Perspective - Tata in Europe - Issue 1

TATA I N E U R O P E Issue one

P E R S P E C T I V E TATA I N E U R O P E Issue one

Tata Steel: a test of metal savvy supply chain management

Corporations as creativity cauldrons companies with a conscience

Literature’s new golden age

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SO ALIVE, IT OBSESSES ABOUT ITS WEIGHT. Underneath the luxurious exterior of the Jaguar XJ, hides an extraordinary obsession with weight-saving. The all-aluminium monocoque chassis was the first in the luxury saloon market. The 90 metres of aerospace-grade epoxy we use is lighter and stronger than welding. And because the XJ is light and stiff it offers something unexpected in a luxury saloon – rapid acceleration and sports car agility. It’s an obsession we’ve had for over 60 years of making legendary sports cars.

Discover more about the Jaguar Alive Technology that makes every Jaguar feel so alive.

JAGUAR.COM

HOW ALIVE ARE YOU? Official fuel economy figures for the Jaguar XJ range in mpg (l/100 km) – Urban 16.7-39.8 (16.9-7.1) Extra Urban 32.8-51.4 (8.6-5.5) combined 24.4-46.3 (11.6-6.1). CO2 emissions g/km 159-270. Official EU Test Figures. For comparison purposes only. Real world figures may differ.

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Welcome

DAVID LANDSMAN, EXECUTIVE DIRECTOR, TATA EUROPE __________

David Landsman, executive director, Tata Europe ILLUSTRATION: KATE COPELAND

COVER IMAGE: INSIDE THE STOVE OF THE REBUILT BLAST FURNACE NUMBER 4 AT PORT TALBOT

The pace and direction of change has been the subject of heated debate at many turning points in history.

Technological advances and globalisation mean that change has arguably never been more rapid.

It’s hard enough to understand what’s going on – in technology, business, politics or society – and still harder to predict what impact it will have on our lives. In Europe, as in the rest of the world, it’s no surprise that both optimism and pessimism have eloquent advocates and strong followings.

In today’s world, in which many voices and influences have an impact on us, we need a range of diverse perspectives on the challenges which face us. That’s why we’ve called Tata’s new European magazine Perspective.

We don’t claim to offer packaged answers, but we do aspire to delve into a wide range of issues on which we and our guests can offer interesting perspectives. And, while our preferred medium is debate rather than monologue, we take the opportunity to share some of our own experiences from Tata companies in Europe and around the world which we believe can make a contribution.

In this first issue, for example, we’ve explored how entrepreneurialism has entered the mainstream in a way that may have seemed unlikely. We’ve focused on the evolution of corporate responsibility into a hard-headed business discipline. And we’ve looked at the transformation of the supply chain from a simple process of buying and selling to a business-defining strategic priority.

I hope you find Perspective interesting and different. I would welcome your thoughts, via the editorial team, which can be contacted at perspective@tata.co.uk

Tata 18 Grosvenor Place, London SW1X 7HS t 020 7235 8281 e perspective@tata.co.uk @TataEurope Corporate communications director

Adam Barriball

Communications coordinator

Ashleigh Gribble

Head of network and projects

Martin Shaw

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FTI

Strategic communications

Will Mackinlay

Perspective © 2014. Published by Think Think The Pall Mall Deposit, 124-128 Barlby Road, London W10 6BL t 020 8962 3020 www.thinkpublishing.co.uk

Editorial Editor Richard Young Art director Darren Endicott Sub-editor Charles Kloet News editor Matt Packer Management

Account manager Kieran Paul Managing director Polly Arnold Publishing director Ian McAuliffe

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Contents

PERSPECTIVE. TATA IN EUROPE. ISSUE ONE 24

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32

44

52 8

connections

News and insights from the Tata universe

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column

Mukund Rajan on the importance of ethical codes to global businesses

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in view

A photographic tour of Tata’s steel-making plants

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column

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column

Howard Wheeldon on why Europe has once more fallen in love with manufacturing

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where’s the smart money?

Five predictions on the future of global business

38

inspired by design

Why good design is increasingly important

42

print isn’t dead

Investing in the future needn’t always be a gamble, explains Vince Cable

Are we entering a new literary golden age?

24

on best behaviour

creativity’s many parents How corporations can foster innovation

44

Why it pays for companies to have a social conscience

50

driving innovation

Collaborating with customers can boost innovation, says Tata Steel’s Karl Koehler

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delivering the goods How supply chains became a strategic priority

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From the labs

Learning from the latest innovations

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think on

Food for thought for business leaders

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q&a

Santanu Mazumdar on life as maître d’ of Michelin-starred restaurant Quilon

The colour theme explained: IT AND COMMUNICATIONS CONSUMER PRODUCTS MATERIALS CHEMICALS ENGINEERING SERVICES ENERGY

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CONNECTIONS

CONNECTIONS

AT A GLANCE: THE TATA UNIVERSE l IT AND COMMUNICATIONS l CHEMICALS l CONSUMER PRODUCTS l SERVICES l MATERIALS l ENGINEERING l ENERGY

PHOTO: JEFF MORGAN

NEWS AND INSIGHTS FROM AROUND THE TATA UNIVERSE

Father of the iPod steps into spotlight at Hay Tony Fadell spilled the beans on life after Apple at this year’s Tata-sponsored Hay Festival The story of Apple is as much about the company’s big personalities as it is about its range of popular consumer gadgets.

But, while names such as Steve Jobs, Tim Cook, Steve Wozniak and Jony Ive loom large in the technology world, one man has mysteriously evaded the spotlight, despite his enormous contribution to Apple’s success.

At the Tata-sponsored Hay Festival in May, that score was finally settled when iPod mastermind Tony Fadell told interviewer Stephen Fry how he applied his intense, yet inspirational, work ethic to the music gadget. It is a tale that would compel any high-tech entrepreneur to dive into their garage workshop for a month or two of solid tinkering.

In 2000, Fadell’s online start-up General Magic floundered amid the deflation of the dot-com bubble, but

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it had still managed to make a name for itself in the communications software field. As a leading expert in portable devices, Fadell was asked to come in on a music player that Apple was toying with, and spearhead its development.

In a six- to eight-week burst, Fadell set to work.

‘I pulled together the storage, the batteries, the schematics and the pricing, put it together in a package, made a Styrofoam model, weighted it with my grandfather’s fishing weights

and then made two other models, because with Steve you always had to make three,’ he told Fry. Fellow executive Phil Schiller brought the handy control wheel over from another R&D project, and, just seven months later, the first iPods shipped.

Fadell’s latest trick is selling his venture Nest, a maker of intelligent thermostats, to Google for $3.2bn.

His guiding motto? ‘It takes a team… [and] if you’re going to do something, do it right.’

Fadell was asked to come in on a music player that Apple was toying with, and spearhead its development. Just seven months later, the first iPods shipped 02/07/2014 17:48

CONNECTIONS

$3.2bn

Six copies of the ultra-exclusive Jaguar Lightweight E-type are set to purr onto the market

HOW MUCH GOOGLE PAID FOR TONY FADELL’S NEST VENTURE

CLASSIC JAGUAR ROARS AGAIN

Jaguar Land Rover will make six reproductions of the Lightweight E-type, ‘the most beautiful car ever made’ Fans of vintage motors rubbed their hands together with glee when James Bond brought his Aston Martin DB5 out of mothballs in Skyfall. Now they have even more cause for applause, with the forthcoming re-release of the Jaguar Lightweight E-Type – a model for hardcore collectors to cherish.

Under plans unveiled by Jaguar Land Rover, six reproductions of the ultraexclusive Lightweight E-Type are set to purr onto the market, at no less than £1m each.

The rationale for that price was explained

by Jaguar heritage consultant Tony Schlup, who told the press that original Lightweight E-type models are far from commonplace.

‘Put it this way,’ he said. ‘There are 11 cars left in the world, and, if they came up for sale,

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I estimate they wouldn’t be selling for less than £3m to £4m each.’

There will be more than a touch of nostalgia attached to the production process: the new E-types will be made at a state-of-the-art facility in Browns Lane, Coventry – the site that gave birth to the first-generation models.

The svelte, torpedo-bodied E-type was designed by legendary stylist Malcolm Sayer, who also crafted the Jaguar XJS. Rolled out between the early 1960s and the mid-1970s, the E-type became a darling of the era’s more sophisticated petrolheads, and turned up in numerous films, such as The Ipcress File. No less a figure than Enzo Ferrari described it as ‘the most beautiful car ever made’.

Firm’s 75th anniversary sees growing focus on corporate social responsibility Addressing the chemical industry’s relationship with the world around it has become the central theme of the 75th anniversary of Tata Chemicals.

In June, the firm marked the anniversary with the appointment of former chief operating officer Ashvini Hiran to the newly created post of chief culture officer.

In this role, Hiran will nurture and safeguard the values central to the company’s corporate social responsibility agenda.

In a statement, the firm said: ‘Tata Chemicals, as a provider of innovative solutions for LIFE – living, industrial and farm essentials – is shaping its organisational DNA to create an enabling culture for its next phase of growth, in line with its values and aspirations.’

WORDS: MATT PACKER AND FARAH DIB

THE FIRST LIGHTWEIGHT E-TYPES SPED ONTO THE SCENE IN 1963

CULTURE IS KING AT TATA CHEMICALS

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CONNECTIONS

60,000

CHILDREN HAVE TAKEN PART IN TATA – KIDS OF STEEL SINCE 2007

Kids show steel in Tata triathlon Annual event proves a winner again

Thousands of schoolchildren have run, pedalled and splashed their way through the exciting programme of events in this year’s Tata – Kids of Steel challenge.

Tata – Kids of Steel is a nationwide scheme organised

by Tata Steel in partnership with professional sports body British Triathlon. It aims to promote a healthy lifestyle among children.

Things got off to a strong start on 9 May with a special mini-triathlon in Corby, in which 1,000 local children took part, all backed by cheering family and friends. Around 30 employees from Corby’s Tata Steel facility were on hand to ensure the event ran smoothly.

Business development director Stuart Welch, who volunteered at the event, said: ‘Tata Steel is proud to support our local communities and the Tata – Kids of Steel event at Corby was brilliant… the energy, excitement and enthusiasm were contagious.’

Customer services employee Andy Morcombe added: ‘My children have taken part previously, so I’ve been a spectator in the past. It’s fantastic – great energy and great fun. I’ll definitely be helping out again next year.’

Now in its seventh year, the 2014 instalment of Tata – Kids of Steel saw the involvement of around 8,000 children nationally.

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‘Design has important tasks to perform in the humanising process of science and technology’

TATA ELXSI OPENS NEW DESIGN STUDIO IN LONDON The new studio will bring the company closer to its European customers and expand its global footprint

A new design studio in central London will become the centre for Tata Elxsi in the UK and Europe.

The launch event, held at St. James’ Court, A Taj Hotel, London, saw experts in the technology and creative industries explore the theme of the evening: ‘Humanising technology – irresistible products and experiences for a world in transition’.

The list of speakers included Sir John Sorrell, who founded the annual London Design Festival and set up the Sorrell Foundation with his wife, Lady Frances; Nick Talbot, global design head, Tata Elxsi; James Woudhuysen, professor of forecasting and innovation at the School of Design, De Montfort University, UK; and David Landsman, executive director, Tata Europe.

Asking key questions, such as ‘How do we make sure technology is serving us?’, the panel delved deep into the symbiotic relationship between design and technology, and the importance of both in creating better experiences for the customer.

Professor James Woudhuysen pointed out: ‘Design has important tasks to perform in the humanising process of science and technology, particularly in explaining, popularising and arguing for technological advance, and in inspiring scientists and technologists to stretch their innovations.’

The new London location was praised by all the speakers, who pointed out that the design studio will be able to take advantage of local talent, the multicultural environment, the creative education system and the many design disciplines that thrive and cross-fertilise themselves in the capital.

Nick Talbot said: ‘This studio will help us better understand and address local consumer preferences and needs through design, and serve our customers more efficiently.’

With headquarters in Bangalore, Tata Elxsi has operations across the world, but the new London design studio forms a significant step towards building a truly global company.

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CONNECTIONS

87,000

NUMBER OF NEW ENGINEERING GRADUATES REQUIRED EACH YEAR TO MEET UK CAPACITY NEEDS

£200m

WAS INVESTED IN THE REBUILD OF BLAST FURNACE NUMBER 4 AT TATA STEEL’S PORT TALBOT STEELWORKS

Engineering the future

Develop schoolchildren’s interest in engineering earlier to tackle the UK’s graduate shortfall, says Tata Europe executive director

THERE’S MORE TO ENGINEERING THAN MANY CHILDREN MIGHT THINK, SAYS DAVID LANDSMAN

Young people’s curiosity about engineering must be piqued much earlier in their school careers, according to David Landsman, executive director of Tata Europe.

In a May interview with the Daily Telegraph, Landsman said that the very concept of engineering can often seem confusing to the young because there are so many different disciplines.

Landsman said: ‘I think it’s important that people get a chance to understand [what engineering is] at an early age, so they don’t think it’s purely about getting your hands oily repairing a gasket.

‘There are some amazing opportunities out there around big infrastructure projects – and this means there will be good jobs for a very long time to come for people who can specialise in hard engineering.’

According to recent research by campaign group EngineeringUK, the business that engineers drive benefits the British economy to the tune of £1.06tn every year. However, there were just 50,000 new engineering graduates in the country last year – well short of the 87,000 recommended to meet capacity needs.

Tata soars to new heights

The company’s joint-venture airline will take off later this year Already a driving force in the automotive industry, Tata group is aiming to establish itself as a high-flyer in the aviation arena, through a joint venture with Singapore Airlines (SIA).

Set for an autumn launch, Tata-Singapore Airlines aims to schedule 87 flights a week to 11 destinations during its first year. By its fourth year, it plans 301 flights, serving 21 destinations.

Tata Group has a controlling stake in the new business, with a 51% share to SIA’s 49%.

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According to BOC Aviation head of investor relations Claire Leow, TataSingapore Airlines has placed an order to lease 20 Airbus A320s from the firm, with delivery of the jets scheduled for around September or October. With Delhi earmarked as the airline’s hub, initial destinations are likely to include Goa, Mumbai, Bengaluru, Srinagar, Patna and Hyderabad.

THE FRUITY SIDE OF SCIENCE

Tata stand’s exploding melons prove a highlight at science fair Pulp flew at the Birmingham NEC’s recent Big Bang Fair – a four-day science expo in which around 1,200 youngsters visited an interactive stand hosted by volunteers from Tata Consultancy Services.

The stand gave the visitors an opportunity to work off any tension by blowing up a selection of helpless watermelons.

Each fruit was imprisoned in a Perspex chamber and subjected to various stress tests, with the 15th or 16th exertion typically yielding a spectacular result: juicy, red melon matter exploding against the chamber’s sides.

It wasn’t all about fruitrelated carnage, though: additional displays focused on creative computing, electromagnets and a remarkably sophisticated Lego robot.

The Big Bang Fair also enabled Tata to introduce children to its IT Futures scheme, which aims to engage with around 10,000 young people every year and inspire them with the wonders of technology. Find out more about the scheme at: tiny.cc/tcsitfutures

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CONNECTIONS

82 seconds 136kph TIME BETWEEN EACH NEW CAR ROLLING OUT OF THE HALEWOOD PLANT

Pods with promise Tata Global Beverages (TGB) has pepped up its brand portfolio with the purchase of Australian coffee business Earth Rules, which sells its goods under the retail brand MAP. The acquired firm has a significant presence in the increasingly popular ‘pod’ coffee market. Such products allow consumers to whip up beverages as good as any they’ll find in a café, by slotting pods of coffee into special brewing machines.

With prices roughly four times that of coffee sold in packets, pod products are viewed within the industry as a premium proposition.

TGB managing director Ajoy Misra told India’s Economic Times that coffee ‘should be a bigger proportion’ of his firm’s offerings and added: ‘Premiumisation is one of the parts where we want to move faster. We want to go up the value chain, and we have an opportunity through MAP.’

NEWS IN BRIEF

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THE ESTIMATED TOP SPEED OF THE MANZA REEV

CAR STARS RACE INTO INDUSTRY TOP TEN

Two senior Jaguar Land Rover executives have made a splash in Auto Express’ latest list of movers and shakers Jaguar Land Rover was the only car company to have two senior executives in the top ten of Auto Express’ 2014 ‘Brit List’, unveiled in June. Compiled every year, the 50-strong list of movers and shakers in the UK automotive sector is widely regarded as a major indicator of who to listen to, and who to do business with.

At number ten was Jaguar Land Rover group strategy director Adrian Hallmark, who was credited with adapting quickly to his role after taking it on in 2013. Meanwhile, group marketing director Phil Popham placed at number seven for stepping up to the plate as sales and marketing head honcho

for both Jaguar and Land Rover.

Popham told Auto Express that one of the reasons Brits have become so successful in the global car industry is because they travel widely, and can appreciate foreign cultures. He added: ‘We tend to bring personality into our cars too.’

PHIL POPHAM CRUISED TO SEVENTH PLACE IN THIS YEAR’S AUTO EXPRESS BRIT LIST

Jaguar Land Rover will create 250 jobs at Halewood to build the new Land Rover Discovery Sport. Operations director Richard Else said the news was a ‘further boost to our committed and loyal workforce… Halewood has embodied the transformation of Jaguar Land Rover’.

India-based conservation group the Satpuda Foundation has received Tata group’s donation of a Land Rover Freelander. Jaguar Land Rover brand experience chief Mark Cameron said that the vehicle would be used in work to protect tigers.

