DECISION
SPRING 2012
FOR PEOPLE WHO THINK ABOUT BUSINESS
Building a central model for success
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CONTENTS
DECISION Spring 2011
4 5
40
EDITORIAL
Playing centre stage 5 Ideas at work 8
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COVER STORY
At the world’s digital core BARRY MCCALL looks at Ireland’s emergence as a leading international centre for the bornon-the-internet generation of companies and how this can generate further opportunities
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CULTURE
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Ireland’s culture as a hub
Positive Trade forecast shows Ireland’s potential 21
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Seeking more sweet victories
EMERGING MARKETS
Fast forward to growth
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SECTORS
Game on ADAM MAGUIRE on the gaming industry, a cutting-edge sector that’s packed with potential for Irish firms
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SECTORS
Med-tech, a great opportunity for Ireland
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DENIS MCCARTHY on how human drivers now rank equally with financial ones in the eyes of global leaders
One step closer to the mobile wallet
WORKPLACE
People place and technology deliver new world of work
EDUCATION
Counting the benefits of exercise
FIRMS
Companies to watch Looking at high potential businesses
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SURVEY
Putting a value on human capital
MARKETING
Exercise doesn’t just improve health, it also aids learning. Putting exercise centre stage in our school curriculum could yield economic benefits for Ireland, says PATRICIA MURPHY
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DAVID DUFFY on medical technology, a sector in which we already have a strong base and which offers high growth potential
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What to do when you can’t predict the future
MARTIN CULLEN of Microsoft Ireland outlines a vision for a happier, flexible and ultimately more productive workplace and describes how his own organisation has worked to achieve this goal.
The search for growth in so-called emerging markets is no longer a matter of choice, it’s a necessity says TIM CODY of Accenture
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STRATEGY
The logic that shapes the first half of your career can leave you trapped in the second says RICHARD JOLLY
THE DECISION INTERVIEW
Food entrepreneur and Bord Bia Chairman Michael Carey talks to FRANK DILLON
24
Future work – the battle for engagement
The way we have been taught to solve problems was designed for a different world. To deal with uncertainty today, we need a different approach say the authors of a new book.
EXPORTS
Ireland’s efforts to increase trade with emerging markets will yield results in the longterm says ALAN DUFFY, MD and Ireland Head, Corporate Banking HSBC
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BANKING’S ROLE IN OUR RECOVERY
Banks will play a central part in Ireland’s recovery and have been adapting their services to meet the needs of high potential companies, says Irish Banking Federation CEO Pat Farrell.
What is the real value of culture to Ireland and what part have artists to play in our economic recovery asks BARRE FITZPATRICK
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China in our hands The scope for increasing trade between Ireland and China is huge says William Leung of solicitors Eversheds, an international law firm with offices in both contries
TRENDS
Short features on management issues and trends
CHINA
BOOKS
Books in Review Reviews of some of the latest management titles
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ARCHIVE
The Rear view The Guinness brewery yard in the 1920s
DECISION April 2012 3
EDITORIAL
Frank Dillon, Editor
Playing centre stage reland is a small place in more ways than one. An island on the western fringe of Europe, we are rich in culture and tradition. Our creativity is legendary. We are an old country but paradoxically, we are also a young country .We contribute to the world well above the natural level our population and geographic isolation suggests that we should and we have been doing this for centuries. We are a hub.
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This issue of Decision looks at the notion of hub from two different perspectives. Our lead story looks how Ireland has become a leader in the born-digital space and the positive implications this has for our economy in the years ahead. The cluster and of young yet leading edge global companies that we have here such as Google, Facebook, LinkedIn, Twitter and Paypal bear witness to our strengths and attractiveness as a hub for international business. We have achieved critical mass. Success has bred success. Moreover, as Google’s Ronan Harris points out in our coverage here, a recent report by McKinsey indicated that one fifth of all G8 growth was generated by companies which were using digital technology to gain advantage over their competitors. Having an impressive base of leading edge digital firms with the skills and knowledge that brings locally can only enhance our position in this area. Decision is published quarterly by Dillon Publications Ltd, PO Box 7130, Dublin 18. Tel: 01 2179418. Annual Subscription Price ₏45 inc VAT. ISSN: 1393-2993, Spring 2012 Publisher & Editor: Frank Dillon - frank@decisionireland.com
We are also a cultural hub, as our piece by Barre Fitzpatrick explores. Culture, he notes, is not defined by the same metrics as industrial development. Yet, even by these narrow financial criteria, cultural activity contributes handsomely to the economy, even before we consider the wider value it contributes to our society and the positive image it creates for us on the international stage.
Associate Editor: Barry McCall Design & Layout: Conleth Adamson, Artworks Tel: 01 2751707 Cover design: Kevin McSherry Advertising: Roger Cole Printers: W&G Baird Ltd
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Frank Dillon Editor
Ideas at Work STRESS
Saying ‘no’ to connectivity t’s no secret that technology has revolutionalized the way people conduct business. The “always-connected” age of Smartphones, iPads, Netbooks, and laptops give people the convenience and freedom to be on the golf course, the beach, the couch, or even in bed, and still be working. But at what cost? In a shortly to be released title,’Sleeping with your Smartphone How to Break the 24/7 Habit and Change the Way You Work (HBR Press), Harvard Business School professor and ethnographer Leslie Perlow delves into the connected world of work and challenges the notion that we must be constantly plugged in to be successful. Furthermore, her work and her research suggests, this 24/7 mentality can actually be counterproductive. Based on her latest research, Perlow recommends a radical yet simple idea: take “disconnected” time off, and both individuals and team members will benefit. She tells the story of how a simple experiment she initiated at Boston Consulting Group (BCG), an elite and competitive organisation, gave way to a powerful yet manageable process that actually changed the status quo at the company. Over nine hundred BCG teams from thirty countries on five continents participated, and the benefits of this experiment were extensive and
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changed the micro-dynamics of the way people there worked. In the book, Perlow lays out the process of “disconnecting” and offers instructions on how to replicate it in other organisations. Rather than help individuals cope with the ever increasing demands of work, Perlow seeks to help individuals alleviate this pressure of always being connected, without grand overarching societal change or even bold and costly changes to the organisation. Perlow is the Konosuke Matsushita Professor of Leadership in the Organizational Behavior area at the Harvard Business School. She currently teaches in the Program for Leadership Development and runs a seminar on qualitative, inductive research and is the author of ‘Finding Time’ (2007) and ‘When You Say No But Mean Yes’ (2003). Written for anyone who works with people—team leaders, managers, senior leaders, HR professionals—and is anxiously awaiting a solution to the “always on” problem, ‘Sleeping with your smartphone’ reveals the power we all have to change the norms and expectations that guide behaviours in the workplace. ■
RECRUITMENT
The War for Talent here is a war going on. A war for talent. If you have read ‘Talent Masters, ‘Workplace 2020’ or any of the latest books in the human resource space you are aware of the importance of recruiting and retaining talent writes Ron Immink. Some 81% of CEOs claim that they are losing that war. George Anders in his book ‘The Rare Find’ looks at what makes recruiters successful and uses examples from the special forces, the FBI, sports, venture capitalists, education an the medical sector. It explains how Facebook recruits their talent (online coding puzzles!). The book refers to “The long tail” and how you can
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use that long tail to spot talent outside of the standard top resumes. It has elements of ‘Business Exposed’ (super CEOs and super talent are hugely overrated) and ‘Blink’ (trust your instincts). The book has a few key messages: • if you don’t know what is coming you need to hire the unexpected • look outside the box • resumes are only the tip of the iceberg, find out the whole story • read the resume upside down • it is not about skill, it is about character and hidden virtues
• compromise on experience, do NOT compromise on character • use observation • ignore cultural fit at your peril • don’t look for “good enough” but try to find the “could be spectacular” The book makes absolute common sense and in some ways there is nothing new in it. Good companies and CEOs will understand the messages in the book instinctively. In a similar vein, “Mavericks at work” is another worthwhile read where the key message is that you need to recruit people that share your passion and that skills are secondary. This book has the same message about the importance of character and how that supersedes experience. According to this work, how your mum and dad raised you is more important than your education. And it is best explained through what the FBI looks for in candidates: initiative, perseverance and compatibility, Discipline, trainability and judgement, loyalty, leadership and maturity. You can’t gauge that from a resume. Ron Immink is a serial entrepreneur and is cofounder of Bookbuzz and Smallbusinesscan. ■
DECISION April 2012 5
TIME MANAGEMENT
Thinking Smarter re you working too hard and feel you’re getting nowhere asks Paul Davis.
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In the words of Harvey Mackay: “Time is free, but it's priceless. You can't own it, but you can use it. You can't keep it, but you can spend it. Once you've lost it you can never get it back.” Maybe it’s time to take a fresh look at how you approach your work and try these practical steps: 1. Recognise that being busy is not the same as being effective. Ask yourself: “Is what I’m doing contributing to what is really important to me?” 2. Choose to be effective rather than efficient. Being efficient at everything will get you bogged down, while being effective at what’s important will get you what you want. 3. Commit to paper in detail what you want to achieve. Having a clear description and picture brings your goal closer to reality. 4. Focus your attention on what you want to achieve, rather than the problem. What you focus on gets bigger. 5. Decide what you really want to do, then just do it! Ask yourself, “What do I really want to do more of in my life?” Make the commitment to yourself. 6. Decide what you no longer want to do, then stop it! Some of your habits no longer serve you and may be counterproductive. 7. Accept your natural gifts and talents and leverage them. It’s okay to be acknowledged and rewarded for something that comes easily to you.
8. Take care of yourself first, so that you can keep giving. Do it as a favour to yourself, your loved ones and your co-workers. 9. Take time to be alone, especially if you need private time to recharge your energy. You will find it easier and more enjoyable to spend time with family and co-workers. 10. Take time to be with other people if you are very social and gain energy from being with people. This is especially important when you are working on solitary projects. 11. Know what you are good at – do only that and delegate the rest. You will produce better results with more sustained energy and enthusiasm. 12. Just do it now! Keep repeating this short phrase to yourself over and over again. Repeat this simple phrase for 30 days and it will become a habit. Once your subconscious has this as a habit, your procrastinations will be no more. Paul Davis is the author of “Evolve – Look Within Yourself For Business Success” and is a business growth specialist and founder of DavisBusinessConsultants.com ■
MARKETING
When bold is good epending on what day it is, you’re bound to find front-page stories about people taking to the streets. It’s small wonder that when Time magazine chose their last “Person of the Year”, it wasn’t a business or political leader that made the cover—it was a masked rabble-rouser known as “The Protester.” For those in business, it may seem as if all of this is transpiring in a separate realm, well outside the corporate bubble. Unless the protesters are specifically targeting your business, it’s natural to think, this new era of protest makes for lively news, but has nothing to do with my company or brand. But according to Scott Goodson, author of the new book ‘Uprising’ (McGraw-Hill, April 2012), staying away from outspoken people, not getting involved and playing it safe, is
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the quickest way to make a brand invisible and irrelevant. “If you play it safe in today’s boisterous marketing environment”, Scott says, “yes it’s true that you won’t have crowds rising up against you- they’ll be too busy ignoring you”. On the contrary, ‘Uprising’ argues that brands actually should become more willing to take a stand. They should become more activist, not less. But they should do so in a thoughtful, considered way that is more likely to put them on the same side of passionate issues as their customers are. Goodson is the founder and current Chairman of the global advertising/marketing agency, Strawberry Frog. He has developed an innovative marketing approach that
connects with consumers via the merging of advertising, entertainment, technology, and social/cultural activism. “In our experience at the agency, we’ve found that when brands are willing to take a deep look at themselves--their culture and their values--and, simultaneously, are also inclined to really pay attention to what’s going on in the lives of their core consumers, it can lead to epiphanies,” Goodson says. “This is what we should be talking about to our customers. This is what we should be helping them do in their lives. When that happens, they begin to have their own clear mission; they’re in a position to do more than just run ads; they can launch an initiative, or better yet, a movement.” Drawing on thought leaders from companies like PepsiCo, P&G, Onitsuka, Tiger, IKEA, the Mahindra Group, and other case studies of cause marketing campaigns from Unilever, LiveStrong, LGBT, Pedigree, Levi’s, Gillette, and more, Uprising offers a model for marketing that links a company’s brand and values to individuals’ passions. ■
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At the world’s digital core BARRY MCCALL looks at Ireland’s emergence as a leading international centre for the born-on-the-internet generation of companies and how this can generate further opportunities in the area of service provision for global companies.
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DECISION April 2012
COVER STORY
hen Digital Equipment Corporation announced the closure of its manufacturing operations in Galway in 1993 many were predicting the demise of Ireland’s ICT manufacturing sector. Despite the then still recent success of attracting a major investment by Intel at Leixlip the doomsayers were out in force contending that Ireland could never compete in high end spaces such as ICT. And even the most determined optimists were not even hinting at the prospects of real growth in the sector.
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But in the two decades since then Ireland has become the acknowledged “internet capital of Europe” and is perceived as a natural home for “born on the internet” industry with global leaders such as Google, eBay, PayPal, Facebook, Twitter, and LinkedIn all choosing to establish significant operations here.
that technology … for those who are expert in the field of cloud computing, it is a wireless connection system to store data and information which is very easily retrievable – and, as a consequence, enlightens people like you and I who don't understand what it means." So what has changed to place the country in this happy leadership position? American Chamber of Commerce chief executive Joanne Richardson believes it is not due to any one reason in particular and is simply a stage in a process. “Ireland has, ever since it began competing for FDI, been very successful in identifying new and emerging sectors with high growth potential and significant opportunities”, she notes. “In the 1970s the IDA attracted the first wave of global ICT companies to these shores. The likes of Analog Devices and Digital were early arrivals. In 1986 when very few people even knew what a software firm was Microsoft set up its first operation in Ireland. As we moved into the late 80s and early 90s through the IFSC, the fledgling concept of Financial Services began to flourish here.” Moving to the boom in the digital sector of the past five years she says: “There is nothing new in Ireland’s ability to be innovative. It is something that we have great experience in. There is no one USP as far attracting such investment into Ireland is concerned. Ireland is
Richardson – “The fact that 60% of US investments last year were made by the existing base of companies shows that we remain attractive and successful but we cannot afford to be complacent and assume that the reasons that attracted companies to Ireland will be enough to retain these investments.” attractive to these companies for a multitude of reasons. These include our well-publicised competitive and transparent taxation regime, a young, well educated workforce, and our close ties to Europe.”
Similarly, Ireland has become an acknowledged centre of excellence in the burgeoning field of cloud computing giving the country a further edge in the “born digital” and broader ICT sectors. Again, our rise to prominence in this field has come as a surprise to many. Indeed, Enda Kenny’s response when questioned about the field during the election campaign prior to his becoming Taoiseach wouldn’t necessarily have inspired confidence: "I don’t understand
IDA Ireland’s global department manager responsible for content, consumer and business services agrees. “If you take it back a bit and look at how we got to where we are the process is very important”, he says. “Back in the 70s and 80s we were attracting high volume fairly low volume manufacturing. In the 80s and 90s we began to move into the data processing space although this was non-digital activity such as insurance processing and subscription fulfilment.” He traces this through the digitisation of this activity with the Irish operations of US insurers, legal firms and others connecting back to servers in the US. After that came the emergence of the call centre and teleservices areas followed by the evolution of multidisciplinary shared service operations where a variety of business process
DECISION April 2012 9
functions including accounts, payroll, HR, and customer relationship management could be handled either by directly owned or outsourced facilities in Ireland. “We were able to capitalise on two or three things happening at that time”, says Dowdall. “We kept producing people with the skillsets required by companies wishing to transfer those business processes. There was also an evolution in the mindsets of the major corporations that they didn’t have to have all those functions in the same place and that they could be carried out on a disaggregated basis. That enabled us to get into a whole range of professional service sub-sectors and new business models.”
have seen some great investment announcements from PayPal, Facebook and Twitter over the past 12 months. The fact is that the model has been proven and companies like ourselves are able to grow here. The fact that a cluster of companies like these has started building creates a unique opportunity for Ireland to take advantage of.” These are some of the factors which have brought Ireland to its preeminent position in the born digital sector but what needs to be done to sustain the advantage currently enjoyed? “The sort of area that should be looked at is improving the environment for digital companies to grow and innovate”, says Harris. “Ireland needs to be a leader in areas such as copyright and data legislation.”
