14/11/2013: Human Capital & The Age of Change: TEDx Dublin

My TEDx Dublin talk on Human Capital Age is now available on YouTube: http://www.youtube.com/watch?v=y1sueM_jhSk

17/10/2013: Customer-Activated Enterprise: External & Internal Influencers

In the previous post I covered a few quick ideas that stemmed from the recently published IBM's Institute for Business Value CxO-level study: "The Customer-activated Enterprise: Insights from the Global C-suite Study" (available here: http://public.dhe.ibm.com/common/ssi/ecm/en/gbe03572usen/GBE03572USEN.PDF).

As I noted - this is an absolutely 'a must' read for anyone interested in the future directions for interactions between customer-driven value added activities and enterprise structures and strategies. It subtly, quietly punches beyond the 'ritualistic' tech-saves-us-all hype and into the deeper thinking inhabiting today's C-level offices. This is good. Very good. Less brand futurism, more future-focused pragmatism.

So another fascinating insight (my judgement, of course, as are the comments presented here).

Based on this guide: Chief Executive Officers (CEOs), Chief Finance Officers (CFOs), Chief Human Resources Officers (CHROs), Chief Information Officers (CIOs), Chief Marketing Officers (CMOs), Chief Supply Chain Officers (CSCOs), let's re-weight by removing 'own' functions of the CxOs:

1) Technology Factors (ex-CIOs) score 11 points
2) Market Factors (ex-CMOs) score 8 points
3) Macro-economic Factors (ex-CFOs) score 19 points
4) People Skills (ex-CHRO) score 26 points
5) Regulatory Concerns (ex-CSCOs) score 20 points
6) Socio-economic Factors (ex-CMOs) score 35 points
7) Globalisation (ex-CEOs) score 37 points
8) Environmental Issues (ex-CMOs) score 36 points
9) Geopolitical Factors (ex-CEOs) score 41 points.

So re-weighted prioritisation is:
Top tier priorities:
Top 1: Market Factors (ex-CMOs) score 8 points - Second Priority for CEOs
Top 2: Technology Factors (ex-CIOs) score 11 points - First Priority for CEOs
Top 3: Macro-economic Factors (ex-CFOs) score 19 points - Third Priority for CEOs
Second tier priorities:
Top 4: Regulatory Concerns (ex-CSCOs) score 20 points - Fifth Priority for CEOs
Top 5: People Skills (ex-CHRO) score 26 points - Fourth Priority for CEOs

The CEO position (2013) overlap is provided directly from the chart below:

Note that the CEOs priorities are not that distant from the priorities of the overall CxO suite priorities once we remove actual direct stakeholders in each priority area.

Also note that top 5 priorities today (as outlined in top 2 tiers above) are consistent themes from at least 2006 survey on. This is aligned, in my view, with the shifting nature of strategic transformation drivers and the input of external sources into strategic influence formation at the C-level:

Notice that C-suite influence is proximate in importance to Customers input and Board input. In the future, with partnerships and networks of value-added expected to both expand and deepen, including growth in customer-partnership models, this is likely to change. We can expect more heterogeneity in perceived influencing factors across the C-suite and the rise of key external business partners and non-executive senior leadership roles in contributing to strategic influence formation. I suspect the C-level and Board inputs will be downgraded.

Something to watch… but here's a suggestive sub-trend:

Can you open up the structures without bringing up the roles of key partners and internal non-execs? I don't think so...

17/10/2013: Customer-Activated Enterprise Research: Partnerships & Value-Added

I recently wrote about the upcoming publication of the IBM's Institute for Business Value CxO-level study: "The Customer-activated Enterprise: Insights from the Global C-suite Study" - the link to the original post is here: http://trueeconomics.blogspot.ie/2013/09/592013-ibm-64-of-global-cmos-want-to.html

Now the study is out and available here: http://public.dhe.ibm.com/common/ssi/ecm/en/gbe03572usen/GBE03572USEN.PDF

Some interesting insights from it will be forthcoming over the next few days as I slowly digest the paper (slowly - due to time constraints and not due to the nature of this superb piece of research).

