services company now has "extremely modern technology front-to-back," she continues. "So, when we look to add something, or when a new idea comes up, we’re not beholden to legacy technology. We could have kept some of these old systems and just migrated them over, but we’re not beholden to that anymore."
Cecola also argues that going with a public cloud provider is more secure than relying on internal corporate assets. "On-prem used to be safe because you could guard your data center like a castle if you think about it," she says. "You have a drawbridge and one entry and exit. Over the last 10-15 years that has disappeared. You have mobile devices now coming forward and other things that are coming in through those walls." "At this point, she adds, "we're far safer. I don't think I could ever secure a data center the way that Microsoft has the ability to do."
Moving to a cloud-first, cloud-only strategy is not without its challenges, of course. Cloud is still a relatively new approach to enterprise technology management. The "tools you were familiar with, or maybe companies you were familiar with dealing with, weren't ready," Cecola relates. "A lot of people tell you they're prepared to be in the cloud, but you have to dig into that and get under the covers. So we had very honest conversations with Microsoft. We knew where they were on certain things, but we had to use other tools in the interim. Now, we're migrating over."
Vendor relationships also needed to change. "You’ll find when you’re in the cloud, vendors you might have used before that you were comfortable with, you have to look at them again. Some people you know might not be as open-minded to it."
Cloud opens up new opportunities for CIOs and IT leaders as well. Business leaders are "very excited about how tech-forward we are," Cecola continues. "They look at a lot of different deals, and some of them have technology software companies and hardware companies. They invite us into those discussions to ask us to look at that technology with them. I've never been a part of business before where IT was brought to the table on business decisions like that."
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42f8aea2a49fff1563b6f6a5ba8f4595 | https://www.forbes.com/sites/joemckendrick/2017/12/19/wanted-more-human-intelligence-to-run-artificial-intelligence/ | Wanted: More Human Intelligence To Run Artificial Intelligence | Wanted: More Human Intelligence To Run Artificial Intelligence
Cognitive computing and AI have become a big part of business plans going forward. A recent survey finds one in three businesses say they already have fully implemented AI across their organizations. Another 20% have implemented AI at parts of their business.
It's surprising to imagine that 33% of today's organizations are already full-functioning AI enterprises. It’s not clear from the survey results, posted by EY, what respondents consider to be “AI” – it’s possible they are looking at advanced analytics and algorithms and branding that as artificial intelligence. It can be assumed that since the survey base was mainly AI professionals, it's something close to cutting-edge AI. Still, "AI" is a very fluid term. Even the US Congress is on the case, with a proposed bill directing the Department of Commerce to define exactly what it means. (Sounds like a job for NIST.) In the meantime, David Gershgorn wrote up an excellent overview of the true meaning of AI in Quartz, defining it as “software, or a computer program, with a mechanism to learn. It then uses that knowledge to make a decision in a new situation, as humans do.”
AI needs people, and lots of them. Photo: Joe McKendrick
Regardless of what it actually is – AI, analytics, machine learning – it requires skilled people to make sure it is capable of delivering at least some value. In my previous post, I explored some of the new types of jobs that are arising out of the cognitive computing and artificial intelligence space. For executives or managers, it means identifying what skills make a difference, then supporting appropriate training or hiring. It’s likely “Voice of the Customer analysts” or “automation economists” don’t even exist yet in most professional pools.
In the EY survey, a majority of senior AI professionals say they are hurting for such skills. Fifty-six percent say a lack of talent is the greatest barrier to implementation within their business operations.Skills is the greatest barrier, and managers also point out that AI technology is a barrier -- 46% feel it has still not reached maturity, so it’s important to take a wait-and-see approach. Many of the leading vendors are bolting AI onto their existing offerings, so it may be more ubiquitous in the coming months and years.
Stakeholder buy-in – presumably meaning line-of-business managers and key corporate decision makers – also is an issue among one-third of the organizations represented in the survey.
Where to begin? The EY study points to IT itself as the place where most AI implementations are happening – cited by 46%. Customer service, along with sales and marketing, follow with about one-third of organizations.