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CONNECTIONS

Tata Motors’ strategy will take it ‘to the next level as a global player’

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500mw

RENEWABLE ENERGY CAPACITY REACHED BY TATA POWER IN JUNE, WITH THE COMMISSIONING OF A SOLAR PLANT IN MAHARASHTRA

TATA CENTRE STAGE IN TRADE VISIT

CARS OF TOMORROW

Tata Motors has taken the wrapping off the Bolt, Zest and Manza REEV A showcase on the future of cars has been laid on for a delegation of Indian journalists at the trailblazing Tata Motors European Technical Centre, a state-ofthe-art facility housed at the University of Warwick in Coventry. Here, Tata nurtures the development of new motoring technologies and production cars, in close contact with the company’s Indian operation in Pune.

While touring the centre, the assembled guests were treated to tantalising insights into Tata Motors’ ambitious new productlaunch programme, set to deliver cuttingedge vehicles to the marketplace up to at least 2020. Many of the cars in this roll-out will be unveiled as part of the company’s Horizonext initiative – launched last year – which will see Tata Motors place ever-

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greater emphasis on driving comfort, design innovation and digital connectivity.

Among the cars on display were the Bolt and Zest, due for launch in the autumn. Both vehicles will be powered by the first-in-class, turbocharged, intercooled, multi-point, fuel-injected Revotron 1.2T engine. There were also insights on the Manza REEV (‘REEV’ stands for ‘range-extended electric vehicle’), a cornerstone of Tata Motors’ push towards hybridisation and other electrical engine developments.

Ranjit Yadav, president of Tata Motors’ passenger vehicles business unit, told Hindu Business Line that Horizonext will ‘take us to the next level as a global player’.

A VIP’s trip to Wales has turned the spotlight on Tata activities in the country. In May, the high commissioner of India to the UK, his excellency Ranjan Mathai, came to see how joint working between India and the Welsh economy has blossomed. The answer, it emerged, is very positively.

Indian consul in Wales Raj Aggarwal, who organised the visit, highlighted the Port Talbot home of Tata Steel – a key location on Mathai’s itinerary – as a prime example of Indian finance paying dividends. Aggarwal noted it is the UK’s largest steelworks, and the renovation of its Blast Furnace No 4 at a cost of £800m over the next five years is ‘the most significant investment’ in Wales for decades.

For Aggarwal, the visit embodied the healthy spirit of collaboration between India and the UK as a whole. ‘Over the years,’ he said, ‘the commercial relationship between India and the UK has been one of great importance... India is currently a major investor in the UK through its ownership of Tata Steel in Wales, Jaguar Land Rover in the Midlands and [Tata Group’s] commercial and IT arm Tata Consultancy Services, all of which will be enhanced by this visit.’

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CONNECTIONS

The Hay Level films are designed to introduce A level students to the critical thinking required at university level and to encourage original thinking about their subjects

Hay Levels: a helping hand for students AS PART OF ITS SPONSORSHIP OF THE HAY FESTIVAL, TATA IS SUPPORTING A SERIES OF FILMS DESIGNED TO HELP YOUNG PEOPLE DEVELOP THEIR CRITICAL FACULTIES AS THEY STUDY FOR LIFE-CHANGING EXAMS

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generosity and clarity are extraordinary,’ says Peter Florence, director of the Hay Festival. Ultimately, the library of films will cover subjects from English and history to maths, physics, chemistry, law, politics, psychology and economics.

So why is Tata involved? Well, aside from the fact that skills development – both within the group and more broadly in society – is a major priority for Tata Europe, this kind of project taps into a much more deeply held philosophy.

‘Since Tata was founded in 1868, we have continued to invest in education and skills in the communities where we work, helping to develop the next generation of scientists, mathematicians and engineers,’ says David Landsman, executive director

MARCUS DU SAUTOY IS AMONG THE ACADEMICS DELIVERING A HAY LEVEL MASTERCLASS

of Tata Europe. ‘We were delighted to sponsor Hay Festival 2014 and are particularly proud to be a leading partner of Hay Levels.’

Future films are due to feature Richard Dawkins, Julia Hobsbawm, Stephen Fry, Tristram Hunt, Simon Schama and Helena Kennedy, which will see the Hay Levels rival TED Talks for quality of content. And the Hay Levels are sure to find an audience well beyond teachers and the A level students seeking inspiration as they embark on one of the toughest – but potentially most rewarding – journeys of their lives. *See Marcus du Sautoy offer thoughts on the practical application of abstract mathematical concepts at tata.com/hayfestival

PHOTO: JON ENOCH, EYEVINE

It’s the question every teacher dreads: ‘When am I ever going to use this stuff?’

From key dates in history to algebraic notation, getting young people to understand the context and potential of their school lessons is a huge challenge.

The answer, of course, is that, if you don’t study the building blocks in subjects such as maths and English, you can never progress to the really high-functioning side – the career in engineering or scriptwriting that young people imagine their studies might lead to.

More importantly, perhaps, there is a constant risk of students learning by rote in order to pass exams. The A levels in the UK, for example, have taken on so much significance within society as a whole that many young people prize a good grade in a subject above actually understanding it.

That’s bad for them – it’s no fun just memorising and regurgitating facts. It’s also bad for universities, which need undergraduates with well-developed critical faculties. And it’s bad for employers, who want young workers with the thirst to learn new skills connected to real-world activities.

Enter the Hay Levels. These are a series of inspirational mini-lectures delivered by some of the world’s greatest academics.

The topics vary, but they’re mostly on set texts and areas of study for current A level students. However, they’re not revision aids – they’re designed to introduce A level students to the critical thinking required at university level and to encourage original thinking about their subjects.

Well-known academics who have signed up to the project so far include Marcus du Sautoy, John Mullan and Jerry Brotton.

‘These are great teachers, and their

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OPINION

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As brands go global, they need clear guidelines on acceptable corporate behaviour columnist Mukund Rajan

Mukund Rajan is Tata group’s brand custodian and chief ethics officer, as well as chairman of the Tata Council for Community Initiatives ILLUSTRATION: KATE COPELAND

Doing the right thing should come as second nature for business people. But that doesn’t mean businesses shouldn’t try to articulate an ethical vision and lay down some ground rules for behaviour. And a bad egg or two can pose a threat to any reputation, so some level of formality in this area is increasingly valuable.

In fact, it’s getting more important. In light of changing times, here at Tata we think it is crucial that we are not only compliant with the law in each country, but also that we invest in educating people about the manner in which our group has evolved.

Some of our expansion in recent times has been through acquisitions. With new entities absorbed into the group, we need to be able to communicate across continents about who we are and why we do things in a certain way.

As the business becomes bigger and we have a larger number of entities and people, the risk of something going wrong increases. Our companies will need to have a sharper focus on measuring the impact of the systems that have currently been deployed.

Take the Tata Code of Conduct (TCoC), which was created in 1998. It is not as if we didn’t follow any code before that document was published. But, at that point in time, it became incumbent on us to create an easily accessible document that would communicate to people all that we believed in.

Having a chief ethics officer – this newly created post is one of my roles – also signifies that the time has come for us to formalise

A bad egg or two can pose a threat to any reputation, so some level of formality in the area of ethics is increasingly valuable

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the way we look at these issues within the group. It’s not a departure from the past; it’s a requirement of the present.

This is an issue that many organisations face, and we’re certainly not alone in developing formal approaches to ethics and culture to protect our reputation. But, like many brands that are increasingly global, ensuring that the ethical dimension is clearly laid out is now hugely important.

In India, people know instinctively about our philanthropic roots, our good deeds and our nation-building. If we had to pick one challenge, it would be how much we need to invest to communicate adequately the propositions around our brand outside of India.

There are three key brand messages that we would like to send out globally: first, that we are now an international group with significant revenue generated from outside India; second, the idea of being trusted and transparent, which is summed up by the ‘leadership with trust’ tagline we use along with the Tata corporate mark; and, third, corporate social responsibility and being a good corporate citizen.

Under Ratan Tata’s leadership, we saw a conscious effort to bring this vast group together as a single, powerful entity. Initiatives such as crafting the group composite mark (the global branding all Tata companies use), the creation of the quality movement (a framework for discipline and process improvement) and the formal enactment of the TCoC — all of these created the platform on which we could aspire to have global ambitions and compete with the best in the world.

It’s a tremendous platform that all of us have the privilege to be part of. In the footsteps of the founder, each successive leader has taken the platform and made it bigger. Today, under the chairmanship of Cyrus Mistry, we have a huge opportunity to propel this group to where no Indian corporation has gone before. We have the scale and talent to make that happen.

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IN VIEW

A STOVE IN PORT TALBOT’S NEW BLAST FURNACE NUMBER 4 SUPPLIES AIR AT TEMPERATURES OF ABOVE 900°C

A FAMILY BUSINESS: JACK BAMFORTH (AN ENGINEERING APPRENTICE) AND HIS FATHER, MARK BAMFORTH (SALES MANAGER – STRATEGIC ACCOUNTS), WORK TOGETHER AT TATA STEEL SPECIALITY STEELS IN STOCKSBRIDGE

In view

photography Samuel Ashfield, John de Koning If we told you that just one of Tata Steel’s duties is to provide 95% of the steel used by UK firm Network Rail, perhaps that would go to show how massive the total operation is. In the high-tech environment that the company has fostered, that kind of output needs the attention of an army of highly dedicated workers – currently totalling 80,000 people across four continents.

Indeed, some families have been attached to the firm’s Stocksbridge plant, in South Yorkshire, for several generations.

Offering mentoring and apprenticeship schemes for younger workers, Tata Steel welds the best of company traditions onto modern perspectives that will drive the firm into the future.

To see more images of Tata Steel and its employees, visit europe.tata.com/perspective

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A VIEW OF THE GAS STORAGE FACILITY AT TATA STEEL’S PLANT IN PORT TALBOT, WALES. GASES CREATED DURING THE STEEL-MAKING PROCESS ARE CAPTURED AND USED AS A SOURCE OF ENERGY FOR THE PLANT, SUBSTANTIALLY REDUCING ITS ENVIRONMENTAL FOOTPRINT

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IN VIEW

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THE BASIC OXYGEN STEEL PLANT IN IJMUIDEN, NETHERLANDS, CONVERTS IRON INTO SHEETS OF STEEL. THE IJMUIDEN WORKS HAS BEEN INSTRUMENTAL IN TATA STEEL’S EFFORTS TO REDUCE ITS ENVIRONMENTAL IMPACT. FOR EXAMPLE, THE SITE IS HELPING TO TRIAL AN INNOVATIVE IRON-MAKING PROCESS CALLED HISARNA, WHICH HAS THE POTENTIAL TO CUT CARBON EMISSIONS BY 20%

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IN VIEW

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MARTIN GIBBS IS AMONG THE EMPLOYEES AT STOCKSBRIDGE, CRAFTING HIGH-TECH STEELS FOR USE IN JET ENGINES, LANDING GEARS, AND OTHER SAFETY-CRITICAL EQUIPMENT

IN THE HOT SEAT: CHRIS STOCKDALE, A MILL OPERATOR, SITS IN THE STOCKSBRIDGE PLANT’S NEW ‘SUPER PULPIT’, WHICH REPLACED 13 SEPARATE PULPITS IN 2013. THE NEW ARRANGEMENT ALLOWS CONTROL OF THE MILL TO BE CENTRALISED, INCREASING SAFETY AND PRODUCTIVITY

STEEL RUNS IN THE FAMILY FOR EMMA GODDARD (TECHNICAL METALLURGY APPRENTICE), WHO WORKS AT STOCKSBRIDGE WITH HER FATHER, TONY GODDARD (EAST COAST LEAD TRAINING ADVISER) MIDDLE: A LAB TECHNICIAN WORKS OUTSIDE ON TEST PANELS OF STEEL WITH COLOURED COATINGS, USED TO CLAD INDUSTRIAL BUILDINGS. HE IS TAKING WIND-SPEED MEASUREMENTS, MONITORING THE EFFECTS OF WEATHER ON THE CLADDING. THIS SHOT WAS TAKEN AT THE LABORATORY IN SHOTTON, FLINTSHIRE, UK

THE WORKINGTON ENGINEERING WORKSHOP PRODUCES ESSENTIAL EQUIPMENT FOR INDUSTRY

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IN VIEW

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APPRENTICE TRAINING INSTRUCTOR STEVE SPRAY (LEFT) WORKS WITH MICHAEL GRANT, A MECHANICAL APPRENTICE, IN THE APPRENTICE TRAINING CENTRE AT STOCKSBRIDGE. MICHAEL IS ONE OF HUNDREDS OF APPRENTICES WORKING WITH TATA STEEL ACROSS THE UK

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INSPIRING YOUNG PEOPLE

At Tata Steel we believe in working together with our partners and communities to bring out the very best in everything we do. As the Community Sponsor of the British Triathlon Federation, our continued support will focus on the children’s triathlon series, Tata – Kids of Steel®.

Tata – Kids of Steel® events aim to give children in communities across Great Britain the chance to have a fun, positive experience of sport and inspire them to lead more active and healthy lifestyles. By 2017, Tata Steel and British Triathlon hope to give up to 100,000 children the chance to take part in a triathlon.

Tata Steel has supported British Triathlon since 2006, and has been instrumental in the growth and success of the sport.

Together we make the difference www.tatasteeleurope.com

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/TataKidsOfSteel

@TataKidsofSteel

02/07/2014 11:30

COLUMN

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Making firm predictions about the future is futile. Investing in the long-term is anything but... columnist Vince Cable

Vince Cable is secretary of state for business, innovation and skills and the Liberal Democrat MP for Twickenham ILLUSTRATION: KATE COPELAND

When I first started working as chief economist at Shell, I was handed a sentence in Arabic that translated into: ‘Those who are able to predict the future are lying – even if it turns out they are right.’ But failure to prepare for the future is always a huge mistake, even though things always change and predictions can never be perfect.

My stint at Shell confirmed to me the importance of standing back from the ephemera and taking the time to understand long-term trends. The aim must be to think about business decisions strategically rather than tactically.

Our best industrial companies need – and thankfully have – a capacity for long-term planning and strategic thinking. These are the kind of companies that stand the test of time.

That’s one reason why Ratan Tata and his predecessor, JRD Tata, are among the business people I most admire.

The government’s industrial strategy does not rely on predicting the future – or picking winners among companies, sectors or regions.

Instead, we have worked strategically in forging partnerships that can deliver results regardless of short-term events.

Many businesses understand the value of the steps we’ve taken: breaking down silos; thinking creatively about partnerships inside and beyond government; and providing greater certainty around regulation and procurement for businesses taking long-term investment decisions.

It’s also about skills and innovation – the building blocks of the future. Here in Britain, we face shortages of engineers, computer scientists, people in the building trades and specialists of all kinds. This is the legacy of many years in which our economy became unbalanced. That’s changing, partly thanks to government support for apprenticeships and university education in engineering, but increasingly also as a result of our great manufacturing companies making skills development and innovation a business priority.

We must also continue to think about the skills and technologies that will be important for our growth over the next 20 years. For example, the government’s Technology Strategy Board is supporting nascent disruptive technologies such as synthetic biology, graphene, intelligent sensor networks and robotics.

We’re already seeing tangible results. I was delighted to be present in April when Tata Steel signed a strategic partnership with the UK Engineering and Physical Sciences Research Council to develop advanced graphene-coated steels and next-generation sensors for extreme environments.

That shows how, in an unpredictable world, a committed government with a long-term vision can work with business to lay the foundations for a better-balanced and more sustainable economic future for our country.

Those who are able to predict the future are lying – even if it turns out they are right

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C O R P O R AT E C R E AT I V I T Y

WE LIVE IN THE AGE OF THE ENTREPRENEUR – A FREEBOOTING FIGURE WHO HAS TAKEN ON MYTHICAL STATUS FOR GOVERNMENTS AND INVESTORS. BUT CAN INNOVATIVE FORCES BE HARNESSED AND NURTURED WITHIN COMPANIES? words Monty Munford | illustrations Ben the Illustrator

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C O R P O R AT E C R E AT I V I T Y

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C O R P O R AT E C R E AT I V I T Y

Disruptive entrepreneurship is embraced by corporate businesses, which nurture it in-house and allow it to flourish alongside more traditional ways of commerce.

Where business has no fear of treading, governments are never far behind – always ‘supporting the ecosystem’, and directing grants and tax breaks to start-up companies, so that their country, economy and chosen cities – or, often, just one city – can be the envy of the watching world.

But is it as easy as just throwing money at the issue? Do corporates and governments understand how entrepreneurship really works? Are they genuine about disrupting markets that might be existing cash cows? Or are they throwing resources at something that needs to be unregulated and free, without a carrot-and-stick approach polluting its innovation pool?

Vote for government

From Bujumbura in Burundi, to Ramallah in Palestine, to more familiar clusters such as Silicon Valley, London and Berlin – the entrepreneur has become the hero of the age.

It has become conventional wisdom. Cities cannot contemplate the future – and cannot grow – if they fail to put the entrepreneur at the centre of their thinking. Whether it is a specialised coffee shop, a co-working space, super-fast wi-fi or a resident accelerator, the combination of technology and entrepreneurialism is now seen as vital.

Another word bandied around in similar awed terms is ‘disruption’. If an entrepreneur isn’t disrupting the traditional way of doing business, then what are they doing? This constant need to innovate and shake up the alleged stasis of existing markets is one that national economies and corporates are betting on to survive, let alone prosper.