And that brings us neatly to the new century and the movement of these services to the web and the emergence of born on the web industries. “Ireland became a natural place for these companies to go”, Dowdall contends. “We had already established ourselves as early adopters of new technologies and fast adapters to new trends. Companies became comfortable with the idea that Ireland could do it. Companies want to evolve and Ireland is an excellent place to do that either in terms of implementing a current plan or moving to a next generation business model.”
Harris – “I certainly think it is possible for Ireland to use its leadership in the digital sector to become a global centre for areas like supply chain management.” One company which has certainly evolved since arriving in Ireland is Google. “Our own story at Google is that when we came here in 2004 we didn’t have a clear sense of what the future would hold for us”, says Google’s head of large customer sales for EMEA Ronan Harris. “Nobody here could sit down at that stage and predict how successful we would be.” He sees talent as a key factor in the company’s success since its arrival in Ireland. “If I could point to one thing it has been the ability to attract talent from all over Europe to come and work for us here. This has helped us build the business here in Ireland. Dublin is still seen as an attractive brand and ‘Brand Ireland’ has done well to recover as much as it has from recent events, although there is still some way to go. Talented people are still open to considering spending a few years in Dublin. It is still seen as an attractive place to live and the cost of living has improved relative to other cities.” Tax and costs while important are not the ultimate determinants of success in attracting this new wave of industry according to Harris. “When US multinationals are looking for a place to base themselves tax and costs do come into it but other jurisdictions will be able to match those. What makes the difference for Dublin is the ability to attract talent at all levels, the fact that it is located in an English speaking country and that we can service Europe from here.” There is also an element of success breeding success at work. “We
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Joanne Richardson believes complacency is the chief danger for the future. “While all FDI is mobile in nature there has been a number of recent investments that indicate the strategic importance Ireland is playing in Digital companies’ long term plans. Last year we saw Google invest some €250 million in purchasing property in Dublin, and particularly encouraging was their investment in a new energy efficient datacentre in Ireland. Microsoft too is expanding a datacentre to support its cloud computing business. And of course PayPal which already employs 1,500 here has announced 1,000 new jobs in a new customer service centre. “The fact that 60% of US investments last year were made by the existing base of companies shows that we remain attractive and
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successful”, she continues. “But we cannot afford to be complacent and assume that the reasons that attracted companies to Ireland will be enough to retain these investments. A constant process of reviewing our offering the areas of tax, talent and competitiveness is required to maintain the fabulous base companies here and grow this into the future.” According to the IDA’s Dowdall staying ahead of the pack will be a question of continuing to play to our strengths. “We have to keep doing what we do well”, he argues. “Ireland has transformed the entire basis of its economy over a very short period of time. We have done this by virtue of the strength of our relationships with industry, education and the research community. We have to stay alert to future trends and where they might take us.” He points to Ireland’s success in attracting R&D investment in recent years as evidence of this ability to anticipate trends and capitalise on them. “We have attracted a large number of inward R&D investments over the past five years and this was supported by the research centres of excellence which are now located around the country and collaborate with industry on leading edge research. That’s part and parcel of how we can stay relevant for the future.” And our success in the born digital sector might be just the beginning.
Our success in the born digital sector might be just the beginning. When it is combined with our proven track record in the areas of professional services and business process provision there is scope for Ireland to become a global hub for a whole range of activities for international organisations. When it is combined with our proven track record in the areas of professional services and business process provision there is scope for Ireland to become a global hub for a whole range of activities for international organisations. “Cloud computing offers a big evolution opportunity for Ireland where we could become a global centre for activities like procurement, IT, finance, and supply chain management. Companies have been centralising activities like this since the 70s and 80s and there is now an opportunity for Ireland to become a leading location for multiple divisions and functions of the global corporations already established here in sectors such as financial services, pharmaceuticals, ICT, industrial products and so on. What Ireland can offer is a high level of expertise and excellence in process design for these functions particularly in the wake of mergers and acquisitions when companies are seeking to realise
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efficiency gains from bringing functions, systems and processes together.” Ronan Harris also sees a significant opportunity in this area for Ireland and points to its potential. “A recent report by McKinsey showed that one fifth of all G8 growth was generated by companies which were using digital technology to gain advantage over their competitors”, he notes. “I certainly think it is possible for Ireland to use its leadership in the digital sector to become a global centre for areas like supply chain management.” This is already happening according to Richardson. “ICT technology platforms and capabilities underpin all sectors of the economy – public services, transport, digital media, medical technologies, advanced manufacturing, logistics and trade, as well financial services”, she says “Away from the sector itself Ireland has benefitted from the innovative ICT culture we have here that has enabled other companies and industries to expand mandates. Kelloggs last year increased their workforce by 25% in their European HQ in Dublin which conducts its supply chain management here. Shared services centres, which also rely on ICT, have been a key growth area in Ireland in recent years. Hertz announced a new centre handling all support services for Europe, the Middle East and Asia. In the life science sector MSD officially opened its shared services centre last February employing 150 people. There is a real opportunity for us to build on that reputation so that Ireland can continue to attract investment and grow both exports and employment”, she adds.
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What is the real value of culture to Ireland and what part have artists to play in our economic recovery, asks BARRE FITZPATRICK
Ireland’s Culture as a Hub Fitzpatrick: “The renewed interest in culture as the expression of a people, as well as an asset and source of wealth ….is simply the return to common sense.”
rish business is well used to viewing industrial sectors such as Bioscience, Medical Technology and Cloud Computing as hubs where we can justly claim to have a global competitive advantage or at least a strong platform for further economic development. But what about music? Wh at about cinema and animation? Are these also hubs, or part of a hub?
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If Ireland can be said to have ‘global reach’ with Kerrygold and Guinness, the same is true of U2 and Riverdance. Such artists and dance shows draw their strength and inspiration from layers of musical tradition that have been deposited over centuries. While they themselves may be relatively recent phenomena, their roots run deep. For example, Bill Whelan’s intermission gig in the Eurovision song contest in 1994 owed a good deal to Planxty, and to Andy Irvine’s experimentation with Bulgarian rhythms, but of course overlaid on jigs and reels from the traditional Irish vernacular. Recently this topic has been the cause of some controversy, as the government looks to recruit ‘the creative industries’ to the banner of economic recovery. Why shouldn’t Irish artists play their part in the recovery mission? Surely there is room for a distinct cultural section in the orchestra of national reconstruction? Farmleigh marked the emergence of this argument in 2009. But, on the other hand, there has been resistance to this from artists. We don’t want to be conscripted by the engineers of Brand Ireland, they say. ‘Monetising the arts’ is just a form of latter-day colonisation, and will fatally undermine the essential independence of Irish culture by hitching it to tourism.
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But, as John Fanning has pointed out in the Irish Times, Yeats accepted the role of Senator in the new state, just as Heaney was willing, more recently, to meet the Queen. And is the poet’s truth so fragile that it cannot stand to share a platform with the IDA? The business community is more concerned to answer a different question: how precisely does Irish Culture function as a ‘hub’? Culture does not conform to the usual expectations of an industrial sector. It falls outside of the usual headings used by the Economist, for example, to report on economic performance, such as unit costs, return on investment, etc. And yet the arts in Ireland employs 21,328 people, pays the state €306 million in tax, and has a wider economic impact of €4.7 billion.
The Range of Irish Culture The great richness of Irish culture becomes immediately obvious when you catalogue everything that is included under that heading: ●
Literature (including poetry, fiction and non-fiction)
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Theatre (from classical Irish theatre to contemporary work)
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Cinema and TV (to include films made in Ireland, films made by Irish directors, Irish actors work, and TV productions in Irish and English)
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Music and Dance (including Traditional Music, Pop, Jazz, and Classical, as well as music labels, groups, composers and producers)
CULTURE
Geographic Spread of Ireland’s Culture Irish people have travelled as a result of the Famine , military service, banishment, religious conviction, family connections, sexual attraction, and even, in the case of one village, kidnapping by pirates. With them have gone their language, music and habits... to influence and be influenced by other people around the world. Ireland is the cultural hub of a vast territory, and the spokes are many. There are the dominant spokes that follow the main routes of travel, both between these islands and inter-continentally, to Liverpool, London, Boston, New York, and Sydney. Then there are the secondary spokes to Catholic Europe (Rome, Louvain, Salamanca, Lourdes), the Spanishspeaking world (all the capitals of South America as well as Madrid and Barcelona), India and Pakistan (some of these are through religious orders, some through service in the British Raj), China, Africa.
What are the causes of these spokes? 1. The Famine (causing the biggest influx of Irish immigrants to the USA in the mid-century, as well as to Britain), 2. Christian missionary activity (across all 5 continents, with the most extensive infrastructure of all our overseas interests), and 3. Military service (Bernardo O’Higgins in Chile, St. Patrick’s Brigade in the Mexican Army, Francis Meagher’s adventures with Custer and in the American Civil War, the long list of those who served under Napoleon, Frederick of Prussia, the Hapsburgs, as well as the Irish regiments in the British Army including both World Wars. Almost 20% of the 18,000 sailors who fought in the Battle of Trafalgar under Nelson were Irish... not to mention the oak that went into the ships they sailed in), 4. Transport to Australia, 5. Trade, self-development and adventure, such as the Wild Geese, and recent emigrations of professionals and skilled tradespeople, and students seeking opportunity,
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Painting and Sculpture (to include galleries and museums, art colleges and artists)
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Architecture and Design (both working here and working internationally)
6. Recent enforced emigration,
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Crafts (including furniture, ceramics, jewellery and textiles)
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Science (including developments such as the TCD Science Gallery and events such as the RDS Young Scientists Exhibition, but also the neglected work of natural scientists from Praeger to Tim Robinson)
Irish Culture in Dialogue with other cultures: the example of Riverdance
7. Tourism.
The mutual influence of cultures is a complex interweaving of many coloured strands. To take one example, tap dancing is the result of Irish step dancing encountering African American dance in the New World. It has even been argued by Prof. Dan Cassidy that Jazz as a term derives from the Irish ‘Teas’ (‘heat’), and entered the slang of gamblers and sportsmen in the early 20th century. English absorbed many Irish terms as an oral culture before they appeared in newspapers and journals as part of the formal written culture... for example, ‘smithereens’, ‘galore’, etc.
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Gaming, digital content, social media
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Sport (including the entire GAA global infrastructure, players and championships, and all other sports played by the Irish)
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The Irish Language, including literature written in Irish, TV product such as TG4, newspapers and magazines, online resources including online language learning
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Comedy (to include stand-up and other forms, as well as TV comedians and writers)
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Festivals, Awards and Events (to include St. Patrick’s Day, Imagine Ireland, l’imaginaire irlandais, the IMPAC Award for fiction etc.)
The Chinese perception of Irish culture offers us a useful ‘view from the moon’ perspective. When the Chinese vice-President, Xi Jinping, visited in February 2012, his itinerary included the following: the Lynch dairy farm in Co. Clare, The Cliffs of Moher, Croke Park, and a private performance of Riverdance. Fintan O’Toole wrote in the Irish Times (25.2.12):
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Organisations such as The Arts Council, Culture Ireland, The International Fund for Ireland, private sector sponsors such as Diageo, Arts Centres and other venues both in Ireland and hosting Irish culture overseas, including Irish pubs, etc.)
A dose of Riverdance is now compulsory for visiting heads of major states, and its appearance in the programme for the visit to Ireland of Xi Jinping, China’s vice-president, is about as surprising as the appearance of Santa Claus at Christmas. But there is every reason to believe that China’s next
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leader was entirely sincere when he declared the performance “breathtaking”. The show’s long reign in the West may be winding down, but in China the appetite for Riverdance seems insatiable ... At one level the attraction is obvious. Riverdance is a vibrant spectacle. It transcends the language barrier. It is politically inoffensive and is thus given something close to official blessing ... But something else is going on. Chinese people seem to find Riverdance not just spectacular but genuinely moving ...The minister of culture Sun Jiazheng was so overcome (when he saw the show in 2001) that, as he wrote to the producers, “a poem flowed out from the deep of his heart”.
Riverdance demonstrates that cultural engagement can help to build relationships with other cultures in ways that foster trade and industry
The development of Riverdance into such a large and successful show means that several troupes of dancers now perform in various regions.
A Definition of Culture From humble beginnings in the 1994 Eurovision Song Contest, it is now earning €100m a year. Riverdance demonstrates several truths about Irish culture: 1. That we can easily underestimate the value of cultural assets. 2. That cultural engagement can help to build relationships with other cultures in ways that foster trade and industry. 3. That segmenting our cultural from our business activities may be understandable from an administrative point of view, but fails to appreciate the ‘spillover effect’ on the overseas customer. In fact, you could tell the story of much of what Ireland has been through in the last quarter century with Alan Parker’s 1991 film of Roddy Doyle’s The Commitments and Riverdance. Each captured a zeitgeist, and reached hearts and minds around the world.
Money and Imagination The twin shaping forces of culture are money and imagination. All art comes about in the creative tension between these two poles. For example, Renaissance artists like Leonardo and Michelangelo were dependent on the patronage of the Medicis and Borgias. Caravaggio painted for the Pope. The monarchy was the source of patronage in the Middle Ages, and the
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artist’s rights were also protected by the king, following the precedent set by St. Columba in his seminal judgement ‘To every cow her calf’. Patronage was the source of funds, and in time that responsibility passed from the king to the state. The Arts Council is responsible for funding the arts in Ireland, and its patronage, on behalf of the people, is supplemented by support from local public authorities and businesses. With recent cutbacks, artists and art centres are being obliged to wean themselves off central government funding... a process that, with skill, can bring them closer to local audiences and private sector funding. Culture Ireland performs a similar function for Irish arts and culture overseas, acting as broker, dooropener and investor.
What is the Value of ? To assess the economic importance of Ireland’s cultural hub, it is necessary first to define the value of culture. This is not a simple task. For example, is U2 a business or a band? Is Arthur’s Day a cultural or a commercial event? One source of confusion is the pricing of works of art. Damien Hirst, the British artist, in September 2008, took an unprecedented move for a living artist by selling a complete show, Beautiful Inside My Head Forever, by auction and by-passing his long-standing galleries. The auction exceeded all predictions, raising £111 million, breaking the record for a one-artist auction.
The difficulty here is the inevitable subjectivity of aesthetic judgment. Unique art works by celebrity artists such as Hirst fetch notoriously high prices, and are therefore classed as valuable assets which can hold their value at a time when equities, for example, fluctuate dramatically.
2. Asked if they ever went to this theatre, the majority replied in the negative. It was the very existence of the theatre that was important for them, not necessarily the opportunity to attend performances there. This is what is meant by existence value.
Existence Value and Use
Maybe the crux of the matter is that there are values other than use values. Where there is a collapse in asset values, we re-discover the ‘existence value’ inherent in our environment, in our culture, in our community. Short-sighted planning decisions, speculation and greed mask ‘existence value’ and are concentrated solely on use value. The collapse of the Celtic Tiger has led to such a re-evaluation in this country, and the renewed interest in culture as the expression of a people, as well as an asset and source of wealth, championed by President Michael D. Higgins among others, is simply the return to common sense. ■
The outrage many feel about prices paid for art works relates to confusion about two kinds of value. While use value can be readily understood as the utility of an object or service, another kind of value seems to be involved in areas such as art, or the environment. This is known as ‘existence value’. This expression refers to the value we perceive in something that is not related to its use value. The Cliffs of Moher, Antarctica, the 3500 year-old-tree that burnt to the ground in Florida in early March of this year, are all examples of things that have ‘existence value’. Research conducted in the UK on people’s attitude to funding the arts showed that 1. They were willing to pay MORE of their taxes to support a local theatre. Asked what percentage of their tax they thought was going to fund the town’s theatre, their replies OVERestimated the true figure by 5%.