It sounds like AI -- however you define it -- is off to a great start in its current form. So what are the keys to "selling" AI adoption across the enteroprise. Here are some points to consider:
Always put people first. AI and its cognitive siblings can be either threatening or confusing to people. The key is to help people become comfortable and even skilled at handling AI systems. Businesses have been "hampered by a shortage of experts with requisite knowledge of the technology," according to EY's Chris Mazzei. "This serves to demonstrate that successful AI integration is not just about the technology, it’s about the people. Looking to 2018, organizations should prioritize talent acquisition and cultivation—both by recruiting individuals with strong technical backgrounds and investing in skills and training programs to help retain and foster leading AI practitioners.”
Simplify the science of AI. Right now, “AI requires very sophisticated human resources, such as data scientists to build machine learning models, and computational linguistics professionals to write knowledge extraction applications," according to Sudhir Jha, senior VP at Infosys. "This restricts AI applications and innovations to a select few, and consequently limits the speed of adoption within the enterprise. But this scenario will not last long. Technology companies are building tools to automate tasks performed by these skilled individuals, thus enabling even a data analyst or business user to build AI applications.”
Increase the auditability and ‘explainability’ of AI. Right now, AI operates in black boxes, especially when it comes to deep learning, but Jha notes that there is early work going on with Explainable AI (XAI). But there needs to be better “auditability and basic visualization tools to take steps towards a system that doesn’t behave like a black box,” Jha says. “It would be hard to imagine wider adoption of AI within the enterprise without it.”
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238bd8983734bb54c10d0125eb7570e7 | https://www.forbes.com/sites/joemckendrick/2018/03/19/5-reasons-to-blockchain-your-supply-chain/ | 5 Reasons to Blockchain Your Supply Chain | 5 Reasons to Blockchain Your Supply Chain
As discussed in my previous post, there is serious money and attention going to promote blockchain as a potential foundation for supply chains.
A report from DHL and Accenture bears this out. Despite all the hype surrounding blockchain today, the study's authors "believe that the logistics industry needs to leverage new technologies and embrace ways of rethinking old processes in the digital era." Referring to blockchain as "The New Internet," the report's author suggests that implementing blockchain in logistics could remove the need for intermediaries, while also verifying, recording and coordinating transactions autonomously without the need for third parties. In the process, blockchain-based supply chains would eliminate an entire layer of complexity from our global supply chains.
Things are looking up with blockchain. Photo: Joe McKendrick
"Already many projects are underway to apply blockchain technology to global logistics, adding value by boosting supply chain transparency and automating administrative operations," the DHL-Accenture team observes. "Imagine how the physical flow of goods can be more effectively orchestrated and synced with information and financial flows when blockchain is combined with the Internet of Things, artificial intelligence, robotics and more."
The DHL-Accenture team sees the following benefits in applying blockchain to the supply chain:
Drive greater automation: Blockchain can greatly reduce bureaucracy and paperwork. The report's authors point out that up to 10 percent of all freight invoices "contain inaccurate data which leads to disputes as well as many other process inefficiencies in the logistics industry." Instead of attempting to manage a lengthy paper trail, blockchain provides for "an automated process storing information in a tamper-evident digital format." This automation can be extended to of services that currently require an intermediary such as insurance, legal, brokerage, settlement services, outsourced transportation management, normative compliance, route planning, delivery scheduling, fleet management, freight forwarding, and connectivity with business partners. Blockchain could be used to track a product’s lifecycle and ownership transfer from origin to store shelf, even as it changes hands between the manufacturer, logistics service provider, wholesaler, retailer and consumer. It would facilitate and automate each business transaction, enabling a more direct relationship between each participant (e.g., automating payments and transferring legal ownership between parties)."
Enable new business models: "Micropayments, digital identities, certificates, tamper-proof documents and much more can be introduced and radically improved using blockchain-based services," the report's authors state.
Create greater connectivity across supply networks: The fragmented nature of the logistics industry -- and cumbersome manual processes -- make many logistics processes ripe for blockchain. "Today, there is a significant amount of trapped value in logistics, largely stemming from the fragmented and competitive nature of the logistics industry," the report states, noting that in the US alone, there are more than 500,000 individual trucking companies. "With such a huge number of stakeholders involved in the supply chain, this often creates low transparency, unstandardized processes, data silos and diverse levels of technology adoption." Blockchain can potentially help to "enable data transparency and access among relevant supply chain stakeholders, creating a single source of truth. In addition, the trust that is required between stakeholders to share information is enhanced by the intrinsic security mechanisms of blockchain technology." More automated, leaner and more error-free flow of goods can also speed up delivery as well, the report adds.