But, while our disruptive entrepreneurs in Burundi and Palestine are still perceived as brave adventurers in a changing world, those in the US, UK and Germany are becoming more mainstream.

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Ivan Mazour is the CEO and co-founder of Ometria, an e-commerce start-up in London. Based in Mayfair, and with Russian and Ukrainian ancestry, Mazour knows how governments work and believes they will always beat corporations when it comes to the evolution of start-up companies.

‘It seems, at least on the surface, that governments have understood the value of entrepreneurship – and the incentives needed to support it – much better than corporations,’ he says. ‘From tax rebates, such as the Seed Enterprise Investment Scheme in the UK or the Angel Investors Tax Deduction Scheme in Singapore, to government-supported early-stage technology ecosystems, such as Tech City in London or the Skolkovo start-up hub in Moscow, entrepreneurs all over the world are being given everything they need.

‘Until they are able to provide the same level of funding with the same level of independence, the best chance for corporations to innovate and disrupt will remain the acquisition of cutting-edge start-ups that are founded and managed by exceptional people.’

A compelling argument. But is it the complete picture? In some ways, corporate entrepreneurship is nothing new. Companies have been struggling to understand disruption and creativity for decades – often as a matter of survival. In the 1980s, for instance, technology behemoths, such as IBM, were undermined by smaller and nimbler companies that out-thought and outfought them.

It was a phenomenon identified by Clayton Christensen in The Innovator’s Dilemma, which

Governments have understood the value of entrepreneurship much better than corporations

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C O R P O R AT E C R E AT I V I T Y

EVEN ACCOUNTANCY CAN BE SHAKEN UP The accountancy profession has remained largely unchanged for 150 years. Most practices cling to a partnership model and billable hours as the main unit of output. But that is starting to change.

One example of a disruptive force in this most traditional of markets is Crunch, which was launched in 2009 to modernise small-business accounting services. It combines cloud software with a team of on-call accountants, and offers clients a full service for a flat monthly fee. Just five years old, in 2013 Crunch was named the UK’s fastestgrowing accountancy company.

Managing director Darren Fell says the company wants staff to think entrepreneurially and has an open culture – for example, any member of the team can suggest ideas to the board.

When new staff join, they have a full induction programme with each department, so they know how the rest of the business works. This gets them thinking about how their work can improve the business as a whole, rather than just their own team.

‘Companies can’t be afraid to disrupt themselves,’ says Fell.

‘One of the few sure things in business is that, if you don’t do it, someone else will. Look at Blockbuster or BlackBerry.

Neither were willing to change, even though the writing was on the wall; now one is ancient history and the other is at death’s door.

‘I don’t believe such vast companies didn’t have any big thinkers within them,’ he adds.

‘Their problem was obviously not allowing the good ideas to bubble to the surface and developing them further.’

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Crunch’s accounting app also provides a forum in which clients can suggest, vote for, and comment on new features that are in development.

Creative disruption has to be nurtured from outside the company, too.

There is a third factor at work. Crunch makes use of initiatives such as the UK Government’s Growth Accelerator programme, which helps businesses to access finance, provides advice on business development, and offers coaching in innovation.

It also matches investment in management training.

Much of Crunch’s strength comes from the fact that it is not set up like a traditional accountancy firm. It has 20 developers, a five-strong editorial and community team, and in-house designers and marketers. This breadth of experience and skills gets more brains and different viewpoints into the business, which in turn creates more opportunities to improve its service and grow its client base.

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One of the few sure things in business is that, if you don’t do it, someone else will explained how large companies could do everything right by their employees and shareholders – but still be outmanoeuvred. First published in 1997, the book shows how ‘disruptive technology’ usurps traditional and successful business – and how the smart survive, either by bringing in talent or investing in those very companies that threaten it.

Nowadays, corporate entrepreneurship is encouraged by companies as diverse as Apple, Mitsubishi and Google, and pioneers such as 3M, which describes itself as a global innovation company that has ‘made buildings safer’, ‘consumer electronics lighter’ and ‘even helped put a man on the moon’.

Moreover, 3M has always supported the entrepreneurial spirit of the people who work for it.

In 1948, the company launched an initiative called ‘15 Percent Time’, whereby employees are encouraged to spend 15% of their time working on their own projects.

Google built on this idea: its scheme, ‘20 Percent Time’, gave employees one day a week for their own initiatives. True, it has subsequently retreated from that purist vision: The Huffington Post reported last year that Google had wrapped some rules around the concept, leading some Googlers to rename it ‘120 Percent Time’, hinting that they felt the company still wanted innovation – just on top of the day job.

Entrepreneurial DNA

But, once the entrepreneurial genie is out of the bottle, it is very difficult to push it back in. And many governments seem to want the genie to work its magic. They dream of emulating the success of Silicon Valley, the archetypal tech cluster, and technology is one area in which budgets and tax breaks seem to be as large now as they once were for just about everything before 2008.

London, with its Tech City investment, and the huge project in Moscow called the Skolkovo Foundation, which has a budget of $4bn, are betting big on their digital start-up clusters.

But such support is not always guaranteed to provide a good return on investment. Initiatives to create African Silicon Valleys in Nairobi, Ghana and Lagos have been slow in generating returns, although the COMPANIES start-up ecosystem in Kenya, based CAN’T BE AFRAID TO DISRUPT on the soaraway success of the THEMSELVES, mobile money M-Pesa platform SAYS CRUNCH MANAGING (see page 35), is beginning to pay DIRECTOR DARREN FELL entrepreneurial dividends.

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A WIDER INNOVISTA Organised by the Tata group Innovation Forum, this year’s Innovista programme inspired more than 1,700 ideas in a variety of categories from 66 Tata companies, submitted to regional judging panels.

The winners from the European region were chosen by a panel of judges including: Dr Clive Hayter, associate director for capability at the Engineering and Physical Sciences Research Council; Dr Simon Hepworth, director of corporate partnerships at Imperial College London; and Professor Penny Sparke, professor of design history at Kingston University.

• Promising Innovation New product: Active driveline (Jaguar Land Rover) • Promising Innovation New service: Bespoke bridge parapet and safety fence design (Tata Steel) • Promising Innovation Core process: Virtual simulation of lightweight architecture (Jaguar Land Rover) • Promising Innovation Support process: Responsible procurement in tin sourcing (Tata Steel) • Dare to Try Optical glass core heater (Jaguar Land Rover) This year, for the first time, Tata estimated the economic benefit of the 43 innovations that reached the global finals: around $1bn.

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Entrepreneurs and education are often entwined in the journey towards disruption and innovation But it is on another continent, Asia, where government and corporate entrepreneurship shows signs of longevity – and growth. Since its formation in 1868, the Tata group has always provided proof that entrepreneurial zeal can be harnessed to a corporate entity.

In its 146 years, there have only been six chairs of the group. In that time, the company’s seven business sectors – communications and IT, engineering, materials, services, energy, consumer products and chemicals – have all embraced group-wide entrepreneurship on the part of employees.

Tata’s Innovista programme, an in-house awards scheme that recognises and showcases innovations within the group, is a great example. It not only promotes the development of interesting ideas, but also delivers results (see box, left). Earlier this year, the European regional final was held in London, featuring innovations developed by companies including Tata Consultancy Services, Tata Global Beverages, Jaguar Land Rover and Tata Steel.

BRANDWATCH’S WILL McINNES BELIEVES DISRUPTION IS THE NEW NORM, AND COMPANIES SHOULD EMBRACE IT

Disruption – or renewal?

Some would say that this form of corporate entrepreneurship is, in many ways, the opposite of disruptive because the ideas and process of running such a scheme, as Tata has for many years, are orthodox and rooted in expanding – not up-ending – a business.

True disruptors, so it is said, are those who do not have a full-time salary to fall back on, who have

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Entrepreneurialism begins with education – empowering children to think with open minds to bootstrap and innovate, and who have no vested interest in incumbent corporate success. They are more likely to turn to universities, academia and start-up accelerators for backing – bodies whose programmes are more likely to reflect modern-day entrepreneurship.

Nevertheless, the sheer breadth of Innovista – hundreds of entries, eight regional contests and a global final – demonstrate that it is about much more than paying lip service to creativity. And it is also true that entrepreneurs and education are often entwined in the journey towards disruption and innovation.

That much is evident from the Tata International Social Entrepreneurship Scheme (ISES) – a partnership between Tata and four globally leading universities: the London School of Economics and Political Science, the University of Cambridge, the University of California, Berkeley, and the University of California, Davis.

Students from these universities undertake eight-week projects at the Tata group in India. The projects have a development, social enterprise, environmental or sustainability focus, and involve a significant research element. The students bring their international perspectives and research skills to the company projects, and in so doing promote global understanding, as well as encourage the wider notion of entrepreneurship, not just socially, but in the business sense as well.

Tata’s ISES scheme is one that other major companies also emulate in the way they encourage social entrepreneurship on the part of important employees who have proved they can operate in this sphere.

Entrepreneurialism: the long game

Whether it is IBM’s pro bono support of voluntary social entrepreneurship or Tata’s tie-up with leading academic institutions to foster a global attitude of employee innovation, the process is clear.

It begins with education – empowering children to think with open minds. Governments can pick up the baton by making environments conducive to entrepreneurialism through tax breaks and social initiatives. And corporates can take an enlightened view – that innovation and even market disruption are inevitable, and are better engineered from within than from without.

Is it too much to say every employee is a potential entrepreneur? To deny those who are from expressing their disruptive and creative tendencies is to risk them eventually becoming competitors to and disruptors of their existing employers.

Given the sheer pace of change in almost every market – driven by globalised capital and trade, and steered by rapid technological developments – that is a risk no organisation should run.

DIGITAL: DISRUPTIVE BY DESIGN While some entrepreneurial firms are overwhelmingly positive about government support for disruptive innovation, others are less enthusiastic.

Brandwatch is a social-media monitoring company with offices in Brighton, New York, San Francisco and Stuttgart. It helps more than 700 global brands to monitor internet channels for what people are saying about them.

The company is forthright about whether governments ‘get’ entrepreneurial ventures.

‘They’re attempting to help cultivate a culture of entrepreneurship through tax relief initiatives and grants, but these can often have the opposite effect,’ says Will

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McInnes, Brandwatch’s chief marketing officer. ‘People don’t start businesses because the tax regime is good; they start them because they have great ideas and there are minimal obstacles to going through with them.’

‘Disruption is the new norm,’ he adds.

‘Businesses are having to innovate just to survive – look at Apple’s update cycle for iProducts and Microsoft’s stagnation earlier this century as examples of the need for constant innovation.

‘These are lessons the music and TV industries have been discovering all too late, as newcomers like Spotify and Netflix can come from seemingly nowhere.’

McInnes also pinpoints how companies are being forced to adapt because of the agility of smaller and newer companies that are emerging as disruptors.

‘Companies are inspiring change through a variety of methods, such as internal social networks, unconventional communication channels, informal “hack” days and by encouraging risk, because they have to do so,’ he says.

‘Rather than focus on emulating the successes of Silicon Valley, European governments should be placing more value on education and generating a culture that embraces risk and is comfortable with the freedom to fail.’

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OPINION

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Europe’s rekindled love affair with manufacturing is no surprise.

In fact, it’s a necessity columnist Howard Wheeldon

Howard Wheeldon FRAeS ran his own successful logistics business, and then spent 28 years as a broker analyst covering aerospace and defence, before becoming a strategy consultant. He is a fellow and trustee of the Royal Aeronautical Society, a member of the Air Power Association and sits on the advisory board of Birmingham University’s Business School. hwheeldon@ wheeldonstrategic.com ILLUSTRATION: KATE COPELAND

Why is it so important that Europe has a strong manufacturing sector? Ask that question and you’ll receive a variety of answers, including the need to control our own destiny, retain skills, and make – rather than import – much more of what we consume here in Europe.

There’s certainly an economic logic to the concept of sovereignty in the manufacture of critical technology products. A strong and vibrant manufacturing sector stimulates research and development of new technologies, products and processes that might benefit the European economy for many years to come.

But perhaps the main reason why manufacturing is so important to Europe is the fact that around 70% of what is produced in the EU is exported. As the economic turmoil in Greece after 2008 showed, an economy with little to export is one that will struggle to survive. And, having raced towards the development of service industries, many European governments have now realised that, while such industries help to create jobs, they provide little assistance in terms of exports.

That need to sell to the world is a powerful pull factor. There’s some ‘push’ at work, too. Europe’s industry has gone through a significant process of change in recent years – much of it caused by opportunities created for international companies to invest here.

That’s a change of mindset as much as policy. It’s now much better understood that it doesn’t matter who owns a particular company – it is how that business is transformed that matters.

Take, for example, Europe’s automotive industry. The volume end of the industry had struggled as a result of cheaper imports and excess capacity. But, when Europe opened itself up to investment and international partnership alliances, the health of the industry improved.

Even the niche and quality ends of the European automotive manufacturing sector, which had remained relatively strong, attracted essential inward investment, and placed more emphasis on research and development. That allowed companies such as Jaguar Land Rover to be transformed – from sales of around £5bn in the year ending March 2009 to more than £15bn by 2013. That means jobs, exports and, critically, expertise accumulating fast.

The strategic importance of a strong, vibrant manufacturing sector, with plenty of investment, is no longer the subject of questions posed in Brussels’ corridors of power, nor by the governments of the various EU member states. They all realise that, despite battling with affordability and deficit issues, the importance of expanding manufacturing and exportability in order to create renewed economic growth and stability is a strategic necessity.

Many European governments have now realised that, while service industries help to create jobs, they provide little assistance in terms of exports

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FIVE YEARS FROM NOW

A GLOBAL TRANSFORMATION IS UNDER WAY: TRADE PATTERNS ARE SHIFTING, POLITICAL ALIGNMENTS ARE CHANGING, AND TECHNOLOGY IS SHRINKING THE WORLD EVEN FURTHER – AS WELL AS OPENING UP NEW OPPORTUNITIES. HERE WE TRY TO ANSWER FIVE KEY QUESTIONS THAT WILL DEFINE GLOBAL BUSINESS IN THE NEXT FIVE YEARS words Charles Orton-Jones

riverless cars are here. Google’s self-driving vehicles have logged over a million kilometres – accident-free.

They’ve crossed the Golden Gate Bridge, zoomed around Lake Tahoe, and could be chauffeuring you to work pretty soon.

But how soon? Two years ago, Google co-founder Sergey Brin said 2017. Google’s own programme director has hinted at 2020 – the date recently set by other manufacturers, including Renault-Nissan. IHS Automotive is less optimistic, and says driver-assisted cars will arrive in 2025, with fully automated cars in 2030.

And that’s the problem with forecasting. Look just a year or two ahead and things get hazy. So is the discipline redundant? The legendary statistician George Box would rebut cynics with his line: ‘All models are wrong, but some are useful.’ The global financial crisis confirmed the first part of the aphorism.

At times, looking more than a week ahead seemed tricky.

But the second part also remains true. Forecasting is riven with uncertainty. That won’t change. But, without sketching out the future, businesses can’t plan or invest. And, like the technological advances that can give us driverless cars, we can see around us the forces driving the global economy and make some good guesses about where we’re heading.

So, as the global economy undergoes a significant rebalancing process, with regions and industries rising and falling and huge shifts in the locus of power, we’ve picked out five questions every business leader and politician should ask.

Your answers might differ from ours, but the questions are crucial for all of us.

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FIVE YEARS FROM NOW

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What will the world economy look like in five years?

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The entrepreneur Sir David Tang adds water scarcity and political disengagement to the list of China’s problems, making for his pessimistic belief that China may take ‘another 100 years... before securing superpower status’, although this will be, he points out, twice as fast as the US achieved it.

Second, developed economies are riddled with similar problems. Rebecca Harding, chief executive of Delta Economics, warns: ‘Politics is our main worry right now. The problem is you can’t forecast what will happen.’ You only have to look at the situation between Russia and its neighbours, the growth of

There are serious doubts about the stability of emerging markets separatist movements in Western Europe and the polarisation of politics in the US to see the point is well made.

Also in the US, whose pre-eminence is hailed by Goldman Sachs as ‘intact and sustainable’, there remain serious doubts over government debt levels. Could it default? Federal Reserve chair Janet Yellen warned Congress in May that debt ‘will rise to unsustainable levels’. Richard Poulden, chair of Dubai-based fund manager Black Swan, says he believes the US can’t raise taxes or interest rates: ‘This is all unsustainable. The likelihood is thus default, rather than repayment.

Defaulting at any level will mean the end of Western dominance of world finance.’

BEST GUESS There will be an ongoing shift in the balance of trade and economic power, but any planning needs to work on the basis of further shocks to the system and periods of uncertain or over-heated growth.

IMAGE: CORBIS

Are we in for five solid years of growth, gilded with exceptional performances by the stars of the emerging markets? Look at the forecasts and you might think so.

The International Monetary Fund (IMF) predicts the global economy will grow 3.6% this year, rising to 3.9% next. The US will grow above trend at 2.75%; emerging markets will contribute two-thirds of global growth, increasing growth from 4.7% last year to 5.3% in 2015. India will grow more than 6%, China more than 7%. Even the euro area is growth-positive. But there are two major warnings.

First, there are serious doubts about the stability of emerging markets. A recent Goldman Sachs report, Emerging Markets: As the Tide Goes Out, states bluntly: ‘We have repeated our belief that these well-entrenched issues – covering the gamut from poverty and pollution to government interference and woefully inadequate infrastructure – were largely being dismissed in the rush to proclaim the rising power and influence of emerging market economies. So it should come as no surprise that we believe this recent bout of volatility and underperformance reflects a significant reassessment of emerging market countries and the lack of progress they have made in addressing their fault lines.’

