Contents Warwick Business School at The Shard, London P10 P24 P48

One of the world’s great capitals. One of the world’s elite business schools. High-impact programs for senior executives. P60 From London’s tallest and most iconic building.

Doctor of Business Administration (DBA) P16 P62 The DBA offers senior executives a professional doctorate; a Business and Management equivalent to a Doctor of Laws or Medicine. Join an exclusive group of fellow executives at WBS London, as you research, implement and evaluate practical solutions to real organisational challenges. P30 P54 Executive MBA (London) Our Executive MBA program will inspire, engage and challenge you over 24 months as you develop your strategic leadership skills. Take your career to the next level as you apply the latest theories in business and management to your own work. ANALYSIS STRATEGY INSIGHT RESEARCH

8 The genetic make up 24 Design enters 44 A book that 56 Cash reaches Executive Education of an entrepreneur the C-suite inspired me to… vanishing point Are some people How strategists and managers Academics pick the books The proliferation of fintech

Our Executive Education programs combine world-class teaching CONTENTS and industry expertise to provide organisations with the tools they pre-disposed to are embracing design that fired their imagination start-ups is changing banking becoming entrepreneurs? need in order to achieve. 29 Five steps 46 City guide 58 The end of capitalism? 10 Putting data Everybody wants creative – Washington DC Uber and Airbnb lead the to good use and innovative staff Find out how to maximise charge to transform society Asking the right questions 30 When the smoke clears your visit to the US capital 60 Can SMS save the NHS? t +44 (0)24 7652 4306 to put today's tsunami How does a company survive How ‘nudges’ could save of digital data to work 48 City guide e [email protected] a scandal? – Beijing healthcare millions of pounds 12 Has the QE 34 Re-building Home to 21 million people, 62 Making sense w wbs.ac.uk/go/core16 experiment worked? Africa’s brand discover where to shop, of ourselves Exploring the consequences A new wave of start-ups where to eat, what to Drama combined of quantitative easing giving the continent see and where to stay with behavioural science 16 Moody models a brighter future 50 Trailblazer Khan to produce a new you Assumptions and pessimism 38 It's more than takes his chance 64 Health stuck could have huge implications just a game Leicestershire CEO Wasim in the slow lane for the planet Could game theory Khan on his debt to an Why new treatments and 19 The skill of using luck help find criminals eagle-eyed teacher and how medicine aren’t reaching Good or bad - underestimate and investment strategies? he raised millions for cricket us fast enough it at your peril 42 Millennials 54 Why I love my job 66 Wild West 22 Dealing tip the scales Hugh Thomas on launching of the internet with destruction Is the nine-to-five coming Ugly Drinks to challenge Hackers are finding new Mergers make some people to an end? A new generation the soft drinks giants with ways to make money out very rich, but are they worth it? want more from work a healthy alternative of the digital world

www.wbs.ac.uk | core | 3 Introduction

he fourth edition of Core arrives at a time of great P22 P58 change with globalisation Tunder attack and slow growth testing the boundaries of economics – see Has the QE experiment worked? (p12). It may well see some companies go under, others being swallowed up, and some industries disappearing, while others flourish and create new markets with new technology. P46 P34 The end of capitalism? (p58) Welcome to the fourth edition looks at how these new markets of Core and my first as Dean are being established through stuck in the slow lane (p64) digital is not without its security P38 of Warwick Business School. digital technology, with companies we investigate why innovations issues and that is about to become like Uber and Airbnb challenging can take years to trickle down even more complicated with the As Dean of one of the world’s not only whole industries but into frontline practice, while Can advent of the Internet of Things, leading business schools, creating a new sharing economy. SMS save the NHS? (p60) reveals which we explore in the Wild at the heart of a world-class Such disruption could see some the art of nudging people to make West of the internet (p66). university, I am in a privileged companies acquired or merge, better decisions regarding their A different approach to position of being surrounded but in Dealing with destruction own health. investment strategies could by a wonderful breadth and (p22) we find that is rarely a Nudging, based on behavioural emerge from Game Theory depth of academic talent. value-boosting exercise. sciences insights, is cost-effective as explored in It’s more than just Core illustrates that diversity In such turbulent times The skill and highly innovative, something a game (p38). While in Millennials P64 of original thought, and will of using luck (p19) is an intriguing all companies crave, so dip into tip the scales (p42) we investigate provide you with an insight concept; is success more about Five steps to make firms more how a new generation want more INTRODUCTION into some of the impactful being in the right place at the right creative (p29) for inspiration. from work. and cutting edge research time and realising it? Fintech is one of the most creative For career aspiration there undertaken at the school. It is debatable that Volkswagen emerging sectors and is hinting is the journey of Wasim Khan, being embroiled in an emissions at a cashless society, read more CEO of Leicestershire County Our vision is to be the leading scandal was down to bad luck, on it in Cash reaches vanishing Cricket Club, in Trailblazer Khan European based Business School, but we use the German carmaker’s point (p56). While many takes his chance (p50). While with global reach. Harnessing troubles to examine how to re-build entrepreneurs in the sector are fellow WBS alumnus Hugh Thomas, the power of inter-disciplinary a brand in When the smoke clears Putting data to good use (p10), of Ugly Drinks, discusses Why research, working across schools (p30). And it is not only companies Pingit is a prime example of an I love my job (p54). and organisations, we seek to that need to look after their brand, innovative fintech idea and how On the theme of self- address the big, complex issues but countries too as revealed in Barclays produced it is explored, development, we also look P16 P50 facing leaders and managers. Re-building Africa’s brand (p34). and much more, in Design enters at how drama and behavioural Volkswagen’s diesel emissions the C-suite (p24). science have been combined We engage meaningfully with © The University of Warwick 2016. All rights reserved. are contributing to climate change, The tech sector has seen to create a new you in Making Stay in touch with us: Neither this publication nor any part of it may be reproduced, business and government to stored in a retrieval system, or transmitted in any form or by but in Moody models (p16) we a whole host of entrepreneurs, sense of ourselves (p62). any means electronic, mechanical, photocopying, recording create a better society, with our @warwickbschool or otherwise without the prior permission of the department of look at how assumptions have but what is the right stuff when it If all that is not enough, city Warwick Business School at The University of Warwick. Published world-class research running a powerful influence over how comes to making an entrepreneur? guides on Washington DC (p46) by Warwick Business School, The University of Warwick, Coventry, through the core of everything facebook.com/warwickbschool CV4 7AL; email: [email protected]; telephone: +44 (0)24 7652 those in power tackle it. The genetic makeup of an and Beijing (p48) offer some places 4306; website: wbs.ac.uk. Where opinion is expressed it is the we do at WBS. opinion of the author and does not necessarily coincide with As well as affecting the climate, wbs.ac.uk/go/linkedin the views of the publisher or The University of Warwick. All entrepreneur (p8) may have to see and stay and A book that information in this magazine is verified to the best of the author’s Professor Andy Lockett exhaust fumes are an obvious some clues. inspired me to… (p44) gives you and the publisher’s ability. However, Warwick Business School /warwickbschool and The University of Warwick do not accept responsibility Dean of Warwick Business School. health concern, but in Health Of course everything going some more reading material. for any loss arising from reliance on it. Printed by W&G Baird.

4 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 5 Contributors

Oliver Balch Anna David Brindle Meg Carter Carly John Colley Kevin Morrell Jonny Paul Mark Ashley Potter Helena Tim Smedley is a UK-based Blackaby is Public Services is a freelance Chynoweth is Professor of is a Professor is a freelance Piesing is a former Pozniak is a management writer and is a freelance Editor of The journalist who is a freelance Practice in Strategy of Strategy journalist and is a freelance journalist for is a freelance and sustainability journalist, business journalist, Guardian. He has writes about journalist who and Leadership and current content writer, journalist writing The Telegraph journalist journalist for the specialising on writing mainly won awards for his all aspects writes about and Associate British Academy recently leaving mostly about and the Press specialising in Financial Times the role of business about innovation, coverage of health, of marketing, business, Dean (Post- Mid-Career Fellow. the Financial Times technology and Association, higher education, and The Guardian, in society. He is a organisational social care and the media and management Experience Masters He specialises to focus on the culture for The and has written postgraduate and was previously regular contributor psychology and voluntary sector. communications and enterprise Programmes). in understanding fintech, paytech Economist, Wired for The Times, and business the in-house to The Guardian entrepreneurship He is chair of NDTi, for a wide range for The Sunday He was Group Public Sector and financial (UK), The The Sun and education and features writer and is author of for titles including a not-for-profit of print and online Times, The Times Managing Director Organisations. inclusion space. Independent/'i', Wisden Almanack. careers, particularly for People three books, 'India The Guardian, organisation titles. Her articles and a variety at a FTSE 100 He is a former FT Weekend He is now Warwick in science Management Rising', 'Viva South British Airways working to improve have been of magazines. business and journalist for magazine and The Business School’s and technology. magazine. He America' and Business Life support for people published in the Executive The Daily Mail Guardian. He also Press and She writes mainly also ghost-writes 'Under the Tump', and Virgin at risk of exclusion, Financial Times, Managing Director and was the UK writes for the New PR Executive. for The Daily and collaborates all published by Entrepreneur. and vice-chair of The Guardian, at a French correspondent for York-based and Telegraph, on books and Faber & Faber. Recovery Focus, The Independent, CAC 40 The Jerusalem Post Frankfurt Book Fair The Guardian and reports with a group of charities Wall Street Journal, business and for many years. owned Publishing The Independent. business leaders providing mental Fast Company, researches mergers Perspectives on and academics. health and Campaign, and acquisitions. edtech, marketing addiction services. Broadcast, and management. Marketing and Wired. Crawford Spence Lucy Hodges is Professor has been of Accounting education and the Associate Robin Yapp Dawn correspondent Dean for External is a freelance Patrick Eubanks of The Evening Programmes, journalist and Cropper is an Associate Standard and The responsible for John former Brazil Mandy Zhang CONTRIBUTORS is a 2015 MBA Professor of Times and edited both the Executive Thanassoulis correspondent graduated from graduate from Behavioural The Independent’s Andy Lockett MBA and Masters is Professor for The Daily Warwick Business Warwick Business Science after Sabuhi Gard education is Dean of WBS, programmes that of Financial Ian Wylie Telegraph. School in 2012 School. He works earning her has been a supplement for and is recognised run out of WBS Economics, is a freelance He writes about after studying for the Air Line PhD in Industrial business journalist Brian Groom nine years. She as one of the London at The a member of the writer, editor psychology, MSc Management. Pilots Association, Organisational for more than a is a freelance is now a freelance world’s 100 Shard. His research UK Competition and broadcaster health, energy She is currently the world's largest Psychology with decade. She has journalist and journalist, leading professors looks at financial Commission for the Financial and sporting working as a Senior airline pilot union, a minor in written for the editorial consultant. specialising in in the field of professionals Academic Panel, Times, The events for a variety International Officer as a Lead Financial quantitative Financial Times, He was formerly higher education. entrepreneurship. from a sociological academic advisor Guardian, Monocle, of newspapers in higher education. Analyst in methods from The Times, Express, the Financial Times He has also been perspective. to OFCOM, and Management and magazines. Washington DC. The University Independent and UK Business and identified as one on the steering Today, Google He also set up ALPA represents of Oklahoma. Her the Independent Employment Editor of the top 50 panel for the Think Quarterly and runs www. and advocates for research interests on Sunday and has held a Technology Department of and other titles. thememorystore. more than 54,000 are primarily in the newspapers. number of senior Innovation Business Innovation He was a staffer net, a new website In 2009, she posts at the FT, Management for sporting and pilots at 31 U.S. and areas of leadership and Skills’ research at The Guardian Credits Canadian airlines. and innovation. was short-listed including political scholars in into Metrics for 16 years and cultural interviews. for 'Business editor, comment the world. and Models teaches multimedia core was designed in-house at Warwick Journalist of and analysis editor for Long-Term. journalism at Business School by Rebecca Cutts. the Year' at and Europe edition Newcastle University. Cover design by Rebecca Cutts. the Santander editor. He is also Produced in-house at WBS with grateful thanks Media Awards. a former editor to all WBS contributors and the Marketing Team. of Scotland Photography by Sam Kirby, George Archer on Sunday. & Peter Marsh Printed by W&G Baird.