Alleviate friction in global trade: "The logistics behind global trade is highly complex as it involves many parties often with conflicting interests and priorities as well as the use of different systems to track shipments," the report's authors state. For example, it is estimated that "a simple shipment of refrigerated goods from East Africa to Europe can go through nearly 30 people and organizations, with more than 200 different interactions and communications among these parties." Blockchain technology can help alleviate many of these frictions, "including procurement, transportation management, track and trace, customs collaboration, and trade finance."
Improve transparency and traceability in supply chains: Blockchain initiatives within supply chains are able to "amass data about how goods are made, where they come from, and how they are managed; this information is stored in the blockchain-based system. This means that the data becomes permanent and easily shared, giving supply chain players more comprehensive track-and-trace capabilities than ever before. Companies can use this information to provide proof of legitimacy for products in pharmaceutical shipments, for example, and proof of authenticity for luxury goods. These initiatives also deliver consumer benefits – people can find out more about the products they are buying, for example, whether a product has been ethically sourced, is an original item, and has been preserved in the correct conditions."
The report's authors make the following recommendations to achieve success with a blockchain initiative:
Create a culture of collaboration. Making blockchain a successful reality for enterprises means "collaboration between all stakeholders," the report advises. "Success depends on all parties working together to transform legacy processes and to jointly adopt new ways of creating logistics value." This collaboration can happen internally, between partners, and through industry consortia. "When a company agrees to work with blockchain technology, it is signing up for an intensely collaborative endeavor. This is because a huge part involves facilitating trusted collaboration between multiple parties including both public and private entities of all kinds – government agencies, industrial organizations, regulators, partners, and even competitors."
Build up blockchain knowledge and capabilities: Training and education are a must, since blockchain represents a dramatic new way of doing business.Provide partners and individual contributors "with the time, tools, and resources they need to successfully contribute to each blockchain project," the report urges.
Manage expectations: "Set realistic expectations and acknowledge that blockchain technology remains in an early phase of the software maturity lifecycle," the report states. "It has yet to be applied at scale." Realizing blockchain's value will be a gradual process that expands as more organizations and individuals get involved.
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123fb2efff55086410bb53eb23a1a489 | https://www.forbes.com/sites/joemckendrick/2018/04/20/executives-believe-they-are-innovators-but-employees-disagree/ | Executives Believe They Are Innovators, But Employees Disagree | Executives Believe They Are Innovators, But Employees Disagree
It helps the bottom line to be an innovator. Innovative companies also have another edge: they're more attractive places to work. A new survey finds given a chance, most people would leave their current jobs for the chance to work at such a company.
So how does one know they're working at such a wonderful company? At at a workplace such as that at Google, signs abound all around, from informal work teams to incentive systems that encourage experiment. At mainstream companies, these signs are more subtle. Most executives are convinced that their companies pass the innovator test. However, employees working in the trenches don't see it this way.
From upstairs, things look more innovative. Photo: Joe McKendrick
These are some of the key takeaways from a survey of 1,021 employees recently released by Ernst & Young LLP. The survey finds that a majority of all respondents (69 percent) would leave their current position for a similar role at an organization that is recognized as a leader in innovation, signaling that a company’s brand recognition around innovation is key to attracting and retaining high-caliber talent in today’s competitive job market. (With all other factors, such as pay and benefits, being equal.)
Most people see information technology as the catalyst for innovation. Innovation, though comes from within the human psyche, and technology is only the tool that helps makes it happen. Accordingly, executives and employees recognize that many new technologies will help, not hurt, their job prospects. The survey finds little trepidation with technologies such as artificial intelligence (AI) and robotics process automation (RPA) -- fewer than than one-fifth of respondents view such innovation as a threat to their individual job stability, and only six percent cited it as a major threat.
Then there's the gap in perceptions about innovation. Most employees -- especially those in the trenches -- do not feel as empowered as senior executives to be innovative in their work. Only 26 percent of entry-level employees believe their company fosters a culture of innovation, compared to more than half of senior executives.
Nearly all senior executives, 90 percent, believe their company provides a channel through which to introduce new ideas, compared with only 55 percent of entry-level employees. In addition, only 54 percent of entry-level people say that new ideas are "celebrated internally," compared with 91 percent of senior executives.