It is a view endorsed by the IMF, the World Bank and an increasing number of financial institutions.

Systemic problems lie at the heart of this pessimism. For example, China faces at least five main threats: imbalanced growth; demographic problems, including more men than women and a top-heavy age profile; financial pressures that have distorted allocation of capital; pollution; and an antiquated household registration system, known as ‘hukou’, that hampers access to education and social services.

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FIVE YEARS FROM NOW

02

Are we making the right things in the right places?

In a globalised economy, does it matter where things are made? Curiously, the origin of manufactured goods is becoming more relevant.

Marketing agency FutureBrand has tracked consumer preferences over eight years in its annual Made In global survey.

The latest report reveals that country of origin, country of design and country of manufacture are ranked second, third and fourth as drivers of choice – ahead of price, availability and style, and behind only safety.

The report highlighted the kind of intelligent enquiries consumers are prepared to make into the origin of the goods they buy. ‘A company needs to be physically present in the country; or the design and patents need to have emerged from talent in the country; or the brand needs to have factories or parts of the production process in the origin nation,’ the report states. ‘Where it might have been enough in the past to “borrow” associations from a country for pure marketing purposes, consumers are less

about buying from their own countries, Italians, French and Australians ranked their own nation highest by preference, yet developing countries like India preferred brands from other countries.

The resurgence of interest in ‘country of origin’ is epitomised by high-tech company Tesla. Founder Elon Musk is a fanatical supporter of domestic manufacture. At a US Senate hearing into space contracts, which Musk hoped to win, he waved an American flag and bragged that his Falcon 9 and Falcon Heavy space launch vehicles are ‘truly made in America’, adding: ‘This stands in stark contrast to the United Launch Alliance’s most frequently flown vehicle, the Atlas V, which uses a Russian main engine and where approximately half the airframe is manufactured overseas.’

Will this nationalist resurgence influence manufacturing trends in the future? Analysts point to a complex picture. ‘We are getting better at calculating the total economic picture,’ says Richard Wright, CEO of the Global

Country of origin, country of design and country of manufacture are key drivers of choice, behind only safety ready to accept country of origin as a choice driver unless it is authentic.’

Other issues are less controversial. For worldwide consumers, France remains the most popular origin for food, for example. When participants were asked

Manufacturing Festival. ‘Previously people chased low labour costs, without factoring in transport costs, energy costs, quality of management and supply chain issues. This means some components are better made in developed economies, and others will continue to be made in the Far East.

ELON MUSK That’s the real trend – KNOWS THE VALUE OF researching where PLAYING TO PATRIOTISM each thing can be made WHEN MAKING best when factoring in A BUSINESS PITCH every variable.’

BEST GUESS National preferences seem important, but ultimately quality will win out in market-based systems. Companies choosing best-in-class locations for the manufacture of components, while factoring in the cost of logistics, should win through.

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Which 03 technologies will amaze?

A well-known science blog compiles a weekly newsletter of breakthroughs. Just one of its bulletins this spring mentioned 715 new exoplanets; the discovery of a new state of matter; evidence of water on an ancient Mars meteorite; the transformation of skin cells into healthy liver cells; and the launch of a hybrid car that runs on air.

With such change in so many industries – and with so much appetite to cross-fertilise innovation between industries – looking five years out may be a fool’s errand.

However, people do try, and the best tech forecasters highlight context and trends, rather than specific technologies. For example, Citi Research’s recent Disruptive Innovation report points to ten ‘game changers’: 4D printing (like 3D printing, but the components you make then assemble themselves into finished products); digital banking; digital currencies; electric vehicles; energy storage; immunotherapy; insurance securitisation; precision agriculture; digital marketing (with a projected compound growth rate of 66%); and robots.

Naturally, the trick is to work out precisely what progress will be made, by

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FIVE YEARS FROM NOW

who, and to what end, in these fields. This is much harder.

Take cars. Chris Aylett, CEO of the Motorsport Industry Association, has unique access to the work manufacturers are doing on the future of automotive technologies – and he still finds it hard to pick winners. ‘This is the most revolutionary period for 100 years,’ he says. ‘In terms of electric, gasoline, liquid petroleum gas, biofuel and hybrid, it’s too hard to forecast. Like in the Grand National horse race, they will all make it over the fence, but they won’t all make it to the finish line. No one knows the winner.’

There’s a similar story in microprocessor design. Moore’s law (the number of transistors on a chip will double every two years and the cost halve) has been a touchstone of the tech industry since Intel founder Gordon Moore made the prediction in 1965. But, for technological and economic reasons, many forecasters predict the progression will break down by 2020.

However, we might reasonably expect new technologies to keep the progression going. For example, quantum chips, which massively shorten the processing time for highly complex algorithms and herald huge breakthroughs in drug design and DNA sequencing, are being developed by researchers such as John Morton at the London Centre for Nanotechnology and companies such as Canada’s D-Wave. And new materials, such as indium antimonide or graphene, could change the basic physics of moving around electrons.

Perhaps the most profound development in five years will be our ability to assess the viability of Ray Kurzweil’s ‘singularity’ theory. Kurzweil, a futurologist, suggests exponential technological improvement will lead to humans merging with machines, an event he schedules for 2045. Both derided and feted, Kurzweil was hired in 2012 by Google to run its natural language processing division. By 2019 we’ll be better able to see whether his conditions for a posthuman future are being met.

IMAGES: GETTY, ALAMY

FACEBOOK THINKS VIRTUAL REALITY IS WHERE THE FUTURE LIES, HAVING SPENT $2BN TO ACQUIRE OCULUS EARLIER THIS YEAR

04

Where are the opportunities in Africa?

In May, Chinese Premier Li Keqiang announced $12bn in aid for African nations, adding it was his dream to see all major African cities linked by highspeed rail. He promised Chinese help ‘to make this dream come true’. Compared to the situation in India, where there are no lines capable of supporting speeds higher than 200km/h, or the UK (where a high-speed rail project of just 192km in length is mired in debate and delay), the vision is breathtaking. But is it fantasy?

In the past decade the achievements of Africa’s strongest economies have forced a series of reappraisals. The African Development Bank says Africa has been growing faster than any other continent, with one-third of the countries surpassing 6% GDP growth annually. The share of the population living in poverty has fallen from 51% to 39%.

According to EY’s Attractiveness Survey 2014, in less than five years Africa has risen to become the second most attractive investment destination in the world, tied with Asia. The report picked emerging hotspots for investment in Kenya, Ghana, Mozambique, Uganda, Tanzania and Zambia – and pointed out that consumerfacing industries, such as technology,

media, retail and financial services, are the fastest-growing targets of foreign direct investment (FDI), with extractive industries hitting an all-time low for FDI last year.

Much of this achievement has passed unnoticed. The McKinsey & Company report Nigeria’s Renewal: Delivering Inclusive Growth in Africa’s Largest Economy notes: ‘While recent global attention has focused on violent unrest in certain areas of the country, less has been written about the significant economic progress that has been made in recent years.’ Quietly, Nigeria has built a stock exchange that is one of the world’s top-ten fastestgrowing. Foreign investment is now more than $80bn. And, though threequarters of exports are petrochemicals, the report notes that 86% of the economy is now outside natural SAFARICOM resources. ‘The SAYS 43% OF selected industries KENYA’S GDP NOW FLOWS – trade, agriculture, THROUGH THE M-PESA MOBILE infrastructure, and BANKING SYSTEM, manufacturing – will WHICH ALLOWS THOSE WITHOUT be among the most BANK ACCOUNTS TO SEND AND important in driving RECEIVE MONEY GDP and productivity VIA TEXTS and contributing

BEST GUESS Look to the technologies already available but that seem to be crude or lack applications, particularly 3D printing and wearable computers. Massive connectivity also seems promising: the ‘internet of things’ could revolutionise business planning, for example.

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That’s better. That’s Tetley.

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FIVE YEARS FROM NOW

Africa has been growing faster than any other continent, with one-third of countries surpassing 6% GDP growth annually The World Bank has emphasised the huge potential of African agriculture, so often mired in low-yield practices.

And sport is a continent-wide obsession.

Moise Katumbi, president of Democratic Republic of the Congo side TP Mazembe (which won back-to-back African titles in 2009 and 2010 and also reached the FIFA Club World Cup final in 2010), recently expressed annoyance at the huge financial gulf compared to European football, despite the close standard: ‘What is important for me is to call those investors investing in soccer in Europe to come, because the future is Africa.’ If they do, they’ll find bargains galore.

BEST GUESS Chinese interest in Africa was originally rooted in raw materials. But, with a technology infrastructure poised to leapfrog those in more developed economies (where prior investment limits the pace of change), Africa will soon be both a source of skilled labour and a burgeoning market for goods and services.

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THE SAME GOLDEN ARCHES WELCOME McDONALD’S CUSTOMERS ACROSS THE GLOBE

05

Does global branding work any more?

Given the rebalancing of trade and manufacture, are global brands critical any more? Or does it pay to adapt to each individual market? The unified approach is exemplified by McDonald’s, which uses the same slogan in over 110 territories. In English-language nations it’s ‘I’m lovin’ it’, Germany ‘Ich liebe es’, France ‘C’est tout ce que j’aime’ and in the Taglish tongue of the Philippines ‘Love ko ‘to’. In China, there are simplified and traditional character translations. The same packaging, branding and colour scheme is used worldwide.

But the unified approach remains a rarity. Qumin is a brand consultancy helping Western brands crack China, and CEO Arnold Ma strongly advises clients to reinvent their whole marketing package for the Chinese market. ‘There is a major trap many Western brands fall into,’ he explains. ‘Names do not translate directly, and, even if they do approximately, they may not provide the brand owner with the necessary positioning. Names that are not understood may have a slang name applied. This often happens when brands do not undertake name research, or only carry it out in tier-one cities in which Western brand names are known. In tiertwo cities and below, names may not be known and frequently a derogatory name is applied, which is something that cannot be undone.’

Sometimes only modest adaptation is required. Clarks the shoemaker is ‘Clarks England’ in China, which emphasises the

desirable heritage aspect of the brand.

When Tetley, owned by Tata Global Beverages (TGB), entered Pakistan, boxes were modified to include a picture of how tea bags should be used, for a clientele more used to loose-leaf tea.

TGB shows the benefits of a blended approach. In India, for example, it wants to focus on core brands, which it hopes will win market share from the strong local brands in different regions. ‘Nothing stops us from bringing in more products from the global portfolio,’ said Harish Bhat, CEO of TGB, speaking in 2013. ‘In the next five years, there could be more tea products from the US and UK markets.

For the moment, though, we would like to grow the flavours liked by Indians in the Tetley portfolio.’

One trend supporting a unified approach is digital sharing. Michele McGrath, chief operating officer of Brand Learning, which manages campaigns for Intel and Sony, points out: ‘In the past there were fairly clear boundaries between markets; now things are more blurred. Digital is one of the key reasons for this. People can share content across the world in seconds. In addition, people are much more mobile around the world and take brand experiences with them that they share.’

BEST GUESS Global players need to find the right balance between projecting toplevel brand values and quality reassurance; and local preferences and cultural norms.

IMAGE: GETTY

to inclusive growth in Nigeria,’ says the report. Meanwhile, Nigeria’s film industry, Nollywood, is second only to Bollywood in the number of films it makes.

Uzodinma Iweala is CEO of Ventures Africa magazine, Africa’s version of Forbes, which gives him a unique perspective on investment opportunities.

He points to health care as the standout sector: ‘Other countries, with India being a prime example, have figured out models that are able to serve both poor and wealthy with good-quality service that is highly profitable. I think that, once there is an attitude shift – more coordination in government regarding regulation, and a greater understanding of how to provide quality and affordable health services with a profit-orientated motive – the health sector will really take off as an area for private investment across the continent.’

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INTELLIGENT DESIGN

INSPIRED

BY DESIGN INTERNATIONAL FOCUS

THE TATA GROUP’S FOCUS ON DESIGN AND INNOVATION HAS BECOME STRONGER IN RESPONSE TO THE GROWING AWARENESS OF HOW GOOD DESIGN ENHANCES THE VALUE OF THE BRAND AND CREATES STRONGER, LONGER-LASTING CONSUMER EXPERIENCES words Rishi Vora

The difference between a ‘me-too’ product and a well-designed one is that the former merges into the background and the latter stands out from the clutter.

Design combines creativity and innovation to create a product that enhances the user experience and delights the consumer.

At Tata, a group of companies have come together to advance the new mantra of design-driven innovation in order to build a sustainable, competitive advantage for their products and services. A recent roundtable conference titled ‘Design@Tata’ was the setting for senior leaders from Titan Company, Tata Technologies, Tata Global Beverages (TGB) and Tata Elxsi to discuss why design is a key function in their organisations and how it translates into value for their brands.

How Titan ‘thinks’ design

TITAN COMPANY ‘THINKS’ AND ‘EXECUTES’ DESIGN ACROSS ITS PRODUCT RANGE, WHICH COVERS JEWELLERY, WATCHES AND EYEWEAR

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Operating in the fashion and lifestyle space – where visual appeal and user experience is of paramount importance – Titan Company regards design as a crucial function. India’s leading watch and jewellery maker, Titan has developed two distinct capabilities: for ‘thinking design’ and for ‘executing design’.

Revathi Kant, associate vice-president of design, innovation and development at Titan, explains: ‘Design enhances the brand’s image, so, keeping that in mind, we have created two separate teams for design. We have a team that only does the “thinking work”. Its functions include understanding the

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INTELLIGENT DESIGN

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By deploying engineering and technology in designs, we are able to convert consumer insights into class-defining products business and its customers, and developing a strategy or an idea based on the design.’

Titan’s superior product aesthetics are a result of the seamless integration of ‘design thinking’ and, the next step, the actual designing.

Titan’s robust design process – called ‘3I design’ – has stages for immersion, ideation and implementation. This design innovation ensures its conceptualised and created products ‘stand differentiated in the marketplace’.

‘We try and use our design concepts in the company’s other business categories, so that efforts are not duplicated within the company,’ says Kant.

Operating in the fast-moving consumer goods sector, TGB is aware that design can play a vital role in growing sales, especially on retail shelves, where a great pack design can attract customers.

‘A good design for a brand can refresh a brand completely, scaling its business substantially,’ says Sushant Dash, global brand director at TGB. TGB says that a great design often depends on getting the very first step right – having a deep understanding of the business and the customer.

A case in point is the Tata Tetley innovation, which increased sales for the brand substantially.

‘Based on the insight that the string teabags were messy, we designed the “Tetley drawstring”.

This helped eliminate the dripping and allowed for easy disposability,’ explains Dash.

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Although establishing direct links between design and sales is often not possible, what is indisputable is the impact on the brand image.

‘In many cases, we have found improvements in brand imagery post improvements in design or its packaging,’ says Dash. One such example is the Tata Tea Gold standy-pack – a modern design that translated into premium imagery for the brand.

Designed by Tata Technologies’ engineers

TATA TECHNOLOGIES STRIVES TO SET NEW STANDARDS FOR INNOVATIVE DESIGN IN THE AUTOMOBILE, AEROSPACE AND HEAVY ENGINEERING SECTORS

Within the Tata universe, Tata Technologies occupies a unique space where design meets engineering meets IT. With 7,000 people on its roll, Tata Technologies uses its design and engineering skills to create solutions for the automobile, aerospace and heavy engineering sectors. Design is integral to the work that Tata Technologies does, as it creates products that establish new benchmarks for a list of clients that includes global leaders.

Subhendu Ghosh, vice president of global delivery at Tata Technologies, shares his company’s approach to designing products for its customers: ‘By deploying engineering and technology in designs, we are able to convert consumer insights into class-defining products.’

Embedding high-end design capabilities in its core business process is critical to the path that

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“Somewhere something incredible is waiting to be known.”

Carl Sagan

At Tata we agree that there are countless incredible discoveries yet to be made and that’s why, since our foundation in 1868, we have continued to invest in education and skills in the communities where we work – helping to develop the next generation of scientists, mathematicians and engineers. We are delighted to sponsor the Hay Festival 2014 and are particularly proud to be a leading partner of ‘Hay Levels’, a series of short films produced to help students prepare for their A Level exams, whether they’re studying Newton or nutrition.

Find out more about Hay Levels at tata.com/hayfestival

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INTELLIGENT DESIGN

Tata Technologies has mapped out for itself – that of becoming ‘the world’s number-one partner of the manufacturing industry’.

Tata Elxsi’s attention to detail

At Tata Elxsi, the role of design is to solve the customer’s business problem. Working closely with several companies in the product and industrial design space, Tata Elxsi has expertise in both design and technology, and uses innovation and design to add value across the brand and the product development life cycle.

Nick Talbot, global design head at Tata Elxsi, says: ‘Design can increase a company’s sales or revenues, but, to do this, it has to create an experience for its customers that will have a lasting impact on their minds. Every 1% intelligently spent on good design can possibly yield a 3-5% increase in revenues for a company.’ This is why Tata Elxsi works as a strategic partner with clients to create a differentiated brand and to address the needs of the consumers.

Talbot explains: ‘With the rapidly changing demands and requirements of consumers, blending creative design with technology has become the need of the hour for companies.’ At Tata Elxsi, a design project is broken down to several smaller elements.

For a brand design, for example, it may include crafting the story of a brand, the values it represents, the tone of voice it uses to converse, the colours it uses to attract, etc. What is needed is a clear objective for the design, says Talbot. This translates into an idea or a strategy, while the rest is all about quality execution with a strong focus on detail.