6 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 7 entrepreneurship is accounted for by genetic factors,” he says. librarian and his mother a teacher. However, we won't be seeing a world where would-be “I think, for me, it’s probably more shaped by my businessmen and women undergo genetic screening before environment,” he says. being granted a bank loan. Having made his name in the internet marketing industry “It’s important to clarify what that means,” says Nicolaou. with TrafficBroker and then acquiring energy comparison “That does not mean that genes determine who becomes website uSwitch, his firm Forward now focuses on both an entrepreneur. We’re only talking here about probabilities early-stage venture capital and later-stage private equity style and likelihoods, nothing else – this is not deterministic.” investment. His personal investment vehicle Neon Adventures In any case, people looking for a specific ‘entrepreneurship also has many projects on the go, including a boutique hotel gene’ will be disappointed – the genetic tendency to start in Marrakech, a professional cycling team for promising young a business is likely to be due to a large number of genes cyclists and a philanthropic project called The Kindness that manifest themselves in many ways, including through Initiative, which aims to make the world a better place a complex dance with the environmental influences that by helping people to be kinder to one another. each individual meets in their life. Perhaps the most He wonders whether it was his upbringing, particularly straightforward way genes influence our entrepreneurial his father’s love of sport, which gave him the drive behind tendencies is through personality. People with inherited traits his multifaceted entrepreneurial career. like extroversion, creativity or an openness to new experiences, “I did a lot of sport growing up so I was used to competition,” for example, are more likely to go into business for themselves. says Hutchinson. “I think having a competitive element is Environmental factors might also probably a key trait in an entrepreneur.” interact with genetics to influence Hutchinson’s story is an inspiration Anna Blackaby investigates whether some people whether someone becomes an Even though genes for those people who don’t come entrepreneur – so a person with a certain do matter, I believe from a particularly entrepreneurial are pre-disposed to becoming an entrepreneur combination of genes may react more family but who dream of launching strongly to an environmental stimulus, that pretty much their own business. And, hearteningly, ANALYSIS thanks to their genes such as a better access to finance. anyone can become Nicolaou’s research backs up And on a more complex level, Hutchinson’s experience. genes may lead people to seek out an entrepreneur “Environmental factors are actually environments that may in turn make with the right training, more important than genes,” says them more likely to become an Nicolaou. “Even though genes do matter, entrepreneur. For example, people who guidance, opportunities pretty much anyone can become an are genetically predisposed to embrace and so on entrepreneur with the right training, new experiences may choose to follow opportunities and so on.” The genetic an adventurous career path where they are exposed That’s where people like Deniz Ucbasaran come in. to a richer seam of potential business opportunities. As Professor of Entrepreneurship at Warwick Business School, “In a way we partly create our own environment based she definitely believes the entrepreneurial mindset is something on our genes,” says Nicolaou. that can be learned. Twin research can only give us an idea of the role genes “Given the proliferation of entrepreneurial education, play at the population level. But when we zoom in to look there’s obviously a large proportion of society that believes makeup of an at individuals, it is impossible to say whether any one person’s it can be taught," she says. ANALYSIS entrepreneurial zeal is down to nature or nurture. Ucbasaran points to some of the key hallmarks of an It would be nice to know, for example, how much influence entrepreneurial mindset – identifying opportunities and genes had on Warwick Business School MBA alumnus John selecting the most promising ones: lean and agile thinking, Dymond, who seems to be the classic born-entrepreneur. and knowing how much you can afford to risk. And these He comes from a very business-minded family where his can easily be learned, she believes. entrepreneur father and uncles have all at some stage run their own ventures. “There is probably a form of entrepreneurship for many Dymond is now co-founder and CEO of DocDelta, people,” she says. “It may not necessarily be a start-up, it may a US-based tech start-up that he describes as a talent be within an established organisation or it may be a social search engine for healthcare professionals. He previously enterprise. It’s finding a match between the individual, their re entrepreneurs born or are they made? all of their DNA, non-identical twins share around half. spent several years working for another healthcare start-up, skills, their passions and the opportunity.” It’s a question that has puzzled researchers Researchers can use this fact to look at twin concordances where he came on-board at a very early stage and helped Ultimately both Ucbasaran and Nicolaou agree that it for many decades. for entrepreneurship – the probability that one twin is an to grow it to a multi-million dollar company. He points to a doesn’t really matter whether the drive to be an entrepreneur A But Nicos Nicolaou, Professor and expert in entrepreneur given that the co-twin is also an entrepreneur. key personality trait he believes he has inherited from his father. is down to nature, nurture or a little bit of both. Nicolaou says: the biology of the entrepreneur at Warwick Business School, If this is greater between identical twins than their “There’s definitely an element of drive that is inherent “What is more important is to demystify entrepreneurship and is shedding new light on the role DNA plays in shaping who non-identical counterparts, it suggests nature plays a role in what I’m doing,” says Dymond. “I don’t like to settle. I like make people believe it’s possible and that it’s not rocket science.” chooses to be their own boss. And his results suggest that in determining who becomes an entrepreneur. But if both to be pushing forward all the time – it drives everyone mad, genes do matter – but only up to a point. “It’s not nature, types of twins display similar twin concordances, it would including my wife.” it’s not nurture – it’s a little bit of both,” he says. suggest that nurture plays the only role. Similarly, the career to date of Neil Hutchinson, another Twins are a fantastic natural experiment which can help Nicolaou’s research show genes do indeed make some Warwick Business School alumnus, is testament to that same Watch Neil's film ‘What I did next’ at scientists tease apart genetic and environmental influences people more likely than others to become entrepreneurs. kind of drive. But, unlike Dymond, Hutchinson doesn’t come wbs.ac.uk/go/core

on all sorts of behaviours. Whereas identical twins share “We found that about 40 per cent of the variance in Cutts Rebecca Illustration: from a family of entrepreneurs – his father was a university

8 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 9 data on usage of mobile phones in the area. They could At the Million Man March in 1995 in Washington use this mobile phone information to estimate with reasonable DC in support of African-American rights, police said accuracy how many people were at a game. just 400,000 demonstrators took part. Organisers pored In other situations, such as protests where no ticket sales over photos of the march to refute these claims; information data is available, such estimates of crowd size would usually from internet and phone usage might have given an immediate fall to human judgement. and more accurate picture. “We found that the best indicator for estimating And for these new forms of data to remain reliable, the number of people in a restricted area is the number models of analysing it need constant recalibration, says Preis. of internet connections that phones open or maintain via the Take Google Flu Trends – once the shining example of mobile phone network,” says Preis. “Every time you make a call the power of big data. From the numbers of people searching or message, it’s logged. Every time you look up information on for flu and related symptoms online, researchers estimated a website, it’s logged. But crucially, even if you leave your phone how many people were actually suffering – a couple of weeks in your pocket it will still check for new messages and updates ahead of official figures released by the US Centers for Disease – and those checks are logged too. Control and Prevention in Atlanta. But at some point, online “All this information is collected by mobile phone carriers, data on flu-related symptoms appeared to lose reliability who can also determine where you are while these interactions – in one winter pointing to double the number of flu cases are going on.” actually recorded by doctors. Analyses suggested that internet This does all sound slightly sinister, but Moat says users had started to search for flu-related terms because they it’s important that people realise what they are unwittingly were concerned about the risk of contracting the disease, revealing about themselves every day. rather than because they had already been infected. “There are many ethical questions society needs The practice of using online data to measure real-world to ask about what use we’d like to see made of all this quantities in this fashion was subsequently questioned. data, and what safeguards we need Preis says: “Importantly, our own to protect privacy,” she says. “The more analyses suggested that it wasn’t in we understand what information we’re ... it’s important fact the data that was at fault: it was Helena Pozniak finds out what we can do with the giving away, the more informed decisions the analysis. We need to build models we can make.” that people realise that constantly adapt and update their tsunami of information on our phones, the internet The team largely work with publicly what they are use of various data sources. We can’t and the ever expanding digital world available data – from the likes of photo unwittingly revealing assume everything will stay the same.” ANALYSIS sharing website Flickr or social networks Making sense of this information has such as Twitter. about themselves roused interest across commercial and In fact, they were able to map every day... The more government parties – from investment movements of people around the world banks interested in understanding how by analysing millions of photos uploaded we understand what markets might behave, to policymakers to Flickr between 2008 and 2013. information we’re interested in crowd behaviour, to retailers By trawling through these geotagged keen to understand how individuals photos, Moat, Preis, postdoctoral giving away, the more engage with targeted adverts. researcher Daniele Barchiesi and other Not only can online data offer Putting data informed decisions ANALYSIS collaborators at UCL showed that they practical help for policymakers could estimate which country tourists we can make and businesses by cutting delay to the UK had spent the last 12 months in. and expense in comparison to Such data is traditionally gleaned by members costly surveys, but Moat says it can also help us measure of the Office for National Statistics poised at UK airports parts of our world that previously escaped measurement. to good use with clipboards and traveller questionnaires, a careful She points to their new research with another doctoral process which costs considerable time and money. researcher in the WBS Data Science Lab, Chanuki Seresinhe, “We get a glimpse into movements of crowds over time,” which suggests that more beautiful environments might hat makes us healthy? How will large crowds research showing a remarkable correlation between crowd says Preis. “If we compare our own estimates of visitors be good for our health. Drawing on health ratings from the behave? Who’s got ‘flu’ at the moment? numbers at football matches and mobile phone interactions, to the UK to those from the clipboard surveys, there’s UK census and more than 1.5 million votes from an online What will stock markets do next? the phone at the Data Science Lab at WBS, which the two an excellent match.” game ScenicOrNot, in which players rate photographs taken W Scientists are only just beginning to decipher academics direct together, has barely stopped ringing. Many Moat adds: “This provides an example of the sort of statistics across the UK depending on how ‘scenic’ they are, the team secrets offered up by huge masses of information left behind different stakeholders are interested in unpicking the secrets that could potentially be generated from information that’s find that people who live in more scenic environments report on the internet and mobile phones, and the potential to that such new data sources can offer – from policymakers freely and rapidly available online.” their health to be better. “These results provide initial evidence understand the present and predict the future is tantalising. to businesses to health authorities. Who wants to know about the size of crowds? How can that aesthetically appealing environments might not only “There’s no shortage of data,” says Suzy Moat, Associate After football fans flocked to cheer AC Milan and Inter Milan this information be put to use? be a ‘nice-to-have’, but may impact on something as important Professor of Behavioural Science at Warwick Business School. at the San Siro stadium in Milan in 2013, the researchers were “Much of this data is available in near to real-time,” says Moat. as our health and wellbeing,” says Moat. Being able to uncover “The main challenge is to ask the right questions – questions handed a gift in the form of two months of phone data, made “So in certain crowd scenarios, for example, you might be able such relationships could lead to better use of resources and to get the most out of the data left in our own digital exhaust,” available to them by an Italian mobile network. to draw on these data sources to identify early warning signs more informed policies. says her colleague Tobias Preis, Associate Professor By looking at ticket sales for football matches, the team of problems before they occur.” “Something has really changed over the past few years, of Behavioural Science and Finance. established the precise number of people in the stadium at Such data might also help us avoid the usual disputes and won’t change back again,” she says. “The world is now

Since Moat, Preis and PhD student Federico Botta published a given time – and discovered this correlated perfectly with Vasilis/Shutterstock Ververidis over crowd counts at protests and similar events. a different place in the face of all this data.”

10 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 11 behaviour, misallocation of resources, in response to the financial crisis. yen to 80 trillion yen a year, though wealth inequality, penalising of savers As the economy improved, bond- the jury remains out on how far and currency wars. buying gradually slowed from this has helped to lift the economy “Perhaps it is not clear to the $85 billion a month to $15 billion. from its torpor. general public that monetary policy By the time the programme ended is not as powerful as we would in 2014 the Fed had added $3.7 trillion Negative rates expect,” says Lei Mao, Assistant worth of assets to its holdings, an Professor of Finance at Warwick eightfold increase. In the absence of fiscal stimulus from Business School. “If you think about The UK created £375 billion of new governments, central banks in the economy as a tree, monetary money in its QE programme between Sweden, Switzerland, Denmark, the policy can fertilise it, but the tree has 2009 and 2012. Debate has raged ever eurozone and Japan have dipped to grow by itself. Monetary policy since as to whether the policy was the deeper into the box of unconventional sometimes will be effective in the best and fairest way to get out of the tools by introducing negative interest short run, but in the long run it is not credit crunch. The Bank of England rates in an attempt to stimulate effective at all.” itself said wealthy families had been growth. This means they charge Kebin Ma, another Assistant commercial banks to deposit money Professor of Finance at WBS says, with them. quantitative easing (QE) was started QE was in effect born This policy has proved even more for a good reason. in Japan... The Bank of controversial in financial markets “We learnt a lesson from the Great than QE, prompting fears of a new Depression,” says Ma. “One mistake Japan injected money banking crisis because it hampers the US Federal Reserve made then into the banking commercial banks’ ability to make was to contract the money supply a profit. However, some economists instead of expanding it. If you system for five years, believe even more radical policies compare the last subprime crisis but commercial banks could be adopted in future – such to the banking crisis in the 1930s as ‘helicopter money’, coined by The financial crisis plunged central banks into a new and compare the rate of recovery, held on to it rather than Milton Friedman in 1969, whereby sphere of monetary policy with the deployment of I think we are certainly doing better lending it to consumers, central banks disburse cash directly than that.” while everybody to households. quantitative easing. Brian Groom investigates its impact Under quantitative easing a Mao believes QE has helped to ANALYSIS central bank uses money it has waited for economic avert problems after the financial “printed” – or, more accurately, crisis because “liquidity in the asset created electronically – to buy assets, conditions to improve. market would have dried up and typically government bonds, from This undermined nobody would have been willing commercial banks and other financial its effectiveness to trade any assets.” institutions. This raises the price of “No liquidity is the worst-case those assets and lowers their yield, scenario, even worse than low thus pushing long-term interest rates the biggest beneficiaries, thanks to prices,” he says. ANALYSIS down across the economy. A more the resulting rise in value of shares Some of the fears expressed when Has the QE debated question is whether the extra and bonds, but argued that everyone QE began, notably that it would money available encourages banks had benefited from the boost to the spark high inflation, have not come to lend more, allowing businesses to overall economy and jobs. to pass: if anything inflation remains invest and consumers to spend. The European Central Bank too low, especially in the eurozone. QE was in effect born in Japan, (ECB) began its QE programme in In the US Mao thinks QE has experiment a country plagued with deflation, January 2015: recently it expanded created a bubble in asset markets in 2001. The Bank of Japan injected it from €60 billion to €80 billion such as the stock market. That is less money into the banking system for a month and included the purchase a factor in the eurozone, where most five years, but commercial banks held of corporate bonds in addition finance for business comes from on to it rather than lending it to to government debt. Mario Draghi, banks rather than capital markets. worked? consumers, while everybody waited ECB president, has argued that He says QE is important there for economic conditions to improve. half the eurozone’s recovery in the because commercial banks were This undermined its effectiveness. past two years could be ascribed overloaded with government debt, t is more than seven years since world from a deflationary spiral to the financial system and created to monetary policy. which restricted their ability to lend to the term ‘quantitative easing’ after the financial crisis of 2007–08. a stimulus to economic growth that Helicopter Ben Since April 2013 Japan has also the private sector. By buying leapt from the dry world of Since then, questions have grown debt-constrained governments were embarked on a further large-scale QE back bonds, Mao says the ECB will Imonetary economics and into about its long-term effectiveness unwilling or unable to provide. The US Federal Reserve under programme as part of expansionary “stimulate private banks to lend public consciousness. and consequences. Critics, on the other hand, accuse Chairman Ben Bernanke – dubbed policies known as Abenomics, and in that sense it makes the This unconventional tool for Central banks insist that this it of promoting a range of ill-effects “Helicopter Ben” for his desire to pursued by prime minister Shinzo economy better.” increasing the money supply is widely policy, coupled with ultra-low including overvaluation of asset drop money out of the sky – Abe. The amount injected was Mao disagrees with the view

credited with helping to save the interest rates, has brought stability prices, inducement to risk-taking Cutts Rebecca Illustration: embarked on QE in November 2008 raised in 2014 from 60–70 trillion that QE has increased inequality.