A majority of staff-level employees, 60 percent, feel their employers care more about "the daily grind" than innovation, as do 52 percent of mid-level executives. Only 41 percent of senior executives feel this is the case.
The lesson here is that while business leaders may celebrate their embrace of innovation, the people who work with them aren't of the same mind. For example, what happens if someone runs with a new idea and fails? Despite lots of hype about the new management tolerance for "failing fast," most companies don't want to fail at any speed. In the EY survey, only 25 percent of entry-level employees said their organizations were tolerant of failure, compared to nearly half (44 percent) of senior executives.
While there is an ongoing dialogue in the market about the workforce implications of new technologies such as artificial intelligence (AI) and robotics process automation, less than one-fifth of respondents view innovation as a threat to their individual job stability, and only six percent cited it as a major threat.
Executives and employees also were asked to identify where employees think organizations should prioritize investments in this space. More than one-third (35 percent) think they should invest in skills training and continuous learning for new and emerging technologies, and 23 percent believe companies should focus on internal communications programs that will promote creative, fresh thinking among teams. An additional 19 percent would like to see an investment in culture and employee experience.
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5a1e7088757361cdc2e6b29bf5fc1025 | https://www.forbes.com/sites/joemckendrick/2018/09/12/cloud-computing-once-loved-for-its-simplicity-is-now-a-complex-beast/ | Cloud Computing, Once Loved For Its Simplicity, Is Now A Complex Beast | Cloud Computing, Once Loved For Its Simplicity, Is Now A Complex Beast
When cloud computing emerged a few years ago in its current form, its biggest selling point was that it was supposed to simplify things for enterprises. If a developer needed to test an application, they spun up an instance to run the test, separate from the production environment, and without worrying about licensing fees. If a sales team needed to better track customers, they tapped into an online service they could all share.
But, alas, as with many things technology-wise, things have only become more complex with the cloud.
Cloud's growing complexity was recently documented by The Wall Street Journal's Steven Norton, citing a survey of 46 CIOs by KeyBanc Capital Markets, in which 32% said they plan to use multiple vendors to create internal private cloud systems, while 27% planned hybrid cloud arrangements. The growing fusion of enterprise data centers with cloud services only mean greater complexity, Norton notes, raising "a number of integration and security challenges, which can translate into higher IT spending."
Today's cloud means on-prem, service provider, hybrid and everything in between. Photo: Joe McKendrick
So, is complexity inevitable, or are there ways business and IT leaders can mitigate this growing complexity? While complex organizations will always require complex solutions, it's time to step back and take a more holistic view of what cloud is bringing to the enterprise. Importantly, everyone across the enterprise needs to be brought together on the same page, with similar goals.
That's the view expressed by Rhett Dillingham, vice president and senior analyst at Moor Insights and Strategy, has been observing this trend with cloud. In a recent BriefingsDirect discussion with Dana Gardner, he states that many enterprises are in the same boat: managing complex arrangements of "one or multiple public clouds" in addition "to their private infrastructure, in whatever degree that private infrastructure has been cloud-enabled and turned into a cloud API-available infrastructure to their developers."
Dillingham points to the need for automation and orchestration to better managing multiple environments, and ensuring greater control of cost, security, and compliance. "This spans from the software and services tooling, into the services and managed services, and in some cases when the enterprise is looking for an operational partner," he said. "This is about the recognition of the need for partnerships between the business units, the development organizations, and the operational IT organization’s arm of the enterprise."
Successful enterprise cloud engagements Dillingham has seen are based on such partnerships, he explained -- not just "bolting on" cloud capabilities, but rethinking the way business is done. The unnecessary complexity arises when teams within organizations "are operating cloud-by-cloud, versus operating as a consolidated group of infrastructures that use common tooling," he says.
What makes hybrid and multicloud adoption so complex? Enterprises "have a footprint on at least one or multiple public clouds. This is in addition to their private infrastructure, in whatever degree that private infrastructure has been cloud-enabled and turned into a cloud API-available infrastructure to their developers. They have this footprint then across the hybrid infrastructure and multiple public clouds. Therefore, they need to decide how they are going to orchestrate on those various infrastructures -- and how they are going to manage in terms of control costs, security, and compliance. They are operating cloud-by-cloud, versus operating as a consolidated group of infrastructures that use common tooling. This is the real wrestling point for a lot of them, regardless of how they got here."