A recent successful design makeover was for Bru – the 50-year-old coffee brand from Hindustan Unilever. With the rise in consumer interest in gourmet cuisine, Bru had to make its presence felt in the premium end of the coffee market, which was

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Design can increase a company’s sales or revenues, but, to do this, it has to create an experience for its customers that will have a lasting impact on their minds dominated by international brands. Tata Elxsi’s task was to uplift the traditional imagery of the brand by creating international appeal. It developed a unique pack design with a glass finish and an innovative cap design. The premium look and greater visibility led to increased market share for Hindustan Unilever.

Demand for design

This article first appeared in the April 2014 issue of Tata Review, a quarterly magazine designed for an audience of corporate leaders, government officials and opinion-makers.

Visit bit.ly/ TataReview for more information

In a country such as India, where customer expectations are driven by a rising youth demographic and increasing exposure to international brands, design can play a vital role in not just building a brand but defining it. Consumers today do not pay much heed to marketing campaigns. Instead they look to break away from the advertising clutter – and that is where design becomes pivotal, providing a single, visible opportunity for a brand to stand for something that is relevant to the audience. This is irrespective of business category – be it a car, or a lifestyle product like a watch, or a consumable such as a beverage.

Innovation has long been a focus at Tata. Pan-group initiatives are in place to encourage and support innovators. The need for strong design capabilities has led Tata to support and build its skill sets. After all, designers across the group are, at this very moment, creating the brands and products of tomorrow.

THE GENESIS OF GENEACTIV Integrating the worlds of design and cutting-edge technology, Tata Elxsi developed GENEActiv, a reliable, wrist-worn accelerometer used to track everyday living in all environments.

Scientifically validated, GENEActiv is fully waterproof and can be worn 24 hours a day. Its software interprets data to provide information about sleep, activity levels, calories burnt and posture. The aim of the product, currently available in the UK, is to enrich people’s lives.

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The challenge was to deliver an appealing, yet gender- and age-neutral, design, to ensure the device suited all users. Based on user research and consumer insights, Tata Elxsi produced a compact and simple wristwatch-style design, boasting an intuitive interface.

Tata Elxsi is now working with several other companies to design products and services that will help to deploy the internet of things, with a focus on home, automotive and energy applications.

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BOOKS BOUNCE BACK

THE AMAZON KINDLE IS JUST SEVEN YEARS OLD, YET THE BUSINESS OF BOOKS HAS CHANGED IMMEASURABLY SINCE ITS INTRODUCTION. AND THE LATEST FIGURES SUGGEST LITERATURE MAY BE ABOUT TO ENTER A NEW GOLDEN AGE words Richard Young | illustration Ikon Images

PRINT ISN’T DEAD It sounds like a lot of money to spend on books. According to research firm Nielsen BookScan, in the UK we spent £1.4bn on paperbacks and hardbacks in 2013. But, sadly, when put in context, the figure doesn’t bring that much cheer.

It’s about the same amount as Britons spent on DVDs or greetings cards last year.

Once you do the maths, £1.4bn looks even less: it’s just £22 per person. Worse still, we spent £98m less on physical books in 2013 than in 2012. No wonder 98 UK publishers went out of business last year – 42% more than the year before. And most experts agree that a major cause of the upheaval in publishing is e-books.

Time’s arrow

The speed of the revolution has been startling. The first-generation Kindle only went on sale in November 2007.

(True, it wasn’t the only e-reader, or even a pioneering one – the Sony Librié was the first E Ink device, way back in 2004.)

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Although it sold out in hours (despite a price tag of $399), reviews were lukewarm.

Even when the Kindle 2 came out in 2009 (it was the first non-US version; it’s been in the UK less than five years) many users remained sceptical.

But five years is a long time in technology. Kindles are now estimated to be a $4.5bn-per-year business for Amazon.

Nielsen predicts e-books will overtake sales of print books this year, with total sales expected to rise to 47 million units.

Even Stephen King, a notable defender of bookshops, has given in. His 2013 novel Joyland was, he said, to be print-only – a stance that lasted just seven months before an e-book edition was announced.

Rites of passage

It’s perhaps, then, no surprise the number of independent bookshops fell below 1,000 for the first time last year (according to The Booksellers Association; that’s around a third lower than when Kindle launched).

But there is good news. While many traditional publishers have been squeezed out of business by the digital revolution, e-books are more than taking up the slack in terms of sales.

For the bigger publishers – those with a more diversified approach, more marketing muscle and a roster of blockbuster authors – digital has been great news. E-books might not appeal to everyone, but, for publishers, they mean lower costs, wider distribution and higher margins.

Hachette, for instance, reported last year that e-books represented 30% of sales, up from 20% in 2012. And, in the first quarter of 2014, HarperCollins’ fastgrowing e-book sales helped ensure that, despite a 7% fall in revenues, profits were up 8%, to $43m.

Better yet for bibliophiles, it’s starting to look like the physical books market, and its publishers, have retreated to a defensible position. In November, for example, the Association of American Publishers

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BOOKS BOUNCE BACK

The sense of an ending

It’s a mark of how far the e-book revolution has come that so many in the publishing world – imprints, authors and readers – express horror, not delight, at the notion digital sales might now be slowing. (Note that this was first suggested prematurely in 2011; and the year-on-year figures can be heavily skewed by blockbuster titles such as Fifty Shades of Grey, which, for some reason, was particularly popular in its e-book version...)

So what exactly is the endgame for book publishing? How will authors find their markets? What is the future for beautiful – sensuous, even – volumes as the e-reader continues its inexorable march?

Digital visionary and MIT professor Nicholas Negroponte thought he had the answer back in 1997. Writing in Wired magazine, which he co-founded, he wrote: ‘Whether you read Grisham or Goethe, you read the author, not the publisher.

That’s why traditional book publishers will slowly but inevitably disappear.

Bookstores will vanish even sooner, as they bring almost no value over a website like

By producing high-quality editions, traditional publishers can shore up sales and retain the loyalty of self-confessed papyrophiles revealed that, while adult e-book sales were up 4.8%, sales of hardback books rose 11.5%.

One successful tactic employed by publishers is to focus on the quality of the physical books they produce. Twenty years ago, publishers knew they could squeeze out extra profits by skimping on the quality of paper or binding. Today, the reverse is true. By producing high-quality editions, they can shore up sales that might otherwise be lost to digital versions and retain the loyalty of self-confessed papyrophiles.

The Folio Society is a good example.

Under threat from digital editions, price wars and an ageing membership, it hired research firm The Insight Connection to learn how to bridge the gap between existing customers and new buyers.

The result? Better marketing (including sponsoring the Folio Prize), a shift upmarket in terms of product and retail partners, and, yes, even a digital strategy.

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Amazon.com.’ (Amazon, note, was then two years old and turning over $147m – last year, its revenues were $74bn.)

He went on: ‘The people who really ought to be disintermediated are publishers. Here I draw a distinction between magazines (of course) and books: the former sells context, and the latter sells content. The content side of the equation can and will go direct the fastest.’

The mechanism Negroponte thought would replace the vast talent-spotting and marketing teams at the publishing houses – user ratings and recommendations on websites – are certainly a massive influence now. And it’s true that it’s now easier than ever for authors to engage in a bit of DIY – in the US alone, 391,000 books were self-published in 2012. But to what end?

Well, the world of independent author earnings (and book sales more generally) is pretty opaque. But writer Hugh Howey has conducted extensive research for his

BOOKS IN NUMBERS

£1.4bn

The amount spent on paperbacks and hardbacks in the UK in 2013

£98m

The fall in the amount spent on physical books in the UK last year, compared to 2012

47 million

The number of e-books expected to be sold this year, as they overtake print editions

11.5%

The rise in sales of hardback books, according to the Association of American Publishers

7k Report and concludes that good books will earn their creators much more published solo than through a big publishing house.

Possession: a romance

Howey, though, has a positive message for the whole ecosystem. ‘There will be [more] casualties in the publishing industry as the delivery mechanisms for stories undergo change,’ he says. ‘But there are opportunities as well. If publishers nurture their authors and work hard to satisfy their customers, they will see more people spending time with a book, rather than on a video game or on the internet. And then the entire publishing industry, as well as those who love to read and those who hope to write for a living, will benefit.’

And that is the principal cause for optimism now – more so than highresolution E Ink (which will win new converts to digital reading) or new kinds of electronic device (perhaps ones ‘able to bottle that “warm feeling” you get when you hold a beloved book in your hands’, as futurist Dominic Basulto put it in The Washington Post recently).

Whether it’s nurturing authors or, like the Folio Society, getting closer to customers who love physical books and want to cherish them, publishers are learning to survive this revolution by listening to their market and responding to readers.

More literature to enjoy in more ways that suit our individual needs? Perhaps we can all learn to love the digital age.

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C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y

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CORPORATE SUSTAINABILITY IS BRINGING VALUE TO COMMUNITIES, ENVIRONMENTS – AND THE BOTTOM LINE. HERE IS WHY NO ORGANISATION CAN AFFORD TO IGNORE IT

IMAGE: IMAGESOURCE

words Matt Packer

Companies cannot afford to ignore the importance of corporate sustainability (CS). It is now an essential component of any effective business strategy, strengthening a company’s licence to operate and driving permission to grow.

The term ‘corporate social responsibility’ emerged in the early 1990s to define a change of perspective broadly summarised as ‘doing well by doing good’. The concept has evolved and anyone who sees sustainability as merely a buzz phrase to generate positive PR hasn’t been paying attention. It is not a publicity tool – it’s a recipe for sustainable value creation.

Innovations in product development and factory processes are encouraging companies to see environmentally cleaner production methods as a way to shed costly inefficiencies. Reaching out to community groups is not a superficial way to win glowing coverage in the next day’s papers, but a vital means of securing skills for years to come. And sustainable policies around people, investment and finance can put organisations on the right footing to avoid a repeat of 2008. To adopt the language of Wall Street’s Gordon Gekko: ‘CS is good; CS works.’

New ideas needed

In April, global innovation consultancy ?What If! threw down a gauntlet to corporations, with the release of its wide-ranging report Eyes Wide Shut, a study of how major UK firms are using new ideas to help them through the recovery.

Based on interviews with 400 CEOs and senior managers in some of the country’s largest companies,

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?What If! found the inventive spirit of British business lacking. Well over half (58%) of those surveyed conceded that their management teams were failing to lead for innovation. Even more worryingly, more than a quarter (28%) admitted that their current business models would no longer work by 2017.

The confinement of innovative activities to specific silos also came in for criticism: some 53% of respondents said that they were failing to capitalise on innovations because their employees couldn’t see the big picture.

For ?What If! co-chairman Matt Kingdon, ‘disconnected structures and laborious processes’ in British firms are preventing a sustainable economic recovery.

‘New technologies, rapidly adapting customer behaviours and globalisation are handing the advantage to nimble businesses that can innovate fast,’ he says.

‘Large companies, whose size was once considered a guarantee of survival – perhaps even a ticket to dominance – must respond quickly and with courage.’

Setting a good example

However, there are companies that defy the stereotype of lumpen, unresponsive corporations, and Tata group – with an emphasis on social responsibility and corporate citizenship that dates back to the founding of the company – tries to ensure each of its businesses is something of a CS role model.

That sense of creating businesses that are part of communities is important. But another hallmark of a rooted and sustainable CS programme is integration with the core business. That means the programme

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should draw on the specific skills of the business, reflect the company’s values, make a contribution to business metrics, and promote innovation in working practices and even products.

That was certainly the effect of Tata Communications’ drive to reduce its carbon footprint by avoiding business travel and instead using sophisticated videoconferencing systems for remote meetings.

‘We realised we could kill several birds with a single stone,’ explains Peter Quinlan, director for managed telepresence services at the company. ‘By deploying telepresence internally, we achieved a significant reduction in our environmental impact and used our experience to design a new commercial service for our customers. The financial savings associated with reduced business travel were the icing on the cake.’

By the end of the first year, executive travel had been reduced by 27%. It dropped by a further 12% the following year. Between 2008 and 2010, Tata Communications reduced its air-travel carbon footprint by 490 tonnes. Staff felt empowered by the company’s support for the technology and using it taught them how best to sell it into customers.

Taking the steering wheel

?What If! director Matthew Cushen says engaging staff in the innovation process is essential for morale. He told Perspective: ‘Younger employees are growing up with an insatiable desire for new and different experiences, with the excitement of what they get involved in at work being an important part of their status. Whether you’re an individual or an organisation, innovation is a muscle that needs exercising. Without it, individuals can stagnate and a business quickly enters a vicious circle.

The best people depart, leaving those who remain with a harder task just to keep up with day-to-day operations.’

Avoiding the kind of stagnancy Cushen warns of is fundamental to the people policy at Jaguar Land Rover. And it is something that goes hand in hand with a top-to-bottom focus on corporate responsibility, as part of which community needs and the demands of the organisation are viewed as one and the same. CSR director Jonathan Garrett wouldn’t have it any other way: ‘If you see CS as a bit of philanthropy, you’re missing the bigger picture. It should deliver value for you and the communities of which you are part.’

A major challenge at the moment is finding the right skills. As well as being a business imperative for Jaguar Land Rover, it’s also a major social and economic issue, first set out by the Royal Academy of Engineering in October 2012. In its report Jobs and Growth: the

NO MORE UNTO THE BREACH Why data privacy is also a CSR issue BUGS IN THE SYSTEM In the past two years, several high-profile data breaches in the consumer-goods sector have put at risk the personal details of large customer bases.

October 2012 US book retailer Barnes & Noble announced that a spate of tampering had affected PIN pad devices at 63 of its stores.

The criminals responsible had installed bugs in the pads that

captured PIN details and creditcard numbers.

Customers were advised to change their PINs and check their accounts for unauthorised transactions.

December 2013 US consumer brand Target said a hack had blown the card details of around 110 million shoppers.

The firm said it would partner with a forensic computing organisation to investigate the hack. In May, CEO

Gregg Steinhafel resigned, citing the incident as the main reason.

May 2014 In a case on a similar scale, online auction site eBay revealed that the passwords of 112 million users had been uncovered in a series of hacks carried out between February and March.

While eBay said payment details were not at risk, it was roundly criticised for the delay between the hacks and the announcement.

DEBUGGING BUSINESS Other companies have distinguished themselves by embedding data privacy into their CSR programmes.

Among them are Japanese logistics consultancy Nippon Express, cloud-computing specialist Cisco and electronics maker Toshiba.

Such firms insist that protecting the personal data of business partners and customers is key to building trust and, as such, being responsible corporate citizens.

JAGUAR LAND ROVER IS ON A MISSION TO BUILD INTEREST IN ENGINEERING AMONG SCHOOLCHILDREN

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Importance of Engineering Skills to the UK Economy, the Academy alerted industry and government to the need for 1.25 million new science, engineering and technology workers by 2020, including 800,000 professionals and 450,000 technicians – and that’s just to keep the economy on an even keel.

‘We want to attract the best,’ Garrett says. ‘However, we’re battling against two perceptions: firstly, that manufacturing and engineering jobs aren’t very exciting, and, secondly, that there aren’t any out there.

But earlier this year we announced 1,400 places at our state-of-the-art Engine Manufacturing Centre in Wolverhampton, and then 1,700 at our Jaguar XE plant in Solihull, so clearly the jobs are available. Our social mission therefore is to fire young people up about engineering as an exciting career path.’

Display of initiatives JAGUAR LAND ROVER’S EDUCATION EFFORTS EXTEND BEYOND THE CLASSROOM TO ENCOMPASS THE CEOs OF OTHER COMPANIES

With that in mind, the Tata Motors-owned brand has blazed a trail, with three strands of community work that prove its CS policy is far more than a hood ornament: • Education: Since 1999, Jaguar Land Rover has run the acclaimed programme Inspiring Tomorrow’s Engineers (ITE), which has reached out to schools to spread excitement about the discipline. Encompassing a series of fun and informative activities relating to science, technology, engineering and maths (‘STEM’ subjects), all delivered by Jaguar Land Rover staff, the scheme has inspired 2 million children over the past ten years, including 328,000 in 2013 alone.

• Volunteering: Some 14% of Jaguar Land Rover employees give up two days per year, paid for by the company, to provide their time to good causes.

The firm also runs a series of other volunteering challenges, enabling staff to improve their teambuilding and project-management skills. On the latest Give & Gain Day – an annual outreach initiative run

Our social mission is to fire young people up about engineering as an exciting career path

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by the charity Business in the Community (BITC) – 100 Jaguar Land Rover workers took part.

• Accreditation: In 2012, Jaguar Land Rover launched its Advanced Skills Accreditation Scheme, which has enjoyed the participation of eight leading universities. Under the programme, postgraduate engineers can pick and choose master’s modules from those institutions to customise courses that will, on the one hand, complement their degree studies, and, on the other, provide them with the skills they feel they will need in industry.

In November 2013, Jaguar Land Rover announced it would build on the ITE initiative with a much wider programme, Inspiring Tomorrow’s Workforce, aimed at tackling youth unemployment. When launched at the firm’s Castle Bromwich plant, the programme involved 150 young people, but there are plans to raise the number considerably in coming years.

The company has also been part of BITC’s Seeing is Believing programme – a Prince of Walesinspired initiative to encourage business leaders to witness first-hand the social challenges in their communities. In May, CEOs from BITC-member businesses visited Castle Bromwich to learn more about the new Inspiring Tomorrow’s Workforce programme and Jaguar Land Rover’s life-cycle approach to minimising carbon emissions, which includes the use of closed-loop aluminium recycling in the manufacturing process. This uses 95% less energy than virgin aluminium production.