12 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 13 no demand no matter how much cash Settlements, who warned that ultra transmission mechanism by which you give to banks.” -loose monetary policies were putting monetary policy affects economies, QE has succeeded in sustaining the global economy at risk and and lifting demand slightly. asset prices, he suggests, but one had led to a build-up of public and He disagrees with the idea that consequence could be to push them private debt. it has provoked currency wars, saying too high. The fact that wealthy Those debts had become a “potent countries have adopted it for families have benefited most from cause for mischief,” he says, adding domestic reasons rather than asset price rises may have restricted that almost every major country had primarily to engage in competitive QE’s effectiveness. indulged in the “zero-sum game” of devaluation. He argues there Ma says: “Their propensity to currency wars. are diminishing returns to doing consume may be lower than that David Mackie, chief European more QE. of middle or low-income families. economist at JP Morgan, thinks “It gets hard to push asset prices In that case the demand-effect might QE has “worked in a sort of beyond a certain level relative not be all that big.” measured way.” to where the real economy is,” He believes it is “possible” that says Mackie. QE is having a diminishing impact. Frances Coppola, a commentator Ma adds: “The magnitude of QE on banking and economics, argues was more unexpected from the that QE is a “pretty weak stimulus.” perspective of market participants She says: “We have to do an awful when it was first introduced. In terms lot of it to have much in the way of changing market behaviour, that of a noticeable effect on the first round would have had a stronger real economy.” effect than subsequent rounds.” The technique is effective at Negative side-effects such as asset propping up asset prices but less so at bubbles can be contained by using restoring growth, she adds. other policies, he suggests. Coppola says: “We have ended “We have prudential policies that up with doing an awful lot of it Empty highways, control a bank’s leverage for real because we have got the idea that Kowloon, estate bubbles,” says Ma. “Plus, there isn’t really anything else much Hong Kong we have policies on the borrowers’ that we can do.” side such as requiring a higher Those debts had Among its drawbacks, she says, down-payment.” is that markets have got used to On whether central banks are become a 'potent constant monetary reflation and running out of firepower, Ma points cause for mischief', panic when it is taken away, such “The welfare of low-income people can boost private sector innovation fiscal stimulus, taking advantage out that they have proved creative almost every major as when the Federal Bank raised should be better off when we have and investment.” of low borrowing costs to increase in finding complementary policies interest rates in December 2015 for easy monetary policies,” he argues. He suggests that could be done by investment in infrastructure. such as ‘forward guidance’ – used country had indulged the first time since 2006. “Governments will have more money reducing corporate taxes, alongside “That would most likely waste to communicate future monetary “It is like an addiction: the more in the 'zero-sum game' ANALYSIS to spend on low-income groups.” some loosening of banking regulation taxpayers’ money,” he says. “China, policy – and ‘operation twist’, where heroin you take, the more you need it As to whether QE has encouraged in Europe. for example, has spent lots of money the Federal Reserve sells short-term of currency wars and when you withdraw it, you excessive risk-taking, Mao says we on infrastructure during the past government bonds and buys become ill,” she says. will not know until another financial If the economy 20 years. There are roads and long-dated Treasuries, in an effort to “I don’t really subscribe to the idea Coppola adds that QE increases crisis occurs. highways with no-one driving on push down long-term interest rates. that it led to a massive overvaluation inequality, not only by raising asset “In the short run, countries are is in recession and them. What is the point of those? The “People have been talking about of asset prices, induced risk-taking prices for the wealthy, but also by competing in how easy their people don’t want Government does not know what the central banks running out of behaviour, misallocation of resources, giving governments scope to pursue monetary policy can be,” says Mao. demand there is in the market. On policy options ever since the crisis, things like that,” says Mackie. “I fiscal austerity, which mainly hits “That could be dangerous, but to make investments this perspective, I am a true believer but I think central banks are being would argue that QE, in substance, those on lower incomes. perhaps the negative side of these and firms don’t want in the free market.” rather creative in using non- has been a bit disappointing.” She argues that the distinction policies will be limited. If you look at Ma says that compared with traditional monetary policy tools,” He suggests that countries who between fiscal and monetary policy is a five to 10-year horizon, global to expand production, traditional monetary policy, QE can says Ma. “It could be a problem, but adopted QE early have done better false and that policymakers should growth is not going to be dramatically there is basically no be more successful in lowering in the end central banks always economically than those that delayed. look at a range of potential measures, changed by monetary policies.” long-term interest rates. As for manage to find a way, one way or “If you compare the UK and US including “helicopter drops” of Among factors that have caused demand no matter stimulating bank lending, he says: another, out of there.” performance with the eurozone, money to citizens and a co-ordinated turbulence in financial markets this how much cash “Some people don’t buy that story one big difference between those write-down of countries’ debts. year is a fear that central banks are you give to banks because you not only need the supply Zero-sum game economies is at what point they As QE’s impact diminishes, how running out of policy options. of credit, you need demand. began to do QE,” says Mackie. long can the world continue to place “Perhaps the focus should “If the economy is in recession Critics of QE include William White, He adds QE has had “modest its faith in monetary policy alone? not be on central banks and monetary He is unimpressed by a call by and people don’t want to make chairman of the OECD’s review effects” in terms of lifting Mao says: “We have to give up policy any more.” he says. “We the OECD, the Paris-based club investments and firms don’t want to committee and former chief economist asset prices and improving balance thinking that central banks can help

should pay more attention to how we of mostly rich nations, for collective expand production, there is basically Cutts Rebecca Images | Illustration: Greuel/Getty Jorg of the Bank for International sheets, while also improving the the economy to grow.”

14 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 15 long time lags involved, imprecise and its potential environmental existing scientific knowledge and the and socio-economic impacts.” Its unpredictable nature of technological Fifth Assessment report, finalised in development, he says. 2014, said global surface temperatures This is especially true for estimating would increase by between 3.7°C and large increases in global temperature, 4.8°C by 2100 if the world remained where knowledge depends on on its present path. Moody extrapolations from complex models. But it could be kept to 2°C or less Could reluctance to confront if greenhouse gas emissions were cut uncertainty when we must weigh up by 40 to 70 per cent compared to a wide range of potential outcomes 2010 levels by the middle of the – arguably a hallmark of failed past century and to virtually zero by the climate agreements – stem from an end of it. irrational but indisputable part of The Paris Agreement set a long- human nature? term goal of keeping the increase to Melkonyan invoked the Ellsberg “well below 2°C” – and attempting to models Paradox, which arose from a series of limit it to 1.5°C. thought experiments carried out in “Climate change is happening In the problematic world 1961 that showed how strong but there will always be a range “ambiguity aversion” is for most [of temperature increase forecasts] of climate science where people – that is a tendency to prefer primarily because there are so many assumptions have to be known risks over the unknown. uncertainties in our predictions,” ANALYSIS Imagine, you are asked to pull a says Melkonyan. made Robin Yapp finds marble from one of two large, covered “No matter how long or how hard urns, and will win $100 if the marble we study those things, some out how levels of pessimism could have huge is black. unknowns will stay unknown.” implications for the planet You are told that one urn contains 50 black and 50 white marbles, while Extreme positions the other urn also contains 100 marbles that are black or white. You Melkonyan's new research, co- don’t know the ratio, but every ratio authored with Robert Chambers, of peaking just after 196 that anthropogenic global warming is as likely as any other, so there could the University of Maryland, examines countries approved the Paris – that is the man-made carbon be 99 black or 99 white marbles in it. whether policy conclusions can be Agreement on climate change dioxide in the atmosphere – must be If people behaved perfectly influenced by behavioural traits in Sreduction measures last addressed is not likely to be matched rationally, they would not have any economic models used to assess the December, the chairman of the by agreement about the resources preference for either urn. But people case for climate change action. Intergovernmental Panel on Climate it requires. overwhelmingly choose the urn that They looked at three models – the Change (IPCC) was in no doubt. gives them a 50/50 chance of success, subjective expected utility (SEU) ANALYSIS “The science is very clear,” said even though there could be 99 black model, the maximin expected utility Dr Hoesung Lee. “We must act now. Could reluctance marbles in the other one. (MEU) model and the incomplete Economics also makes it very clear to confront uncertainty The results, which have been expected utility (IEU) model. that we can build a better world by replicated many times since, The latter two represent opposite addressing climate change problems when we must weigh- demonstrate an inherent preference extremes: the MEU model sees the right now.” up a wide range of for the known over the unknown. worst as highly likely and seeks to So, if science makes an unarguable potential outcomes... “Given our ignorance about the insure against it as fully as possible; case for counteracting climate change nature and magnitude of climate the IEU interprets doubt about – and every nation now appears to stem from an irrational risks, decision-makers responsible for outcomes as a reason not to act or agree – then to what extent can it also but indisputable part designing climate change policies to take far less action. guide us on how we should act? face an ambiguous decision situation It is the SEU model, lying between While 15 of the 16 warmest years of human nature? akin to betting on Ellsberg’s urns,” the other two, which has been most on record have come in the 21st says Melkonyan. “The unfortunate widely used in economic assessments Century, confidently predicting the In his research Melkonyan has difference is that the stakes are now of climate change even though it has rate of future climate change remains found that underlying assumptions immeasurably higher.” come under fire from some economists. problematic even for climate experts. about the likelihood of different SEU thinking recognises the need Tigran Melkonyan, Associate scenarios, risk tolerance and the Paris agreement to act but the details of how depend Professor of Behavioural Science at importance placed on future greatly on the decision-maker’s risk Warwick Business School, conducts generations could lead to starkly The IPCC was established to Climate change tolerance and concern for future ice sculpture research into decision-making different policy conclusions. provide policymakers with a “clear 'Minimum generations, and its robustness has in conditions of risk and uncertainty. Climate change assessments are scientific view on the current state Monument' by come in for criticism. It has also been Néle Azevedo

He believes the growing consensus “inherently subjective” due to the of knowledge in climate change neleazevedo.com.br © Néle Azevedo: criticised for not taking into account

16 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 17 our natural bias for known risks still a big step forward.” insurance claims related to weather spotted by Ellsberg’s urns so the The agreement also stipulates that events,” says Elmes. newer MEU and IEU models were developed countries will continue to “On current assumptions, the developed as early alternatives to the help developing nations to reduce commitments countries have made criticised SEU model. emissions and build resilience to are not going to get us to the 2°C “The newer models recognise that climate change. target, let alone 1.5°C. in real life we might not know the Melkonyan says expectations “But we’re starting to break the old odds of something happening, so our inside China were also important with rule that more economic growth pessimism or optimism also plays a a growing focus on deaths attributed means using more energy and things The skill of role,” he says. to pollution. are changing quickly in terms of the When examining the policy falling cost of renewables.” outcomes of these models Melkonyan Much of the discussion about the found they produced polar opposite appropriate way to tackle climate recommendations. He believes this change centres on discount rates, is because the MEU and IEU which essentially seek to convert models reflect two different types potential impacts on future generations of pessimism. into current monetary values. using luck Broadly, applying MEU thinking Economists typically assume we to climate risks involves pessimism will spend less than a dollar today about things as they stand and to prevent a dollar’s worth of damage Ian Wylie meets Chengwei Liu to discuss how following will accept substantial costs now in future. to avert even a small possibility of The 2006 Stern Review for the the most successful is pointless and how chance future disaster. British Government concluded we doesn’t get enough credit IEU thinking is, instead, pessimistic should invest one per cent of global ANALYSIS about alternatives to the status GDP in fighting climate change or quo and favours ‘business as usual’ face consequences that could cost up unless changing path would have a to 20 per cent of world GDP annually. definite benefit in all potential Lord Stern, a former chief resulting scenarios. economist of the World Bank, said ever mind that Chengwei Liu is one of the Science at Warwick Business School. Of course, successful climate change was the greatest more self-effacing academics you are ever likely people don’t like to have their success explained by luck, while Bottom-up policy market failure ever seen and saw to meet. He can hardly deny an element of good audiences too seem unwilling to acknowledge the role of luck A decade ago, China seriously the issue as so urgent that he set Nfortune in his success to date – after all, the role in the success of outliers. As a result, the stories of the most The models show how people can considered a Green GDP measurement the discount rate close to zero. of luck and randomness in exceptional performance is successful attract the most media attention. respond very differently to the same to capture the environmental costs of Some economists criticised him for exactly what he studies. decision-making environment due to its development, even announcing that but Lord Stern recently argued Liu has spent a number of years researching extraordinary Don’t follow Gates their attitudes to ambiguities within it. that in 2004 the cost had been that most models still underestimate performance in the world of business, and concluded that Melkonyan says in this respect we equivalent to 3.05 per cent of GDP. the dangers of climate change, adding often luck is mistaken for skill. So why is the idea that exceptional performers are the most should see the differences as The figure was lower than many that even the IPCC recommendations The latest accolade to come his way is being listed skills-flawed? Because exceptional performance often occurs ANALYSIS behavioural, rather than ethical, economists had anticipated, but the are not strong enough. as one of the global management thinkers most likely in exceptional circumstances, wrote Liu in research with Jerker although he believes a hard-line IEU policy was quickly dropped as “The debate about the appropriate to shape the future of how organisations Denrell, Professor of Behavioural Science position “is risky for society,” authorities came to view the story it discount rate is related to interest are managed and led. Every two years, at Warwick Business School. Top especially as 196 countries have told as politically damaging. rates but also to how ready we this Thinkers50 poll ranks and shares ... research performers are often the luckiest people, agreed to finally act. Though as But could the old view that are as a society and as individuals the best in management ideas suggests that the more who have benefited from rich-get-richer Frederik Dahlmann, Assistant tackling climate change acts as a to care about future generations,” and heavyweights Michael Porter, dynamics that boost their initial fortune, Professor of Global Energy at WBS, brake on growth be changing and says Melkonyan. Clay Christensen and Peter Drucker exceptional a success concluded their research. points out, just how is yet to could jobs created by clean energy “It’s a problem we will face in are among previous winners. is, the less we can Consider a college dropout who be decided. But he believes the help sway doubters and deniers? the fairly short-term, say 50 years, “One common feature of the people turns out to be the wealthiest person Paris Agreement’s commitment to “The consensus on the role of and if we don’t do enough, certain I know on this list is that we all challenge learn from them, in the world. Yes, Bill Gates may be progress reviews every five years may human actions in climate change is irreversible processes are likely the wisdom of some existing because moving very talented, but his extreme success spur greater action in China, India growing,” says Melkonyan. to begin. management gurus,” says Liu. from “good to great” perhaps tells us more about how and other developing nations. David Elmes, head of the WBS “People don’t realise that even For example, instead of learning circumstances beyond his control “Questions about sovereignty and Global Energy Research Network, 2°C of temperature change can from “great firms” and trying to imitate often requires luck by created such an outlier. who makes decisions were a big believes most business sectors have have devastating effects. It can the most successful people and being in the right place In other words, what is more sticking point in the past,” he says. factored an assumed carbon price increase mortality risks, besides organisations, his research suggests exceptional in this case may not be “Now each country must think into investment decisions for years. all the economic impact on that the more exceptional a success is, at the right time Gates’ talent, but his circumstances. about what they will commit to and “We have a growing body of agricultural output and many other the less we can learn from them, because For example, Gates’ relatively privileged there’s hope that this bottom-up business and economic evidence that productive activities.” moving from “good to great” often requires luck by being background enabled him to gain extra programming approach will lead to a positive supports acting on climate change It makes picking the appropriate in the right place at the right time. experience when less than 0.01 per cent of his generation then self-fulfilling prophecy. From a policy now and we have the insurance model to base policies on all the “Some wisdoms now need to be modified and adapted,” had access to computers. He attended one of only 50 schools

perspective it’s insufficient but it’s industry paying out more on more important. © Nicholas Goodden says Liu, Associate Professor of Strategy and Behavioural in the country that had a computer at the time.

18 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 19 There are implications for the management of talent. If not observed or moderate, the role of luck in success can lead Oakland Gates proved to persistent bias and inequality and Liu’s research suggests Athletics' it's not what the need for policymakers to design nudges to help people winning you know, but strategy who you know resist the temptation to reward or imitate the top performers. in 2002 In research, this time with Mark de Rond, of Judge Business School, Liu points out that untangling luck and skill in the performance of others isn’t easy… but it’s necessary. “Rewarding the highest performers can be detrimental or even dangerous because imitators are unlikely to achieve exceptional performance without luck unless they take excessive risk or cheat, which may partly explain the recurrent financial crises and scandals.”