• Barre Fitzpatrick is a management consultant, working mainly in the area of strategy and innovation. Previously on the editorial board of the Crane Bag, he has also contributed The Ghost in the Machine to RTE. He blogs at www.theroombehindtheshop.tumblr.com. His website is www.stride.ie
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SECTORS
Positive Trade Forecast Shows Ireland’s Potential A Ireland’s Efforts to Increase Trade with Emerging Markets will Yield Results in the Long Term says ALAN DUFFY, Managing Director & Ireland Head, Corporate Banking HSBC.
s the world continues to face well-documented economic challenges, there are grounds for optimism for international businesses. HSBC’s Trade Forecast, published last month, suggests international trade growth is predicted to accelerate from 2014. Corporate Ireland needs to make sure it is in a position to track that growth. Irish companies are well renowned for their innovation and export competitiveness and the concerted effort of the Irish government together with trade associations to increase trade with emerging markets is a large step in the right direction. It is also imperative to consolidate and protect our market share in the established markets like US, UK and in Europe as they will continue to be hugely relevant to the Irish economy and our trading patterns over the coming years.
The Trade Forecast predicts how trade is going to develop over the next five, 10 and 15 years. It forecasts overall trade growth globally, in global regions, and individual countries. The global picture shows that despite the current climate the overall trend for international trade is positive with growth acceleration predicted sooner than previously expected. This is forecasted to result in predicted global trade growth of 86% from 2012 to 2026, taking total trade activity in 2026 to $53.8 trillion. Over the next five years it is forecast that world trade will grow at an annualised rate of 3.78%. This acceleration in trade growth is driven by two key trends: ‘Trade Fuelling Trade’ and ‘Corridor Creators’. In ‘Trade Fuelling Trade’ we see the rapid growth of sectors that support world trade. Eight of the top 10
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emerging fast growth sectors fall in to this category, including ‘Containers and Packaging’ reflecting a greater transportation of goods around the world and ‘Binding Products for Foundries’ which tracks trade of the moulds used to create iron/steel infrastructure products required by the increasing number of railway, road and building infrastructure projects, which then directly facilitate further international trade. ‘Corridor Creators’ are businesses searching out the best trade partners to drive competitive advantage, regardless of location, defining their own trade routes and corridors. For example, Indian businesses are opening up trade in pharmaceuticals with Africa and emerging Asia, creating new corridors in the Southern Silk route. These innovative businesses are the ones to watch as they help to redefine how individual nations and regions are defined. This is also evidenced by the growing trade relationship between Germany and Latin America within the automotive sector - Germany is utilising existing relationships with Mexico to forge new links within Argentina. Innovative business activity is reshaping the trading world. New trade hubs are emerging as countries develop or expand their role as gateways in key trade corridors or between regions. Egypt, for example, is a fast growing trade nation, due in part to its role as a route between Africa and Europe. Turkey and Malta are already known as gateways between Europe and the Middle East, and their trade activity will continue to grow. In addition, Panama will have a greater role as a global trade hub as the Canal’s widening enhances shipping lanes to both Singapore and between North and South America.
The key question for us is where does this leave Ireland? The Trade Forecast predicts that trade in Ireland will grow at an annualised rate of 1.55% to 2016 and will then increase substantially between 2017 - 2026, at 4.35%. This equates to growth of over 76.21% over the next 15 years. Although this forecast is slightly below the world average it is still an encouraging figure. We see Ireland’s growth fuelled by three key sectors and by both traditional and new trade partners. Ireland’s largest export destination will remain the USA, followed by the UK and Belgium. Much of the growth to the USA and Belgium is predicted to be accounted for by expansion in chemicals and medicines with, for example, exports of blood products to both countries set to increase substantially. Ireland’s fast growing export destinations include Bangladesh, where exports are forecast to grow by nearly 14% over the next five years, largely due to exports of silk worm cocoons and yarns for the textile sector. Ireland’s largest import partners will remain the UK, the USA and Germany. Ireland’s emerging import partners reflect its increased demand for oil and gas as trade with Kuwait, Uruguay and the UAE grows over the next five years. Ireland will also increase imports from Malta, bridging between Europe and MENA, at over 13% over the next five years. The first of the key sectors where Ireland can prosper is chemicals. The Irish chemical sector is complex, research driven and interwoven with the country’s important agribusiness and pharmaceutical sectors. As such it can be a major area of trade growth over the next five years. Exports of compounds used in penicillin and other drug production are set to increase to the USA, Belgium and to Spain. Exports of hormones to Switzerland are forecast to increase too. This activity will assist both the medical sector and the export of meats, both of which are set to grow. Pharmaceuticals and Medicines is the second area. The medical sector is growing rapidly and given the pace of internationalisation, set to overtake digital as the major trading sector within the Irish economy. Trade corridors are opening with Switzerland and the USA, fuelled by the European and North American pharmaceutical supply chain which is dominated by big drugs companies. Corridors are opening up for exports of blood products, antisera and vaccines with Germany, orthopaedic appliance exports to the Netherlands and medicines to France. This dynamic sector can propel Irish businesses onto a global platform as trade routes beyond Europe and the USA begin to open up.
Finally, Ireland’s consumer electronics sector is integrated into the global supply chain, and has been moving up the value chain too. Exports of integrated circuitry to China are predicted to increase alongside exports of printing and ancillary machinery to the USA. As the emerging world increases its presence in the high end of the consumer electronics market, Irish businesses in the sector need to react to this competitive challenge and grow their international activities. While the Trade Forecast has a unique approach to understanding the drivers of trade from a business perspective and market and business environment influences on trade, for the forecasts to become a reality for Ireland, it requires Irish businesses to realise that target. The bottom line is that annualised total trade growth in Ireland over the next 15 years will be 3.16% and this is the rate at which companies will need to increase their international activities if they are to keep pace with change. Ireland’s open economy means it is in a good position to take advantage of these new opportunities but we mustn’t be complacent. We need to ensure that we provide the necessary infrastructure, insight and support to ensure that Ireland’s international businesses can achieve the best outcome for themselves and for Ireland Inc. ■
• HSBC’s Trade Forecast and Ireland report can be downloaded in full from; http://tradeconnections.corporate.hsbc.com
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DECISION THE INTERVIEW WORDS: FRANK DILLON
• IMAGES: FIONA BROPHY
Seeking more sweet victories MICHAEL CAREY has a knack of achieving what he wants in the food business and making money along the way. His skills are currently being employed on behalf of Ireland in his unpaid role as Chairman of Bord Bia and in social entrepreneurship initiatives in Haiti and Uganda. Now, he is getting back actively in the money-making game with his latest venture, The Company of Food. t’s a bright Spring morning and Michael Carey bounces down the stairs of his new office to greet his visitor. Appearing to be alone, he is enjoying the classical music wafting through the adjoining high ceilinged rooms in his new Georgian lair in Dublin’s Fitzwilliam district. It’s an unusual environment for a man more accustomed to running busy large manufacturing and distribution businesses.
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Carey has recently come into a large sum of money but he isn’t destined to spend his days on the golf course. He is excited about his new venture, The Company of Food – a business whose purpose is to help create the next wave of premier division Irish food companies. He’s looking for a handful of ventures, exciting high potential firms, that have already demonstrated success and he wants to partner with them to take them to the next level. With an initial team of five, including his wife Alison Cowzer, The Company of Food will identify and invest in a select group of food enterprises. There will be a defined exit strategy and an opportunity for the entrepreneurs involved to take back the venture but the intention is to ramp up these operations, developing their full market potential “We’re looking for companies that are likely to have a turnover in the €3-5m range driven by successful entrepreneurs who have hit a glass ceiling,” he explains. His experience tells him that there are around around 20 firms in Ireland that fit the profile he has in mind. Finding these companies won’t be difficult. Carey is steeped in the food and drink industry, a fact acknowledged in his appointment as Chairman of Bord Bia last year.
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Moreover, Carey is no journeyman in this sector. On the cusp of 50, he has packed a lot into a career that he has nurtured much like a well-crafted consumer brand. He recently came across a sheet of paper that he had scrawled plans upon as a young man. The ambitions set out had all been realised on schedule – company director at 30, Managing Director at 35 and business owner at 40. Best known for his role leading Jacob’s Fruitfield, Carey realised the business owner ambition acquiring the Fruitfield business two weeks before his 40th birthday. It may not have been planned with military precision but Carey is certainly an organised individual who has a habit of getting what he wants. “I’m a planner,” he acknowledges. “I’m a great believer in setting things down on paper. That helps to bring clarity and helps you to make choices. When I am speaking to students, I often suggest to them that they should treat their career like they would a brand with all the thought and effort that that entails,” he says. Carey’s formative years were spent in Cabra, where his family lived above the newsagents shop his parents ran. With the store open from 7am to 11pm in the 1960s and 1970s, long spells behind the counter were a part of life - an experience that he feels gave him a good feel for customers. “My parents had a strong work ethic and it was a great way to learn about business. A lot of the owners of businesses I’ve met over the years grew up in family businesses. It gives you a very useful perspective.” A B Comm degree at UCD was followed by a Master of Business Studies
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(MBS). Many of his contemporaries in the latter class also ended up forging successful marketing careers in the food and drinks industry including the likes of Colin Gordon, Anne Sawbridge and Loretto Dignam – a tight group who have remained friends to this day. Marketing positions followed in Batchelors and Fox’s biscuits in the UK before he landed the position of Marketing Director of C&C Soft drinks. After a spell in a similar role at Irish Biscuits – a forerunner for ownership of this business later – he landed the first of several managing directorships of major companies in the UK. A successful stint at Evian Water, part of Groupe Danone, led to a return to Fox’s Biscuits as MD. Carey’s star was in the ascendant. The upwards trajectory of this career, however, soon came to a crashing halt. A further move, this time to Kellogg’s, as Managing Director for the UK and Ireland, proved to be a mistake. The offer of the job is one he likens to being asked to manage Manchester United but this was to prove no Alex
If you are going to be sacked by anyone, I would recommend Kellogg’s. I don’t bear any grudges. You’ll still find Special K in my cupboard if you look. Ferguson-style experience. “It was a complete and utter disaster of a move and I realised that very quickly,” he recalls. “Kellogg’s is a great company and a very well-run business but I didn’t enjoy it. At Fox’s, I had a great deal of freedom but here I was reporting to a boss on a daily basis. They fired me after eight months.” Time - and subsequent success - means that Carey is now philosophical about the failure and can afford some light-heartedness about it now.
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“At the time it was like falling off the edge of a cliff – a massive blow to the ego - but I have to say that they treated me very well. I got a year’s salary by way of compensation. If you are going to be sacked by anyone I would recommend Kellogg’s. I don’t bear any grudges. You’ll still find Special K in my cupboard if you look ,” he smiles. Carey has every reason to be grateful to the multinational cereal-maker. The payoff from his short spell there was to provide the seed money for his entrepreneurial career. “I came back to Dublin unemployed and unemployable at the age of 39,” he recalls. “There were a lot of coffees and chats with people I knew in business and the advice I got pointed me in the direction of owning a business rather than working for someone else.” By way of serendipity, Nestle had just announced the sale of a number of its business divisions in Ireland and the UK. The multinational was disposing of its loss-making food manufacturing business in Tallaght, and Carey led a management buy-in, in the process becoming managing director of Fruitfield Foods in 2002 with a 60% shareholding. “Having spent almost two decades at the time working in large businesses I felt I had the skills to lead my own business and I realised a long-held ambition,” he says. The portfolio of products was a diverse one including Fruitfield brand marmalades and jams, Chef sauces and well-established local confectionery brands such as Silver mints, Scott’s Clan and Yorkshire Toffee, products Carey was more than familiar with from his days in the shop in Cabra. “They were what you would describe as orphan brands in the Nestle portfolio and the operation was losing €2m on a turnover of around €25m when the new management team took over in 2002. We were able to provide a strong local focus. We cut costs, achieved growth and got back into profitability quite quickly,” he recalls. Within two years in fact, the business was on a strong expansion path and when the opportunity to buy Jacob’s biscuit operation in Tallaght came up, Carey and his partners jumped at the chance. Securing bank funding on the strength of Fruitfield’s success, they paid €70m to Groupe Danone creating Jacobs Fruitfield, a €100m plus business. Two smaller businesses, the Real Ireland Food company and Katies, a Cork-based biscuit manufacturer, were subsequently acquired. The management team was beefed up with ex Aer Lingus Chief Operating Officer Seamus Kearney becoming MD, while Carey took on the role of Chairman. Carey believes that one of his best contributions in Jacobs Fruitfield was in establishing a good management team, an achievement later recognised by the accolade of the Deloitte Best Managed Companies Award in 2010. As had been the case with Fruitfield, it was clear that the Jacob’s biscuit operation required surgery. The scale of that surgery, however, was to prove more radical than expected with its management concluding that the Tallaght manufacturing facility needed to close. The factory has been set up to produce 60,000 tonnes of biscuits when only 10,000 were now being produced and manufacturing was simply not economic at those levels. “That was a tough decision to make - it was made after detailed analysis – but ultimately it was the right decision. The market environment had changed radically with a dramatic reduction in prices and we did not have economies of scale. The operation would not have survived had we not made that move,” he says. Integrating the various Jacobs Fruitfield businesses involved reducing the workforce from around 400 to 100, closing the company’s manufacturing facilities in Ireland and moving production to third-party factories in the UK and mainland Europe. The Jacob’s biscuit plant was broken down and reassembled at a UK location although Carey is coy
about saying exactly where for competitive reasons. While the company continued to enjoy success, Carey says that scale remained a problem in the growth of the business so a decision was made to become part of a bigger group, The sale of the company to Valeo Foods last year meant it become part of a €300m operation, with a portfolio that includes Batchelors, Odlums, Shamrock, Sqeez, Roma, Erin, Amigo, Lustre and Picnic and a workforce aof around 500. Valeo is controlled by CapVest, a London-based private equity firm led by Seamus Fitzpatrick, who is chairman of the enlarged Valeo group. Carey reinvested half of the proceeds of the sale of his stake in Jacobs Fruitfield to become a significant shareholder in Valeo while Seamus Kearney became MD of the group. In his new Company of Food venture, Carey has assembled a group of advisors that will help the portfolio of food companies get to the next level. The group includes long-time associates such as Colin Gordon and Eddie Scaife, former MD of Premier Foods. Daragh Monahan and Gerry
Drawing on his own experience, Carey says that scale is a problem for many Irish food companies: “We need to have a bigger number of larger companies if we looking to compete in global markets.” Murphy, whom he worked with as Sales Director and Finance Director respectively at Jacobs Fruitfield will also be employing their expertise. “This group will work with the companies to achieve a growth plan. We are looking at investing in up to five companies in the first 12 months. Its early days but those we have spoken to think it’s a great opportunity,” he explains. Initially funded by Company of Food shareholders’ equity, Carey says
that these investments will be active and hands-on which is why he is seeking quality over quantity. A separate Angel Fund will be established for smaller investments, he elaborates. Having done well personally in this sector, Carey has also taken time to put something back. He is involved in a number of not-for-profit ventures in less affluent parts of the world, a process inspired by his involved in the Ernst & Young Entrepreneur of the Year Awards programme. He is one of a number of Irish business figures behind the Soul of Haiti initiative and has made eight trips to the country over the last year. Practical initiatives include making the connections that has resulted in Irish coffee chain Java Republic buying $1 million worth of Haitian coffee and supporting a new bakery. He is also Chairman of the TradeLinks group which provides practical supports in helping Africa companies develop trade opportunities. A number of well-known figures in Irish business including Adrian Heavey of Tullow Oil and Liam Fitzgerald of United Drug, are also involved in this initiative. With a huge focus at the moment on the potential to develop Ireland’s agriculture and food and drinks sector, Carey’s role as Chairman of Bord Bia is a busy one, taking up more time than he anticipated - around 50 days a year, he estimates. He is encouraged by the approach of the industry at the moment and of the state food organisation in particular. “It’s as good as any food multi-national in the world and has done a great job in building and managing the reputation of Ireland as a quality food source,” he says. “We also have a food sector that is working very well together, from farmers to food producers to brand owners and we do it better than most,” he adds, citing the commitment to quality assurance through the food chain as a key strength. “Trade buyers place a huge emphasis on reassurance in that area and communication of that message effectively is tremendously important,” he says. The recent Chinese trade initiatives could represent a major breakthrough in a massive market. The burgeoning Chinese middle classes could prove a boon to areas such as Ireland’s dairy and beef industry as well as to a wider range of consumer food companies. “I think the scale of that opportunity will become clearer over the coming months,” Carey says. More traditional markets, such as The Continent, still represent strong growth opportunities. Beef has huge potential, especially in Germany. Whiskey exports could also double in the coming years, he adds, while the lifting of the quota on dairy production in 2015 represents an opportunity as well as a challenge. Drawing on his own experience, Carey says that scale is a problem for many Irish food companies. “We need to have a bigger number of larger companies if we looking to compete in global markets,” he says. Access to finance is an issue for smaller firms and the domestic recession with declining consumer spend is having a dampening effect on the development of smaller Irish companies who need to gain a firm base in Ireland before they can expand internationally. Nonetheless, Carey remains optimistic. “There are things that can be done. Co-opitition between smaller and larger enterprises is one approach. Take the way that Cashel Blue is working together with Kerrygold at the moment in a joint branding initiative. That’s a good example of the type of kind of initiative that we need.” It’s also going to be part of the thinking at The Company of Food. Finding businesses that can share experiences and can work together for mutual benefit will be part of the mix, a philosophy Carey is more than happy to live by as well as to preach. ■
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SECTORS
Fast forward to growth The search for growth in socalled emerging markets is no longer a matter of choice. It’s an accepted fact that our economic recovery will be export-led and so, for Ireland, it’s a necessity, writes TIM CODY of Accenture.