Dillingham notes that "I hear a lot of cloud strategies that are as simple as, 'Yes, we are allowing and empowering adoption of cloud by our development teams,' without the second-level recognition of the need to have a strategy for what the guidelines are for that adoption – not in the sense of just controlling costs, but in the sense of: 'How do you view the value of long-term portability? How do you value strategic sourcing and the ability to negotiate across these providers long-term with evidence and demonstrable portability of your application portfolio?"
Commit to an action plan for the enterprise, Dillingham advises. From an IT perspective, "there needs to be a plan in place for how you are maturing your toolset in cloud-native development -- how you are supporting that on the development side from a continuous integration and continuous delivery perspective? How you are reconciling that with the operational toolset and the culture of operating in a DevOps model?"
From a business perspective, it means looking ahead -- "enabling a deep discussion of where you want to be in three, five, or 10 years, and deciding proactively. More importantly than anything, what is the goal? There is a lot of oversimplification of what the goal is – such as adoption of cloud and picking of best-of-breed tools -- without a vision yet for where you want the organization to be and how much it benefits from the agility and speed value, and the cost efficiency opportunity."
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13748466b74bce802aebf92e5f23cbc6 | https://www.forbes.com/sites/joemckendrick/2018/11/29/artificial-intelligence-paradox-as-robots-take-over-people-skills-become-more-critical/ | Artificial Intelligence Paradox: As Robots Take Over, People Skills Become More Critical | Artificial Intelligence Paradox: As Robots Take Over, People Skills Become More Critical
Artificial intelligence and machine learning aren't going to wipe out jobs on a wholesale basis anytime soon. But the technologies are going to dramatically transform the tasks associated with many jobs, for both white-collar professional and firstline workers. In many ways, AI will reduce mundane or repetitive tasks, while also helping to elevate and increase the scope of many jobs.
People management skills are beyond the grasp of AI. Photo: Joe McKendrick
For top-level decision makers and entrepreneurs, success will be defined by their ability to marshal the forces of AI and digital technologies to realign and build faster and cheaper ways to deliver products and services to customers. For technology professionals, opportunities will abound in building and maintaining these systems.
For support-style functions, the future is muddier. There will be a realignment of skills and priorities, and many jobs -- ranging from accountants to HR managers to administrative assistants -- will be recast in ways that are not quite foreseeable today.
Some envision a somewhat bleak picture for the people in the corporate middle. Igor Perisic, chief data officer at LinkedIn, Corporation, foresees a bright future for tech jobs -- positions such as "software engineers and data analysts, along with technical skills such as cloud computing, mobile application development, software testing and AI, are on the rise in most industries and across all regions." However, many corporate support jobs fall into the highly “automatable” category, such as administrative assistants, customer service representatives, accountants and electrical/mechanical technicians.
These support roles -- constantly under cost-containment pressure as it is -- are the next natural targets for AI, as related in a recent McKinsey report. "Many organizations have already tapped the potential of traditional levers such as centralization, offshoring, and outsourcing," the report's authors, Alexander Edlich, Fanny Ip, and Rob Whiteman, all with McKinsey, explain. "Today’s leaders are turning to digital solutions and automation to improve performance and reduce costs across finance, human resources, and IT."
Rather than threaten or diminish these roles, the McKinsey team argues these jobholders will see greater engagement and value to their businesses. For example, the authors drilled down to financial functions, and determined that at least "27 percent of finance activities could be automated using technologies already available." Areas ripe for automation include general accounting operations, revenue management and cash disbursement.
At the same time, there are financial activities well beyond the grasp of automation, that require human brainpower and guidance. These include business development, external relations, auditing, and risk management.
Another important corporate support area, human resources, will also see some key task areas automated and subject to AI. Overall, Edlich and his co-authors estimate, about 22 percent of HR functions are ripe for automation. Time, collection, attendance and payroll functions are the most primed for automation, followed by record-keeping and reporting. Benefits administration is also likely to be picked up by the robots. However, HR practitioners are likely to see more of their skills needed for labor relations, as well as strategy planning and policy. Organizational development is an area of activity also well beyond the reach of AI and automation.