Moneyball lessons However, the “luck bias” is very persistent. Liu’s research found that even when observers are given clear feedback and incentives to be accurate in their judgement of performers, 58 per cent of them still assumed the most successful were the most skilled when they were clearly not, mistaking luck for skill. Liu has, for example, tried to apply his research with some financial institutions, where he believes the most successful traders may simply be the luckiest ones who took more risks than their colleagues. These traders tend to be rewarded with bonuses as a result, but in all likelihood their luck will run out. “I seek to help HR departments identify the lucky outliers and discount their performance in evaluation,” explains Liu. “Continuing to reward high performing stars on the trading floor could lead to a dangerous risk-taking culture in the long run. Far better to improve your own evaluation internally, and take advantage of your competitors who will continue to systematically mistake luck for skill.” The lucky few should understand and appreciate the role that luck has in their extreme success – Liu’s research finds, interestingly, that entrepreneurs are more willing to acknowledge the role of luck in their success than corporate managers – and with that understanding comes an obligation when buying. But they also gained because other teams paid bias. A degree from Oxford or Cambridge is so prized And his mother’s social connection with IBM’s chairman to those that have not. more for these players than they might be worth when selling as ‘elite’ that many UK legal firms are over-represented ANALYSIS – she served alongside him on the board of a charity – enabled “I do a lot of teaching on executive education courses them. The Oakland A's strategy led to a higher ratio of win by their graduates. Gates to gain a contract from the then leading PC company, and I’ve found it really difficult to convince some executives rates relative to salary costs than other teams. Of course, many of them are competent. But inevitably generating a lock-in effect that was crucial for establishing that luck plays an important role,” he says. Still, there are ways Liu calls this idea as strategising with (others’ biases of) luck. some Oxbridge graduates are overrated and become his software empire. to ‘get lucky’. His latest research extends this idea to other areas where biases disappointments due to false positive mistakes. More Of course, Gates is not a stupid man. His talent and effort “Chance favours the prepared mind,” as Louis Pasteur, the are so systematic that they allow some others to exploit their importantly, firms can omit hidden gems from other universities play important roles in the Microsoft success story. But that’s French chemist, once wrote. Good and bad luck befalls to all, competitors’ mistakes. due to false negative mistakes. Clifford Chance’s CV-blind not sufficient for creating such an outlier. Talent and effort were but only some can maximise the return on luck. And only some For example, when hiring talent some employers strategy forces evaluators to judge candidates’ potential based probably less important than the circumstances. He could not organisations are able to see what others do not see, says Liu. continue to be influenced by stereotypes. Successful firms on track records instead of using the stereotype shortcut. have been so successful without the latter. But for Liu, calling He points to the bestselling book Moneyball, in which tend to be overconfident and have little incentive to change In the same way, many employers have vowed to adopt out the role played by luck is not enough. Michael Lewis documents how a stereotype of what good recruitment strategy. a name-blind policy to fight against racism. This strategy should “I realised early on that if I wanted to have a career players should look like blinded the scouts and coaches in most On the one hand, missing hidden gems is an invisible error be even more effective for smaller firms, thinks Liu, because in business schools, I had to say something more actionable Major League baseball teams to the role of luck. But, as a result, – employers rarely follow up what happens to the candidates hiring against the negative stereotype can help them identify and constructive,” he admits, with a laugh. one unfashionable team was able to benefit. they reject. Moreover, those hired are trained and developed hidden, undervalued gems that others overlook. Around the turn of the millennium Oakland Athletics so they can perform competently even when they were really There is one further lesson for companies which discover Second best are best managed to pay less for players than their eventual contribution false positive hires. a winning way to do things differently: keep the success would suggest they were worth and then resell their best But this can falsely boost an employer’s confidence in the to yourself. The Oakland A's did the opposite and let Lewis So if we can’t learn from the best, who can we learn from? It is performing players toward the peak of their output. stereotype hiring strategy. However, while some employers write a bestseller on their strategy. The publication of Moneyball more useful, says Liu, to draw lessons from the less exceptional The Oakland A's recognised the tendency for extreme continue to suffer from such a blind spot, other, smarter firms in 2003 marked the decline of their performances because performers, the second best, because their circumstances are performances in ‘star players’ to regress to the mean in future see opportunity. rivals started imitating their approach. likely to be less extreme, implying their performances are more seasons. They benefited from this trading strategy because Corporate law firm Clifford Chance, for example, employed If you want to keep beating the competition, says Liu,

informative and offer more evidence for skill. they were better able to recognise the value of their players Creative/Alamy © National Geographic Images Shaw/Getty Ezra a CV-blind strategy in the UK to break the Oxbridge recruitment don’t let others know how you did it. Just say you were lucky.

20 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 21 Companies contemplating mega- Companies mergers and acquisitions used to fear contemplating the bite of regulators and rulings that view industry concentration as mega-mergers and significantly reducing competition acquisitions used and against the consumers’ interest. Dealing with Regulators have the power to to fear the bite of unwind the deal or force substantial regulators and rulings divestments. But in the last 10 years regulators have taken a softer line that view industry both in the US and Europe, says concentration Colley. Cuts to public spending have reduced the ability of regulators to as significantly investigate on a major scale. destruction reducing competition “There is also a view that mergers increase industry efficiency which in and against the competitive markets should lead to With the return of the mega-merger 2015 was a record consumers’ interest lower prices for consumers,” he says. Still, some of the current crop of year for M&A, but Ian Wylie finds there is little value deals may not pass the regulator’s in most takeovers According to Colley, shareholders may also seek to scrutiny. According to Colley, competition authorities are ANALYSIS reward and retain good management teams, even though beginning to define markets more narrowly. AB InBev, for they may have reservations about a bid. example, has had to agree to sell its global rights to Miller, There may be another reason shareholders agree. If they Grolsch and Peroni. are large institutional shareholders, there’s a good chance The basic conditions for a successful acquisitions they hold a portfolio of shares across the sector, possibly market is high liquidity which means corporate cash piles, hen John Colley expresses his doubt in the offices and regional management structures. And savings in the target company itself, and so may stand to benefit cheap borrowing and institutions with large cash balances value of large scale mergers and acquisitions, can be enormous: beer brewer AB InBev's last two major if the deal goes through. to invest. These conditions persisted in the first half of he knows what he’s talking about. acquisitions created savings amounting to 14 and 21 per According to Colley, high levels of M&A activity tend 2016, driving global acquisition activity, but continuing W Now Professor of Practice in Strategy and cent of sales value. The result may also be increased to boost the value of all shares in the relevant sector. uncertainty regarding Brexit meant merger activity Leadership at Warwick Business School, Colley was market power – there’s one less rival to worry about and There is another group of beneficiaries. Advisers to the collapsed in the UK. The fall in sterling, though, fuelled Group Managing Director at BPB PLC, a FTSE 100 control of distribution networks may strengthen. deal are always well remunerated, with fees-per-deal of some acquisitions, especially those with substantial export business and the world's largest manufacturer of However, M&A activity tends to be cyclical, with peaks several hundred million dollars not uncommon. sales and UK-based costs. plasterboard when it received a hostile takeover bid in seen in 2000, 2007 and now 2015. Deals breed deals as Investment bank fees alone for 2015 were more than $8 2005 from French multinational confidence grows, and Colley warns billion. These fees, says Colley, are often success-related, Saint-Gobain, and witnessed at first that the risks and costs of growing by which means that advisers are rarely a moderating John Colley's five worst deals hand the puzzling process. Research acquisition are often steep – with influence when pricing decisions are made. “We had a turnover of around £2.6 shareholders in the bidding company The board directors of the acquiring company, consistently finds 1. In 2001 AOL completed buying Time Warner in a $164 billion ANALYSIS billion, but Saint-Gobain turned over bearing the brunt. if successful, will usually preside over a bigger business deal. The new company rapidly lost 97 per cent of its value €40 billion, and were very determined that more than half “Research consistently finds that and will pay themselves accordingly. And, in most cases, leading to a de-merger in 2009 to acquire us, increasing their bids of acquisitions destroy more than half of acquisitions destroy the directors of the target company will probably be well until finally our shareholders decided shareholder value,” says Colley. “And compensated for losing their jobs. The threat of 2. RBS – with Fred Goodwin as CEO – bought part of Dutch to accept the offer,” he recalls. shareholder value and between 60 and 80 per cent fail to redundancy may be welcomed less by rank-and-file lender ABN AMRO in 2007 for €71 billion – three times “They paid a ridiculously high sum deliver expected benefits.” employees, however. its book value. In effect it created almost irreparable damage between 60 and 80 to both banks and RBS had to be bailed out by the Government for us, and I could never understand Shareholders of the target “The actual integration process post-acquisition is also how they justified each increased bid per cent fail to deliver company almost always benefit with a major issue,” says Colley, who hears alarm bells when 3. Daimler bought Chrysler in 1998 for $36 billion, but cultural to their shareholders. They seemed expected benefits substantial pre-bid share premiums. someone describes a deal as a “merger of equals”. “It’s a differences saw it turn into a disaster. Daimler essentially willing to pay whatever was necessary This often runs at around 40 per cent, huge distraction for management, with so much fighting paid Cerberus Capital Management $650 million in 2007 to buy us, then try to justify to their says Colley. for position and power. to take Chrysler off its hands shareholders afterwards. It alighted my interest in M&As So why, then, do shareholders in the bidding companies “You also know you're in trouble when there’s a 4. Hewlett Packard paid $11.7 billion in 2011 to acquire UK and why, very often bidding companies, and their sanction these huge bids when, argues Colley, they would you-be-CEO, I’ll-be-chairman arrangement, because there software firm Autonomy – a premium of around 79 per cent shareholders, pay too much.” be better following the example of companies such as will be no clarity on who is running the business.” over its market price. It had to write off $8.9 billion almost Low interest rates, relatively benign markets and decent Compass that choose to follow a strategy of growing And unfortunately, following the completion of most right away due to poor strategy, cultural mismatches and growth prospects are just some of the factors that made through small, low-risk but focused acquisitions? M&As, there is usually one further group of losers. alleged misstatement of results 2015 a record year for M&A deals – $4.6 trillion in total, “It’s the big question,” agrees Colley. “I can understand Consumers, says Colley, rarely enjoy the benefits of a 5. Guy Hands lost 60 per cent of his personal net worth when trumping even the giddy days of 2007. why the chief executive and the board are keen merger or acquisition, and frequently face a reduced his private equity firm Terra Firma was forced by a US court Many of these recent deals – between AB InBev and for acquisitions. choice of products and possibly even higher prices. to sell EMI to Citigroup. It paid $4.7 billion for the music label SAB Miller, Dell and EMC, and Holcim and Lafarge, for “They often find themselves in markets where it’s “If drinkers are hoping the cost savings from the AB but immediately wrote down 46 per cent of its value and then example – have been industry consolidations, with difficult to grow and a major acquisition is a very easy, InBev and SAB Miller deal will be passed on to them, for lost a lawsuit, with Citigroup taking over EMI and Terra Firma

companies aiming to reduce costs by rationalising head if expensive way of achieving growth.” Cutts Rebecca Illustration: example, I feel they will be sorely disappointed,” he says. losing $2.5 billion.

22 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 23 Tim Smedley finds out how the ‘design process’ is being applied to more and more areas of business Design enters and not just to the designer’s the C-Suite Apple Mac STRATEGY

raditional management theory that has dominated boardroom thinking for so long has finally got a rival. And it’s called ‘design thinking’. T Approaches that used to reside within product design and R&D departments are being turned inward, and helping to reshape organisational structures and processes. Ayse Birsel, co-founder of Birsel + Seck, a design and innovation studio in New York that works with multinationals including GE, Johnson & Johnson, and Hewlett Packard, defines design thinking as “thinking like a designer, holistically, optimistically, collaboratively, with empathy and asking ‘what if ’ questions to inform business practices. In other words, the design process is inclusive, it gets people to see the big picture, put themselves in other people’s shoes, be open to new ideas and provide the tools to think differently and creatively about the same old problems. “Traditional management tools don’t allow for leaps of imagination and problem solving – design thinking

brings creativity, business logic and intuition together.” STRATEGY The notion of design thinking as a holistic business approach was first popularised in 2008 by Tim Brown, CEO and President of IDEO, the Californian innovation and design consultancy. “Historically, design has been treated as a downstream step in the development process,” said Brown. “Now, however, rather than asking designers to make an already developed idea more attractive to consumers, companies are asking them to create ideas that better meet consumers’ needs and desires. The former role is tactical, and results in limited value creation; the latter is strategic, and leads to dramatic new forms of value.” Markus Hohl, London CEO for Finnish service design agency Hellon, believes the emergence of design thinking parallels a significant social change. “We are moving from B2B and B2C to H2H: the Human to Human era,” he says. “B2B and B2C thinking worked until recently as markets moved at speeds that Barclays allowed a considered response, the direction of market hopper team development was predictable, the competitors known. work space by criticaldigital.co.uk by Graphics Environmental “But today’s markets move at rapid speeds, it’s hard to know which direction the competitive

24 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 25 disruption will come from, and employees often have The bank’s successful Pingit mobile payment service, to respond immediately.” for example, was launched like a start-up, utilising This volatile business climate, argues Joe Ferry, Visiting a dedicated hopper team. Tutor at the Royal College of Art and former Head of Micheli’s research found that this collaborative Design for Virgin Atlantic, means that “the relevance approach allowed for a much faster time to market with of embedding design thinking into a company's culture development much more grounded in customer insight. has never been more relevant.” The hopper teams observed how customers used the app, He adds: “It can be used to establish possible future rather than asking them via questionnaires. states for businesses and therefore help develop strategies. “It’s the observation of their behaviours in their Or it can be used by a business that wants to be the environment that we try to design around,” Chief Design disruptor to the market.” Officer Derek White told Micheli. “Not necessarily what Warwick Business School and the Design Council they tell us in focus groups.” formed a collaboration in 2013, headed by Pietro At the time of the study Pingit had been downloaded Micheli, Associate Professor of by more than two million customers Organisational Performance, to and had won more than 20 awards examine how businesses – including for innovation. Another example is organisations not traditionally the Nest smart thermostat. associated with design – can benefit from design thinking. User at the centre “At its simplest level, design thinking is a process,” explains Micheli says: “If somebody had come Micheli. “One that you can use for to you and said: ‘Do you want a new virtually anything around you – when thermostat?’ It may not have been buying a new home, or preparing a something you’d really thought about Extracting room for a new child, whatever it may before. However, this has become toners from be. It’s essentially a sequence to a super-selling product because, old printer cartridges. approach a problem by asking ‘what although it may not have been Guiyu, China if ’ questions, through exploration, labelled as such, it followed a design iteration, and a strong focus on the thinking process.” user. You’re not going to understand You’re not going to This, in essence, was to observe people just by asking them what they and understand the habits of energy The observational approach – also known as Puma’s in-store bins also make it convenient for think. You observe people and their understand people just consumption within people’s daily ethnography – is also integral to the recent collaboration consumers to return them. Xerox is another example, unconscious habits.” by asking them what lives, as a credible alternative to between Scott Dacko, Associate Professor of Marketing being far ahead of the curve in 1991, when it began This can be utilised not only the traditional, linear, incremental and Strategic Management at Warwick Business School, designing photocopiers for ease of disassembly and to improve product design but also they think. You observe optimisation-driven process that is and Rosanna Garcia, of North Carolina State University, recovery for re-manufacture, re-use and recycling, the services and internal workings people and their the norm in product design. looking at design thinking for sustainability. diverting tonnes of waste from landfill and saving billions of companies, says Micheli. unconscious habits “I’m not saying market research is Their chapter in the book Design Thinking: New Product of dollars in raw material costs.