This combination of innovative life-cycle thinking and education programmes from school to workplace led BITC to award Jaguar Land Rover the title of Responsible Business of the Year 2013.

BITC chief executive Stephen Howard says that the firm earned the award ‘for its holistic approach

10/07/2014 16:59

The science of steelmaking starts with the art of conversation.

At Tata Steel we know it’s through understanding your business and goals that with you, our dedicated account teams can deliver steel products and services that give you the advantage. Whether it’s enhancing your product

Together we make the difference www.tatasteeleurope.com

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02/07/2014 11:29

C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y

will be reshaped to better reflect its core values.’

Stonestreet argues that, in terms of more general CS shortcomings in the financial sector, ‘the main problem has been a short-term focus, and that has affected corporations across the board.

Another is when sustainability has been siloed – in other words, an organisation will set up a particular initiative and use that as an example of sustainable thinking. That’s not good enough.

What they should really be doing is making sustainability part of everything they do.’

Business leaders who do not factor CS into their money management are exposing themselves to a host of risks, from the small to the ‘huge and catastrophic’, warns Stonestreet. In the energy sector, for example, one of the biggest financial millstones is the problem of ‘stranded assets’: tapped-out or down-valued oil or coal reserves that companies still have stakes in, and, as such, must be recorded on balance sheets.

‘Organisations that use large amounts of water are also having problems,’ she says. ‘The threats to companies can be wide-ranging, from reputational risk to the more fundamental question of whether they can continue to function. No organisation can afford to ignore those factors, or the level of public scrutiny that they will face.’

TATA COMMUNICATIONS USED TELEPRESENCE TECHNOLOGY TO CUT ITS CARBON FOOTPRINT, DEVELOPING A NEW COMMERCIAL SERVICE IN THE PROCESS

to responsible business, from improving its environmental performance and investing in sustainable innovation and communities to developing its future workforce’.

CS rolls downhill

In Howard’s view, top bosses must lead the way in furthering CS across the corporate world.

‘Their everyday decisions and everyday behaviours set the tone and spirit of an organisation,’ he says. ‘They are the ones who create and embed a culture of honesty, consistency and consideration for future, as well as current, needs.

‘Most crucially,’ he adds, ‘they have the power to integrate and embed values into business strategy, which involves taking a fresh look at how values are built into team targets, personal KPIs and performance reviews. That then must be reinforced through accountability at board and senior-management levels. Embedding responsible business behaviours in an organisation is more likely to succeed if all invested parties are clear on one thing: where the buck stops.’

Avoiding catastrophe

In the financial sector, the question of where the buck stops has been a dominant theme since 2008. Libor fixing and management chaos at the Co-operative Group are just two recent instances of grievous ethical failure.

Lisa Stonestreet, programme director at the UK Sustainable Investment and Finance Association, explains that we can’t pretend the Co-op crisis isn’t an issue in the CS debate, because the organisation’s previous success was rooted in public disillusionment with big banks.

‘However,’ she says, ‘judging by the reports that have come out about the Co-op’s governance, it wasn’t because of its core ethical and sustainability values that it went wrong. That was down to managerial factors. People are watching with interest to see how the bank’s governance regime

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Next steps

With an eye on improving their position, then, what sort of steps should firms take to ring some much-needed changes?

‘There are lots of examples of best practice that we didn’t have 20 years ago,’ Stonestreet says. ‘Companies would do well to learn about the UN-backed Principles for Responsible Investment scheme [www.unpri.org], which aims to integrate sustainability across the asset-management landscape.

‘There is also the Global Reporting Initiative [www.globalreporting.org], which is dedicated to ensuring that sustainability reporting becomes standard practice around the world.’

Some changes, Stonestreet points out, will be easier to integrate than others. For example, the needs of a multifaceted organisation with multiple arms will be very different from those of a firm that specialises in human capital. However, she adds, there is one very simple way to gauge which course of action would make the best fit: ‘Look at best-practice peers who are working in your sector.

How have those organisations distinguished themselves by including CS in their financial management? And can you do the same?’

It is a strategy that can surely be applied to any business area – and within any organisation.

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KEEPING FOUR Is ON AN ETHICAL FUTURE ?What If! director Matthew Cushen offers four tips for changing to a more responsible business model Innovation is often seen as just the act of coming up with ideas.

But it has multiple parts, all of which are essential for creating an ethical business.

At ?What If!, we call them ‘the four Is’.

• The first is to think expansively and identify what ‘ethical’ means for your stakeholders and in your business context.

• To do this, you’ll need to cast the net wide to gather insight from your stakeholders: customers, staff, owners and the community. If done well, the opportunities to improve ethically will become clear, as will the potential to distinguish yourself from your competitors.

• After deciding which opportunities to prioritise, focus on coming up with new ideas to address those platforms.

• Then create the maximum impact by experimenting with the ideas, getting feedback, and improving them.

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KARL KOEHLER, CHIEF EXECUTIVE OF TATA STEEL’S EUROPEAN OPERATIONS, EXPLAINS HOW THE COMPANY HELPS CUSTOMERS OVERCOME THEIR CHALLENGES THROUGH INNOVATION words Karl Koehler, chief executive, Tata Steel’s European operations

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Innovation is key to growth for industries operating in mature markets, such as the European steel industry. Indeed, discerning customers have evolved to become the key drivers of innovation in global steel markets. And suppliers with intimate knowledge of their clients’ businesses and markets stand to gain, because customers are keen to form profitable, longterm partnerships.

For Tata Steel, innovation is about working with customers to develop products and services they need. We strive to provide customers with ‘differentiated’ offerings: products and services that few others – sometimes no others – provide.

To deliver on this strategy, the company redesigned its operating model. And we believe the new model is unique in the steel industry – a true differentiator. We have created teams that cater to customers in specific markets, working closely with them to understand their needs. Those needs then dictate our production, supply chain and delivery activities.

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For Tata Steel, innovation is about working with customers to develop products and services they need Pipeline to innovation

CUSTOMER COLLABORATION CAN IMPROVE A PROJECT’S CHANCES OF SUCCESS, SAYS KARL KOEHLER

To drive innovation through product and supply chains, we established a new product development pipeline in 2011. This pipeline captures ideas, filtering and commercialising the best.

The pipeline’s success can be measured by the increase in new products and services in the company’s portfolio. Tata Steel launched 30 products and services last year – the highest number since the start of the programme. The volume of new products and services sold last year also rose by around three-quarters.

An important product launched last year was a new grade of heat-treatable, case-hardening steel. The steel has excellent formability and good punchability, making it perfect for wear-resistant automotive parts that can withstand extreme fatigue stress in demanding applications, such as clutch discs and gear wheels.

Innovation has a key role to play in the development of new systems and products, such as the new photovoltaic ground-mounting systems – an essential component in solar power-generation modules. The systems can be built to order, based on individual customer needs. An innovative aspect of the system is that it reduces material consumption by reducing the number of piles needed for installation.

The role of R&D

This article first appeared in the April 2014 issue of Tata Review, a quarterly magazine designed for an audience of corporate leaders, government officials and opinion-makers.

Visit bit.ly/ TataReview for more information

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Our 600 research and development colleagues in the UK and elsewhere in the world are, of course, at the heart of our innovation.

In addition to supporting the new product programme, our R&D colleagues boost work on new ideas and concepts through an initiative called ‘Thrust’. Tata Steel works with a number of customers, industrial partners and academia on these projects, providing R&D resources and sample material. The automotive Thrust team, for example, is working on a project to develop low-carbon vehicle technologies. Collaboration with customers on a project increases its chances of commercial success.

The company’s R&D activities span the whole range of iron- and steel-making operations, from raw materials to finished products. They also extend to customers’ own processes. Last year, for example, Tata Steel opened a new hot press forming plant at IJmuiden

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in the Netherlands to serve the company’s automotive customers by developing crash-resistant steels, aimed at making vehicles safer and more fuel-efficient.

Proving innovation

Tata Steel’s R&D function is also the main pillar of another customer-orientated initiative that is taking shape: The Proving Factory.

Through The Proving Factory, Tata Steel is working with several partners to help bring to market groundbreaking green technologies that will power the cars of the future.

The Proving Factory will act as a bridge between green technology prototypes and high-volume production. It will prove the viability of producing low-carbon vehicle technologies designed by small, high-tech British companies and university research departments, increasing the technologies’ chances of being adopted by motor manufacturers.

Once completed, The Proving Factory will identify advanced technologies for vehicle-makers and carry out trials. It will aim to manufacture between 1,000 and 20,000 units a year using any one technology, and between ten and 20 different types of products.

Recently, The Proving Factory announced the manufacture of the first components and two new sites for assembly and manufacturing operations in the UK.

Sustainability

Tata Steel is supporting the development of breakthrough technologies to deal with the challenge of carbon emissions, as a founding member of the ULCOS (Ultra Low CO2 Steelmaking) consortium of European steel producers.

Among the potential technologies ULCOS has identified as having the best prospects for success is HIsarna, a cyclone-converter technology that combines Rio Tinto’s HIsmelt process with the Isarna process developed at Tata Steel’s IJmuiden works. The technology has the potential to reduce carbon emissions from the iron-making process by upwards of 20%.

A 60,000-tonnes-per-annum HIsarna pilot plant was built previously at Tata Steel’s site in IJmuiden, the Netherlands, with support from the European Commission and the Dutch Government.

There are still many years of further work to be done before technologies like HIsarna can be fully proven, let alone operational. The pilot plant recently underwent a fourth testing campaign in IJmuiden.

In a globally competitive sector such as steel, policy-makers and industry must work together to deliver the right operating and investment conditions to stimulate technological breakthroughs. Steel has underpinned the development of modern civilisation, and the current generation of industry leaders must realise steel’s full potential as a material. We, at Tata Steel, will continue to focus on innovation to profitably grow with our customers.

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F E AT U R E

TODAY’S SUPPLY CHAINS ARE ABOUT MUCH MORE THAN BUYING IN RAW MATERIALS, COMPONENTS OR EVEN EXPERTISE, AND THEN NEGOTIATING A GOOD PRICE. CORPORATIONS ARE INCREASINGLY RELYING ON THIRD PARTIES TO HELP THEM INNOVATE, AND MANAGING THE SUPPLY CHAIN IS NOW A STRATEGIC PRIORITY words Marc Ambasna-Jones | illustration Marek Haiduk

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the very idea of globalisation under threat? Ever since the financial crisis of 2008, opinion has been increasingly polarised.

In Europe and beyond, extreme views on employment, trade, immigration and the very concept of economic and political alignment are becoming more common.

Yet, whatever politicians say, business leaders know that there’s been a sea change in the way we operate commercially. We live in a world where extended supply chains stretch around the globe and now define how most organisations operate.

Companies are no longer largely self-sufficient entities that turn raw materials or labour into products and services. They are conductors, orchestrating suppliers.

The rise of credible suppliers for sophisticated components and skilled labour in every region of the world has certainly reshaped business in Europe.

It has increased competition, but it has also enabled businesses to be more competitive. It has helped to broaden product portfolios, while enabling increased specialisation.

In short, globalisation, empowered by mobile and web-based technology, has started to virtualise businesses, leading to increased complexity, myriad cross-border supplier relationships and the associated risk-related pressures. But that’s not all.

Globalisation marches on

Supply chains are now highly political. In the UK, for example, regulatory pressures and political attention were increased after last year’s horsemeat scandal. Faced with geopolitical crises, politicians are increasingly turning to control of supply chains as a means of applying pressure to regimes they don’t like.

(And, at the same time, they’re learning their own businesses’ supply chains are so intertwined with others that sanctions can be self-defeating.)

Demands for more supply chain transparency at last June’s G8 meetings in London and Belfast added to the momentum, which is now culminating in a swathe of supply chain-related policies and regulations in the UK and across Europe.

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From UK trade secretary Vince Cable’s £100m reshoring deal to support British supply chains through to EU regulations on supplier sustainability reporting, procurement is no longer just a case of what Sir Alan Sugar refers to as ‘smelling what’s selling’.

Supply chains are now starting to reflect the evolving nature of businesses looking not just to meet the needs of global consumers, but also to use procurement as a strategic advantage.

Yogesh Chauhan, director of corporate sustainability at Tata Consultancy Services (TCS), agrees that procurement has evolved and now has a much more influential role on the future of a business.

‘Never underestimate the transformational role of procurement teams,’ he says. ‘With clear performance indicators and targets – not just financial but also in terms of corporate sustainability and risk management – procurement teams can really help drive business impact.’

Given the scale and complexity of international trade, Chauhan has a point. According to a McKinsey & Company report published in April, there was an 18-fold increase in cross-border internet traffic between 2005 and 2012. Meanwhile, emerging economies accounted for 38% of cross-border flows of products, services and finance. This, predicts McKinsey, will mean that total global flows of goods, services and finance could increase from $26tn (36% of global GDP) in 2012 to between $54tn and $85tn in 2025 – up to 49% of global GDP. (For more on the rebalancing of the global economy, see page 32.)

This is the new supplier economy that businesses face today: fragmented supply chains, where countries increasingly play host to specialisations to maximise their marketability on a global product and service exchange. It’s a strategy that comes loaded with both risk and opportunity.

Specialist and virtual

At the root of change is technology. The internet has given rise to online trading portals such as Alibaba and TraDove. But, at a deeper level, it has also had a massive impact on the way we manage supplier relationships and our ability to source new suppliers regardless of location. It means even relatively small companies – let alone giant corporations used to co-ordinating disparate supply chains – can search for, engage with and monitor increasingly disparate sources of components, skills and materiel.

This feeds the trend for businesses to buy in increasingly specialist products and services, and

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for suppliers to specialise within their niches in a way corporations never could. Apple, for example, might specify and even design elements of the screens used in its products. But it looks to screen-makers such as LG and Samsung, with specialist expertise and manufacturing capacity, to produce a vital part of the product its customers use. This isn’t just about outsourcing assembly – it’s looking externally for the very innovations that define a business.

Supply chain consultancy Proxima looked at the accounts of 2,000 public and private global organisations in 2013 and discovered that 69.9% of revenue is directed towards externalised, non-labour costs. Only 12.5%, on average, goes toward internal labour costs. In the last three years alone, companies have increased their external spend as a percentage of revenue by nearly 4%.

‘The notion of corporate virtualisation is a very real and continuing trend,’ says Matthew Eatough, CEO of Proxima. ‘The definition of “a company” has undergone a dramatic transformation, as a significant portion of revenues are now being spent outside the organisation, with third-party suppliers.

Management has to mitigate this externalised risk by having more complete visibility into the extended supply chain and to ensure it is being managed properly.’

‘Externalised’ equals ‘complex’

Chauhan at TCS agrees: ‘Procuring externally for core goods and services need not necessarily carry greater risks. However, in keeping with all good management practice, one needs to invest in risk management extending to the supply chain. This

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includes visibility on the risk register, a business continuity plan and good two-way communication with the supplier.’

That’s not easy. Although management teams might understand the value of employing specialist providers, their governance, oversight, control and risk procedures have not evolved at the same rate. This leaves companies open to reputational, operational and financial risk, created principally by unforeseen problems occurring two or three steps up the supply chain.

In other words, risk processes designed to audit immediate suppliers aren’t worth much if it turns out their suppliers’ suppliers engage in undesirable business practices.

Faced with upheaval and the complexity of reworking legacy supply chain processes, many businesses struggle to make the leap. But is conservatism an option? Not according to KPMG’s head of supply chain, Andrew Underwood. He says that ‘the time is right for organisations to adopt an agile approach to their supply chain and accept that a one-size-fits-all approach is no longer relevant in a multichannel marketplace’.

The point is well made – because this isn’t just about risk and auditability. Businesses more sensitive to time pressures from on-demand products or services will, in turn, demand new terms from suppliers, with a premium on urgency and a more agile approach to the relationship. Supply chain planning has always been integrated into demand and sales planning, but those disciplines, in the internet economy, happen in real time.

Organisations must adopt an agile approach to their supply chain and accept that a one-size-fits-all approach is no longer relevant That faster, more responsive supply chain is a key ingredient in KPMG recipes for accelerating growth as economies recover. Underwood says that businesses should adopt new, low-cost technologies to enhance transparency for customers and facilitate collaboration amongst partners.

He also suggests that businesses should make more use of outsourcing and shared service centres to consolidate order-taking, financing, logistics planning and wider elements of logistics execution. This, he points out, will drive better collaboration across the supply chain by integrating sales and operations planning processes. But it simply further accelerates the concept of corporate virtualisation – pushing more functions outside any business, which then retains an increasingly specialised group of functions for itself.

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S M A R T S U P P LY C H A I N S

Beyond reputation

You only have to think back to the European horsemeat scandal to understand how supply chain problems can affect product sales and brand reputation. More recently, media attention has focused on the use of halal meat in ready meals.

Further afield, P&G, Walmart and PepsiCo became embroiled in accusations of mass deforestation around their use of palm oil. P&G’s share price took a hit, and prompted the business to make a commitment to palm oil traceability and zero deforestation in its supplier plantations.

If you don’t know what’s going on in your extended supply chain, you will always be at risk of reputational issues, as well as potential breaks in supply continuity.

This is the social media age, after all, where news can disseminate quickly and gain momentum in mainstream media across the globe. International political and social issues can also have a major bearing.