First instalment a chart plotting CxOs' view of major changes in the business landscape in the next three to five years.

Note the emphasis on (opinions and views are my own - on foot of my interpretation of the data presented):
1) Bigger partner network is seen as a crucial trend changer by 73% of CxO executives - which is inherently driving the strategic focus of the enterprise development toward more diversified base of partnerships and networks.
2) Social and digital interactions are displacing face-to-face interactions and this implies that social and digital platforms will have to become also key tools for development and deployment of partnerships. End result of this (1) and (2) nexus is that business models will have to expand horizontally and beyond traditional nodes of corporate management and control. Risk will rise, uncertainty will rise both in scope and complexity.
3) This is supported by the shift in the partnerships nature: from lower emphasis on efficiency-driven partnerships toward more value-adding partnerships. In other words, not sub-contracting to specific tasks, but expansion of R&D, strategy and value-adding chains beyond the bounds of the traditional enterprise. This is very exciting, but adds even more complexity and uncertainty as well as more disruption to traditional (vertical or hierarchical) enterprise structures.
4) Focus on customer as individuals focus shift suggests that the era of Big Data will be moving toward the era of Small Data - greater granularity to follow with greater customisation. These can only be delivered via fluid, dynamic, non-contractual partnerships arrangements. Networks, not managerialism.
5) Not surprisingly, operational control weakens, organisational openness rises.

Much of the same that I have been talking about at TEDx Dublin and more recently at Alltech's Presidents Club meeting. You can also see my ideas on MNCs-led partnerships by searching this blog.

21/9/2013: Human Capital & Social Mobility: Capital Tax v Education Spending Reforms

A new paper Human Capital, Social Mobility and the Skill Premium (September 18, 2013, CESifo Working Paper Series No. 4388. Available at SSRN: http://ssrn.com/abstract=2327435) by Angelopoulos, Konstantinos and Malley, James R. and Philippopoulos, Apostolis produces fascinating insights into the relationship between human capital, physical capital and skills/wage premium.

The main drivers of the skill/wage premium are commonly recognised to be: 

1. Skills-complementary technical change (SBTC - B standing for 'biased'), "which raises the demand for skilled labour, and the relative supply of skilled versus unskilled labour". Economic policy can influence this channel by increasing R&D and innovation which lead to increased technology contribution to the economic activity and in turn generate demand for complementary skills.
2. "Occupational choice of economic agents, usually focusing on the distinction between entrepreneurs and workers, and its implications for social mobility." Here, economic policy too can have an impact via, say labour markets regulations and interventions, as well as general taxation policies.
3. Direct policy impact via stimulating "capital accumulation via tax reforms" and direct "labour markets …intervention".

In contrast, "although education policies and tax policies have been considered as important determinants of social mobility, their impact on the joint determination of social mobility and the skill premium has generally not been studied."

Human Capital, Social Mobility and the Skill Premium "develops a dynamic general equilibrium model to highlight the role of human capital accumulation of agents differentiated by skill type in the joint determination of social mobility and the skill premium."

The authors find that "the model with endogenous social mobility can capture the empirical co-movements of the skill premium, the relative supply of skilled to unskilled workers and aggregate output in the U.S. data from 1970-2000." The study shows "that the model predictions for these empirical co-movements are improved when we allow for positive externalities from skilled human capital on social mobility." In other words, skill premium for skilled and unskilled workers tends to rise/fall jointly (co-move) and this co-movement is strengthened when increased social mobility of skilled human capital is associated with increased social mobility of unskilled human capital.

The authors' "policy results first show that endogenous social mobility creates additional incentives for the agents which enhance the beneficial effects of policy on aggregate outcomes and wage equality."

"Second, that important dynamic effects of policy on the skill premium are captured by allowing human capital accumulation to affect social mobility. In particular, post reform, the skill premium is higher in the short- to medium-run than in the long-run."

"Third, that although all policy reforms considered lead to an increase in output and social mobility, their implications regarding the skill premium differ. In particular, the skill premium increases after a capital tax cut and decreases after an increase in spending on education for unskilled agents and in spending on education for skilled

agents."