“The big difference is that service wrong,” says Micheli. “But what you Development Essentials from the PDMA, posits that design A key phrase in Garcia and Dacko’s writing is that STRATEGY design happens from many touch find out from that is what people can thinkers have the potential to slow down environmental “users contribute as co-creators”, ideally through points,” he says. “If you think about your relationship tell you. It can give you some kind of trend or average. and social degradation more so than economists or a process called rapid prototyping – creating visual with your bank, it’s not that you go into a branch, buy But if you want to know something new that is going to even engineers. manifestations of a concept, and giving it to consumers something and never hear from them again as you would trigger something different, it’s unlikely to emerge from By creating products and services that incorporate to see what they think and how they would use it in do if you buy a washing machine. traditional processes.” empathy for consumers’ wants and needs into product their everyday lives. “Instead you set up a relationship through internet The famous phrase from Henry Ford – “if I’d asked and service design, waste can be reduced and resources “You say to users, here’s a prototype, it’s tangible, you banking, you may have separate accounts and investments people what they wanted, they would have asked for faster better utilised. can interact with it, talk about it, and they have ideas and – so they design a service to accommodate your needs. horses” – rings true almost a century on. Currently 80 per cent of products are discarded after offer feedback,” says Dacko. “It fits with crowdsourcing But most banks don’t look at it from a user point of view Hohl, who features in Micheli’s research, describes the a single use and 99 per cent of materials are discarded – a company can’t have all the ideas. The net effect is you and a holistic experience.” user as “the starting point and centre of design thinking.” in the first six weeks of use. Consumers and regulators are create empathy, you co-create, and end up with something “Unless a business addresses the user’s need with their demanding new alternatives, says Dacko, namely products that’s more sustainable.” Making Pingit offer it’s unlikely to succeed,” says Hohl. “It sounds and services which have a whole lifecycle, cradle-to-grave While focus groups can be useful to garner ideas and obvious, but you need to know how to ‘get to’ the user’s approach, with re-use and recycling considered from contributions, an ethnographic process can be especially One bank that has attempted such an approach, real needs, requiring expert research techniques and the start. useful in sustainability design because it can uncover real as uncovered by Micheli’s research, is Barclays and its interpretation, you can’t just ask them. world, unconscious habits. dedicated Chief Design Officer under the tenure of the “It often seems easier for businesses to speculate on Crowdsourcing design “There’s an issue now, for example, with single use retail-centric CEO Antony Jenkins. user needs and then settle for a solution – the ‘build it and espresso machine coffee pods,” says Dacko. “Increasingly At Barclays a new way of setting up project teams was they’ll come’ syndrome. Or marketing – ‘if we just tell The sportswear company Puma is cited as ‘best practice’ the users of these machines care about recycling, but their being trialled. Known as ‘hoppers’, cross-functional, everyone or make it cheap enough they’ll surely buy it’. in Garcia and Dacko’s chapter for its InCycle range actions are inconsistent with their concern. It’s too easy mixed hierarchy teams were assigned specific tasks related While there is some mileage in those, the maximum value of footwear and apparel, which are made from materials to throw away, even where a company gives users a bag to customer experience and allocated a space to work can be extracted from an investment if you know what that are relatively easily turned back into both biological to recycle. You capture that behaviour and reasoning far

away from their day jobs to work solely on that project. really meets the customer’s needs and wants.” Images Irvine/LightRocket/Getty Stefan and technical nutrients at the end of their useful lives. more in observation than you would in a focus group.”

26 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 27 Procter & Gamble is a past master at what we value is much broader ethnographic observation of customers. than just buying a product. Dacko says: “It will ask customers: ‘Can “The second claim is the 5 Five steps we come into your homes and watch you ‘humanisation’ of technology as it do the laundry?’ Tesco also went to the becomes all pervasive, through US and asked if it could observe how intelligent homes, wearable to make firms more creative people prepare meals at home.” technology and the internet This may be time consuming and of things. What design promises is costly, but it should lead to enhanced to make it human and relatable product or service design because Dacko to human needs.” Promoting creativity in organisations has traditionally focused on argues “customers are good at identifying Gretchen Gscheidle, Director a few departments, such as R&D. However, firms may be squandering problems far more easily than solutions.” of Insight and Exploration at untapped resources if they do not encourage creativity throughout their He adds: “It can lead to a design Herman Miller, agrees that the process that addresses the prevention or opportunities to “delight workforce. Tamara Friedrich, Associate Professor of Entrepreneurship reduction of a negative consumer customers are stronger than ever and Innovation, lists five evidence-based ways to boost staff creativity outcome by changing behaviour. before – and the rewards for doing “It is rarely a case of ‘I have observed, so ever greater.” therefore I now know what to do’, it is She says: “We’re also seeing often quite challenging. But it should a generation of workers who have lead to several ideas that can then be grown up in a culture where Step 1: Drop the carrot Step 3: Space – the lost Step 5: T-shaped people shortlisted and evaluated.” collaborative work is a regular and stick frontier In addition to fostering interpersonal Garcia and Dacko’s chapter offers a part of their education experience. It is important to understand what The cubicle farms of modern connections, it is also beneficial to method for organisations and It’s a new normal for them and drives employees to be creative. workplaces have been designed foster intrapersonal connections; that practitioners to follow. The ‘what if ’ will only intensify as I know there Extrinsic motivators, such as money, for efficiency and in the hope that is an individual’s ability to generate ideas questions mentioned by Micheli are are an increasing number of typically do not work as well for creative individuals would interact more by connecting knowledge or experiences broken down by Garcia and Dacko into schools deploying design thinking performance, which is driven by intrinsic frequently and share ideas organically, they have from different interests specific stages, including identifying a The future explicitly in their curriculum.” motivation or an internal desire to thus boosting creativity. The reality, or areas of their life. To accomplish this, specific goal, imagining what such a of intelligent Dacko sees an increasing create something new simply for however, is that these loud, busy some leading innovative organisations homes? Nest product or service might look like that Thermostat interest in sustainability and user- personal satisfaction. Instead of the spaces are often not conducive encourage employees to be ‘T-shaped’, could deliver this, and then discussing focused design among the latest carrot and stick approach, leaders to the focused, thoughtful creative meaning they have depth of expertise the milestones needed to achieve this. crop of MBA students. can stimulate intrinsic motivation by process. Common spaces can foster in their main area of work as well as That should then be followed by ‘what wows’ “They see sustainability as a key success factor now,” providing a clear and motivating vision interactions that boost creativity, but a breadth of knowledge or experience. to “determine if the sustainable product or service says Dacko. “Certainly those I teach are motivated, they that employees will want to contribute individuals should not be forced into This breadth can be gained in both designed in ‘what if ’ actually enchants the consumer as are committed, they see a need and they want to to as well as a supportive, risk-tolerant these spaces at all times. It is best their personal and professional life intended,” says Dacko. be responsible. I’m relatively optimistic that the direction culture where employees feel safe, when there are social and meeting and facilitates seeing unique connections, This can be assessed via sustainability assumption will be a greater take up of design thinking for appreciated and willing to give areas where employees can mingle or translating ways of doing something testing – testing each touch point that the consumer sustainability over time.” their ideas freely. and exchange ideas, but it is critical to from one domain into another. also provide employees with protected has with the firm and the product, including packaging, Another cause for optimism is arguably the greatest STRATEGY supplementary products and end-of-life as well as rapid proponent of design thinking: Apple. Step 2: Better brainstorming time and space to think deeply about prototyping. This eventually leads to ‘what works’, which “Whenever you go to any event, I always count how When faced with a problem to problems without distractions. is observing of consumer behaviour to determine many seconds – not even minutes – it takes for somebody solve, teams often jump directly if the resulting design actually meets its goals. to say Apple and Steve Jobs,” groans Micheli. “But yes, into brainstorming. But traditional Step 4: Get connected To work in practice this process needs to be part of the if you buy an Apple product it is obsessive with the level brainstorming, where teams generate When employees have the opportunity organisation’s culture, not “a bolt-on, take it or leave of detail, right down to how you open the box and how ideas together with instructions to share what they are working on, it option,” argues Dacko. In the long run, he believes it feels to enter an Apple store. to resist evaluation and where no idea mix with others that have different design thinking for sustainability will be the norm, “Apple has been fantastic in interpreting the idea is unreasonable, does not produce experiences, and facilitate the and sustainability measures will be standard indicators of what design means in terms of shape and aesthetics, the most creative ideas. It often results cross-fertilisation of ideas, we can that all firms track. ease of use, the intention to be intuitive, and relatability in wasted time and a conversation see truly novel breakthroughs. This A snapshot of today’s business environment, however, – the whole experience. It almost makes you feel unique driven by a few, dominant voices. can be encouraged in a formal way suggests this is still some way off. Cheaper, linear models despite the fact that hundreds of millions of people have Instead, it is best to provide employees – such as through internal conferences, still dominate, and a throw-away society remains the bought the exact same product. That is quite something.” with some guidelines on desired workshops, or cross-functional teams Western norm. But there are signs and trends that lead If design thinking is the driving force behind the outcomes, the time to generate ideas – or in an informal way by providing Micheli to be optimistic. world’s most successful company, that’s reason enough on their own before bringing the team common areas for people to interact He says: “If I were to make two bold claims, I would for others to copy it. together, and a clear process for sharing or fostering a culture that promotes say one is: the way we, as consumers or users, relate those ideas that ensures each person integration rather than silos. to a product or service is changing. has the chance to speak. This technique “We are valuing the experiential part much more than balances the benefit of bringing different we used to. In the past the fact that a car started was Watch a film about leading business people together to feed off each other’s already quite something; now, you are definitely expecting by design at wbs.ac.uk/go/core ideas, while still ensuring social dynamics

a lot more from an automobile. Our expectations and © Nest Labs don’t undermine the process.

28 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 29 Volkswagen proved it doesn't pay to cheat

12 brands – including Audi, SEAT, Bentley, Bugatti, Lamborghini, is estimated at 10-15 per cent. The German carmaker reported Porsche and Skoda. But it remains most closely associated with a 2015 third quarter loss of £2.5 billion – its first quarterly Meg Carter examines Volkswagen’s reaction to its its top-selling, namesake marque, Volkswagen, and that brand’s loss in 15 years. three core values: responsibility, sustainability and innovation. Though top line figures have been hit hard, the negative emissions scandal to look at how a company rebuilds Then, in September 2015, Volkswagen was accused impact of a scandal can extend far further. its burnt and frazzled brand of violating the US Clean Air Act by the Employee dissatisfaction and a desire STRATEGY United States Environmental Protection to no longer work for a company is one Agency (EPA). As soon as the side effect. Loss of third party support The EPA found the carmaker had use of its ‘cheat device’ – from a local event or team that intentionally programmed turbocharged company might sponsor, for example direct injection diesel engines in 11 million software was made – is often another. Reduced belief in what of its cars to meet US standards for public, Volkswagen a company is saying can also undermine nitrogen oxide emissions only during the business’ guarantees and warranties. STRATEGY regulatory testing – the cars emitted found itself the One key challenge for Volkswagen up to 40 times more nitrogen oxide focus for regulatory has been how best to undertake When the for everyday driving. the necessary steps required in a way As soon as the use of its ‘cheat investigations in a that complements and reinforces rather device’ software was made public, number of countries. than undermines the brand and what Volkswagen found itself the focus it stands for. for regulatory investigations in a number Its stock price fell Immediate steps after any scandal of countries. Its stock price fell sharply sharply – initially by are likely to include firing those – initially by one third. Meanwhile, one third. Meanwhile, responsible - which was Volkswagen’s smoke clears confidence and interest in buying immediate response - appointing new the Volkswagen brand slumped. confidence and managers and or embedding new t can take just minutes for a brand owner to destroy of trust,” says David Arnott, Principal Teaching Fellow By January 2016 Volkswagen’s interest in buying managerial structures and audit trails. relationships it has spent decades building with its in Marketing & e-Business at Warwick Business School. EU sales were down 3.8 per cent Attention should then turn to addressing consumers – as Volkswagen has been learning at first hand. “Some of what the company has done since the scandal year-on-year despite passenger the Volkswagen relationships with key stakeholders I Repairing the damage to a brand post-scandal, however, has demonstrated good practice, but not all. car sales in the EU that same month brand slumped through carefully crafted communications. takes more than a quick fix. Acknowledging mistakes, making “With so many vehicles affected, the level of deceit rising to 1.06 million – up 6.2 per cent “A brand should act as a ‘central amends and being seen to be doing both are only the is significant and appears to have been deliberate, and this year-on-year, according to the European organising principle’ that sits at the beginning. As important is guarding against repeating mistakes makes the problem potentially bigger and certainly more Automobile Manufacturers’ Association. heart of a business informing decision-making at all levels and this means that what might initially appear to be ‘just’ complex to resolve.” In the UK, the Society of Motor Manufacturers of an organisation,” says Mike Rocha, Global Director, a brand marketing problem can require far-reaching Founded in Germany in 1937, Volkswagen’s business & Traders revealed Volkswagen’s sales were 13.8 per cent lower Valuation, at brand and design consultancy Interbrand. organisational change and even a new business strategy. – and reputation – has long been built on its engineering. year-on-year in January 2016, while new sales overall rose 2.9 “So when a scandal occurs a brand should go back to what

“Essentially, what’s happened at Volkswagen is a breach Now the second-largest carmaker in the world, it comprises © SCHRANK Photo/Alamy Sulova/CTK © Katerina per cent. Meanwhile, the overall slump in US sales post-scandal it stands for, to what its ultimate purpose is, and ensure that