While technology roles will prosper in the AI age, automation is catching up here as well -- IT departments will not escape the impact of their own doing. At least 22 percent of IT functions can be handled by AI, algorithms and robotic process automation, the McKinsey team states. Tasks ready for automation include application maintenance, application hosting and end-user services. However, management support and systems will still need human oversight, along with network services. Application development still requires human designers and authors as well.
Again, the impact of AI and automation on job roles is still evolving, and the state of things five years from now is uncertain. What is becoming clear, however, is that many of roles in the corporate middle will become increasingly elevated to more consultative, leadership-oriented tasks. In other words, there will be greater demand for people skills, even as the robots take over much of the grunt work.
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7f88985514d1dcac8465a48d8c9d04cc | https://www.forbes.com/sites/joemckendrick/2019/04/17/digital-technologies-benefits-are-still-out-of-reach-for-most/ | Digital Technologies' Benefits Are Still Out Of Reach For Most | Digital Technologies' Benefits Are Still Out Of Reach For Most
While there has been a rush to digital technologies in the name of digital transformation, it has been almost a given that there will be visible benefits that go with it. Inevitably, executives will be approving huge budgets in the name of turning around their businesses in a matter of months. However, two new studies suggest the benefits of digital transformation don't automatically materialize as soon as the switch is thrown.
Buying a stairway to digital Photo: Joe McKendrick
For the most part, the benefits aren't being seen yet, as reported in a survey of 501 IT professionals released by Cloud Foundry. Of the total sample, one in five IT decision makers, 21 percent, say they are experiencing the benefits of digital transformation in their organization. Another 32 percent report they hope to see benefits within the next quarter. Finally, one in five respondents expect benefits to be realized within the year and 25 percent don’t anticipate benefits for at least a year or longer.
Other research also points to the long game for digital transformation. A survey of IT professionals published by Webtorials and Masergy also shows most see digital transformation as a long-term process. A majority of IT executives, 61 percent, see ROI as more long-term and strategic than based on short-term results. There's no doubt they see digital transformation as important -- essentially if it helps improving the customer experience. The most important benefit to be gained , cited by 22 percent of the respondents, is enhanced customer experience and ROI, followed by remaining competitive with the industry, cited by 16 percent, and enabling a new business model, cited by 15 percent.
Measuring ROI for digital transformation is tricky, the Masergy report's authors observe. "Dollars spent on technology that improve customer experience do not show an immediate monetary or revenue impact. The payoff comes from increased customer loyalty and subsequent sales in the future. The payoff may also come in the form of a happier workforce, thus reducing the expense of retraining and rehiring employees. This is much more strategic than tactical ROI."
Since ROI for digital tends to show up later than sooner, you can imagine how gaining funding for digital expenditures may be problematic. Accordingly, budget commitments are the leading obstacle to digital transformation, cited by 22 percent. Another 20% say difficulties in gaining executive support and leadership stand in the way. Third on the list was a dearth of skills, seen among 18 percent of companies.
The technology investments seen as key to a digital transformation effort include moving to the cloud, cited by 22 percent, upgrading security, as indicated by 18 percent, 17 percent bringing in data analytics and artificial intelligence to add greater intelligence to their operations.
The Cloud Foundry survey points to cloud computing as the most important step enterprises can take to kick start their digital efforts. In this year's data, for the first time, most companies reached a point where mission-critical apps have been moved to the cloud. Since Cloud Foundry started tracking this topic in August 2016, the number has flipped from a majority on on-premises legacy environments to the cloud. Most organizations have shifted those apps to the cloud, with 51 percent of respondents having mission-critical apps to operating in the cloud and 45 percent still maintaining apps in legacy environments. Previously, the ratio was 53 percent with on-premises to 44 percent in the cloud.
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f657a4996bda4abd4fb0647a6411f828 | https://www.forbes.com/sites/joemckendrick/2019/05/31/artificial-intelligence-is-now-far-too-big-to-be-limited-to-computer-science/ | Artificial Intelligence Is Now Far Too Big To Be Limited To Computer Science | Artificial Intelligence Is Now Far Too Big To Be Limited To Computer Science
While all systems reflect the intentions and biases of their human creators, artificial intelligence takes things in a new direction, connecting inferences in unexpected, and often, unexplainable ways. That's why some leading voices in the academic and computer science community are calling for a new way of studying and understanding AI actions, which they call "machine behavior."