Reputation is important. But there are more operational risks, too. The BSI’s (British Standards Institution’s) recently released SCREEN Global Intelligence Report highlights the constantly evolving threats to supply chains. Cargo theft is a key concern, for example, particularly in Italy, Mexico, Russia, and South Africa. But the report also highlights supply chain risk driven by trade interruption, costing global trade a quarter of a trillion dollars annually.

Professor Brian Squire at Bath University’s School of Management tracks trade-disruption risk and says there are ‘an enormous range of risks facing supply chain managers.’ ‘We analysed over 2,600 disruptions between 2000-2013 and the most common causes of disruptions were production problems, accidents, natural catastrophes, labour disputes and terrorism and war,’ he says.

‘Of course, there is a very long tail of possible causes and that is why the management of risk is a big challenge for organisations. There is also evidence to suggest that the issue is becoming more acute. Supply chain trends, such as globalisation, outsourcing and lower inventory holdings, mean that both the probability and impact of disruptions can be very severe.’ He adds that around 25% of disruptions in his database have costs of over $100m.

Mitigating the risks

‘There are now fairly well established methods of mitigation that, coupled with better data availability, are improving outcomes from disruptions,’ continues Professor Squire. ‘We are currently developing tools that automatically track data available on the internet to provide predictive analytics for managers, which should help reduce or prevent disruptions, as well as analysing factors that improve the rate of recovery.’

Building predictive pictures of supply chain risk is a developing science and one that is increasingly being aligned with sustainability data, too. However, for many organisations, putting a plan together to

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Emerging economies accounted for 38% of cross-border flows of products, services and finance between 2005 and 2012, according to a McKinsey & Company report __________

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In 2013, almost 70% of the revenue of 2,000 public and private organisations monitored by Proxima was directed towards externalised, non-labour costs __________

25 Around 25% of trade disruptions have costs of over $100m, says Professor Brian Squire __________

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SUPPLY CHAIN SUSTAINABILITY GATHERS PACE ‘Sustainability’ is a term often bandied around, but what does it mean in the context of supply chains?

The UN Global Compact refers to supply chain sustainability as ‘traceability’ and offers some guiding principles for businesses to adhere to, but, for many organisations, sustainability has evolved from providing corporate social responsibility data in year-end reports.

The EU recently rubber-stamped this idea with its directive on the disclosure of non-financial information, a regulation already in place in a few countries such as the UK, Denmark and Australia.

There are numerous references to extending reporting to the supply chain, something many large firms already do.

Understanding carbon emissions, energy, water, waste and origin of materials in the supply chain provides organisations with a clearer understanding of the true nature of suppliers. Are suppliers responsible? Do they take local environmental laws, employment issues and resource scarcity seriously? Are they mindful of reducing waste and energy use, thereby keeping costs low and working efficiently?

To manage reputational and business continuity risk, sustainability factors

can be used as earlywarning indicators of potential problems in the chain. The problem most organisations have is how to build a sufficient sustainability picture of the supply chain to enable benchmarking and comparisons to be made.

Investigating supply chain sustainability has often meant sending reams of questionnaires to suppliers that inevitably buckle under the pressure of survey fatigue, especially those with multiple customer bases. A number of businesses have sprouted up to help organisations tackle this issue.

Companies such as Carbon River can provide businesses with a complete picture of supply chain sustainability by matching industry averages against purchase ledgers. Other businesses, such as Sedex and Ecodesk, can offer organisations supply chain sustainability data-management and analysis software to help target suppliers and build maps and pictures of sustainability credentials.

It’s an evolving science in a fragmented market but one that will gain momentum over the next two years as it moves out of the shadows of tree-hugging environmentalism and into the mainstream of critical business thinking.

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counteract immediate and visible risk – and to take remedial action – tends to be higher on the agenda.

There are some basic rules for coping with rising costs and fluctuations in customer demand, for example. Popular approaches include hedging commodity costs or diversifying suppliers. But this requires a set of metrics to enable organisations to monitor activity effectively. The Supply Chain Council’s Supply Chain Operations Reference is a good source of key principles and is increasingly used as a bible for supply chain management measuring.

Integration and collaboration

For many businesses, though, hedging is not enough.

Increasing collaboration with suppliers is seen as a much more rewarding strategy – and a much more effective method of mitigating risk. Speaking at a recent Chartered Institute of Purchasing and Supply debate on integration versus hedging, Phil Joss, director at 4C Associates, said a truly holistic supply chain requires ‘significant integration with both your customers and your suppliers to have better input in developing your risk strategy’.

Integration and collaboration can also bring product development and logistical benefits. You only have to look at WalMart and P&G to see this is action.

The companies collaborated on a piece of software that enables P&G to track its products on WalMart shelves via satellite links to scanners at the registers.

This enables P&G to fine-tune its production and sourcing for WalMart, and to improve its logistics.

WalMart wants to take this integration a stage further. In early May, Doug McMillon, president and CEO of its US business, called for supply chain partners to innovate.

‘Walmart and our suppliers recognise that collaboration is the key to bringing sustainable solutions to all of our customers,’ he said in a statement. ‘A great deal of innovative work is happening every day, but there are still too many

Supplier relationships are now founded on innovation and consistency, not just on price and delivery gaps and missed opportunities. Today’s commitments are about creating real systems change from one end of the supply chain to the other – meaning how products are grown and made, how they’re transported and sold, and how we touch the lives of people along the way.’

It’s common sense to use specialist knowledge in your supply base to help you solve problems or improve products and services for your customers, something Jaguar Land Rover has also benefited from recently. The motor company announced in its recent sustainability report that it has been working with its supply partners to develop a new aluminium casting alloy, RivAlloy, that offers the same level of performance but tolerates higher levels of impurities and helps to reduce the amount of aluminium sent to landfill.

The combination of financial pressures, globalisation, increased competition, demands for sustainability and transparency, and falling commodity pricing have, it seems, created a perfect storm for change in supply chain management. The procurement function is at the heart of this business evolution – a shift where supplier relationships are founded on innovation and consistency, not just on price and delivery.

The Global Commerce Initiative sums it up nicely: ‘Building the new value chain vision starts with information sharing within and between enterprises.

Other critical cultural and behavioural changes will include organisational development, improved trust, and new measures and rewards to support the better alignment of strategic and tactical thinking.’

SMART SUPPLY PAYS DIVIDENDS As global supply chains become more fragmented, with countries and companies specialising production and organisations looking to fill strategic gaps, managing supplier relationships has become hugely important.

That means organisations need in-house supply experts who can see and exploit the entire value chain for innovation and growth.

A 2014 Deloitte survey of over 400 manufacturing and retail executives worldwide tracked what companies

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considered ‘supply-chain leaders’ do to stand out from the pack. They are more likely to: • Empower executive-level leadership with an end-to-end span of control.

• Develop supply-chain strategies aligned to unique business segments.

• Integrate activities and data across functional and enterprise lines.

• Build innovation capabilities to fuel long-term growth.

• Align talent and supply-chain strategies.

Taking this much more integrated approach internally and externally pays dividends.

Seventy-nine per cent of companies with true ‘supply-chain leaders’ reported revenue growth that was significantly above average, compared with 8% in other companies, according to Deloitte. Also, the earningsbefore-interest-and-taxes margin was significantly above average among 69% of supply-chain leaders, but among only 9% of all the other companies.

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FROM THE LABS

no_

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01 GRID EXPECTATIONS High costs, climate change and geopolitical uncertainty are combining to take energy policy to the top of the political agenda. Can science and engineering take the pressure off? words Keri Allan

MIT PHD STUDENTS WARDAH INAM AND DANIEL STRAWSER ARE DEVELOPING ULINK, A LOW-COST POWER CONVERSION AND ROUTING DEVICE USED TO CONNECT HOUSEHOLDS THAT HAVE EXCESS GENERATING CAPACITY WITH NEIGHBOURING HOUSEHOLDS THAT NEED ELECTRICITY. ULINK MAKES FOR HIGHLY SCALABLE MICROGRIDS (SEE PAGE 58 FOR MORE ON SUCH GRIDS)

Industry, academia and policy-makers continue to juggle with the energy ‘trilemma’: ensuring supply security, affordable costs, and meeting obligations towards carbon-emission reductions. This three-way balance is tough to manage, but one possible answer may lie in the form of smart grids.

Smart grids include a range of intelligent network options designed to transform the way we produce, deliver and use energy. But, rather than focusing entirely on new technologies, smart grids use sensors and instrumentation currently available to shift the way we distribute and consume power.

‘As far as smart grid technologies go, the world is focusing on advanced metering infrastructure,’ says Parimita Mohanty, a fellow at The Energy and Resources Institute. ‘That means using technologies we know work, like smart meters and demand response, peak load management, smart analytics and forecasting of renewable energy resources, to name but a few.’

If these technologies can be harnessed together, the argument goes, we can offer a more reliable power

supply, minimise excess energy production at periods of low consumption, introduce variable pricing to encourage consumers to balance their usage, and make much better use of renewables, where output is not guaranteed 24/7.

Numbers game

‘The “smart” part comes from automation and the use of data,’ explains Colin Axon of the School of Engineering and Design at Brunel University. ‘The key question is whether there is a business case for the additional cost of investing in the sensors and instrumentation, the communications mechanisms and the computing power to process data. There is plenty of suitable instrumentation on the market, but there are costs attached that need to be recouped. It’s about return on investment.’

In relation to costs, Axon explains that we should also look for incremental improvements in technology – and one development with plenty to offer is the application of algorithms. ‘There may be more efficient ways of storing or mining data, control algorithms, network models, algorithms for estimating the state of the system, fault detection, or system restoration after a fault has occurred,’ he says.

‘The main example of the need for entirely new technical development is in energy storage,’ he continues. ‘There is a huge amount that could be done in the very near future with existing technology or techniques if there was a business case for doing it. The main barriers do not lie with technology. It’s the economics, market structure, regulation and consumer engagement.’

Getting smart

However, the challenges are not deterring the distribution network operators around the world that are engaged in smart grid demonstration projects, often funded by regulators and governments keen to explore different ways of tackling the trilemma.

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‘Our project, Low Carbon London, has undertaken trials into the feasibility of using “demand-side response” with customers to offset the need to build additional – and expensive – network capacity,’ says Dave Openshaw, senior advisor on future networks at UK Power Networks, which owns and maintains electricity lines across London and the south-east of England.

‘Trials have shown it is possible to agree contracts with commercial customers who have air-cooling and/or standby generation that reward them for reducing their demand taken from our network at peak times, if called upon to do so.

‘We have also shown that, by using smart meters installed by partner EDF Energy and a dynamic electricity-pricing tariff, it is possible to encourage domestic consumers to manage their electricity consumption according to the price of electricity,’ Openshaw continues.

‘Customers participating in the trial were given 24 hours’ notice of the electricity prices that would apply at various periods on the following day so that they could plan their electricity usage. Being able to adjust electricity consumption based on day-ahead pricing might become increasingly important as we build our reliance on intermittent renewable energy, such as wind and solar power, which has near-zero marginal cost of operation.’

Access to the grid

Power distribution is already an international affair, of course – the Nordic interconnected grid and EU continental interconnected grid, for example, both link the transmission systems of various EU countries.

So it’s not surprising that enthusiasm for these technologies also reaches across borders. There is

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The Western world may be facing its own energy issues – but super grids also hold promise for the more than 1.4 billion people worldwide who have no access to electricity. In India, for example, more than 400 million people don’t have a grid connection.

At MIT, academics and students at the Tata Center for Technology and Design (TCTD) are looking at different modes of power generation and distribution using microgrid concepts. Like smart grids, microgrids

manage generation, distribution and pricing of electricity for consumers – but locally, allowing communities to integrate renewable resources, for example, and allowing for customer participation in the business of power.

‘One team is working to understand demand at a very granular level in rural areas by examining where people live and conducting interviews,’ says TCTD co-director Robert Stoner. ‘They’re also developing an automated way to do this across the entire country,

using satellite and census data to map where demand is, and then automatically designing a microgrid so that it can be costed, designed and delivered to businesses that want to build and operate it locally.

‘Another group is working on the operating system, and a novel approach to power delivery, allowing systems to be expanded in an ad hoc manner by the people who live in the community, enabling them to trade power with one another,’ Stoner adds.

Smart grids could allow for greater levels of renewable-energy generation and mitigate against price rises for consumers

So smart grids could allow for greater levels of renewable-energy generation and mitigate against price rises for consumers through more efficient use of energy infrastructure and technologies.

However, policy needs to address the long-term issues around risk, innovation and investment, as well as equity, so that vulnerable consumers are not disadvantaged. Dr Nazmiye Ozkan of the University of Westminster recently completed the ‘Scenarios for the Development of Smart Grids in the UK’ project, funded by the UK Energy Research Centre.

‘Part of the population may be disadvantaged because of their financial situation, or because they’re tenants or live in remote locations,’ she says. ‘I think there’s an important and challenging role for the government and policy community to play here.

There are a lot of trials in progress to understand all the issues and there’s a big learning curve. It’s early days, but there’s some interesting learning taking place and being shared across all parties.’

European super grid

SUPER GRID TO MICROGRID

currently talk around the concept of an international transmission system called the ‘European super grid’.

It is envisaged that this would: • Lower the cost of electricity in all participating countries by allowing the entire region to share the most efficient power plants.

• Pool load variability and power station unreliability, reducing the margin of inefficient spinning reserve and standby that have to be supplied.

• Allow for wider use of renewable energy, particularly wind and solar. (Despite huge progress in countries like Germany and Spain, a country-by-country approach to renewable energy makes nations vulnerable to changes in conditions and seasons.

Since it tends to be windy in the summer in North Africa and windy in the winter in Europe, these areas could support each other in ‘off season’.)

• Allow wide sharing of the total European hydropower resource, which is equivalent to about six weeks of full-load European output.

Again, these technologies are unlikely to be unveiled in one big bang. ‘For example, one particular proposal by the European Commission, as a building block towards a Europe-wide super grid, is the “North Sea offshore grid”, involving Germany, the UK, France, Denmark, Sweden, the Netherlands, Belgium, Ireland and Luxembourg,’ says Openshaw.

FIND OUT MORE ABOUT THIS WORK AT TATACENTER. MIT.EDU

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02 SCHOOL 2.0 Technology continues to revolutionise the way students learn, pushing boundaries within the education industry and giving more children access to study materials, no matter where they live words Keri Allan

A growing number of organisations are developing IT solutions that provide new and exciting ways to learn, often termed ‘e-learning systems’. Because of the growth of this industry, many institutions are moving away from a traditional classroom model of education, instead becoming increasingly virtual and interactive.

In the Western world, today’s students, who have grown up surrounded by technology, are embracing these learning tools. And they truly are enablers. For example, many schools are using videoconferencing, allowing them to bring into their classrooms teachers from around the world – for example, conducting a Spanish class with a native speaker in Spain.

‘Smart classrooms’ are also making use of interactive whiteboards with applications designed to engage pupils in a different way. Then there are the opportunities that mobile devices can provide. For example, the Supreme Education Council of Qatar has provided over 100,000 tablets to students instead of textbooks. It developed an e-learning platform to which students can connect, accessing interactive educational documents, videos and an electronic library wherever they are.

Mobile technology also allows children in remoter regions to have better access to education; if they’re unable to physically reach a classroom every day, they can continue their studies remotely.

There are still many challenges that schools have to face when it comes to implementing such solutions, including the initial cost of adoption, training staff and upgrading technology infrastructure. But, based on the evidence of successful projects (see boxouts), we can be certain that technology will soon redefine the classroom.

CLASSROOM ON YOUR LAP There are millions of children around the world who have no access to education at all, let alone to the technology to support it. One Laptop per Child (OLPC), founded by digital guru Nicholas Negroponte and created by faculty members from the MIT Media Lab, is a non-profit organisation that aims to change that.

OLPC’s goal is to provide every child around the world with a rugged, low-cost, low-power, webconnected laptop, giving them access to modern forms of education. Having developed the XO laptop, currently in its fourth iteration, the organisation has so

far touched the lives of over 2.5 million children and teachers around the world.

Some of its work has been sensational.

In 2012, OLPC delivered Motorola Xoom tablets with solar chargers in two boxes, taped shut, with no instructions whatsoever, to two remote villages in Ethiopia. These were communities where people did not use the written word, much less advanced technology.

‘Within four minutes, one kid not only opened the box, but found the on/off switch,’ Negroponte told the conference where he announced the results of the project. ‘He powered it up. Within five

days, they were using 47 apps per child per day. Within two weeks, they were singing ABC songs [in English] in the village. And, within five months, they had hacked Android.

Some idiot in our organisation or in the Media Lab had disabled the camera.

And they figured out it had a camera, and they hacked Android.’

Proof, if it were needed, that today’s young people don’t just benefit from technology in education – they define it.

FIND OUT MORE ABOUT OLPC’S WORK AT ONE.LAPTOP.ORG

HIGH-TECH TEACHING Tata Consultancy Services recently worked closely with Nature Education, the educational division of Nature Publishing

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Group (NPG), to develop an online learning environment that supports science and technology education.

Using Web 2.0 tools, NPG needed to enable virtual collaboration among students, offering user-generated

multimedia content, conceptual search, synchronous dialogue, multi-device delivery, and self-guided learning

paths. With the work now complete, NPG has an application that is scalable and flexible, with over 50,000 happy users.

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03 WATER OF LIFE Accessing clean water continues to prove a major challenge in many parts of the world. But ongoing research into biochemistry and nanotechnology is delivering new and creative ways to help quench people’s thirst words Keri Allan Nanofiltration: it’s probably not a term you hear every day. But this technology is playing an interesting role in delivering one of the most basic necessities of life: water.