30 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 31 the action it takes in response to the crisis builds on these "We have lost credibility and trust in recent months,” he said. core ideas.” “We are now doing everything we can to win that back.” It’s all about acting human, according to Dylan Stuart, Volkswagen’s new TV ad, in which its cars were described Partner at brand strategy consultancy Lippincott. “Brands as “a lifelong companion”, proved uncontentious. But its print are human creations and as such are fallible, as humans campaign was less so as it used the line: “It’s more than just are,” he says. “So it is important they react in a human a car. It’s keeping your promises.” This was something many way – admitting where there is fault, taking responsibility observers believed Volkswagen failed to do. and demonstrating they can and will change.” This gap between Volkswagen’s words and actions What is also needed next is an exploration of what is indicative of a deeper challenge the company needs went wrong and why – an independent enquiry always to address, some suggest. helps – and efforts to make the outside world aware you “Volkswagen has failed to deliver on past values,” are working to put things right. says Van Doorn. “I don’t think its statements in press releases “Having identified the causes, measures must then be put or marketing communications will convince without it acting in place to ensure it doesn’t happen again and confirmation boldly and proactively to ensure it can change and its plans that such action has been undertaken needs to be shared to do so are viable, credible and achievable within three years publicly,” says Arnott. rather than 10 or more.” In this respect, many believe Volkswagen has made A company may have positive values, but if its culture some positive progress. Yet not everything it has so far done is wrong it will find them impossible to anchor within Volkswagen has been ‘best practice’, according to Sebastiaan Van Doorn, the business as a single, guiding theme, he adds: “Mindset Beetle, Associate Professor of Enterprise at WBS. determines action. And the an unlikely Hollywood “Volkswagen was clever to replace misalignment of mindset and values film star former Chief Executive Martin Furthermore, there suggests a misalignment of senior Winterkorn quickly,” he acknowledges. management and middle management.” “But it missed an opportunity with the is an historical disjoint The extent to which the Volkswagen Arguably the greatest challenge of all for Volkswagen, and then, rather than admit it, found a way to side-step appointment of Matthias Müller (former at Volkswagen brand – and, indeed, any brand however, is whether its senior management team has the problem by cheating regulatory tests. chairman of Volkswagen-owned Porsche) post-scandal – is likely to be given the inclination and appetite for the root and branch internal “The decision to install the cheat software was a strategic to replace him. Because Müller had between its board a second chance by consumers change many observers now claim the business needs. decision. The failure to think through the implications – and so close a connection this appointment of directors and will be dictated by a variety of factors. “Volkswagen is not the only automotive company to assume the downside risk was acceptable – is a big problem. did not send out a strong message its marketing function. “In essence, trust is the willingness to have failed to comply with industry standards, and Both are key indicators that something fundamental internally externally that the company was of an individual to become vulnerable it is not the worst performer in terms of emissions,” at Volkswagen must be addressed.” willing to change.” Neither appears able to another’s behaviour which, says Van Doorn. Like many brands to suffer the consequences of a scandal, Volkswagen’s decision to quickly to speak the same in business, depends on a company’s “But it has been the most ‘creative’ in terms of efforts crisis could prove to be a powerful catalyst for Volkswagen put in place a plan with considerable ability to deliver on what it promises,” to work around them.” to change – for the better. funds set aside to deal with fines, language, and the says Arnott. “And in Volkswagen’s In a statement made by Volkswagen in December 2015, “If a brand is very damaged, then it could seize compensation to car owners in board is dominated case, one part of its brand promise it even admitted to a mindset that “tolerated” rule breaking the opportunity to revisit its story, its vision, its mission, some markets for the reduced value – its focus on engineering – has not and “a chain of errors” behind its values, to re-energise the of their vehicles, and funding for the and directed by been breached.” its emissions cheating. organisation,” says Rocha. recall of all affected vehicles was another Also in Volkswagen’s favour “The scandal that resulted is in part But even if the damage is less engineers and The scandal that STRATEGY positive step. is consumers’ previous experience down to Volkswagen wanting to be severe, being forced by circumstance An estimated 11 million cars financial people of the brand and the lack of any too perfect and not wanting to be seen resulted is in part down to self-examine and reassess can lead were to be either fitted with a ‘flow past evidence of scandal or deceit. to fail. And this, in turn, is due to the way to Volkswagen wanting to positive change. transformer’ device to enable the correct calculation Yet another factor, believes Arnott, is a firm’s ‘benevolence’ the organisation is structured and “A lot of strong, established brands of fuel and air being combusted or a software tweak. – whether people feel they can assume that company will functions,” adds Van Doorn. to be too perfect and can get stuck in conservative thinking But the senior management’s claim to know nothing behave in a fair and equitable way. And on the basis of the “Volkswagen is still one of the most not wanting to be and look only to protect what they of the cheat device apparently sanctioned by some of nature of the scandal Volkswagen’s credibility is compromised. centralised organisations. As a family have rather than try new things Volkswagen’s middle managers was not well-received A brand owner’s ability to respond effectively to a scandal firm, it is not naturally inclined seen to fail. And this, and this – in turn – can sow the seed and, worse, raised questions about the effectiveness of will be dictated by other factors, however. Its size, for example, to release a mandate to lower levels in turn, is due to the for long-term decline,” says Stuart. its internal communications and management procedures. corporate structure and even company culture. And for within the business and those middle way the organisation “But the jolt to the system a scandal Furthermore, the brand’s corporate and advertising Volkswagen, all three present challenges. managers will feel they’re not heard brings can be an opportunity to realign communications post-scandal have received a mixed response. Deep pockets always attract lawyers. And a major driver and not taken seriously. is structured with changes quickly implemented After immediately suspending its marketing of the furore has been the US market where, despite not being “Only time will tell whether senior and functions that might otherwise have taken communications, Volkswagen ran tactical advertising one of Volkswagen’s main markets and diesel cars accounting management sees this as being months or years.” to apologise with a pledge to address the problem. In February for just 25 per cent of its sales there, some observers suggest important enough to address.” Longstanding and enduring brand 2016 the strategy then switched to brand advertising with there is an eagerness to pursue damages claims simply Furthermore, in recent years Volkswagen has let itself values, deep pockets and a rapid response carried Volkswagen a campaign created by advertising agency DDB Germany because the company is big and profitable. down on one of its brand’s core values – innovation through the first few months after the scandal, enabling emphasising the longstanding, emotional relationship “Furthermore, there is an historical disjoint at Volkswagen – in a way that suggests its business strategy is at fault. it to start regaining lost ground. between Volkswagen customers and their cars. between its board of directors and its marketing function,” Arnott says: “Volkswagen set out to push ‘clean diesel’ However, in a world in which brands now liaise Launching the new advertising, Volkswagen Brand Board says Arnott. “Neither appears able to speak the same language, rather than zero emissions or hybrid cars, as other automotive with the public not through communications but actions, Member Jürgen Stackmann firmly positioned the campaign and the board is dominated and directed by engineers manufacturers have done. But that strategy was wrong. how the company re-sets its strategy for the long term

as the “first visible step in a new mindset”. and financial people.” Ltd/Alamy © Pictorial Press "They tried but couldn’t deliver on the clean diesel promise will determine how Volkswagen recovers from the scandal.

32 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 33 iROKOtv dubbed the Netflix of Africa

its entrepreneurs and has found a country very different iROKOtv in 2010 after he was tasked by his mum to buy some to the one the West sees in the news. Nollywood DVDs – Nigeria’s equivalent to the US’ Hollywood “One of the 20 fastest growing economies in 2015 was film industry. Surprised and frustrated he couldn’t get hold Kenya according to a survey by Bloomberg economists,” of any easily on DVD he jumped on the plane to Lagos Africa has long been seen as the next ‘China’ and says Stadler, Professor of Strategic Management at Warwick – and the rest, as they say, is history. Sabuhi Gard finds a new breed of entrepreneurs Business School. “However, most of the items of news we Njoku started buying online licences for Nollywood see on the TV report Boko Haram terrorism in West Africa movies to stream on a dedicated YouTube channel. Thanks STRATEGY might finally be making it a reality or Al Shabaab in Somalia. to investment from US-based hedge fund Tiger Global, “There are also somewhat negative views of African the channel became a dedicated Nollywood platform. migrants who come to the UK. We in the West are also Now dubbed the Netflix of Africa, iROKOtv makes its unable to make a distinction about different types of own content to stream and has offices in Lagos, New York, Africa geographically, for instance Nairobi is very different Johannesburg and Kigali in Rwanda, with a staff of more to North Africa.” than 100 and funding totalling $25 million. Perceptions like these have to change, Stadler believes, iROKOtv’s popularity is set to grow in tandem with STRATEGY so that investors are attracted to allow the African economy the Nigerian entertainment industry, whose revenues grew to develop. And he has discovered plenty of opportunities 23 per cent between 2010 and 2013 and contributed three Re-building for investors looking for the next big growth area. per cent to the country’s GDP. This will only be exacerbated “The number of Africans interested in entrepreneurship by the surge of mobile internet users expected to total is growing dramatically,” says Stadler. “In countries like Gambia 110 million by 2018, who will push the entertainment and Nigeria 40 per cent of people have started a business that industry’s value up to $8 billion in the next three years, is less than three years old. Investors do not want to miss out according to iROKOtv. on this opportunity.” According to the African Development Bank and the There is also a burgeoning middle class in Africa that US billionaire George Soros, Africa now has the fastest-growing needs feeding. They are increasing demand for consumer middle class in the world. Some 313 million people, 34 per cent Africa’s brand goods, presenting ripe opportunities for entrepreneurs. This of Africa’s population, spend $2.20 a day, a 100 per cent rise new army of entrepreneurs also come armed with the latest in less than 20 years. The bank’s definition of middle class in management thinking and teaching thanks to the West’s Africa is people who spend the equivalent of $2 to $20 a day frica’s consumer-facing industries, resources, the perception of the African people and economy is a mixed universities, especially in the US and UK. — an assessment based on the cost of living for Africa’s near agriculture and infrastructure together could one, coloured by media pictures of war, famine and unrest. “There is a growing number of people returning from the one billion people. generate as much as $2.6 trillion in revenue The continent’s troubled image has caused global West having been educated in universities there or employed By 2060, Africans living below the poverty line will be Aannually by 2020, according to a report by companies to overlook business opportunities, but there is there and they are using all of that knowledge to pursue in the minority – 33 per cent. The bank describes the rise the Mckinsey Global Institute. a new breed of entrepreneur in Africa that could be changing opportunities in Africa,” says Stadler. “They see it work in as “unstoppable”. Investors cannot ignore revolutions in North Meanwhile, Africa’s collective GDP in 2008 was that, a breed that has flourished with a rare single-mindedness the US or UK and then go back to Africa to implement it.” Africa, and famines in East and West Africa, but the underlying $1.6 trillion – roughly equivalent to that of, say, Brazil or Russia. and creativity that sometimes only limitations and scarcity University of Manchester graduate Jason Njoku is one mantra of “growth, growth, growth” is taking hold. These economic facts should be viewed as plus-points can produce – after all the imagination is limitless. such African who had the entrepreneurial mindset to see Njoku was living in England when he set up iROKOtv,

for those wanting to invest in African economies, however, Christian Stadler has travelled to Africa to find out about Olha K/Shutterstock © @iROKO an opportunity and jump in with both feet. He set up but Stadler believes many Africans have been driven to

34 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 35 for business, as examples of companies that have grown than 20 per cent – who can service that kind of debt in the first thanks to M-Pesa. few years as a start-up? “M-Kopa is an example of a business that links a very basic “But there are growing initiatives and bodies set up to give need to smart technology,” he says. “This business was started out grants. I recently attended the Africa Business Angel Forum by a group of entrepreneurs who saw that people living on the that has both angel investors and institutional investors and it outskirts of towns and in villages were having problems getting was really interesting to hear what they look for and even more electricity into their homes cost effectively. interesting to see entrepreneurs pitching and how much they “They were also using unsafe methods to light up their were looking for and valued their business.” homes like burning kerosene lamps. An alternative solution Shortlist got its funding from management consultants for lighting up your home would be to put a solar panel Phillips Consulting who came to Leigh with the idea. on your roof and get electricity in your house that way.” “Unemployment remains a huge issue in Nigeria with M-Kopa estimates that 80 per cent 30 per cent of 24-35 year-olds out of work,” says Leigh. of its customers live on less than “We wanted to cater for a specific niche, the experienced $2 a day and energy accounts for professional, middle managers and a significant amount of their spending. directors who would depend on word The company’s power system costs of mouth or personal referrals to make $200: it includes a solar panel, two LED their next move. bulbs, an LED flashlight, a rechargeable “We are kind of like a LinkedIn radio, and adaptors for charging a for Nigeria. This means our registered phone. The kit comes with a two-year candidates are directly contacted warranty, and its battery is designed for roles that are often not advertised to last at least four years. and they probably would not have It is a lot of money for those living heard about.” in rural villages so what the company It is clear that a new generation sells is, in effect, a loan of about $165. African of African entrepreneurs are emerging Clients pay $35 upfront and agree to entrepreneur with full force and setting up companies Jason Njoku, make a daily payment of 45 cents for CEO iROKOtv like M-Kopa, Shortlist and iROKOtv and a year until the system is theirs – hence these people are changing the way the the name kopa, which in Swahili means global business community and global ‘to borrow’. The kits come with a control media view the African economy. box containing the battery and a SIM It is clear that “There is an increasing interest card that can communicate with M-Kopa a new generation of in Africa by a collection of people with headquarters in Nairobi. African entrepreneurs a true affiliation to the continent,” says Kopo Kopo, meanwhile, is a service Leigh. “I know that the narrative of Africa that helps businesses to accept payment are emerging with as a troubled continent is not the Africa of services rendered through M-Pesa. full force... these that many young people are now It is easy to use and affordable; only one growing up with, Africa is now cool. M-KOPA III per cent of the transaction is deducted. people are changing “The export of music, fashion and

solar home STRATEGY system It enables service providers to the way the global the greater connectivity of the world track transactions and identify sales means young people in the continent trends and market insights. Running business community are being influenced, talking about on the M-Pesa platform means it is and global media view and connecting to the same pop culture entrepreneurship due to the lack of formal employment Technology is also helping African entrepreneurs overcome safe and trusted. and issues that the rest of Europe and in their country or they have decided to turn their everyday the infrastructure problems the continent has. Many tech Kopo Kopo is based in Nairobi, the African economy the US are exposed to.” duties into a business. start-ups have built on the success of M-Pesa, the mobile which has made its mark in the global Immaculate Kiiza, director of According to the 2015-16 Global Entrepreneurship Monitor payment system that was launched by Safaricom in 2007 technology community through the mobile banking children’s charity, Hope for Children in Uganda is hopeful (GEM) report more than 60 per cent of people in Senegal and giving Kenyans technology way ahead of Western consumers. technology that has evolved around M-Pesa. These innovations that perceptions of Africa are changing. Botswana stated they intended to start a business over the With 80 per cent of Kenyans using M-Pesa and more than 18.2 are changing the face of Nairobi, meriting the description “Africa is becoming a force to be reckoned with,” she says. next three years. In its 2014-15 report GEM found an average million subscribers, mobile money transactions in Sub-Saharan as Africa’s ‘Silicon Valley’. “With each passing year and the new generations coming up, of 71.5 per cent of 18-64 year-olds in Angola, Botswana, Burkina Africa hit $656 million in 2014. Funding has always been a problem for start-ups in Africa, I believe the stereotype will change. This, of course, has to start Faso, Cameroon, South Africa and Uganda believed becoming Stadler says: “M-Pesa has enabled a lot of start-ups with banks being out of the reach of most, but that is also with us, the Africans. We have a long way to go, but if entrusted an entrepreneur was “a good career choice”. to flourish and is one of the reasons why entrepreneurship being solved says Tayo Leigh, who set up Shortlist, with great leadership I personally believe the rest can follow.” “Someone collecting rubbish every day as their job can has grown so quickly in Kenya. a headhunting platform in Nigeria, which allows job Stadler agrees and is optimistic about the continent’s future, turn it into a rubbish recycling business or a cleaning lady “M-Pesa works on the very simple principle of transferring seekers to upload their CVs for companies to search for talent. believing the people have the drive and ability to improve who is just cleaning one house, then gets more cleaning jobs money via your mobile phone. The transactions carried out “There is more funding for online businesses,” says Leigh. Africa’s economy and, in doing so, change its image. due to word of mouth, then she sets up her own cleaning via M-Pesa are larger than all of the banks in Kenya combined, “Institutional funding is still very hard to get hold of without “The right ingredients are there: talent, demand and business,” says Stadler. it is a very successful business and allows other companies an extensive business plan and watertight numbers behind increasingly also the capital that is required for some of the “If you look at how quickly cities in Africa are growing – you to exist.” you – and I don't know that entrepreneurs have the know-how initiatives reaching a critical scale,” says Stadler. already have 51 cities bordering on a population of one million. Stadler cites M-Kopa, which sells solar panels to rural to deliver that perception of robustness at the early stages “Looking at the entrepreneurial energy in places like Nairobi

As these cities start growing so does their division of labour.” residents in Africa, and Kopo Kopo, a mobile payment tool © M-KOPA © @iROKO of their business. Lending rates on bank loans are often higher or Lagos I have no doubt the future belongs to Africa.”