In other words, the authors show that "endogenous social mobility and human capital accumulation are key channels through which the effects of capital tax cuts and increases in public spending on both pre- and post-college education are transmitted."

Note: in my view this tends to support the idea - outlined by me in my TEDx Dublin talk last Saturday - that we are witnessing migration to the age of tech-enabled human capital away from the skills-enabled tech capital. 

"In particular, social mobility creates additional incentives for the agents which enhance the beneficial effects of policy reforms. Moreover, the dynamics of human capital accumulation imply that, post reform, the skill premium is higher in the short-to medium-run than in the long-run."

Note: in the context of my TEDx Dublin theme, the above reinforces my concept of new policy paradigm of C.A.R.E. (policy dimension aimed at establishing a comprehensive economy that is capable of Creating, Attracting, Retaining and Enabling human capital).

"Regarding all three results above, the effects of public spending on education for skilled agents are dependent on the externality that skilled human capital has on social mobility. In particular, a negative externality generally reduces many of the positive effects of this policy reform."

What about a capital tax cut? 

The "improvement in aggregate outcomes" following tax cut "also implies increased wage inequality. The reason is that the policy-induced increase in the capital stock is skill-biased because capital complements skilled labour more than unskilled. Hence, …the skill premium increases with the capital stock post-reform."

However, this "increase in the skill premium works to encourage the accumulation of unskilled human capital, as a means to increase social mobility to capture the higher returns associated with skilled employment. In turn, …the resulting increase in the relative skill supply acts to lower the skill premium. In fact, the reduction in the skill premium starts taking effect 20-30 years after the reform, when the increase in the share of skilled labour is sufficiently strong to counterbalance the increase in the capital stock."

Note: in my TEDx Dublin talk context, the above relates to the changes in underlying drivers for growth I highlighted in the chart - in particular, the lags we are experiencing in terms of the Age of Tech translating with a delay into future wage premium erosion (some might argue we are already witnessing this today). 

Education spending increase for unskilled workers: "As expected, the stock of human capital for unskilled labour increases and this raises output in all models and social mobility in the models that allow for endogenous skill accumulation. In turn, this increase in the relative supply of skill leads to a decline in the skill premium in the medium- to long-run. However, initially, the skill premium increases …because the labour productivity gains, brought about by the increase in human capital, also increase the return to physical capital and thus lead to increased capital stock, which tends to increase the skill premium." 

Over time, "when the relative skill supply has increased sufficiently, the skill premium starts to decline. In this case, in fact, the increase in the share of skilled in the population is sufficiently strong to decrease the skill premium in the long-run."

"The dynamic processes of human capital accumulation and social mobility have non-trivial implications on the …determination of …skill premium-social mobility" co-movements. Long-run: wage inequality is reduced along with increased social mobility. Short-run: wage inequality increases.

Summary: 

(1) In the long-run, "government spending on unskilled education, by increasing the labour productivity of unskilled labour and increasing their skill accumulation, raises output, reduces wage inequality and improves social mobility. However, "the increase in government education spending crowds out private consumption." In the short-run, unskilled education increases lead to increased inequality and social mobility declines.

(2) "…Increases in government spending on the education of the skilled agents has positive effects on output and consumption, as well as encouraging social mobility, despite the reduction in the skill premium. This occurs because, by supporting the productivity of the skilled, the government indirectly increases the potential future benefits of the unskilled, if they succeed in climbing the social ladder. However, these results are sensitive to whether externalities of skilled human capital on social mobility are positive or negative. The former enhance the positive effects on social mobility, wage inequality, and welfare, whereas the latter reverse them for social mobility and wage inequality and lower them for welfare."

(3) "Wage inequality effects of capital tax cuts are significantly dampened by the increase in the relative skill supply, which follows the increased returns to upward social mobility, while, at the same time, the aggregate efficiency effects of the capital tax cut become stronger."