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rrespective of when and how our traditional markets regain momentum in their domestic economies, the global map of demand is being redrawn. Nearly 60 percent of the global increase in household income between 2010 and 2020 will take place in emerging economies. The downturn has not initiated this shift, but has likely accelerated it. Leaders of companies recognize the need to target high growth markets to secure their future. But there is evidence that many multinationals and, we can assume, Irish organisations do not currently believe their companies have the necessary capabilities today to trade into, and to compete in, these economies.
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According to the Irish Exporters Association, Irish exports to the fast growing emerging BRIC markets ( Brazil, Russia , India , China) account for less than 4 percent of total Irish exports of goods and services and grew by less than 5 percent in 2011, whereas the EU27 member states managed to increase their exports to these markets by 22.5 percent. Thankfully, one sector is bucking this trend. On the back of strong exports, the agrifoods sector is looking to expand into emerging economies to drive growth. Recently, the Irish Dairy Board announced it had raised €350 million in loans to embark on exportled expansion into the emerging markets of Russia, China and South East Asia. The Irish Dairy Board has been recording strong growth, at least in part due to increased sales from overseas, and this latest venture indicates its strategic intention to do business with the populous nations of BRIC and beyond. Other sectors should look to agrifood as a guide because, if current trends continue, the volume of exports between emerging markets will surpass that between developed economies for the first time by the end of 2013. It is therefore no surprise that in a global survey of nearly 600 senior executives in 85 countries carried out by Accenture, 80 percent confirm that their company’s primary focus for growth is on emerging economies. Despite this, 40 percent of executives say they lack a strategy or the operational capabilities to take advantage of opportunities in these markets and 57 percent believe their company will have to “reassess” or “fundamentally rethink” the approaches and capabilities they need to compete in them. Contrary to conventional wisdom, new evidence indicates that executives from emerging and mature market companies share the same fear. So why is it that these views barely differ between executives in Dubai, Dusseldorf or Dublin? The answer lies in the complexity and diversity of the opportunities that are emerging. These are challenging companies to develop entirely new skills in order to help secure success in fast developing markets.
The rules of the game are changing for everyone. Our analysis suggests that emerging markets will generate an additional €6.5 trillion of household income between 2010 and 2020. To take a slice of this pie, however, businesses will have to be far more proactive and precise in identifying and targeting opportunities. Turkey, for example, may see one of the greatest absolute increases in income for households earning at least €38,000 of any emerging
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strengths, including sophisticated supply chains. Many of these companies have become leaner and more competitive in response to the downturn. And there is a new breed of emerging market multinationals, expanding from a strong local base, combining scale with low cost capabilities and often benefitting from state support.
Moving beyond conventional market segments
economy in the decade to 2020. That segment of the population will enjoy an increase in total income of €290 billion, a rise of 150 percent from 2010. Our analysis suggest that Kazakhstan will have 770,000 households at this income level by 2020, more than Indonesia, Vietnam, Pakistan and Egypt put together. And as great as China’s size and growth rate are, 21 other emerging economies – including Poland, Colombia, Malaysia, Nigeria and Kazakhstan – had a greater number of households with an annual income above €38,000 in 2010. Brazil, Russia, India and China are important, but companies should look beyond convenient groupings and labels and seek out markets in other, perhaps surprising, places. Despite this multitude of opportunity, many companies are holding back, waiting for the global economic picture to clear. Some are building up large reserves of cash that could be used for expansion. American nonfinancial companies, for example, had cash reserves exceeding €1.5 trillion in June 2011. Hesitation, however, is likely to be the worst option of all. Windows of opportunity are getting narrower as other more nimble competitors make headway. The successful market players include well-entrenched domestic firms, benefiting from local knowledge and relationships. But there are also mature market players exploiting their global brands, scale and operational
Given this landscape of changing consumers and competitors, the first step companies should take is to improve their ability to size and prioritize markets. That demands the use of sophisticated statistical tools to undertake consumption forecasts. For example, analysis of projected demand for specific products and services in multiple target locations can help determine which groupings to target and when. Companies will also have to invest in analytics skills and solutions to maximize the value of existing proprietary customer data where market data is scarce. The emergence of powerful mobile and social media tools will help them in this task, improving the collection of reliable local data and insights direct from consumers.
Other sectors should look to agrifood as a guide because, if current trends continue, the volume of exports between emerging markets will surpass that between developed economies for the first time by the end of 2013. Successful companies are also beginning to define markets in unconventional ways. Instead of looking at countries with a common language, for example, they identify groups of consumers in particular cities or customer segments that may straddle national borders. For example, Proctor and Gamble identified the needs of male consumers in areas with scarce water supplies and designed male grooming products for this customer group in multiple markets. Within three months of launch, one shaving product became the best selling of its kind on India. Grupo Elektra, the Mexican retailer, collected financial data from its customers to extend into financial services, building a large network of bank branches to complement its retail chain. And Coca Cola in Brazil has used social media to understand consumer preferences and has developed a successful local network to supply traditional Coca Cola products, as well as more localized fruit juices. It’s clear that the shift in economic power to high-growth emerging markets does not signal an end to the success of Irish companies; in fact, it signals a pathway to growth. And, as our survey demonstrates, executives in emerging markets share the same fears over their competitive capabilities as their counterparts elsewhere. The uncertainty of the current economic climate may cause some to hesitate. But by applying more precise and unconventional approaches to identifying markets, Irish companies will be better placed to secure early footholds and seize sizeable opportunities in a diverse range of high-growth markets. The speed of change is great. That’s no reason to wait. It’s the reason to act urgently. ■
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SECTORS
Game On With revenues that often outstrip even the most successful movies, the games industry has become a cutting-edge area that's packed with potential for Irish firms. ADAM MAGUIRE reports
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hile there were many factors that made Hollywood the base of the US - and global - film industry, its primary selling point was location.
W
The town's south-western locale made its weather attractive and predictable, which was an obvious draw when time spent filming directly related to money invested. It was also relatively close to a wide variety of scenic locations, which helped keep transportation and set-design costs down. Perhaps most importantly, however, was the fact that it was far about as far away from the reach of Thomas Edison's lawyers as you could get without leaving the US. This was critical for any filmmaker who wanted to avoid the onerous terms Edison had put on the use of his patents, which were crucial to the movie-making process.
Healy (left): "You’re trying to conceptualise your idea from your own drive and imagination. All of a sudden they stand someone in front of you who is coming from the world of Angry Birds and you just see how it’s done." While patent evasion is not a driving factor for today's gaming industry, which can draw many other parallels with its celluloid-based cousin, location has still proven to be just as important. According to Maeve McConnon, Content Manager for the IDA in the areas of internet, gaming and social, this has created an opportunity for Ireland which the agency is keen to exploit. "It was a target area that we identified about five years ago," she said. "We are all the time looking at new areas and we saw the growth projections were huge as it's the fastest growing industry in the entertainment space.
In some cases development has also made its way onto Irish shores - for example a recent release of PopCap's popular Bejewelled game was made in its Dublin studio. However the country is still some way from competing in development terms with places like Montreal or even London. According to McConnon, convincing big production houses to use Ireland for development - in addition to everything else - is a long-term aim. However efforts are already underway to ramp up development from the indigenous sector.
"We also saw a shift towards digital distribution, that companies would need to closer to the consumer, and the games as a service model that has evolved where companies are looking at seamless transfer for games from one device to another... that model suits Ireland very well."
In February industry group The Interactive Games Association of Ireland held its first Games Industry Gathering, which aims to be a networking and information event covering all aspects of the sector.
From that point of view, said McConnon, the IDA has been busy selling Ireland to games companies in the same way it has to other technology players in the past.
Enterprise Ireland has also put a focus on the games sector in recent years and has developed a number of programmes to help small companies grow their ideas into something real.
Ireland is in a good location for American companies looking to reach into, and beyond, the lucrative European market. It also has an educated, English-speaking population.
Fantom is one such company to benefit from this support.
Perhaps most importantly, however, it offers proximity to important technology players like Google and, more recently, Facebook; a major selling point for the types of companies that use these platforms to sell their games. "It's still a relatively small industry but there are many related industries outside of that like animation, film, internet, elearning and they all start meshing together and linking into each other," says McConnon. Over the past five years the IDA has targeted American companies and encouraged them to base various types of operations in Ireland; be they back-office, support, analytics or localisation. Its hit rate so far has been commendable. Today companies like PopCap, Zynga, Activision/Blizzard and Big Fish Games have all claimed a space on the island.
A graduate of the DCU Ryan Academy's Propeller Venture Accelerator Fund, Fantom takes a digital spin on the traditional concept of kids' trading cards. Users can collect and trade digital cards across a range of brands, building up virtual currency as they go with a view to completing sets in their favourite areas. According to Fantom's CEO Paul Healy, Enterprise Ireland has helped them to take their project from inception to the market in a number of ways. "They've been great in terms of helping through their competitive startup, which is where they are investing in games companies," he said. Healy says their Internet Growth Acceleration Programme (iGAP) has also been a significant help to them. This is aimed at improving the managerial competency of start-up companies in the sector and features a range of talks from experienced industry players.
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“You’re trying to conceptualise your idea from your own drive and imagination,” he said. “All of a sudden they stand someone in front of you who is coming from the world of Angry Birds and you just see how it’s done.” He said the atmosphere alone at these sessions shows him just how much passion there is within the indigenous games industry, with hundreds regularly attending to get advice and guidance. Despite his enthusiasm Healy says there is one factor that could stunt the growth of the games industry here, whether it is led by multinationals or local start-ups.
He said there was a 'doughnut' effect in the games industry here at the moment, with many small players and many bigger players on the scene but nothing in the middle. Efforts by the likes of Enterprise Ireland as being key in changing that, he said, as they will push local entrants up the food-chain into the middle of the market. For Fantom, that push is taking place in earnest. The product has now officially launched and it is signing important licencing deals on a regular basis. The next step is to turn the idea into that elusive notion - a hit.
"A big problem I find is people; it's very hard to get people because of how successful the sector has been," he says "Talent gravitates towards the Googles, eBays, Facebooks, PayPals and so on, so getting good programmers is difficult." He said small companies cannot compete with what the big players have to offer, even when it comes to the security of the job on offer. McConnon agrees that this will be an issue that needs to be addressed, particularly in the context of the Government's aim to double employment there to 5,0000 in the next few years. "The industry is quite dependent on a number of key creatives and you need to incentivise those to come here," she said. "We streamline a lot of visas for companies, fast-track the process and new incentive packages are coming on stream with a view to bringing entrepreneurs over here." There is also a growing base of local talent, she said, though getting experience over was also critical in the early days at least. "The games industry even globally is quite small, a lot of people know each other and move around, so there's a lot of that type of movement within the industry," she said. This challenge aside, Healy is confident that Ireland could become a serious player in the games market, not least because of the maturing view of technology amongst backers. "I can definitely see that the entrepreneurial attitude has matured, the investment community and the entrepreneurs are looking at sustainable companies and not burger flipping their business," he said. " The dotcom phenomenon was about trying to cash-out in three years, there’s a definitely desire in the community to build sustainable business."
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"For us it’s about becoming a serious business, the gap between the idea and a product is a big one and the gap between being a product and a business is even bigger," he says. ■
Gaming by numbers ●
The games industry generated an estimated $65bn in revenue in 2011, compared to $103bn in 2004.
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The industry's biggest selling game ever - Call of Duty: Modern Warfare 3 - grossed $400m in its first day of sales when it launched in November 2011.
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The Nintendo Wii is the best selling console of the current generation, with 95m units sold. ●
The best selling games console ever is the Sony PlayStation 2, which has shipped 154m units since it launched in 2000. The Nintendo DS comes a close second with 151m. ●
With over 700,000 units sold here, Ireland was the second biggest per capita buyer of Sony's PlayStation 2. The machine's native Japan was the only one to out-do this country. ●
Games consoles account for just 40% of all gaming, according to the CEO of development powerhouse EA. PCs take a sizable share too, however John Riccitello reckons it is the iPad that is the fastest growing gaming platform out there. ●
Across all of its consoles, home and handheld, Nintendo has sold around 240.5m Super Mario games worldwide.
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SECTORS
The medical technology industry, in which Ireland already has a significant base, represents a huge growth market for us, says DAVID DUFFY
MedTech A great opportunity for Ireland I
reland is already a recognised cluster in the global MedTech Industry and has the opportunity to become a more significant cluster or indeed a Go To destination for the industry. Despite significant advances in recent years it has work to do to exploit this opportunity. Globally, the medical technology industry is estimated at €280bn - €300b. Some forecasters have indicated that the sector will show growth of 10% over the next 5-6 years. This growth will be essentially driven by an aging population in need of treatment for chronic diseases and the increase in the income level in developed and developing economies. MedTech accounts for 4.2% of total healthcare expenditure in Europe.
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MedTech products are non-metabolic products, instruments, devices or diagnostic equipment which helps to prevent diseases and/or improve quality of life. Europe is a significant player in the world MedTech Industry with over €95 billion sales in 2009 which is about 30% of global sales. It also invests about €7.5 bn annually in R&D (8% of sales). It employs over 500,000 people in 22,500 MedTech companies of which 80% are SMEs. Germany is the third largest medical technology products producer and medical services provider in the world. In terms of new patent registrations, German manufacturers currently lie second behind the
USA, making Germany Europe’s strongest location for innovation in this industry. German medical technology producers achieve roughly a third of their turnover with products that are less than three years old. The German medical technology industry is a high-tech sector with high levels of innovation and a strong export orientation that is characterised by small and medium sized companies. Its success has been built on its long tradition of precision engineering skills and research capability. A unique characteristic of German medical technology is the “Mittelstand” (medium-sized) company oriented structure which makes it possible to react in a flexible way, cover a multitude of themes and provide niche products for specialist application. Close cooperation between Germany’s R&D institutes and equipment manufacturers, not to mention a plethora of in-house R&D facilities, helps maintain an internationally unparalleled competitive edge which is reflected in its product development and patent output. Germany has over 1,200 companies (each with more than 20 employees) active in the MedTech sector which invest around 9% of their turnover in R&D. Around 15% of all employees in this industry work in R&D.
With 2.8%, Ireland has one of the lowest expenditures per capita on Medical Technology as a percentage of GDP, compared to a European average of 4.6% which presents a great opportunity for MedTech firms to sell more into the Irish Healthcare system.