The process uses a membrane permeable only to water, with separation mechanisms that involve both size exclusion and charge repulsion and attraction.

Put simply, nanofiltration is a much smarter way of removing both larger impurities and the tiny particles that can make water unsafe, ensuring that only true drinking water is left. And, thanks to the latest advancements in higher-quality membranes, this approach is becoming incredibly reliable.

‘These are typically high-flux and high-selectivity membranes manufactured from all sorts of polymers,’ says Dr Darren Oatley-Radcliffe from the Centre for Water Advanced Technologies and Environmental Research at the University of Swansea. ‘Control of the pore size and distribution of these membranes in former times was a bit of a black art. But, nowadays, these properties have been rigorously researched and are much more controllable.’

A closer look

Another key technology that has assisted in the development of these membranes is the atomic force microscope. ‘This has allowed imaging and roughness measurements of the membrane surface,’ OatleyRadcliffe explains. ‘These more advanced techniques can measure the charge interactions between the membrane and the pollutants or foulants.’

MIT’s Tata Center for Technology and Design (TCTD) has also been working on clean water systems. As well as working closely on improving the Tata Swach product (see boxout), the Center is undertaking several other projects, including developing village-scale water-filtration techniques.

One of the more ‘far out’ projects has been the nanotexturing of plastic and metal surfaces. ‘We looked at the way a lotus leaf is textured by nature to handle water,’ says TCTD co-director Robert Stoner.

‘By adjusting the texture – making the bumps and the nooks and crannies on the surface larger, smaller, more widely spaced or closer together – you can make surfaces hydrophilic or hydrophobic. You can make them shed water, which is something you’d want to do if you were trying to make something dry quickly; or, if you were trying to use something to collect water and direct it somewhere, you can make them attracted to water.’

This technology could eventually be used to stop contamination of groundwater with pesticides, too.

‘For example, if you were applying a water-based pesticide to a crop and it doesn’t want to stick to the leaf, it’ll roll off and just land on the ground, leaving you with an unprotected plant – or you’ll use a great deal more pesticide, which contaminates the groundwater. If you can find a way either by modifying the spray or coating the leaf with a preparing agent that makes it more hydrophilic, you can greatly reduce the amount of pesticide you’re spraying.’

ENTER THE SWACH Several Tata companies have collaborated on cleanwater techniques, with the results

including the awardwinning Tata Swach, a purifier that requires no energy or running water to operate.

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This bulb-like unit is made of rice-husk ash impregnated with nano-silver particles, which

kill bacteria. It first came to prominence in disaster-relief situations, providing essential hydration

when existing supplies had been disrupted. But its use has widened to tackle one of

India’s biggest social and technological challenges: the need for safe drinking water in every home.

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PAGE 61

Playing it safe

PAGE 62 Leaders in the mist

PAGE 64

The dawn of co-creation

Playing it safe words Morgen Witzel Around ten years ago, Corus (rebranded as Tata Steel in 2010) adopted a policy of ‘zero harm’, aiming to prevent workplace accidents altogether. Andrew Page, director of health and safety for Tata Steel group, explains that, while legal and moral issues are highly important, the company also thinks about safety in a proactive, value-creating way.

‘It is incredibly important to us that we operate reliably,’ he says, ‘and operating reliably means we are operating safely as well.’

The company has now set the European benchmark where safety is concerned. Not just other steel companies but companies from other sectors with hazardous working conditions are looking to learn from Tata Steel.

A key role in that success was played by Ashorne Hill, the Tata Steel trust established to provide education for Tata Steel and, increasingly, other businesses. Ashorne Hill helped to embed new safety standards and then provided training programmes to cascade those standards down through the company and build a culture of safety. ‘Tata Steel fundamentally changed attitudes to safety,’ says Chris Rowles, director of learning solutions at Ashorne Hill. ‘Safety is no longer something you have to do; it is now the first thing you consider. That culture changed right through the organisation.’

(the air-conditioner and refrigerator maker) and Tata Consulting Engineers. The construction industry in India is notorious for its high accident rates, and Tata is determined to continue to improve standards. Companies often adopt higher safety standards to bid for work in Europe or the US, where excellent safety performance is essential to a successful bid.

As a first step, TQMS developed six standards relating to workplace safety: an electrical-safety standard, a fire-safety standard, a working-at-height standard (for work conducted on ladders, scaffolds and cherry pickers), a lockout-tagout standard (which regulates safety when working with sources of energy), a job-safety analysis standard (setting standards for risk assessment and control across the board) and finally a contractor safety-management standard that ensures

A PROACTIVE APPROACH TO SAFETY IS PARAMOUNT FOR TATA STEEL’S WORKERS

Spreading the standards

The rest of the Tata group is determined to learn from Tata Steel and continually improve safety standards right across the group. Chris Rowles and his team are working with Tata Quality Management Services (TQMS) in Pune to help disseminate the zero-harm approach. They have already run programmes for the construction industry ‘vertical’, a cluster of five firms including Tata Housing, Tata Projects, Tata Realty and Infrastructure, Voltas

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contractors and sub-contractors will abide by the same standards. This final standard is particularly important in India, where contracting out of work is the norm and contractors and sub-contractors use a lot of transient workers. Getting these workers to accept the need for higher safety standards requires a holistic approach.

Chris Rowles and his team ran workshops for the five companies in the vertical, helping their CEOs to come to terms with the issues of culture change and helping them to develop strategy maps for their organisations. These programmes were run for executives at the very highest level, since their leadership and support is crucial; if members of the top team buy into the new safety culture, they are in

If members of the top team buy into the new safety culture, they are in a position to disseminate it through the organisation a position to disseminate it through the rest of the organisation. TQMS subsequently organised a forum to allow the companies in the vertical to liaise with each other, benchmark best practices and develop new ways of working safely.

The key issue in any organisation, says Rowles, is to work out how to inspire culture change. The onus should be on individuals to think proactively about safety at all times: abiding by the legal minimum is not good enough. That culture is relatively new in Europe; the task is often to help establish it on a global basis.

In for the long haul

There is a huge amount of work involved in bedding down safety standards in any organisation. Culture change is one of the hardest things to achieve, and it is even harder when the change programme crosses national and cultural boundaries. Often this involves addressing some very fundamental ways of thinking and working. Ashorne Hill’s methods for achieving culture change are based on two principles: (1) that, if the CEO supports change, it will happen, but (2), even so, change will take a long time. It might take another ten years for these standards to bed down and a zero-harm culture to take root, and CEOs and senior managers will have to work very hard to support change in their own cultures. This is a fascinating case study of the importance of culture change – one that will interest companies in many sectors and with many different cultural issues to confront.

And, of course, there is the hope that, if Tata companies set new safety standards, other construction companies will follow suit. The impact, in terms of injuries prevented and lives saved could be enormous.

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Leaders in the mist words Morgen Witzel Most leaders don’t really understand how leadership works, nor do they realise that the organisations they think they are leading are out of their control.

That was the conclusion of Dr John Lawler of Bradford University and Professor Jeff Gold of Leeds Metropolitan University in a recent article for the magazine Organisations & People. The article was part of a special issue on leadership paradoxes published by the magazine, with contributors from the UK and US offering their views on why leadership is so difficult and why so many leaders struggle to be effective.

Leading through the fog

Lawler and Gold describe leaders as operating in a fog, a mental shroud that prevents them from

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Rather than focusing on the strengths of individual leaders, organisations would do better to look at the collective strength of the group How do we deal with this problem? The conventional answer would be to dispel the fog and enable leaders to see more clearly and make rational decisions but, argue Lawler and Gold, that is impossible. True paradoxes are not puzzles that can be solved; they are conditions that exist and have to be lived with.

Team leadership

PHOTO: IMAGESOURCE

MANY LEADERS FAIL NOT ONLY TO SEE BEYOND THE FOG SURROUNDING THEM, BUT EVEN TO NOTICE THAT IT EXISTS

seeing and understanding the environment around them, and knowing what to do next. They feel the heavy weight of responsibility thrust upon them, and they know that those around them expect them to take action, to do the right thing and to lead the organisation forward. But they cannot see clearly through the fog surrounding them. They cannot predict the future; they cannot even, with any certainty, tell what is going on at present. They can control the actions of those immediately around them, but – especially in large organisations – the rest of the organisation is distant and invisible, and they have no accurate way of knowing what is going on. Sometimes they only find out what their subordinates are doing after the fact, by which time it is too late to influence them.

All of this has a deleterious effect on leaders. The paradox of both being in control, by virtue of their position as leaders, and not being in control because of the smothering effect of the fog, creates uncertainty and stress. ‘Leaders are puzzled when they find that there are barriers to their leadership,’ say Lawler and Gold. ‘They face the conundrum of being leaders who are expected to be in control, but who see that leadership is manifestly beyond the control of any one individual.’ Leaders feel that they cannot meet others’ expectations of them. The fear of failure starts to dominate, and in turn increases the fog, as leaders stop trying to make sense of their environment and start spending all their time worrying about themselves.

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Lawler and Gold’s view is that we should instead think about leadership in different ways. For one thing, we need to give up on the notion that leadership is something that is found in individuals. The idea that each organisation has a leader to whom followers look for inspiration and guidance is as dead as the dinosaurs.

As individuals, we are effectively powerless. We can only lead through, and with, the cooperation of others. Here, Lawler and Gold are tapping into the idea of distributed leadership espoused by Richard Bolden and his colleagues in their book Exploring Leadership.

Bolden, like Lawler and Gold, believes that, in any organisation, leadership is practised by a large number of people – not always those at the top.

Think of a busy restaurant, crowded with diners and with staff serving food. Who is the leader? The chef, who runs the kitchen and determines when food is served? The maître d’, who controls the dining room and oversees service? The individual waiting staff, who control the level of service to their own tables? The restaurant manager, nominally superior to the chef and maître d’, who is in charge of the whole operation?

The customer, the nature and timing of whose orders affect everyone else? According to the theory of distributed leadership, it is all of them. None of them can see through the fog; the chef does not know what is happening in the dining room, and the waiters do not know what is happening in the kitchen. But, together, as a team, they work out what needs to be done. The excellence of their leadership is determined by their ability to work as a team.

‘There are no quick fixes for appointed leaders,’ say Lawler and Gold, ‘but the first move has to be to accept and embrace the leader’s conundrum and to recognise that they cannot know it all, even if others expect them to.’ Rather than focusing on the strengths of individuals appointed as leaders, organisations would do better to look at the collective strength of the group.

Does the group work well together? Can it develop a collective vision and analyse and solve problems?

If it can, then it is effective. Tomorrow’s definition of leadership might well be just that: the ability to create and work towards a shared vision.

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THE ROBOTS IN LEGO’S HUGELY POPULAR MINDSTORMS RANGE, INCLUDING THE NXT (PICTURED), ARE TESTED AND REFINED

BY CUSTOMERS BEFORE LAUNCH

The dawn of co-creation words Morgen Witzel When it comes to modern business thinking, sharing is the new black. More and more companies are looking towards co-creation as the next big thing that will help them build a lasting competitive advantage.

Here are just a few examples: • Burberry, the fashion house, asks customers to help with the designs of new coats. Customers can submit their own designs, and the good ones are adopted by the company, while features of others help to inform Burberry’s own designers.

• In the footsteps of open-source software development, some power-tool makers are now encouraging customers to design their own devices, which the companies will then manufacture.

• Toy maker Lego has user groups of children and adults around the world who design new Lego products.

• Coca-Cola asked customers to help provide promotional material for an advertising campaign, ‘Energising Refreshment’. Thousands sent in photos and videos that were used in the campaign.

• Tanishq, the Indian jeweller (and part of the Tata group), has asked customers to come up with new designs for jewellery. The campaign, ‘My Expression’, is helping Tanishq to better understand what its customers want – and to unearth some talented new designers.

No fad

It might sound like a new craze, but the idea of co-creation has been discussed in academic circles for a while. CK Prahalad and Venkat Ramaswamy wrote an article on the subject for Harvard Business Review in 2004, prophesying that it would become the next big thing in marketing. Co-creation, they

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argued, was quite a different concept from customer focus. Instead of finding out what the customer wants and then delivering it, the classic marketing model, co-creation ‘allows the customer to co-construct the service experience to suit their context’, or, in other words, to shape the service they receive in order to suit themselves.

Writing in the European Management Journal several years later, Stephen Vargo and his colleagues made the point that products only have meaning when customers make use of them. A car without a customer is just a lump of metal, plastic and rubber; it has no intrinsic value. It is what the customer does with the car – commuting to work, driving for pleasure or racing on a track – that gives it value. So, they argue, co-creation is inherent in every exchange.

Companies need to wake up and realise this basic truth: value is created by the interaction of products and services with customers, and in no other way.

So, why is co-creation starting to take off now? One idea is that the economic downturn has given the idea new impetus. During the boom years, companies thought they could afford to take their customers for granted. When the crunch came and spending power dropped, some of them discovered the hard way how wrong they had been. On the other hand, those companies that had cultivated strong relationships with customers often came through with less damage.

Their customers remained loyal, and continued to buy their products. British supermarket group Waitrose even expanded its operations during the downturn because it listened to its customer base and altered its product offering to one that customers both wanted and could afford.

Co-creation can be viewed as taking customer relationships to the next level – not just listening

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Co-creation can be viewed as taking customer relationships to the next level – not just listening to customers but getting them involved further upstream, at the level of production, rather than consumption to customers but getting them involved further upstream, at the level of production, rather than consumption. The benefits of this, as the examples above show, are several. First, as Prahalad and Ramaswamy pointed out, people can create products and services that suit them, rather than accepting the mass-produced, one-size-fits-all offerings that most companies churn out. Second, the companies gain valuable knowledge about what customers want. Experience has shown that customers who get involved in co-creation are more proactive about expressing their desires and do so in greater detail than consumers who are surveyed post-consumption.

Third, as Tanishq says, and as some open-source software projects have found, there is real talent to be found out there and companies can tap into new and diverse design ideas. And, fourth, there is no doubt that co-creation also strengthens customer relationships.

But does co-creation only apply to customers? What about other stakeholders? In their book Taking Brand Initiative, Mary Jo Hatch and Majken Schultz show how co-creation also applies to the employer brand. A company can use the concept of co-creation by asking employees to help define its values and do things that will reinforce its reputation. Companies can also work with communities to help develop projects that will be of value to the community, ranging from recreational schemes in developed countries to the provision of education and health care in the developing world.

Management consultancy McKinsey & Company, for example, offers the services of its consultants on a pro bono basis to help with community projects all across the world, ranging from building community centres in deprived inner-city areas to helping the people of Indonesia and Sri Lanka recover from the devastation of the 2004 tsunami, all projects designed and defined by the communities themselves. Tata Steel’s work with poor villages in India’s rural Jharkhand is another example.

Co-creation is not a simple concept, nor is it necessarily easy to manage. But, for companies that do learn how to manage it, the rewards can be considerable. Far from being a fad, it looks like co-creation might just be what Prahalad and Ramaswamy said it would be: the next big thing.

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PHOTO: GETTY IMAGES

Broader applications

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SANTANU MAZUMDAR MÂITRE D’, QUILON

After ten years as maître d’ at Michelin-starred south Indian restaurant Quilon, Santanu Mazumdar knows luxury when he sees it What is different about managing a Michelin-starred restaurant? It’s about very simple things. Many of our guests are busy entertaining clients or with their families and might not realise the level of detail that goes into the order of service. But absolutely everything, from the time it takes for the waiter to put down your starter in front of you to the ideal size of the napkin, has been carefully thought out and calculated. The service is so seamless the customer is not even supposed to realise it’s happening.

What are the most difficult challenges in your role?

Sometimes we get groups where one person is on a very tight schedule and needs to leave before the rest. Working to ensure everyone gets the same pleasurable experience, whether they are there for 45 minutes or three hours, is a real challenge.

You have to coordinate with the chef, who is already working with the complicated demands of a full restaurant, and it requires good communication and observational skills.

What is the strangest request you have ever had?

Recently, someone wanted us to hide his proposal ring in one of the desserts so that, when his girlfriend cut into it, he could get down on his knee and propose to her. I must say it was rather nerve-racking to be entrusted with such an important element as the ring.

Everything is carefully thought out and calculated

Who is the most famous person you have had in the restaurant? We always have high-profile people in here.

Of course, for them, the most important thing is that you just act normally.

What’s more important: innovation or tradition? That is the challenge: to find the balance between the two. There is no point in innovating just for the sake of it. We like to call ourselves progressive because it signifies a starting point in tradition and an innovative process that brings something improved and inspired.

How do you relax after work? I love walking on the South Bank. My favourite place to walk is from Kennington towards London Bridge, along the river to Tower Bridge, across and then back.

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02/07/2014 11:29

SO ALIVE, IT’S OBSESSED WITH POWER. Once you have power, it’s difficult to let go. Something you’ll find with the F-TYPE R. Supercharged and super agile, it will give you control of the road you never thought possible. And with up to 550PS, capable of 0-60mph in 4.0 seconds (0-100km/h in 4.2 seconds), there’s no doubting its power. Just remember, with great power comes great responsibility.

JAGUAR.COM

HOW ALIVE ARE YOU? Official fuel economy figures for the Jaguar F-TYPE range in mpg (l/100 km) – Urban 17.8-22.8 (15.9-12.4) Extra Urban 34.0-41.5 (8.3-6.8) combined 25.5-32.1 (11.1-8.8). CO2 emissions g/km 205-259. Official EU Test Figures. For comparison purposes only. Real world figures may differ.

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