Looking at a multi-disciplinary future for AI Photo: National Energy Scientific Computing Center
In a recent post, I explored current-day drivers of AI, which include gamers, hipsters and angels, who have applied the technology in highly unexpected ways. So, already, there are new forces at work bringing AI into the mainstream of business and society. In addition, C-level executives have increasing responsibility for the actions and behaviors of their AI-driven systems.
The academic community recognizes that AI has left the computer science building, metaphorically speaking. "Currently, the scientists who most commonly study the behaviour of machines are the computer scientists, roboticists and engineers who have created the machines in the first place. These scientists may be expert mathematicians and engineers; however, they are typically not trained behaviorists," writes Iyad Rahwan, who leads the Scalable Cooperation group at the MIT Media Lab, along with a wide team of computer and data scientists from leading universities. "They rarely receive formal instruction on experimental methodology, population-based statistics and sampling paradigms, or observational causal inference, let alone neuroscience, collective behavior or social theory." In their report, published in Nature, Rahwan's team proposes to increase this level of understanding by expanding the horizons of computer science into biology, economics, psychology, and other behavioral and social sciences.
“We’re seeing the rise of machines with agency, machines that are actors making decisions and taking actions autonomously," they write. "This calls for a new field of scientific study that looks at them not solely as products of engineering and computer science but additionally as a new class of actors with their own behavioral patterns and ecology.”
The proposal acknowledges that AI is no longer limited to computer science labs. "It’s not that economists and political scientists aren’t studying the role of AI in their fields," states Stephanie Strom of the MIT Media Lab in her overview of the paper. "Labor economists, for example, are looking at how AI will change the job market, while political scientists are delving into the influence of social media on the political process. But this research is taking place largely in silos."
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f7ece3e947a056ad0093ffb7f451fa77 | https://www.forbes.com/sites/joemckendrick/2019/07/24/needed-a-little-more-backbone-in-digital-transformation/ | Needed: A Little More Backbone In Digital Transformation | Needed: A Little More Backbone In Digital Transformation
If an organization adds cloud, mobile, analytics and sensors, does that make it a digital organization?
The short answer is no, cautions Dr. Jeanne W. Ross, principal research scientist at the MIT Sloan Center for Information Systems Research, and co-author of Designed for Digital: How to Architect Your Business for Sustained Success. In a recent chat at an MIT Sloan Symposium, Ross pointed out that becoming "digitized" is different than becoming "digital."
Jeanne Ross: Becoming "digitized" is not becoming "digital." Photo: MIT
"You're digitized, and you might be making a lot of money on this," Ross explains. "You might have very happy customers. In the short term, if you're in retail or media, in most industries that'll be enough for you to perform better and better and better. But if you want to look at the long term, then you have to recognize what companies that are Uber-like in their thinking are going to do to your value proposition. What they're going to do is wrap what you do in information, and they're going to steal your margins by taking what you do and making it better. And basically, for you to be digital, you want to beat them to that."
A robust and successful digital transformation demands new skills, new business processes, and new organizational competencies, she continues. Often, it takes time to make this shift. For many organizations, despite the screaming headlines and scare stories, there is still some time to get on the right track. "The good news is a lot of companies aren't disrupted yet," Ross points out, adding that many are just starting a transformation process. "We went out and surveyed them recently. What we learned is only about 14% of companies have an operational backbone that is an asset."
So what is an operational backbone? It's putting the right structure in place capable of underpinning a digital migration. A successful digital enterprise not only requires operational backbone, but also the flexibility to act on innovation and opportunity.
“There’s an impatience to get going and show results, but becoming a successful digital business is not easy,” Ross said in a related article. “Our research suggests the reason why it’s so hard is that most established companies do not yet have the capabilities they need to become digital.” Ross and her Designed for Digital co-authors found that, on average, only five percent of the most advanced companies’ revenues are coming from new digital value propositions. "That’s five years of having a vision and pursuing that vision, and revenue from digital offerings is accounting for just 5% of their [total]. Any of these companies will tell you there is a level of capability development and customer development that has to be done, and it’s not easy.”