The German medical technology sector is largely made up of small and medium-sized enterprises (SMEs). Ninety-seven percent of all medical technology firms in Germany employ less than 500 employees and 15% of all employees work in businesses with less than 50 employees. With an average of 78 employees per company, the medical technology industry is typically more small and medium-scaled than German industry by and large - with an average employee number of around 130. Berne in Switzerland is another recognised MedTech cluster in Europe. Its success is based on the long tradition of the watch and clock making in the canton of Berne which has advanced the know-how in precision manufacturing and is an important advantage for the medical technology sector. It has 320 medical technology companies employing approximately 7,000 people of which 190 of which are manufacturers and suppliers. It has sales of €3.3bn of which 70% is exported. The success of this cluster, although smaller than Ireland in terms of sales is also assisted by the support of the University of Berne with Masters and PhD in Biomedical Sciences and in Biomedical Engineering. Berne University of Applied Sciences encompasses both the Bachelor and Master degree levels as well as on the job further training and provides: Bachelor of Microtechnology, specialising in medical technology: Diploma of Advanced Studies Medical Technology Management and a Masters of Advanced Studies in Medical Technology Management.
Irish MedTech sector in good health There are currently over 250 medical technology companies in Ireland, exporting €7.2bn worth of product annually and employing 25,000 people – the highest number of people working in the industry in any country in Europe, per head of population. 50% of the MedTech firms are indigenous which provides some shelter against potential relocations by the MNCs.
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According to IMSTA, improved market access will be needed to realise this potential and could simplify the pathway by which new technologies pass from development into wider use. Benchmarking and developing ways to monitor uptake will also be important. The Irish MedTech sector is in good health indicated by the fact that exports of medical devices and pharmaceutical products have grown by 7.26% and 14.43% over the period 2009 – 20101 respectively according to the CSO. Exports of medical devices and diagnostics products now represent close to 10% of Ireland’s total exports and growth prospects for the industry globally are good.
partners, including research institutions, clinicians, manufacturing and marketing/distribution companies and government agencies. The MedTech industry is the home of technological disruptive innovations or “enablers”–much needed solutions for healthcare challenges.
Key challenges for Ireland While Ireland has many advantages to support the growth of the MedTech sector such as a favourable regulatory environment, a sector that operate to the highest international quality standards e.g. European, US and Japanese and a competitive corporation tax rate of 12.5%, it has some challenges to address in its ability to develop and grow further. These include: Skills shortages – the Irish Medical Device Industry recently carried out a survey of its member companies to identify current skills shortages. These skills shortages included: ●
Engineering including design, process, control, mechanical, quality, automation, chemical processing and manufacturing.
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Applied statisticians and toolmakers
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Quality and regulatory professionals, including Analysts and Quality technicians
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Sales and marketing is also vital to the sector and companies are currently facing shortages in this area
Greater research collaboration required - There is a relatively low overall level of engagement by clinicians in research. In addition the level of collaboration between the industry and the research community is low but improving. This stands as a challenge for the future of medical devices research in Ireland as significant medical device innovations frequently emerge informally from the application of engineering principles to clinician insights. Commercialisation – Ireland’s record in this area falls far behind competing clusters due to a lack of experience in universities and hospitals. Clinical trialling and medical device evaluation are in early stage development in Ireland and national co-ordination could be facilitated by the creation of centres of excellence and/or competence for MedTech which would facilitate commercialisation and strengthen the bonds between academia, clinicians, government and industry. Rising Costs - The MedTech sector owes much of its growth to overseas investment. However, this record of growth is now being challenged by rising costs, unfavourable exchange rates, and the improving manufacturing capabilities of competing low cost economies. A recent IBEC Business Sentiment Survey found that 42% of medical technology companies planned to hire new employees by the end of 2011. Over the course of 2011, Irish-based medical technology companies announced investments of a combined €170m, leading to the creation of 875 jobs, which will come on stream in the coming years. Many of the world’s top medical technology companies have invested significantly in Ireland and a number of exciting, research-based, indigenous companies are emerging and competing internationally. The medical technology industry in Ireland is changing from being prominently manufacturing to being more complex and driven by R&D. It now involves intensive collaboration between a broad range of
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Education – while good progress has been made on this front the educational sector needs to do more to support in the provision of relevant undergraduate and post graduate programmes. Ireland can become a significant player in the MedTech sector if it can address the challenges above. ■
• David W Duffy is a director of Prospectus Strategy Consultants and leads their MedTech practice dduffy@prospectus.ie
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SURVEY
Putting a value on Human Capital DENIS MCCARTHY, Director of the Chartered Institute of Management Accountants (CIMA) Ireland, reviews the findings of a major survey of attitudes amongst global business leaders that found that human capital issues rivalled financial drivers as key business priorities. ouglas Flint, chairman of HSBC and one of CIMA’s most prominent members, recently summed up the current business environment with the comment, “I don’t think we’ve ever been in a period of our lifetimes where things have been more uncertain.” With this focus in mind, CIMA and the American Institute of Certified Public Accountants decided to ask business leaders around the world how they view the current global challenges and what their priorities will be over the next few years.
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Almost 300 business leaders from over 20 countries were surveyed. This was followed up by 17 in-depth interviews with CEOs, chairpeople and other business leaders who, between them, are responsible for over 2 million jobs and market capitalisation of $1trillion. So what did we find? Unsurprisingly, when asked what the focus for growth is over the next 18 - 24 months, our business leaders saw the financials as key. There is no doubt that reducing costs is still a priority. But at the same time there has been a clear shift in focus. Central to our findings was the fact that the human dimension of the business (such as customer and supplier relationships, talent development, intellectual capital ) is a core focus. Importantly, our business leaders rated this human dimension as being equal in
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significance to financial drivers when it comes to their key actions for growth see diagram 1). The majority (68%) of those surveyed acknowledged that most of their organisational value is non financial. They see people’s ideas, skills, knowledge and relationships as more important than traditional, financial sources of value. Our conclusion was that the need to measure and manage the human dimension has never been more critical - and we need the right people with the right skills to do this. The will is there. A total of 75% of our business leaders said they want to put more emphasis on measuring and utilising the non-financial value of their organisations. But for businesses to capture their non-financial value, they need to have professionals who have the ability to measure and manage it. Separate research by intellectual capital equity firm, Ocean Tomo, shows that in 1975 a total of 83% of the market capitalisation of companies in Standard & Poor’s 500 index was accounted for by tangible assets. By 2009, the figure was just 19%. So why are firms still placing so much emphasis on financial value? For too long there has been a fixation on short-term financials, short-
Diagram 1: Key actions for growth over the next 18 – 24 months term reporting and short-term gains. What we really need to see is a focus on long-term goals, long-term planning and long-term results. So what are the obstacles?
can also help to overcome the current over-focus on financial reporting and put in place better ways of measuring the non-financial value of a company.
The majority of our business leaders (69%) felt that the financial markets are holding businesses to ransom as many investors show little or no interest in the longer term. This sentiment was felt even more strongly in South East Asia and Asia Pacific than in the UK and US. This surprised us, as short-termism is more commonly associated with Western markets.
Our CEO research highlighted another crucial factor - transparency. We live in a world where businesses must live with unprecedented transparency and where anything they do, or write, may become public. But global business leaders must learn to understand and harness the power of transparency. Our results indicate that there is a virtuous circle: companies that embrace transparency as a core value find that it becomes a key driver of success and a source of major competitive advantage. But we also found that almost the same number struggle to find the right balance. So this is a major challenge in itself.
There are other problems too. Many respondents (67%) said current reporting tools are skewed in favour of financial reporting , 76% said the current reporting system promotes excessive focus on financials and 28% felt that there are also challenges from existing and new regulations. So, what is the solution? Firstly, integrated reporting has an essential role to play. Integrated reporting shows the links between an organisation’s strategy, governance and financial performance and the social, environmental and economic context within which it operates. This is an initiative that is being led by the International Integrated Reporting Council, an organisation that the AICPA and CIMA work closely with. By reinforcing the diverse connections, integrated reporting can help businesses to make better decisions and enable investors and other stakeholders to understand how an organisation is really performing. It
36%
33%
In conclusion, our report put out a clear message that there is a great need to pull all these different issues together. We believe that longterm, sustainable business success will depend on strong, cohesive teams that collaborate effectively. Our CEO survey found that there are three key areas for development in the C-suite: marketing expertise, performance management and technological expertise. In addition, our in-depth interviews with 17 business leaders told us they want professionals who have: ●
Strong technical skills;
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The ability to build multidisciplinary expertise and collaborate effectively with their colleagues;
35%
32%
28%
7%
Diagram 2: Obstacles to measuring non-financial value
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Diagram 3: The virtuous circle of transparency ●
Skills in the human dimension such as communication, team-working, decision-making, negotiation and leadership
and ●
A good strategic understanding of the whole business
So who are CEOs turning to for help in measuring non-financial value? At the moment, it’s not their finance professionals. Perhaps because the reporting system promotes an excessive focus on financials, only 12% of global business leaders would go to their finance team for help. They are far more likely to go to the executive team. Although CEOs in South East Asia are more likely to turn to their finance teams (20%), they are still more inclined to go to investment analysts for help. As CEOs currently have to go to multiple sources to gather this vital information, It seems that there is an unmet need here. This demonstrates that measuring non-financial value isn’t part of the routine. It also means that business leaders need to find the right people to measure and grow that value. The CEOs in our survey were adamant that they need help in ‘connecting the dots’ to give a clear picture of how the organisation is running and where the opportunities are. All this points to the core strengths of management accountants - skilled people who can bridge the gap between business, strategy and finance and who understand how harness the value derived from a strong policy on transparency and ethics. In an environment where change is the only constant, management accountants have the agility and adaptability to guide and support
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critical business decisions and drive strong business performance. Moreover they can pin down and manage the metrics that are so essential if organisations are going to benefit from the value that can be derived from the human dimension. To update the old adage: what gets measured, gets valued. In a global business environment, it is essential that organizations employ financial professionals who can operate on a global scale. At the end of January, CIMA and the American Institute of Certified Public Accountants jointly launched a new designation: the Chartered Global Management Accountant (CGMA). This new designation is designed to ensure that management accountants are fully equipped to meet the challenges ahead both in terms of developing business sustainability and extracting value from the human dynamic on both a national and international platform. We believe we have created the right formula to best support the Irish business community. From our initial research, business leaders think we have got it right as well. In our CEO survey, 75% said they’d want their existing finance employees to obtain the CGMA designation. In South East Asia that number was even higher at 86%. When asked if they would place CGMA designation holders above other candidates when recruiting, 80% of the C-suite said that they would. Undoubtedly companies will become more accomplished at developing the benefits of the human dimension. But to obtain sustainable success in the long term it is important to lay down strong foundations now. I may be a little biased but it seems clear to me that companies that utilize the skills of CGMAs will gain a clear and sustained advantage over those who do not. ■
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China
in our hands The scope for increasing trade between Ireland and China is huge says WILLIAM LEUNG of solicitors Eversheds, an international law firm with offices in both countries. he recent visit of Chinese Vice President Xi Jinping to Ireland and the follow-up Irish Government led trade mission to China have focussed attention on the huge potential trade opportunities between the two countries.
T
One man who is well positioned to comment on this is William Leung. Leung is a solicitor in the Hong Kong practice of Eversheds, the only full service international law firm with offices in Ireland and in China. He already has a lot of experience project managing European clients’ dealings with their local partners. “We have good connections with Chinese companies in respect of both outward investment from China and sourcing local partners for Irish companies looking to set up operations in China,” Leung notes.
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He has a further distinct advantage in this respect, however. Leung’s family moved to Ireland when he was aged eight and his formative years were spent in Swords in north Dublin before he embarked on an international legal career. Most of his immediate family are still in Ireland and he returns here regularly. Leung sees Irish-Chinese business opportunities as very much a two-way street. China’s outward Foreign Direct Investment (FDI) amounted to $60 billion in 2010, of which Ireland accounted for around $150 million. Relative to our overall share of world FDI, this figure is low so there should be scope for a significant increase, he says.
CHINA
Rising middle classes “China’s class is expected to grow to 700m by 2020, and this combined with rising wages would make it the world’s largest consumer base, and one any Irish company cannot ignore. I think there are particular opportunities for agri-businesses and high end consumer food and drinks products as well as other luxury products. While the Chinese market is enormous, scale is not something Irish firms need to worry about. Firms should focus on the opportunities in high end niches, rather than attempting to service the broad market, he says. Exclusive designer fashion items, for example, represent another opportunity for Ireland.
“We have good connections with Chinese companies in terms of both outward investment from China and sourcing local partners for Irish companies looking to set up operations in China,” Leung explains. Even in advance of the trade mission, bi-lateral trade between the two countries had been steadily increasing. “There are further opportunities for Chinese companies to expand their operations by acquiring distributors and setting up direct operations,” he says.
China’s middle is class expected to grow to 700m by 2020, and this combined with rising wages would make it the world’s largest consumer base, and one any Irish company cannot ignore
From a legal perspective, there are a number of issues companies should be aware of and employing the services of a law firm that understands the issues from both a Chinese as well as European perspective is crucial, he advises. Companies also need to take account of labour law in China when sending their employees to China as well as the law and entitlement of Chinese workers that they may employ. Intellectual property and e-commerce related legislation, taxation, and product liability and food safety laws are among the many other issues companies need assistance with.
Hong Kong entry point Setting up an office on the ground in China is a much more expensive undertaking than it was just a few years ago. According to Leung, a good starting point for many firms is to incorporate in Hong Kong instead for risk management and availing themselves of the preferential treatments such as relaxation on restrictions on equity shareholding and registered capital requirement in their venture in PRC under a cross-border cooperation scheme unique to entities set up in Hong Kong. “When entering the Chinese market it’s vital to have an appropriate business vehicle at the outset to manage the risk element and depending on the nature of the business, to avail itself thereafter of the preferential treatment under the CEPA (Mainland and Hong Kong Closer Economic Partnership Arrangement) in starting business in the mainland. Many foreign investors will set up a Hong Kong corporate entity first then start their own business in China or have joint ventures with Chinese investment partners,” he explains. A further advantage of establishing an operation in Hong Kong is that the Hong Kong Stock Exchange is an increasingly attractive place for foreign companies looking to raise capital, he notes. Eversheds is the only full service international firm with offices in Ireland and in China with a presence on the ground in Hong Kong, Shanghai and shortly Beijing. The firm already has a lot of experience project managing European clients’ dealings with their local partners.
From a Chinese perspective, Ireland is a very attractive location in which to invest. “It’s a business friendly environment with a very low corporate tax rate of 12.5%. It was also very heavily affected by the financial crisis so there are a lot of investments available for good value, particularly in the real estate sector.” The recent wave of Chinese investment in UK real estate, especially in London, is a likely precursor for similar investment here, he predicts. There are a lot of cash-rich Chinese buyers looking for good long-term investment opportunities, he says.
Culture Cultural fit is also something important and one which can only enhance the on-going relationship between the two nations, Leung concludes. Indeed, during his visit to China, The Taoiseach commented on the many similarities between the two countries including the creation of a business culture centred on innovation along with a long history of cultural tradition. “In recent decades, both Ireland and China have moved rapidly toward a knowledge-based economy founded on innovation and technology. We both have innovative business and commercial development policies that are driven by cutting-edge information technology. Yet, we have each managed to successfully balance the importance of tradition and the challenges of modernisation,” Enda Kenny noted. ■
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FINANCE
Banking’s role in our recovery Banks will play a central part in Ireland’s recovery and have been adapting their services to meet the needs of high potential companies, says Irish Banking Federation CEO PAT FARRELL. If Ireland’s economy is a tale of two halves – a challenging domestic scene and a growing internationally focused sector – the same can perhaps be said for Ireland’s banking industry. The headlines have been dominated by news of crippling bank losses and redundancies for some time now. However, according to Pat Farrell, CEO of the Irish Banking Federation (IBF), there is another side to the banking story.
I
It’s one that involves banks getting to know more about different types of businesses – ones where the assets are not usually denominated in bricks and mortar. The consequences of the bias of Ireland’s banks towards assetbacked lending - principally property – have been well documented.
The message is that finance is available but banks will be more challenging as to whom they provide finance in the future. “The business of banking is to support businesses that have a viable future. To lend to those who do not is simply to deprive others who have viable businesses.” The recent Mazars SME Lending Study showed a reduced demand for credit – down to 36% from a previously-recorded 52%. When queried as to reasons why, this was deemed to be business related in 85% of cases with only 10% bank-related. Moreover, many SMEs were found to be undercapitalised and bank finance alone was not enough to address this deficit.