36 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 37 Oliver Balch discovers a new branch of game theory, hide and seek, that could help find criminals, unearth unexploded mines and show how It's more than best to diversify investments STRATEGY

n May 2, 2011, at around 1am local time, US special just a game forces burst into a three-story mansion in North East Pakistan, close to the town of Abbottabad. O Huddled around a television in the White House, the US president and his chiefs of staff watched intently. Minutes later, Osama Bin Laden received bullets to the head and chest. The world’s most wanted man was dead. Catching the mastermind of the 9/11 attacks on the World Trade Centre took the best part of a decade. Rumours and alleged sightings had him placed everywhere from the Afghan border to the Balochistan mountains of Pakistan and beyond. In 2006 a French newspaper even reported his death, supposedly of typhoid. In reality, the Al Qaeda figurehead had moved around the Khyber Pakhtunkhwa province of Pakistan, from Peshawar to the Swat Valley and from there to Haripur close to Islamabad, before settling on his final safe house. It was one of Bin Laden’s couriers who eventually put US authorities on the path that led to his Abbottabad hideout. Rather embarrassingly, the compound turned out to be right next to a military barracks. STRATEGY During the 10-year search, US investigators never thought to ring Steve Alpern. Not that he expected them to. He knew no more about Bin Laden’s whereabouts than they did. Yet five decades working on ‘search theory’ - a branch of game theory - means Alpern would have been well set to at least pass on some tips. What options of escape and concealment does the fugitive have? What strategies for his capture might prove more or less likely? How might investigators most efficiently deploy the resources at their disposal? “In reality, what most security services or police do when trying to catch someone is just put all the resources they can into every possible area. In as much as mathematical modelling can help optimise the use of these resources, then I’d like to think my research would potentially prove useful,” says Alpern, who joined Warwick Business School in 2012 as Professor of Operational Research. Game theory has taken on a life of its own of late. From poker tactics to price-stability-oriented monetary policy, the term seems to be everywhere. Its biggest success, in terms of being applied, is auction theory, with the biggest example being the UK Government’s auction of the 3G mobile network

38 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 39 “I’m waiting for my Daddy to find me – he does rendezvous well. The really clever ones change cache sites regularly search and knows how to do it.” or recover their food at intervals. A key mitigating factor in both rendezvous and standard Alpern’s research takes this caching game to a different search games is speed. Move too slow and the ‘searcher’ level of sophistication. Using empirically observed animal may miss a moving ‘hider’. Or, if the hider is still, the searcher behaviour, he investigates how the total quantity of food may take excessive time to find him. If the searcher is moving is shared across various sites, as well as the ideal number too fast, on the other hand, they may pass the hider unawares. of sites and the ideal depth for burying food. He even factors One practical area where Alpern believes this line of search in the use of ‘decoy nuts’: nuts placed above other nuts that theory research could make a powerful are buried further down. All this to real-world difference relates to the establish the optimal diversification detection of land mines or improvised of resources against catastrophic loss. explosive devices (IEDs). He is currently “The idea of the scatter-hoarders in discussions with various demining is essentially to have enough food left organisations working in former conflict so that when some of the nuts have areas about setting up a conference been pilfered they can still survive during on precisely this subject. lean times,” says Alpern. “An explosives expert searching for “In terms of business, this method an IED may be able to move from place of scattering nuts might also be seen to place quickly in a vehicle,” says Alpern. as a way of diversifying investments “But in order to detect the IEDs they against the threat, say, in banks that must get out of their vehicle and move might fail.” Using game theory could at a slower pace. Similarly, specially For all its potential applicability, help search trained mine detection dogs are used hide-and-seek theories have yet to really for IEDs extensively in the detection of mines. take hold outside academic circles. That It’s been observed, for example, that dogs could well change. As with game theory, perform this role more effectively when considerable interest is emerging among in 2000. A complex process of 150 rounds of bidding over would she best hide? The monster faces the same dilemma moving at a slower speed.” economists and businesses. six weeks saw the applicants whittled down to five, who paid about whether to remain in one place and wait (an ‘ambush’ Talk of dogs links to another Perhaps the best known application a whopping $35.5 billion. tactic) or to actively hunt the princess down (the ‘cruise search’). of Alpern’s research interests: animals. is the use of search theory models to Alpern’s search theory could be the next branch finding Game theory asks: how do the fairy-tale pair decide in a He’s not alone here. Over the years, better understand labour market trends. its way into the ‘real world’, especially as it has so many potential way that assumes that both are as rational as one another? search theory has drawn heavily One way of seeing unemployment, after applications from finding criminals to finding aliens. At the time, as a diversion from his graduate studies, Alpern on the animal kingdom – and behavioural all, is the inefficient allocation of workers At its most basic game theory’s conceptual conceit came up with a solution to one part of the problem. A few years ecology, more specifically – for inspiration. to job opportunities. Either the employee is relatively simple: a rational party (or ‘player’, to keep later, an Israeli mathematician Shmuel Gal solved the so-called An expansive literature exists around is ‘hidden’ to the employer, or the with the theoretical analogy) finds himself in a predicament ‘princess and monster game’ in its entirety. predator strategies, for instance. Imagine employer to the employee. or quandary, the resolution of which depends on him The two would later go on to co-publish a book called you’re a bird of prey: you spot your Reality is never that clear-cut, discerning how another rational party or parties will act. The Theory of Search Games and Rendezvous. lunch running in a field below, but of course. Supply and demand in the job The ‘prisoner’s dilemma’ is perhaps the best known example. Rendezvous Games are basically like simple hide-and-seek, fail to catch it on the first dive. Do market is rarely in equilibrium. Nor are all STRATEGY Two criminals, both interrogated simultaneously in separate only harder, because instead of one person hiding and the you conserve your energy and give In terms of business, those out of work necessarily searching cells, both offered lighter sentences if they grass up the other other seeking, both seek. Imagine the scenario: you arrange up the chase, or do you use up more this method of desperately for a job. But, it’s computing but both facing longer sentences if they both grass. What to meet a friend on the train station, but arrive to find the ticket energy by continuing your pursuit? contingencies such as these that do they do? Enter the mathematicians’ formulae. hall absolutely packed. The question Alpern poses is how they Start-up entrepreneurs encounter scattering nuts might is precisely what excites search ‘Hide and seek’ theory, Alpern’s noted specialism, works should move about the ‘search region’ to minimise the time the same scenario all the time. also be seen as a way theorists like Alpern. on a similar premise: namely, the application of rational taken to meet? When to give up the search? The searched for object doesn’t decision-making to a context where the meaning of rationality Finding answers to this problem isn’t just the concern Alpern is more into squirrels than of diversifying even have to be an ‘object’ as such. is questionable. His introduction to the subject came as of pure mathematicians. Alpern gives the example of artificial birds of prey. To get through the winter, investments against In the case of product sales, for example, an undergraduate, back in the 1970s. Oskar Morgenstern, intelligence. As scientists consider sending robots to the moon squirrels and their ‘scatter-hoarder’ ilk the threat, say in banks it could be unknown demand. How does one of the founders of game theory and one of Alpern’s or to another planet, how can they be programmed to meet rely on collecting nuts and then scurrying an ice-cream vendor know how many tutors at Princeton University, suggested he read a book up to perform a task? Or, to keep with the theme of outer space, them away for later. ‘Pilferers’ adopt that might fail ice-creams to order? They listen to the by Rufus Isaacs on ‘differential games’. consider the search for extra-terrestrial intelligence. a different, less laborious tactic. Instead weather forecast, track tourist numbers, Differential games have two players who make continuous Just picture for a minute that there are other life forms out of looking for food themselves, they search out the test out different order volumes, and so forth. Alpern worked time decisions. A famous example is the ‘homicidal chauffeur there, busy beaming out radio signals into the galaxy. How can scatter-hoarders’ food caches and steal whatever they can. with the acclaimed US economist Dennis Snower on just such game’, where a driver with a fast car that can’t turn quickly tries we best increase our chances of picking up these interplanetary And so a sophisticated game of hide-and-seek develops. a problem. Together the pair resolved how to reduce the to run over a pedestrian who is slow but can turn on a dime. missives? Inventors looking for willing financial backers provides Scatter-hoarders usually spread their food supply around a associated costs of over- or under-ordering. Alpern’s curiosity was piqued by another example in the a more grounded version of the same dilemma. large geographic area (so-called ‘cache spacing’). That way, Distilling complex mathematical-based solutions into book: one about a princess and a monster. The pair are situated Alpern offers another example even closer to home. if pilferers happen upon one cache, they won’t necessarily everyday tools is imperative for hide-and-seek theory’s uptake. in a dark room whose dimensions both know. The monster, In case he ever got separated from his daughter, he’d tell find the others. But with the rising tide of digital data, algorithms are being who is looking to catch the princess, moves at a set speed. her to find an open area and wait until he found her – i.e. revert Other hoarders opt not to scatter at all, choosing instead used in more and more areas of our lives, and in search theory If the princess is to stay out of his grasp should she keep to a traditional hide-and-seek format. Her response to any to store all their supply in one place and then guard it jealously. a host of new formulae can now be applied to solve seemingly moving or stay still? If she chooses not to move, where friendly adult looking to help her was always the same: To confuse matters further, some hoarders turn to pilfering as intractable problems. Kenzo Tribouillard/Getty Images | Illustration: Rebecca Cutts Rebecca Images | Illustration: Tribouillard/Getty Kenzo

40 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 41 Millennials tip the scales

For many the digital world means being connected to work for longer thanks to the ubiquitous smartphone. But finds younger workers are STRATEGY Carly Chynoweth looking to change that trend

mployers who want to attract more job applicants It also suggests employers could do more in the – particularly younger ones – should talk about meantime to look at how to tailor the benefits they offer their work-life balance policies when recruiting, to the specific needs of the demographics they are Esuggests research by Shainaz Firfiray. targeting with their recruitment advertising. The WBS academic’s experimental study involving 189 But getting new employees through the door is only MBA students aged between 26 and 40 found that people the first part of the process, which is why Firfiray’s latest were more likely to apply for a job that promised flexibility research examines what happens next. What she found than for an equivalent role offering healthcare benefits suggests organisations that want to take full advantage – or no benefits at all. of the business benefits of their work-life balance policies Entrepreneur Lizzie Penny, however, has taken a are getting paid exactly what they think they deserve,” “There is already a lot of anecdotal evidence and need to do more than put them on their websites somewhat different view. The WBS graduate argues that she said. Associates, who are free to take on projects research suggesting that many employees have difficulties or include them in the employee handbook. real work-life balance requires not simply a cultural for other clients, can also choose when and how they

managing work as well as their personal commitments,” Such policies can mean employees feel more committed change, but a structural one. work, whether that is term-time only, a day or two per STRATEGY says Firfiray, Assistant Professor of Organisation and to their employer and therefore less likely to leave “It needs the sort of radical change that only week, evenings only – whatever suits them. Real work-life Human Resource Management. “The last European – avoiding all the associated costs of staff turnover – but entrepreneurs are confident to do at this stage,” says Penny. balance means having the ability to fit work around life, Quality of Life Survey found that 22 per cent of only if managers endorse and support them. She is speaking from experience. In 2009 she set up not the other way around, says Penny. people in employment are not satisfied with their “Work-life balance policies attract potential employees, a marketing agency called Futureproof. For a number “Everyone is freelance or self-employed,” she says. “We work-life balance.” but they do not make them more likely to stay on unless of years it operated on traditional agency lines, eventually believe that people can only truly get a proper work-life Given this it is hardly surprising that companies they can see the policies are supported by the organisation growing to 30 employees, but in May last year it became balance by being their own boss. We also think that, while who make a point of promising to help employees and by their direct supervisor,” says Firfiray. “Employees a fascia of The Hoxby Collective, a flexible working self-employment is on the rise, it comes with some find that balance have an advantage over their peers. need to feel confident that taking advantage of such community, who provide outsource support functions challenges. It can be quite isolating and you can’t deal Despite this, few companies that offer such benefits a policy will not harm their career prospects.” of which she is co-founder and joint chief executive. with big businesses because of their payment terms.” mention them on the recruitment pages of their websites. In other words, they need to be reassured that it is okay Penny no longer has employees, instead “curating Penny is quick to explain, however, that The Hoxby “If they did mention it they would find that putting to actually use the policy. teams” of individuals, who take on projects on behalf Collective is more than a platform connecting freelancers up even a small amount of information might help them “This means that work-life balance policies have to of The Hoxby Collective’s clients. Those individuals to clients. Associates are screened before being added to to attract more applicants,” says Firfiray. be accompanied by a change in organisational culture,” come in the form of roughly 125 freelance associates their roster, as the business vouches for their work. And Another finding of Firfiray’s research was that work- says Firfiray. “There needs to be greater openness about in 12 countries; 18 of Futureproof ’s former employees each project is assigned to a team of people rather than life benefits were more popular with ‘millennials’ – people discussing the needs of employees as well as those of the – made redundant when Penny changed the model – are one person; it is the only way to make sure that both the who reached adulthood around the turn of the century organisation, and the assurance that the policies won’t among them. It also has a number of self-employed equity client’s needs and individual worker’s work-life balance – compared to members of Generation X – generally seen create any negative outcomes in terms of careers.” ‘partners’ who, between them, own a quarter of the choices can be met at the same time. as those born between the 1960s and the early 1980s. This level of change will often require employers business and share in its profits. The end result is good for workers, for the partnership “As people get older they may have more healthcare to make a significant cultural shift in order to convince And it is always profitable, says Penny, as it makes and for the business that use its services, argues Penny. needs and therefore be more attracted to the benefits of staff – including the managers whose endorsement a margin on the day rates charged by each associate. Maybe the future of balancing work and life will not be healthcare,” she says. “Future research could work to is critical to employees’ trust – that this support of “We make a profit every month, clients get exceptional shaped just by changing job advertising, but by changing

isolate the effects of age and other demographic factors.” work-life balance is genuine. Cutts Rebecca Illustration: value and all associates set their own day rate, so they the nature of work itself.