Including the need for operational backbone, Ross explained in her talk that there are five components needed to ensure success in the digital economy:
Operational backbone: "This is what we've been after for the last 20 years," says Ross. "Now we have to get serious about it, and we have to take advantage of digital technologies. So getting that so our current business is solid it's predictable, it's efficient, it's still enormously important. It's table stakes." Shared customer insights: "The ability to constantly understand better and better and better what a customer will pay for." Digital platform: "We have to recognize that we're all going to become software companies, and we're going to need the kind of digital platform -- a Salesforce.com, a Microsoft -- that allows us to succeed as a business. We're creating repositories of business data and infrastructure components so we can constantly reconfigure what we create for the next customer need. That's a digital platform." Empowered teams: "We need the ability to create all those components and reuse them. We are not able to do that in most of our businesses today. It is not about hierarchical structures, but rather, empowered teams who are aligned to pull off the delivery of the customer solutions that we want to deliver. That, of course, is very different from the way we run our businesses today -- understanding ownership and how we assign that accountability will be core to success in the digital economy." External developer platform: "As we're developing our digital platform and configuring solutions, we're going to find that our customers love us so much they're going to ask for more and more and more. Realistically, we're not going to be able to deliver it all. You can find a partner to deliver it. But that has to be a digital connection. We need an external developer platform to pull that off."
In her MIT Sloan Symposium talk and book, Ross cited the example of Schneider Electric, which made the transformation from a supplier of electrical equipment. "What it started to realize is that it could put alerts on its big equipment switchboards, transformers, to recognize when they were dying or over capacity," she related. From this, they designed an energy management solution, called Resource Advisor, which leverages the data coming out of these devices.
However, Ross added, it took time for Schneider to be recognized in its market for these new services. "When you're developing our first solution, especially in B2B, you're going to think it's brilliant when you just come up with the idea. Unfortunately your customer probably won't." When Schneider Electric said "'we're going to give you energy management solutions,' their customers said, 'Schneider, we don't think of you that way.'" To resolve this, the company built its new offerings in conjunction with partners such as Hilton, on reusable features such as dashboards and analytics algorithms. "It takes a while to build, it takes a while to sell, it takes a while to recognize how you'll reuse. The good news is that Schneider now has 20 Resource Advisors with different names and they will soon have 40. Once you get going, you do gain momentum in and this really starts to sell."
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d0306357f296240aa534740523705578 | https://www.forbes.com/sites/joemckendrick/2019/09/17/good-news-for-digital-transformation-laggards-its-not-too-late/ | Good News For Digital Transformation Laggards: It’s Not Too Late | Good News For Digital Transformation Laggards: It’s Not Too Late
Given all the media and analyst coverage about digital transformation these days, one can be forgiven for assuming their company is limping hopelessly behind the pack. However, it’s not too late to catch up, and as you do, it can be done in incremental spurts. Plus, even the digital dynamos are still confused and grappling with the right way to do things.
That’s the finding from a survey of 1,400 executives by Wipro, which follows up a 2017 survey that shows more enterprises are finding success with digital transformation, but challenges related to leadership and adapting to new ways of working are likely points of failure in the early stages.
Late adopters may still catch their competitors, the survey shows. Overall, the majority of respondents, 87 percent, believe that companies who have started their digital transformation journey later than others still have a chance to beat the competition – 22 percent say “yes, definitely,” and 65 percent say “yes, probably.”
The goals of digital transformation don’t have to be monumental and earth-shaking, either. The majority of companies have modest and incremental (34 percent) or moderate and extended (39 percent), ambitions for their digital transformations. Only 19 percent say their efforts are leading to something “disruptive and fundamentally new.”
There isn’t a single, clear-cut approach to digital transformation either. “Digital transformation” is not one program, but many, the survey shows. Companies have averaged eight digital transformation projects during the past five years. Reasons for digital transformation are all over the map as well. One in five, 21 percent, cite revenue growth as their top motivator when deciding to begin a digital transformation. Another 14 percent cite increased agility as their primary reason, and 14 percent are looking to accelerate their speed to market.
The study found that digital transformations can seem overwhelming at first to organizations, with personnel issues as the biggest barriers. The report found that the longer a company has been undergoing a transformation journey, the less likely it is to experience people-related issues as a barrier to success whereas technology may become a bigger barrier. Fourteen percent of executives with journeys less than two years cite technology as the biggest barrier, compared to 26 percent of executives whose journey has lasted two or more years.
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ROI takes about a year: Only 14 percent saw measurable business results of digital transformation in less than six months, 31 percent saw it within six to twelve months, and 54 percent said it was one to three years. Only one percent said it took longer than that.
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