Companies involved in software development for example have a business model based on ‘future cashflow’ – the major costs in the business are generally incurred some time before revenues are generated.
Businesses should interact with their banks and be open and transparent about their needs, he says, as part of a process of building trust, adding that the notion that banks have no funds to lend is a myth, however. “The banks have more than enough capacity in terms of liquidity,” Farrell says. “In many cases people are simply not approaching their bank for funding because of the general noise about access to credit in Ireland. That’s a mistake. Our advice is that businesses should engage with their bank and make their credit case.”
“In the past, banks’ knowledge of IP-based business has not always been as matched by their knowledge of the more traditional sectors. The sector has made a concerted move to address this over the past two years,” he says. “The banks have worked closely with Enterprise Ireland to identify where there are funding gaps and what the nature of these gaps are. Executives from Enterprise Ireland have also been seconded into some of the main banks as part of a process of education and change.”
To facilitate this process, the banks have engaged with the main accountancy representative organisations here to draw up a standardised ‘Heads of Business Plan’ template. When finalised, this document will further assist both the SME customer and the bank in the credit application process. . The IBF and Chambers Ireland have collaborated on a new website, www.smallbusinessfinance.ie . This is an online portal of information on
As Farrell notes, many of the companies that will lead Ireland’s recovery are ones that are rich in Intellectual Property (IP) rather than physical assets. Understanding the financial dynamics of these companies, and being able to make appropriate lending decisions involves a different approach.
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Farrell: “Having a strong and supportive banking sector is a key part of the process of achieving growth and success in global markets.” business planning and financial information for small businesses of all backgrounds and at various stages of development. According to Farrell: “A common theme on the issue of small business access to bank credit is that many small businesses are not sufficiently up to speed in business planning and financial management; and that the banking sector and other professional advisers could do more to assist them in that regard. We see this new website as very much helping to bridge that information deficit. Banks and businesses need one another. A viable and vibrant small business sector is very much in our interests and we are committed to doing all we can to help make that happen.” The initiative has been very well received by Government, State agencies – national and local, and by the business sector generally. The banks are also working with Government to support the launch of a temporary, partial Loan Guarantee Scheme and a Microfinance Fund for small businesses which have the potential to address some current perceived barriers to credit.
Farrell is positive about the prospects for the Irish economy. Recent surveys indicate a growing level of confidence on the part of businesses in general and there are at least tentative signs of a pick-up activity in sectors such as the mortgage market, he notes. The most recent IBF/PwC Mortgage Market Profile quarterly data shows that 3,856 new mortgages to the value of €639 million were issued during the fourth quarter of 2011, bringing to 14,273 the total number of new mortgages issued in 2011. This had a total value of €2.5 billion. While the level of new lending in the fourth quarter of 2011 was down some 31% by volume on the previous year, it is up almost 7% on the preceding quarter. Moreover, this latest quarter increase represents the third consecutive quarter of growth and is the first time since 2005 that the number of new mortgages issued has increased in three successive quarters. In the export-focussed sector, the country is performing strongly in sectors such as ICT and pharmaceuticals. Banking has a key role here and, as Farrell notes, Irish banks have a long and successful track record in developing the strong base of multinational companies here by providing all the financial facilities that they need to grow their operations. This well-developed infrastructure and skillset will also be of benefit to indigenous high potential companies as they grow and expand their businesses into international markets. “Having a strong and supportive banking sector is a key part of the process of achieving growth and success in global markets and Irish banks are more than willing to play their part in making this happen,” he says. ■
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STRATEGY
What to Do When You Can’t Predict the Future The way we have been taught to solve problems was designed for a different world. To deal with uncertainty today, we need a different approach say Leonard A. SCHLESINGER, CHARLES F. KIEFER, and PAUL B. BROWN, authors of ‘Just Start: Take action, embrace uncertainty, and create the future’. OU’RE SMART, creative, and terrific at approaching challenges. So why does it seem that the number of things you can’t figure out is increasing? The problem may not be you. It could be the way you were taught to think. From infancy on, we’ve all learned prediction reasoning—a way of thinking based on the assumption that the future is going to be pretty much like the past.
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Demographics are one simple example of how prediction reasoning (what we refer to as Prediction) works. You can calculate with some confidence, the world population in 2050 because you know a lot of things. Studying all this data and much, much more, you can, as the United Nations did recently, say with reasonable certainty that in the year 2050, there will be 8.9 billion people on the planet. Armed with that data, you can also make a number of fairly accurate estimates, such as how many diapers will have to be produced and how many gallons of water those 8.9 billion people will drink each day, We have got really good at Prediction. To support this kind of thinking, we have developed great analytic tools (statistics, probability theory, computer simulations, and the like). These tools are logically sound and complete. Because it works so well in these kinds of situations—and countless others—we (like you) became accustomed to using Prediction all the time. But when the future is unknowable (Is quitting your job and starting something new a good idea? Will the prototype we are developing at work find a market?) you need a different approach. We are going to give you a proven method for navigating in an uncertain world, an approach that will complement the kind of reasoning we have all been taught. It will help you deal with high levels of uncertainty, no matter
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what kind of situation you face. We know it works because entrepreneurs— the people who have to deal with uncertainty every day—use it successfully all the time.
If it works for them . . . When people write about entrepreneurs, they invariably focus on their behavior: what Howard Schultz or Michael Dell did in building their companies. If you take that approach, you probably would conclude that every single entrepreneur is unique, so there is little to be learned from studying them; you would have to be Howard Schultz to start Starbucks and Michael Dell to start Dell. Enter our friend Saras D. Sarasvathy, professor at the University of Virginia’s Darden School of Business. Early in her work, she made a fascinating discovery, one that ran counter to the conventional wisdom. Sarasvathy studied serial entrepreneurs, people who have started two or more companies successfully. But instead of looking at the behavior of entrepreneurs—which is indeed unique—Sarasvathy focused on how they think. There she found amazing similarities in how they reasoned, approached obstacles, and took advantage of opportunities. Yes, of course, there were variations. But the basic approach, as she understood it, was always the same. In the face of an unknown future, entrepreneurs act. More specifically, they: 1.
Take a small, smart step forward;
2.
Pause to see what they learned by doing so; and
3.
Build that learning into what they do next.
This process of act, learn, build, as we came to think about it, repeats until
entrepreneurs are happy with the result, or they decide that they don’t want to (or can’t afford to) continue.
What’s a Smart Step? In our description of how Creaction works, we said that you take “smart steps” toward what you want, toward what you desire. So, what’s a smart step? It is the action you take based on the resources you have at hand and never involves more than you can afford to lose, that is, your acceptable loss. It can involve bringing other people along, although initially it does not have to.Having taken the step, you pause to reflect on what you havelearned. From there, you take another smart step or quit if your desirehas waned (or you have discovered something else that you want more) or if you have exceeded your acceptable loss. You repeat this process until: 1. You succeed. Or 2. You no longer want to continue. (You changed your mind; something else is more appealing.) Or 3. You exceed your acceptable loss. Or 4. You prove to yourself it can’t be done. We found that the entrepreneurial logic works in business and potentially elsewhere. You can use this way of thinking to complement the kind of reasoning you have already been taught—an additional way of thinking that can help you deal with high levels of uncertainty no matter what kind of situation you face.
What are we are talking about? What exactly is Creaction? Well, to start, it is based on acting and creating evidence, as contrasted with thinking and analysis. Here’s one way to think about that pivotal difference. A dancer dances. Substituting thinking for dancing doesn’t work. If all you do is think, you end up just thinking about dancing. There is nothing to show for that thought. Thinking is often a part of creating, but without action, nothing is created. This is true for even very intellectual, cerebral fields. For a task to be considered creating, you must publish, teach, or whatever. Daydreaming by itself is not creating.
1. Desire. Find or think of something you want. You don’t need a lot of passion; you only need sufficient desire to get started. (“I really want to start a restaurant, but I haven’t a clue if I will ever be able to open one.”)
How does Creaction play out in practice? How does it help us deal with uncertainty? The process has three parts, which repeat until you have reached your goal or decide you no longer want to. (See figure 1-1.)
2. Take a smart step as quickly as you can. As you will see, a smart step has its own three-part logic as well. • Act quickly with the means at hand—i.e. what you know, who you know, and anything else that’s available. (“I know a great chef, and if I beg all my family and friends to back me, I might have enough money to open a place.”) • Stay within your acceptable loss. Make sure the cost of that smart step (in terms of time, money, reputation, and so on) is never more than you are willing to lose should things not work out. • Bring others along to acquire more resources; spread the risk, and confirm the quality of your idea. 3. Build on what you have learned from taking that step. Every time you act, reality changes. If you pay attention, you learn something from taking a smart step.
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“Researchers found that successful entrepreneurs used a common logic that allows them to deal with situations in which the future is unpredictable. What works for them will work for you.” In other words, when facing the unknown, act your way into the future that you desire; don’t think your way into it. Thinking does not change reality, nor does it necessarily lead to any learning. You can think all day about starting that restaurant, but thinking alone is not going to get you any closer to having one.
When the Future Is Unpredictable Action, the cornerstone of Creaction, does indeed trump everything when the future can’t be known with much certainty. That simple statement makes sense, of course. If you are heading into an unknown frontier—and starting a new journey of any sort usually qualifies— the only way to really discover what is out there is to go and find out. “Are there potential customers?” “Is the market big enough?” “Will the community like the civic venture I helped create?” Take a small, smart step and find out. Thinking and creating endless “what if” scenarios doesn’t help you. You can “what if” yourself to death. The only way to know for sure is to act, reflect on what you have learned, and act some more to gain more learning. But before you do, double-check to see that the future is as uncertain as you think; that there is, indeed, no way to predict what will happen. If there is a more than reasonable chance that the future is knowable, you are often better off letting Prediction dominate, and that is a good thing. Our point is simple: when the results of thinking would lead to actions that are predictable (“I wonder how many high-end sports cars I could sell in a year during an economic slump”), let predictive thinking dominate, supplementing it with Creaction as necessary. You can expect Prediction to give you a solid result, that is, you know the uncooked egg will crack when it hits the floor, and you can come up with numbers that will project fairly accurately how many specific types of cars you are likely to sell in a given period. But in the face of unknowability— what is the market for motorized skateboards with training wheels or for a four-wheel Segway, things that don’t yet exist—you can’t do a lot of learning in advance. In this case, the fastest, easiest, most effective (and often only) way to get that learning is by acting.
Here are thirteen reasons why: 1. If you act, you will find out what works 2. and what doesn’t. 3. If you never act, you will never know what is possible and what is not. You may think you know, but you won’t be able to point to anything concrete to prove you are right. The problem with that, as Mark Twain famously pointed out, is clear: “It ain’t so much the things we don’t know that get us into trouble. It’s the things we know that just ain’t so.” 4. If you act, you will find out if you like it . . . with “it” being whatever the new action is 5. or you don’t. 6. Acting leads to a market reaction, which could point you in another
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direction. You thought you were going to open the world’s best Italian restaurant. Taking a small step toward that goal, you began hosting large dinner parties and cooking for the monthly meeting of the Elks club to try out your recipes and discover firsthand what the food service business is like. People raved about your food, but were surprised when you didn’t want to talk to them. You, in turn, were left cold by the experience. You hated interacting with people; the idea of doing all the logistics necessary (finding a place, dealing with the constant turnover of waitstaff, etc.) made you break out in a cold sweat, and you really didn’t want to prepare more than three kinds of entrées at a time. It turns out you learned that you liked the cooking part of running a restaurant but weren’t crazy about all the rest. Your action, the decision to take steps toward starting a restaurant caused a market reaction. People loved the food but found you to be a cold fish; you loved the cooking but could do without everything else. Your action has convinced you to go into highend catering and hire someone to deal with the clients. 7. As you act, you can find people to come along with you. For example, in talking to your suppliers, you ended up meeting the world’s most organized person. She now runs the day-to-day operations of your catering business and is a 10 percent owner. 8. As you act, you can find ways to do things faster, cheaper, better. You discover, after making your world-famous chicken parmesan fifty times, that you can prepare the dish in eight steps instead of eleven. 9. If you act, you won’t spend the rest of your life going, “I wonder what would have happened if” 10. If all you do is think, you may end up being less interesting as a person. Who would you rather sit next to on a plane, someone who started a successful rock-climbing store (or even an unsuccessful one), or someone who only thought about it? 11. If all you ever do is think about stuff, you can gain tons of theoretical knowledge, but none from the real world. You become like that woman in the fable who knows the price of everything but the value of nothing. In other words, if all you ever do is think . . . all you do is think. 12. Action always leads to evidence. You act, therefore something changes, and in observing that reaction, you gain knowledge. (“Hmm, if I drop an egg from shoulder height, it shatters.”) Thinking doesn’t lead to proof— or messy floors. As Scott Cook, the founder of Intuit, said when interviewed for a Harvard Business Review article: “Evidence is better than anyone’s intuition.” 13. If you act, you know what is real. You always want to know what’s real. For all these reasons and dozens more that you can come up with on your own, action trumps everything when the future is highly uncertain. ■ • Leonard A. Schlesinger is the twelfth president of Babson College, widely recognized as the world’s leading educational institution for entrepreneurship. He formerly served as vice chairman and chief operating officer of Limited Brands. Charles F. Kiefer is president of Innovation Associates and a regular advisor to global companies on leveraging the human side of their enterprises. Paul B. Brown is a longtime contributor to the New York Times and a former writer and editor for BusinessWeek, Financial World, Forbes, and Inc. Reprinted by permission of Harvard Business Review Press. Excerpted from Just Start: Take action, embrace uncertainty, and create the future. Copyright 2012 Harvard Business School Publishing Corporation. All rights reserved.
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FEATURE
One step closer to the mobile wallet O2’s Money Card has proved a hit with consumers since its introduction last year. It forms part of a wider move to mobile wallet services which are likely to come on stream here within the next year, with huge potential benefits for consumers and businesses as Telefónica Ireland’s EUGENE MITCHELL explains. quiet revolution is underway in the area of consumer payments. While a cashless society has been boldly predicted for decades, over the next couple of years many analysts are predicting that mobile phones will take over from plastic cards as a means of paying for goods and services. Our mobiles will, within the space of a few years, hold virtual versions of our debit and credit cards. One company that is at the forefront of this transformation is Telefónica Ireland, which operates the O2 brand here. O2’s introduction of a prepay money card in February 2011 marked the first step for the company in a process of convergence between the phone and the wallet.