15/9/2013: WLASze Part 2: Weekend Links on Arts, Sciences and zero economics

Due to time constraints of yesterday's TEDx talks (http://www.tedxdublin.com/), I had a shorter version of WLASze: Weekend Links on Arts, Sciences and zero economics. As promised, more is now following in part 2…



15 dynamic images of changes in the demographics across 15 countries around the world from today through 2100: http://www.businessinsider.com/15-countries-in-2100-2013-9
Very interesting changes. As a teaser: "The year 2020 will be a seminal one for Japan, with the country's capital home to the 31st Summer Olympiad and adult diapers set to outsell their baby counterparts." Just think about that line for a second… I will be posting tomorrow night my Sunday Times article from last Sunday which covered the figment of imagination that is our unwavering belief in some 'demographic dividend' for Ireland. The article addresses the question 'What happens when Germany get older, while Ireland stays younger?'


A superb article from The Atlantic on the effects that our education system's obsession with regurgitation of facts has on our ability to think:
http://www.theatlantic.com/education/archive/2013/09/when-memorization-gets-in-the-way-of-learning/279425/
This is a neat extension point to something I have been talking about in my TEDx Dublin talk earlier today - the fact that our education systems are innately incapable of producing the human capital that we will need for the future. I wrote about the related deficiencies in education systems here in my earlier Sunday Times column, with unedited version available here: http://trueeconomics.blogspot.ie/2013/08/2182013-irelands-potemkin-village.html


From the sciences side of things:
http://www.redorbit.com/news/video/the-daily-orbit/1112946481/moon-water-origins-hint-at-early-earth-091213/
We normally hear about extraterrestrial origins of things found on Earth. How about terrestrial origins of things found elsewhere in the solar system? Hm… And the daily Orbit  presentation style… double hmmm…


Extraterrestrial is the best way to describe some of the DesignJunction pop-ups at the London Design Week:
http://www.dezeen.com/2013/09/13/pop-ups-at-designjunction-next-week/
Need proof?

Or how about the Digital Sunrise (it appears to be a rug, but feel free to guess):

On the serious side of things: the rest of DesignJunction is corporate and boring… no, really, see for yourselves: http://thedesignjunction.co.uk/virtual-showroom/


From the series of accidental art:
IMAGE: russian-skywalking-photographers-european-skyscrapers-designboom-10
"russian photographers and daredevils vadim mahora and vitaly raskalovym travel europe with a clear purpose -- to illegally climb to the highest point of the city's main attraction, hang off its edge, and capture their extraordinary viewpoint" via http://www.designboom.com/art/russian-skywalkers-photograph-european-buildings-from-the-air/

The thing is: to be consistent the duo must take pictures from all cities visited. Problem is: once you confine yourself to such a commitment, art becomes secondary to pursuit of locations, and as such, purely accidental. As the show linked above clearly shows, not all (by far) images are even close to possessing properties of artistic inquiry or discovery, let alone aesthetic completion and compositional integrity. Hence, accidental nature of art… Still, impressive!


http://www.art-moscow.ru/ is opening on the 18th of September. The show will feature special exhibition Russian Avant-Garde 1910-1930 with some rare paintings by less-known artists: http://www.art-moscow.ru/2642.html
Whimsical and yet somehow infused with challenges and questions work of Grigori Mayofis: http://www.art-moscow.ru/2701.html will also be on show:

In the week when Harvard awarded its annual Ig Nobel Prizes - the spoof prizes for idiotic  research, it is only worth running few links on that:
http://www.cbc.ca/news/technology/shrew-eating-penis-amputation-studies-earn-ig-nobel-prize-1.1828634
http://rbth.co.uk/arts/2013/09/13/six_ig_nobel_prize_awards_received_by_russians_29823.html
And the 2013 awards summary: http://www.policymic.com/articles/63697/10-weirdest-ig-nobel-prize-winners-this-year


This weeks Part 2 is turning out to be quite a Russia-fest - not by design, just as an accident… so to conclude it - an images gallery from Kamchatka Peninsula: http://rbth.co.uk/multimedia/pictures/2013/09/11/going_to_kamchatka_to_get_a_glimpse_of_the_moon_29721.html

Enjoy the links!