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The O2 Money card was very much a product of its time. It’s a pre-loaded payments card that consumers can put money on, much like topping up a prepay phone. The amounts are typically larger than a phone card, with top-ups averaging €100. Consumers can then use the card to purchase a wide variety of goods and services, wherever Visa is accepted – at home and abroad. They can also transfer their money in real time to other O2 Money card users by phone. A number of factors have combined to make the card popular. These include a desire on the part of consumers to control expenditure, the capacity to instantly transfer money to others – and a feeling of security associated with having a pre-determined amount of money on the card. Another very practical advantage is that it overcomes the difficulty some
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consumers currently have with non-acceptance of Irish debit cards by some international online stores. In its first 12 months on the market, over 100,000 of the cards were sold and over 1.2 million transactions were made. According to Visa Europe, the O2 Money card is, to date, one of their most successful prepaid card launches per capita. The O2 Money card also won the Best Prepaid Card Marketing Campaign of the Year at the 2012 Card & Payments Awards for UK and Ireland. “The card gives people total control over their spending and this has been one of the reasons that it has been so successful,” explains Eugene Mitchell, Director of New Business at Telefónica Ireland. “While most customers are using their card to make online purchases, we are also seeing the card being used in stores at home and abroad. Thousands of customers are also using O2 Money to send funds instantly to other cardholders, and this feature, which really demonstrates one of the potentials of mobile commerce, is very popular,” he added. Some 80% of transactions have been online purchases, with well-known music and book retailers, airlines, online gaming services and supermarkets accounting for the majority of activity. Offline, the majority of usage of the card is in supermarkets and convenience stores. While the card has proved popular with younger consumers, who find it handy for gaming and music downloads, for example, Mitchell says the
age profile of users is more mixed than might be expected. Close to half of the customers purchasing the cards are over 35, for example. Thousands of O2 Money customers are also making use of a feature that allows them to instantly transfer money to another card holder, either online or using a smartphone app, which is available for iPhone and Android devices. Many parents are using this function to transfer pocket money to teenagers or to help out sons and daughters at college when they are stuck for money. The app also makes it easy for customers to check their balance and track their spending whilst on the move. While a very useful product in itself, the card is a taste of what’s to come in the mobile commerce area. Mitchell says that the long heralded electronic wallet is set to become a reality in Ireland within the next 12 months. “We are undertaking a Near Field Communications (NFC) pilot in the coming months to see how it operates in practice. The idea is that your smartphone will have a digital wallet with stored value that can be used to purchase goods and services. Retailers are currently gearing up for this with the introduction of new near-field enabled terminals,” he explains. The NFC pilot will provide Telefónica Ireland with an opportunity to drive forward adoption and deployment of the new technology, and demonstrate the potential for mobile payments in Ireland, while gaining initial learnings in a controlled environment. There will be a detailed research programme associated with the pilot to gain insights into perceptions, attitudes and views on NFC technology in mobile phones
“Thousands of customers are using O2 Money to send funds instantly to other cardholders, which really demonstrates one of the potentials of mobile commerce.” and the mobile wallet, and to understand and learn from customers’ experiences. It’s a natural extension of business for a mobile phone operator that’s involved in the transaction business. For busy consumers contactless payments will speed up transaction times in store, cutting down queues. It will also facilitate retailer loyalty programmes, removing the need for issuing and carrying loyalty cards as transactions can all be recorded electronically. Consumers and retailers are set to benefit equally from the introduction of this new technology. And indeed many large retailer chains are already investing in contactless readers, which will pave the way for the use of mobile payments. Collaboration between the various players across the payments industry will be important to the success of NFC payments. And, as we inch towards a cashless society, it’s clear that mobile phones will have a key role to play. So you can expect to hear a lot more from Telefonica Ireland on this in the months and years to come. ■
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SECTORS
People, Place and Technology Deliver New World of Work MARTIN CULLEN of Microsoft Ireland outlines a vision for a happier, flexible and ultimately more productive workplace and describes how his own organisation has worked to achieve this goal. ver the past few years, Irish businesses have suffered due to the rapid contraction of the domestic economy. Economic conditions have also been unfavourable in many of our export markets, where we have faced increased competition, due to globalisation and the emergence of new exporting countries. Any economic recovery to date has been driven by gains in competitiveness, reflecting Irelandâ&#x20AC;&#x2122;s business-friendly environment, flexible labour market and skilled workforce. Nevertheless, the country has slipped four places in the global competitiveness table over the past two years, to 29th place. I believe that the New World of Work is a model of working which can create a significant competitive advantage for Irish companies in domestic and global markets and can be a key contributor in terms of bringing us back to a position of international leadership.
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In addition to macro-economic challenges, organisations need to address a knowledge gap created in organisations, caused by teams which are formed from internal and external resources and which subsequently disband, potentially with the loss of accumulated knowledge for the organisation.
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Organisations are also challenged by changing work-styles, which are driven by both push and pull factors. On the one hand, employees have to travel, in order to be close to customers and colleagues. Sometimes they are prevented from travelling to their workplace due personal commitments or even due to increasing severe weather events. In many situations, an organisations many employees need flexible work arrangements, so that they can manage their work-life balance. Finally organisations are challenged by the Consumerisation of IT, whereby employees are using personal IT devices for work. This boosts their productivity, but creates a challenge for IT departments, who need to provide reliable yet secure access to company data from anywhere, on any device. In the New World of Work, the first pillar of the response comes from people. Workers need to be flexible, which means focusing organisations around the needs of our customers and making it easier for employees to meet customer expectations. They need to be mobile, able to work from anywhere, whether in airports, hotels, client sites, or from home. Finally they need to be collaborative, able to bring their best skills to a
In 2004 Microsoft introduced the New World of Work initiative. Among the results to date are that half of employees now spend less time at their desks. Microsoft Collaborative Workspaces have resulted in 30% reduction in real estate and 40% improvement in work/life balance. Pictures here show the flexible workspace options available for employees at the company’s Sandyford offices. Employees have a choice of different environments, depending on the nature of the work they are doing at the time. Open comfortable spaces are designed for collaboration while partitioned, kiosk or closed spaces are available where concentrated quiet work needs to be done.
compete with smaller more nimble low cost companies. As IT tools move towards the cloud, the workplace will no longer be the heart of the enterprise and organisations will be more focused on their customers. The office of the future will become a collaborative workspace, which provides a task oriented work environment, to enhance cross-group collaboration, productivity and satisfaction.
work structure that is less hierarchical and more driven by the skills that each person brings to the table. Such a new work environment needs to be supported by simple yet powerful enabling tools. Rather than being based around desks with landlines, the New World of Work will be based around workers who are contactable by voice, e-mail, instant messenger or video-conferencing, from a smartphone, tablet, laptop, or the nearest available PC. One Forrestor study shows that such tools can pay for themselves in less than 13 months and provide a three-fold return on investment over a threeyear period. Cloud computing is also supporting the transition to the New World of Work. Applications and data in the cloud are hosted in secure data centres, which are available to workers from anywhere and on any device, in a secure and well-managed way. The pricing structure of cloud services means that software is no longer a major capital expense, but is rented on an as-needed basis. This gives small businesses the ability to take advantage of applications and tools that might have been prohibitively expensive in the past, while giving larger organisations the ability to
The collaborative workspace at Microsoft Ireland is optimised for the different phases of work and includes a quiet area for workers who need to concentrate on their work; a community area for meetings and interaction; and relaxation zones that encourage conversation and ad hoc meetings between employees. This work environment has already produced a dramatic improvement in employee’s work experience and productivity. The strategies and policies of the New World of Work will not be implemented overnight and successful implementation will require a change in management culture. Managers will have to change from being supervisors to being leaders, inspiring their teams to become totally engaged in their work goals. Most organisations will have to set goals and then move towards the New World of Work in achievable iterations. Ultimately this New World of Work is not about facilitating people to work from home. It’s about a fundamental restructuring of the way that we do business, allowing organisations to closely integrate with their customer’s business; and trusting and facilitating the employee to work towards optimal productivity. ■
Martin Cullen is Small, Medium and Partner Business Director, Microsoft Ireland
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EDUCATION
C o u nt i ng t h e b e n e f it s o f e xe rc i s e Exercise doesn’t just improve health, it also aids learning. Putting exercise centre stage in our school curriculum could yield economic benefits for Ireland, says PATRICIA MURPHY n sport, the difference between bringing home the gold and being left trailing at the back of the field is a combination of genetics, training, a burning desire and an unfaltering focus to be the best. The skills, the drills and constant repetition by the world’s elites is truly a remarkable dedication.
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The rest of us average citizens can be content with a trip to the gym, organised team sports or a jog in the park to give us our daily dose. Meanwhile we entrust much of our children’s physical activities to their schools, unless of course they are involved in clubs or associations in their spare time. The school curriculum includes a wide range of subjects both at junior and senior level to enhance a child’s physical, mental, social, emotion and spiritual development. This well rounded quality education (QE) recommends two hours per week of curricular exercise with the additional time being comprised of extracurricular sports and hobbies. Education drives the economy and vice versa. Research and common sense suggests that eating habits have an important influence on a child’s physical and mental learning and development but what about the benefits of exercise? A 2006 Government Publication ‘State of The Nation’s Children’ outlines key findings in relation to levels of activity among 10-17 year olds during a 2002 and 2006 survey. This Health Behaviour in School-Aged Children (HBSC) Study conducted by NUI Galway found that on average 55% of Irish children were active for at least 60 minutes four times per week, putting Ireland as a nation well above the International average of 37% and in fact at the top of the scale. The trend for the younger age groups of 10-11 year olds showed the biggest increase in the four year follow up by as much as 10%. Meanwhile our 15-17 year olds showed very little variance over the same time period which put them at a steady but disappointing level of activity at 30% less than the younger age groups. Recent suggestions by Professor Niall Moyna (DCU) to get our schools more active includes a recommendation that fitness become a modular subject like maths or
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English with credits attached. Idealistically these points can then be accumulated towards the race system for third level places. Of course this raises the questions about resources. It could be argued that some schools would have an advantage over others but that could be argued for any subject already on the curriculum. Professor Moyna believes that ‘if you reward students for their efforts they will be able to attain these goals’ in relation to reaching specific fitness targets.
testing in children >9 years and has been updated and extensively administered worldwide under the name Stanford-Binet. This testing uses: ● ● ● ● ●
Although these suggestions were being driven forward in response to the obesity epidemic that is sweeping across the globe and the considerable costs to the health care systems, the additional benefits to the smart economy merit some further clarification. Educational kinesiology recognises the interaction between muscles, posture and movement in relation to brain development. The studies by Paul Dennison as early as 1969 were testing and developing this association
Fluid reasoning Knowledge Quantitative reasoning Visual Spatial processing Working memory
Research conducted in both schools and workplaces to measure cognitive function demonstrates that exercise and nutrition have an important role to play in an individual’s fitness for purpose; physically and mentally. To assess the long term affects of self reported physical activity the UK based Whitehall II test recruited 10,308 adult civil servants aged 35-55 years and followed their progress over an eleven year period in four phases. The study, published in 2005, showed that the high activity groups maintained higher mean scores particularly in semantic (verbal) fluency. The overall difference between the highest and lowest group increased from an initial 2.4% difference to a staggering 6.45% at conclusion of the study, demonstrating that low levels of physical activity over a lifetime are a risk factor of cognitive functioning in middle ages. Meanwhile back in the classroom the relationship between scheduled moderate and vigorous exercise against academic performance was tested in 214 school children of average age 11.5 years . Students were assessed on individual grades for maths, science, English and world studies. The kids who exercised at vigorous levels on average of nineteen minutes of the fifty five minute session achieved higher grade scores than both the moderate and not activity groups. It was also noted though that none of the student’s academic scores decreased as a result of losing fifty five minutes of daily academic classroom time.
years before neuroscience was able to provide us with details of how it all works. A typical cardio vascular workout like jogging can be broken down in to the following simple steps: Rise in heart rate, breathing and circulation Muscles contract pumping oxygen around the body and to the brain ● A protein called IGF-1 (Insulin Growth Factor) is produced which also gets pumped to the brain ● This stimulates the release of several chemicals including BDNF (Brain derived neurotropic factor) ● BDNF stimulates the growth and connection of neurons (brain cells) ● New junctions = new pathways = improved learning. Voila! Although intelligence cannot be specified as one particular thing, cognitive testing generally samples a range of abilities. Early childhood development testing in children <9 years is based on function as outlined by the Gesell Developmental Scales and scored as a Developmental Quotient (DQ) in relation to age and gender. The work of Binet in the late 19th, early 20th century with French school children developed a more formal intelligence ●
With results like these it is easy to see how our own experts are passionate about promoting the message of exercise and activity across the whole population. Of course not everyone has the potential or indeed wants to be an elite athlete nor does every student want to be top of the class. Approaching the need to look for creative solutions to our population’s health and wellbeing from different viewpoints we may be hitting on a shrewd economic investment, a two for the price of one. Buy one get one free. Incorporating recommendations for increased physical activity and rewards for participation to our over burdened health care system may in fact be giving us an advantage in the economic and educational development of Team Ireland both for our youths and our aging population.
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The purpose of an education is more than academic. It is about awakening that higher purpose in every individual. A well rounded education incorporating academic, emotional, spiritual and physical development might not guarantee individual economic prosperity and career development but the lack of it would certainly seem to present a barrier to these aspirations. ■
• Patricia Murphy has an MSc in Exercise and Nutrition and is a qualified personal trainer and yoga instructor. She specializes in corporate health, fitness and wellness providing in house consultation and instruction services. She blogs at nutrishon.blogspot.com, email: nutrishon@gmail.com
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Companies to watch McDonnell: ‘Service and knowledge worker organisations everywhere need to do much more with a lot less. The opportunity is enormous and we plan to take advantage of it.”
A Productive venture with global reach Alex McDonnell sees huge opportunities for his cloud-based business that addresses productivity deficits in service and knowledge-based businesses inding a way of achieving high productivity is, for many managers, akin to discovering the holy grail. This is especially the case for those managing workflow in task orientated environments such as financial services businesses or in many areas of the public service. Measuring what people actually do – as opposed to what their job says they do – can also be an enlightening as well as ultimately rewarding process. For veteran entrepreneur Alex McDonnell it also represents a huge business opportunity. McDonnell latest venture is Xperity, a cloud based business that, he says, delivers dramatic performance improvement benefits of 20-40% across a variety of measures including productivity, within the first three months of use. Founded in March 2010, Xpertivity specialises in business performance optimisation, an emerging market sector that embraces the legacy concepts of workforce management, workforce optimisation, workforce engagement, business performance improvement (BPI) and business process reengineering (BPR), bringing them up to date with the new
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thinking necessary to successfully manage, develop and grow successful knowledge economy organisations. Operating in a market worth around $20 billion globally, McDonnell estimates that Xpertivity’s current target market represents about 10% or $2 billion and is growing at a rate of over 10% per annum. The company is being backed by Enterprise Ireland and a group of private investors. McDonnell hopes to capitalise on the growing need for productivity Improvement in many organisations, accelerated by the recent economic downturn. Now faced with significantly reduced resources, organisations need new solutions to these new challenges if they are to produce ever higher levels of service with the on-going need for ever lower costs. Xpertivity’s genesis lies in his experiences in McLaw & Associates, a business which he founded with Paula Lawton in 2003. McLaw has helped clients deliver over 40 large scale business performance optimisation programs in the financial services, construction, clinical trials management and public sectors in Ireland, USA, Northern Ireland, the UK and Eastern Europe. “The conventional method to measure and manage operations in a service or knowledge worker organisation has been through the use of spreadsheets, an approach which is limited as service and knowledge worker organisations have become much larger, multi-sited, more complex and subject to greater regulation and compliance,” he explains. Once the need was identified, further research by McLaw and its customers failed to identify an existing suitable system. The Xpertivity product was incubated in McLaw during its early development and involves over six years of design and development work done in close collaboration with a small number of clients whoa agreed to taking a proactive part in the initial pilot programmes which began over two years ago. “Productivity in areas such as the financial services, public services and other service and knowledge based sectors has lagged well behind that in the manufacturing and industrial sectors,” notes McDonnell. “This is partly because productivity is much easier to achieve in manufacturing where operations are isolated from the vagaries of customer interactions and where the disciplines of Operations Management and Operational Excellence have been honed for over a century. In the service and knowledge worker sectors customers are part of the production or service delivery process and the traditional disciplines of operations management and operational excellence have been slow to adapt to this more complex environment.,” he adds. According to McDonnell, concepts such as workforce management and workforce optimisation put the performance of people at the core of the problem. “This is perverse as it been known for well over 50 years that 97% of the time it’s the system that people work in that is at the root cause of low levels of organisational performance. These legacy industrial economy concepts need to be updated if we want to leverage the opportunities of the smart or knowledge economy. We need to
take advantage of the investment we make in educating our people to a much higher degree than was the case when industrial sector management practices were being formed,” he says. The core asset of service and knowledge worker organisations is their people and their expertise so achieving these apparently contradictory goals has to be achieved in a way that is deemed to be fair and equitable and does not irreparably damage people’s goodwill and morale, he maintains. “Whether it is managing someone through their mortgage arrears troubles, coping with an overcrowded A&E or managing medical card renewals, the operational practices and processes involved can be dramatically improved to make it easier to accomplish the task with less effort and not leave the employees feeling they need to cover two or more people’s work. Business performance optimisation should and can be a win-win for the organisation, its customers, its employees and society as a whole.” Xpertivity’s coud-based solution involvesdeploying a set of structured management systems, processes and tools to both management and staff that allows the organisation capture its
key operational data and turns it into a valuable asset to be mined and managed. Alex McDonnell is no stranger to growing and selling technology based businesses. In the 1990s as CEO of IDOC Inc., he took a $7m technology localisation business and drove a global growth and industry consolidation strategy, acquiring four competitors and selling the combined entity to Bowne Inc. of New York, creating Bowne Global Solutions, a $400m global business. Before this he was a pioneer in business process outsourcing in Ireland back in the mid 1980s with a successful software manufacturing service business providing services to many of the world’s leading technology companies such as HP, Canon, Kodak, Microsoft and Intel which he later sold. However, McDonnell sees Xpertivity as his most exciting prospect to date. While the focus is initially on Ireland he is looking to recruit partners to target the huge UK and later the US markets. “The shift to knowledge based economies, accelerated by the global recession, means that service and knowledge worker organisations everywhere need to do much more with a lot less. The opportunity is enormous and we plan to take advantage of it.” ■
Start up hopes for brite future Few people relish the thought of a bill, but Irish start-up Brite:Bill is offering companies a way to turn the dreaded necessity into an asset writes Adam Maguire e they weekly, monthly or otherwise, bills are a fact of life that most - including the companies issuing them - take for granted. They are rigid formalities that let a customer know what they owe and how to pay it. That is, unless you talk to Brite:Bill. The Irish start-up, which has had considerable success in the local market already, offers a way for companies to turn their regular missives into powerful marketing tools. According to the company, the humble bill is less a chore and more a guaranteed-to-be-seen chance to interact with the user. "We help companies improve the way they present their bills to their customers," said Alan Coleman, CEO of Brite:Bill. "We make sure that the information on the bill is clear and we make recommendations for different services." Brite:Bill has been in existence since 2010 and was established by Coleman, Jim Hannon, Gus Legge, Finbar Callaly and Eric Fitzgerald. It started life as GetitKeepit.com and was originally designed to allow customers to track and manage their bills through its online portal. However Coleman, who previously worked for Accenture, and his colleagues quickly saw the larger potential on offer in the area of customer billing.
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Coleman: “All of our growth this year will come from our international sales.”
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The company, rebranded as Brite:Bill, now offers a suite of tools that allows utilities to improve their bills in a number of ways. For a start, it makes greater personalisation possible. This means a bill can be automatically tailored for what is known about the customer, what services they already use and what might be of interest to them. It also helps display the information in a more punterfriendly manner, using graphs and charts to show customer usage and spending. The intention of this is to reduce the need for customer service queries, thus cutting a major cost for service providers. Perhaps most importantly, however, the company's package also helps utilities to recommend new services to customers based on their previous usage. This means a package or product can be more precisely targeted at those who might have the most need from or interest in it. "The aim of it is to make sure the customer has the information they need to make decisions," said Coleman. "That they feel they don't need to call the call centre and that they can choose maybe to buy additional services or offerings relevant to their relationship with the company." Traditionally companies looking to offer new packages to customers would have to take the scatter-shot approach of packaging marketing materials with all bills. A more targeted alternative would be an expensive and time-consuming phone campaign where customers are contacted by telesales to see if what they are currently paying for is the right fit or not. Brite:Bill's approach offers to handle this workload in a far more automatic and cost-effective way, presenting the customer with the relevant information on a regular basis
through their bill. A large part of the company's approach has been to attract postal companies around the world that are struggling to deal with declining volumes. Brite:Bill caters for digital billing and the company sees their tools as a route for postal services to remain relevant as people transition away from paper to this method. In addition the company also offers its services to telecoms providers, utilities and retail banks. The company has already built up a strong client base in Ireland but according to Coleman the key in the next twelve months is to build the brand abroad. "We're very pleased with the progress we've made in the Irish market but all of our growth this year will come from our international sales," he said. "We're leveraging some of our sales in Ireland to sell abroad and it's definitely a focus of Brite:Bill to sell internationally." Brite:Bill obtained seed funding from Enterprise Ireland in 2010 and was one of 16 Irish companies to display at the agency's stand at Mobile World Congress 2012 in Barcelona. It also took on a €1.2m investment from the Ulster Bank Diageo Venture Fund, managed by NCB Ventures, in late 2010. More recently it announced a deal which will act as a major step forward on its attempts to go global, becoming a global technology partner with Accenture. As a result Brite:Bills solutions are now being piloted by a number of large postal companies as part of their attempts to build digital revenue streams. "We're looking to double or triple our growth from last year to this year," said Coleman. "Next year we hope to be a much larger organisation and have realised some of the potential we're seeing in the postal and telecoms space." ■
THREE OF A KIND ■ BoxPAY
Credit cards are still the primary route for people to purchase goods and services online but in an increasingly mobile world BoxPAY is offering a simplified solution. It has created a way for online merchants to charge people through their mobile phone, meaning customers can add the cost of purchases to their phone bill rather than credit card. This solves two major problems for online shopping - for a start it makes smaller purchases faster and more practical. It also gives those without a credit card access to online shopping. Phone-based payments are huge in many developing countries, often because the population has skipped a generation and gone straight to what is deemed the more practical solution. BoxPAY is hoping people in countries like Ireland, who might otherwise to consider the credit card as the default online purchasing tool, will quickly see its merits too.
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■ Escher Group Automation is a long sought-after standard when it comes to billing and service payment. Escher Group, which has its headquarters in Boston but its European offices in Dublin, offers a number of products including automated kiosks, which can be used for delivery of products and payment of services. Its Riposte system offers a number of computer-based systems to make point-ofsale and back-end operations more seamless and in Ireland boasts An Post as a major customer. The company also offers a mobile wallet product, which utilises Near Field Communications technology - the idea being that a card or even mobile phone can be swiped at a terminal to provide payment.
■ MobileAware
The explosion in smartphone use is as much an opportunity as it is a challenge; MobileAware's solution is to make it easier for network operators to offer services to their customers without incurring a great expense in doing so. The company offers self-care applications for telecoms customers, meaning they can find out about things like their bill usage and add services right from their phone. This reduces the need for customer care calls and allows the user to tailor their package on an on-going basis, depending on their needs. One of the key features of MobileAware's offering is its ability to work across a wide range of devices. This is increasingly important as customers are seeking to access their services on a wide variety of phone types, brands, models and operating systems. Globally its clients include big players like Denis O'Brien's Digicel, Orange, T-Mobile and Vodafone.
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Books in Review The Progress Principle by Teresa Amabile and Steven Kramer, Harvard Business Review Press REVIEWED BY CONOR DEMPSEY
his book sets out to prove to the reader what it is that motivates people in a work setting. The progress principle itself is the pearl of wisdom at the heart of it all and the targets are knowledge workers such as the consumer product designers, software engineers, chemical and mechanical engineers that were researched in depth by the authors. This focus on knowledge workers should be of interest to a large percentage of managers and employees in this country given that Ireland is now branded as ‘Innovation Island’ to the international business community reflecting the strong IT, international financial services and pharmaceuticals sectors already established here. The authors are a couple married for over 20 years (they get credit for that alone) whose complimentary professions combine to provide a credible foundation to this book. Teresa Amabile is a Professor of Business Administration and Director of Research at Harvard Business School and her husband and co-author, Steven Kramer, is a developmental psychologist. At the core of the authors’ research is a survey that yielded over 12,000 real-time daily diary entries created by 238 people, in 26 teams, across seven companies and covering three industries. Amabile and Kramer identified a construct they call “inner work life” which they advocate is the key state we need to understand about ourselves and our colleagues in order to be able to influence productivity and creativity. Inner work life, they explain, is comprised of our own emotions (limited to our reactions to work events), motivations (our desire to do the work) and perceptions (sensemaking of the organization where we work, the work itself and our colleagues). The importance of inner work life is presented to us early on in the introduction as: • A rich and multifaceted phenomenon. • Something that influences people’s performance across four dimensions: creativity, productivity, work commitment and collegiality. • Something that really matters as no matter what a company’s strategy is, it depends on great performance by the people that constitute the organisation. • It is profoundly affected by events occurring every day at
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work. • It matters deeply to employees as evidenced by the fact that the research participants got no reward for their daily diary entries other than the insights they gleaned into themselves through participation. A shorter explanation also given as to its importance is the assertion that “as inner work life goes – so goes the company”! ‘Progress’ is found to be the most important element to a positive inner work life. Progress in itself does not have to be a big ticket item – small, incremental steps towards the attainment of a goal or project are proven to be sufficient to ward off a lot of other negative stimuli in the work mix. In effect, once people feel they are making progress they are largely prepared to shoulder other issues. Key happenings in work are termed events and three types of events are defined namely, progress (in meaningful work), catalysts (events that directly help project work) and nourishers (interpersonal events that uplift the people doing the work). The research participants were asked to send a daily e-mail to the authors addressing the same matter each day, namely to describe the key event (from their own perspective) at work each day. The researchers not only got daily descriptions of the events but they also got a lot of insight as to the emotions the employees felt about the events. The diary entries served as a form of confessional for employees who, in the normal course of events, are much more likely to keep the inner thoughts and feelings to themselves. From the outset the authors invite the reader to, somewhat voyeuristically, “look through the window onto people’s inner work life” through the case studies extrapolated from the diary entries and which populate the book heavily. The book meanders its way through countless examples of situations drawn from the 12,000 diary entries to test theories and prove points. Inevitably it is all quite academic although the authors do make a decent attempt to spice it up a bit by using a creative writing style when delving into the case studies. The employees are akin to characters in a novel and a descriptive, atmospheric style is invoked. The problem with the case studies, that cannot be overcome, is the fact that they are all anonymous in order to protect the identity of the companies and individuals. This makes it hard for the passive reader to relate to the examples and ultimately to stay the course. To be honest, as with all management books I have ever read, at the core of their insights is basic common sense. People are more productive when they are making progress...while motivated...oh, and being in a positive frame of mind also helps, etc, etc!
Criticism aside there is method in their (longwinded) madness. In effect the book invites readers, probably mostly managers, to take a serious look at what makes employees happy so that they can better manage people to be more productive. In the more advanced global companies this is probably second nature to most employers but others, say like a Ryanair, may need more persuasion that delving into what makes an employee happy and motivated is worth their while! The need for making a robust and lengthy case in support of softer managerial skills is doubly so in an era where the hard financial realities are ruling managers’ mindsets. It is fairly pointed out early on that traditionally in the western world we put managers and employees in opposition to each other. It is fair to say that a that a ‘them and us’ culture is not what knowledge-based industries thrive on, nor indeed is it what 21st century graduates expect from their employers either. In focusing on the example of modern employers the book starts with a decent ‘grab opening’ describing the nirvana working world of Google HQ where world class chefs cook employees meals, table tennis tables are available everywhere
and dog-owners have the option of having their four legged friend by their side in the work environment. But the authors aren’t advocating that we all must be like Google, they assert that “great inner work life is about the work, not the accoutrements.” One assumes that Google must have both! A clear mission and goals allied to autonomy, help & resources are cited as key ingredients to enabling talented people to succeed at meaningful work. The authors address the sceptics who might and be of the ‘no pressure – no diamonds’ school of management think that Amabile and Kramer’s outlook is too new age or just plain soft. They point to the depth of their study and the triangulated results and assert without fear of contradiction that the evidence demonstrates that positivity brings more productivity than negativity. All in all the book represents a refreshing insight and a useful model on the way forward for cash strapped organisations in need of creativity and productivity boosts. However, I suspect that only HR professionals are likely to get full value from the book and the rest of us will look to the shorter synopsis for what we need. Conor Dempsey is a Director of Slattery Communications ■
The Ikea Edge – building global growth and social good at the world’s most iconic home store by Anders Dahlvig. MCGRAW HILL. he serendipity between practicing social responsibility and achieving strong bottom line business results is the strong theme running through this insider account of how IKEA does business. Dahlvig rose through the ranks of the Swedish home furnishing giant to become CEO in 1999. In his decade in charge the company tripled sales as it went on a major international expansion path. He shares the socially inclusive vision of Ikea’s founder Ingvar Kamprad whose vision was that those with limited financial means should have access to furniture with high design values. The most obvious example of Ikea’s social vision is its drive to lower prices while increasing sales volumes. Contrary to the practices of many other retailers, the company doesn’t focus on improving its gross margins but rather it tries to develop its top line revenues instead. It constantly seeks to lower buying costs and passes on the savings to customers in lower retail prices. Other aspects of the vision that are explained are the primacy of functionality over design aesthetic and ‘customer involvement’ to reduce price - in other words self-assembly
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and customer collection from the warehouse! In the Ikea vision, as explained here, companies that practice
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social responsibility gain the respect and trust of society, which in turns helps them to increase profits and organisations that attempt to do good are more competitive in the marketplace which helps them recruit, motivate and retain the best people. He traces the international expansion of the group from its Swedish base. In its early years the expansion strategy was to go wide and thin – opening a few stores in a new country and then moving on to the next. Dahlvig’s sees the obvious flaws in this approach. Opening in many new markets at the same time increased costs significantly. The United States and Eastern European markets didn’t perform as well as other new territories and Ikea started to lose money in these countries. The response of the company was to increase prices to maintain gross margins – going against the grain of its stated philosophy. Some of these new markets demanded a more locally adapted range to boost sales quickly and in accommodating these demands the range size increased quickly. As a consequence volume advantages in the buying process declined and Ikea lost control of the supply chain. Prices increased, product quality problems became more frequent, poor product quality in the stores became a problem. The response was to launch a cost reduction programme but this compounded problems with service quality reduced through long waiting times at checkouts, too few parking
spaces and little investment in improving the stores. The crisis forced change and by 1995 the company began to return to its fundamentals. The product range was refined, reducing the volume of products and improving its brand identity. The purchasing strategy was changed with a major reduction in the number of suppliers with production moved to lower costs countries. This meant that prices could be reduced again and an investment programme was started in the stores. Between 1995 and 1998, Ikea only opened in two new markets – Finland and Spain, a major reduction in its rate of new market expansion. Dahlvig says the lessons learnt from this experience was that the Ikea concept was successful when it stuck to having an aggressive pricing approach with big differentials from competitors, had a unique range with limited depth, had a focus on low purchase prices through a production adapted range and continued to invest in its stores, its product range and its people. While Dahlvig’s enthusiasm for the company he spent 26 years in is unsurprising, he does at least question some aspects of the business such as the ‘overly smart and tax aggressive’ franchise model Ikea operates as well as the founder’s continuing active role in the company which may act as a hindrance to a smooth transition to the next generation. ■
Jack – business lessons from life, life lessons from business by Blaise Brosnan. PUBLISHED BY MRI, WEXFORD. anagement consultants like to impart the wisdom gleaned from their life experiences and there can be sameness about many of the business lessons they attempt to tell their readers. Wexford-based management consultant Blaise Brosnan has taken a different tack in this book. He has adopted the technique of using a fictional character, Jack, to impart stories about coping with the challenges of life and business. For the most part it works well and Brosnan reveals himself as a fine story-teller with a keen eye for detail and observation about human nature. Written is a confident, assured tone, Brosnan’s book has an almost biblical feel. You get the strong sense that this is a series of parables with each incident containing some valuable life lesson. The narrative starts with Jack’s parents struggling to raise a family in rural Ireland in the 1950s and the sacrifice of Jack’s mother to provide an education so he can break-out of the narrow confines and limited opportunities that otherwise face him. Each chapter has a summary at the end, underlining key lessons learnt from the challenges faced by the characters. There are various twists and turns in Jack’s life as he emigrates foolhardily to a navvy life in Liverpool and London before hatching a plan to save college fees, make peace with his estranged family and qualify as an engineer. He then embarks on a successful career and marriage, always learning something along the journey. There is a checklist after each chapter, underlining all of the key messages. The final chapter Packed full of life lessons, the book stops short of preaching
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but concludes that success and happiness come from being true to yourself and having meaningful values. According to Brosnan, we need to identify our core values and who and what are our influencers and we need to make a conscious decision to align our goals more precisely with our core values. This is what makes life worth living and gives you a sense of achievement, fulfilment and excitement. What is past is history and we can’t change that. However, we can change the issues and events ahead of us. ■
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The Rear View The Brewery Yard, St. James’s Gate, circa. 1920. By the turn of the 20th century, the Guinness brewery was the largest in the world. It was by far the largest employer in Dublin at that time, employing over 4,000 people. The brewery was ‘a city within a city’ with its own medical dispensary, fire brigade, co-operative stores, canteens and internal rail network which was used to transport raw materials and wooden casks around the sixty acre brewery site.
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