42 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 43 Ask questions Look deeper To smile John Colley John Thanassoulis Kevin Morrell A book that Professor of Practice Professor of Financial Economics Professor and British Academy Mid-Career Fellow inspired me to… Accounting for Growth Fault Lines: How hidden Terry Smith fractures still threaten A Confederacy the world economy of Dunces We asked five WBS academics to pick a book that has inspired them, This book changed Raghuram Rajan John Kennedy Toole here’s what they chose... the face of Western accounting and played This is a compellingly This is a brilliant, a major part in the written book about Rabelaisian comic decline of a genre an incredibly important novel about the Think differently Love my job Spot my biases of large businesses subject. Rajan sees anti-hero Ignatius Andy Lockett Crawford Spence Dawn Eubanks called conglomerates by putting a the financial crisis J Reilly: “a mad Dean of Warwick Business School Professor of Accounting Associate Professor of brake on corporate acquisition activity. as the outcome Oliver Hardy, a fat Behavioural Science & Strategy It also changed the way we think about of deep imbalances in the whole global Don Quixote, a perverse Thomas Nausea The Craftsman published accounts, introducing caution, economy. He explains, in easy Aquinas rolled into one.” Ignatius Jean-Paul Sartre Richard Sennett Thinking, Fast and Slow scepticism and occasionally suspicion. to understand flowing language, is a 30 year-old slob who lives with Daniel Kahneman Acquisition activity had appeared why deeper problems in the economies his mother and rants incessantly much more successful than it really was of the West and the East combined at the world. When asked: “Got a job?” I read Nausea Sennett succeeded through perfectly legal but misleading to generate a subprime crisis in the He says: “I dust a bit... In addition during my late in striking a personal This would make accounting. It is now generally accepted US and then a global financial crisis. I am at the moment writing a lengthy teens, not because chord with me. a great present that more than half of all acquisitions Of all the books using economics indictment against our century. When I was angst-ridden, He explores the nature for anyone curious destroy value. Before this book that to analyse the state of our world this my brain begins to reel from my literary but because of craftsmanship, which about how we was anything but clear. is the one I find most credible and most labors, I make an occasional cheese dip.” I was curious about he defines as “the make decisions. As a young finance director it taught engaging. It is not a narrow analysis of It's impossible to do Confederacy the meaning of existentialism. desire to do a job well for its own sake.” It summarises me that accounts are only as good as the flaws of the banking system: greed, justice summarily – trying to reminds I can’t say it was an easy read, He suggests that this is routinely a body of research on the psychology the questions you ask. risk-taking, fraud. Instead it explains why me of Woody Allen's joke: “I took a speed but it was certainly one that benefited undermined in the contemporary of judgement, decision-making Having chaired businesses over a banking system established on these -reading course and read War and Peace from perseverance. What it taught economy where more emphasis and behavioural economics that two decades I have developed a healthy lines serves a deeper end of delivering in 20 minutes. It involves Russia.” me was the importance of not seeking is placed on quick results and saw Kahneman receive the Nobel scepticism about the stories accounts credit to large sections of the population The simplest thing to say is meaning in the outside world; you throwaway products. Prize for Economics (even though and reports intend to tell. whose incomes are stagnating. thinking about it makes me smile. can give meaning to your own life. He does not merely lament this he is a psychologist) in 2002. Smith unveiled the many practices This is not a book that assaults the There are brilliant light-and-shade We are all self-authoring our trend, but highlights how craftsmanship Kahneman leads the reader through corporates legally used to distort reader with statistics as to the inequality contrasts in Confederacy, but these existence; always becoming, and if it is an enduring human impulse that is various decision-making biases their accounts on a grand scale in the East or the size of China’s foreign fade compared to the tragic story were not for the contingency of death, always striving to find its full expression. so that they also fall into the trap when making acquisitions. exchange balance. But, rather it explains behind its publication – the real-life it would never end. For me the message Indeed, there is much to be learned of making sub-optimal decisions. Profits were enormously inflated dunces were those who were too

why the export-fuelled path to growth INSIGHT was uplifting, but I confess that I did have from the book for those working Experiencing this for oneself by making acquisition activity look very can be a motorway with no exit, which dim to recognise John Kennedy to read the book more than once before in modern organisations. is a powerful way to drive home attractive. Conglomerates like Hanson ultimately leads to stagnation. Toole's Pulitzer Prize winning genius. the penny dropped. People in organisations today the decision-making biases presented. Trust, BTR and Williams Holdings bought This is a thoughtful and deep analysis If you don't know the book, resist For many of an Anglo-Saxon often find themselves subject to myriad The research is delivered in a compelling, any business they could squeeze cost from one of the world’s leading scholars. the temptation to ‘Google’ it and persuasion Sartre may come across output-based performance metrics, entertaining manner, making it easily from and which had enough market It is the book I would most want skim the backstory – just get hold as pretentious, but for me his work which can potentially reduce their work accessible for anybody. For those position to influence prices. my students to read. of a copy and read it. is very real and keys into the essence to simply being a means to some end. wanting more, there are two full-length The cash produced plus the of existence. By paying more attention to the journal articles presented at the end veil of 'dodgy accounting' increased Funnily, the one line that has stayed inputs and to the process of work of the book. their share price and allowed further with me all my life is the lament that: itself, we can infuse meaning and I was fortunate to attend a seminar acquisitions to be made. Eventually “Three o'clock is always too late or too a sense of purpose into what we do. at LSE a few years ago where Kahneman City investors realised that this early for anything you want to do.” In turn, this is likely to yield more spoke about this book. I’m not usually approach had little prospect of creating interesting outputs as a result. one to be star struck, but I did take the growth and frequently destroyed The point is that people have a opportunity to have him sign Thinking, value. Conglomerate share prices basic desire to do good work, but this Fast and Slow for me afterwards. collapsed and they were broken is often mismanaged by organisations The addition of his signature made up to 'release value'. that socialise them into routines that it an even better gift for a friend. Even are anathema to craftmanship. without the autograph, it’s a great gift As Sennett concludes: “Society for anyone interested in learning about can collude in that mismanagement how we make decisions and common or seek to rectify it.” traps that our brains can fall prey to.

44 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 45 City guide Washington DC

Patrick Cropper, Warwick Business School city’s ‘half-smoke’ – similar to a hot MBA graduate and Principal at aviation dog but spicier – is also a favourite consultancy ICF International, tells us among visitors and the President! For those seeking a more elegant about his home city named after one of dining experience, a drink at the the US' founding fathers George Washington. Round Robin Bar in the iconic Willard InterContinental Hotel, a venue steeped in US political history, will set the right tone for any evening. Then walk or take a taxi to one of my current favourites: Brabo 1 or Founding Farmers 2 .

Washington DC 3

Where Airport. For those looking to relax showcase topics from American to chill out while enjoying a sporting event, history to air and space travel. visit Nationals Park 4 to watch Washington DC, founded Where Frenchman Pierre Charles L'Enfant the Washington Nationals play www.nps.gov in 1791, is the seat of power to eat designed Washington DC in the late a Major League Baseball game. www.whitehouse.gov 2 18th century and ensured that in the US and the Western Washington DC’s culinary parks were prominently and world. Home to the White scene has experienced www.benschilibowl.com equally placed throughout the city. Sights House, Congress, Supreme something of a www.washington.intercontinental. As a result, there are many settings Nearby cities

not to miss to visit INSIGHT Court and the President renaissance in the past com/food-drink/round-robin to relax in and enjoy the weather. www.braborestaurant.com it houses a host of national decade, with dishes from One such park is Dupont Circle, 3 Any visit to Surrounding Washington DC are around the world. For www.wearefoundingfarmers.com monuments. Spring is a major social landmark playing Washington DC a number of historic quaint towns. a quick lunch, visit the host to markets, small festivals, should include a particularly special time Fredericksburg, Middleburg, many food trucks that and all sorts of leisurely gatherings. a stroll through and Leesburg are all good to visit during the National line-up along Farragut Where The circle is also surrounded the National options for a day-trip and each Cherry Blossom Festival. Square for an affordable to shop by great shops, cafes, bars and 5 Mall. Anchored host impressive commercial Each year, in late March and tasty meal. Ben’s restaurants, ensuring something on either side districts with good food, shopping or early April, 1,700 Cherry Chili Bowl, a DC Georgetown, nestled along the of interest for every visitor. For by Capitol Hill and the Lincoln and attractions. The Amtrak train landmark serving the 5 Blossom trees, a gift from banks of the Potomac River, boasts those looking for a more casual Memorial, this two-mile park takes visitors from DC’s beautiful some of the area's best shopping. setting, on the boasts some of the city’s most the people of Japan in the Gravelly Point Union Station to Richmond, Georgetown’s cobblestone streets other side of the Potomac River popular attractions. Walking Baltimore, or Philadelphia, early 1900s, bloom around are lined with a wide variety of offers a beautiful view of the city through the Mall, visitors can each in less than two hours. the city’s Tidal Basin. It’s a shops. M Street and Wisconsin on an expansive see the Washington Monument, beautiful site and attracts Avenue serve as the neighbourhood’s bank of the river. which has an elevator to the top, residents and tourists alike. two main arteries, with plenty of Plane-spotters the White House, many memorials quaint side streets. Across the river will also commemorating notable leaders Watch Patrick's film in Virginia, Alexandria’s King Street appreciate its and national heroes, and a wide ‘What I did next’ at also hosts an impressive shopping proximity to variety of museums, including wbs.ac.uk/go/core 1 4 corridor with an 18th century vibe. Farmers | © Founding © Brabo Arnott | © Richard | flickr.com/photos/geoliv/3736649006 flickr.com/photos/ncindc/11018747776 Reagan National the National Gallery of Art, that

46 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 47 City guide Beijing

Mandy Zhang, Warwick Business School MSc Management graduate, and now Senior International Officer at King’s College, London, reveals all about China’s capital

3 Beijing 2 its steamed stuffed bun (baozi) If you want to experience the it offers more than a shopping a reservation early. The gong bao and fried dough twist (mahua). traditional Chinese courtyard, experience - there is also prawns and roast duck are highly If you are a ski fan visiting in Double Happiness Beijing a museum, an art gallery, recommended. If you want fine the winter, Zhangjiakou 3 is the Courtyard Hotel has very and a boutique hotel with dining with western cuisine try nearest city that has ski resorts good reviews. tropical garden. Temple Restaurant Beijing 1 and will co-host the 2022 Winter www.shangri-la.com/beijing/ or Capital M 2 . Olympics with Beijing. chinaworldsummitwing www.trb-cn.com Sights www.m-restaurantgroup.com/ not to miss Located in northern China Where capitalm Right in the heart of Beijing, Beijing is full of history and to eat Where to shop the Forbidden City 6 is a must. is renowned for its opulent Beijing Roast Duck is a It is the world's largest palace palaces, temples, parks, must-try for visitors! While Where Wangfujing complex with hundreds of ancient gardens, tombs, walls and Quanjude is the most to chill out Shopping buildings and collections. Here, gates, while its art treasures well-known restaurant It used to be a factory, but Street 5 offers you will appreciate the exquisite INSIGHT and universities have made for this, Dadong and now 798 Art Zone has been a one-stop craftsmanship and history of shopping China. Across the road from it a centre of culture and art Bianyifang are also transformed into an avant-garde highly recommended. 5 experience: the north gate of the Forbidden in China. Beijing has seven district with galleries, design Xi He Ya Ju, sitting in studios, art exhibition spaces, food stalls, book stores, souvenir City is Jingshan Park, formerly UNESCO World Heritage a traditional Chinese artists' studios, fashion shops, 4 shops and large shopping malls a private imperial garden, it is the Sites – the Forbidden City, courtyard near Ritan Park, restaurants and bars. It feels with international brands, there best place to enjoy a magnificent Temple of Heaven, Summer is one of my favourite very refreshing and relaxing going Where to is something for everyone! panorama of the city. Palace, Ming Tombs, restaurants. It has an there on a lovely day with friends! stay Nanluoguxiang, on the other hand, is a preserved alley Zhoukoudian, Great Wall, outdoor courtyard that is perfect for alfresco dining, www.798district.com Hotel prices in central Beijing are (Hutong) with a lot of small but and the Grand Canal. but make sure you book much lower than London prices, interesting shops and food stalls. The 2008 Olympics saw and you can find plenty of five-star Silk Market is always popular it build a host of spectacular Nearby luxury hotels for around £100 per among tourists – you can find modern stadia including the cities to visit night. If you’d like a view of modern everything you want from Chinese National Stadium. The best Beijing, China World Summit crafts and pearls to watches and Tianjin, only half an hour away Wing, 4 the tallest building in the handbags, plus practicing your time to visit Beijing is April by high speed rail, is an important heart of the central business district, bargaining skills with multilingual and May or September and port city in Northern China with overlooks the city. You can also salesmen can be fun! One of October when the weather some charming European-flavoured enjoy the beautiful skyline at my favourites is Parkview Green 1 6 is pleasant. neighbourhoods. Make sure you try Beijing | © Capital M Beijing Resturant © Temple | flickr.com/photos/36408880@N03/6103453416 | flickr.com/photos/calflier001/8153555156 Summit Wing | China World wlski.com ski resort: Wanlong Atmosphere bar on the top floor. Fangcaodi. Stunningly designed,

48 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 49 INSIGHT Trailblazer Khan takes his chance

From smashing boundaries on the field to breaking new ground off it, CEO at Leicestershire County Cricket Club Wasim Khan has become one of the most important men in English cricket. Ashley Potter travels to Leicester to meet him

hen Wasim Khan sat in the alleyways of inner I really make? Here at Leicester there’s a real chance -city Birmingham chiselling a picket fence to achieve something.” post into a cricket bat with his mum’s kitchen Grace Road has always been one of the less Wknife, little did he realise it would lead to romanticised county cricket grounds, but as we stroll a lifelong career in the sport. around the outfield building work is under way to Khan has been breaking barriers ever since. When in transform that. playground. Khan not only impressed but was made barriers to his rise to prominence, as he became a symbol August 1992 Khan strode out to bat for Warwickshire in From humble beginnings Khan has already achieved Warwickshire Under-13s captain, despite being the only for his community. the Sunday League clash with Northamptonshire at great success. His parents travelled to England in the state schoolboy in the squad of 13. “I didn’t face any problems, I blended in well,” says Northampton’s County Ground he became the first 1960s from Kashmir, a region beset by war and conflict “It was the innocence of youth, I knew with a bat in Khan. “I understood I needed to adapt to the environment INSIGHT Englishman of Pakistani origin to play professional cricket as India and Pakistan disputed the region. His father my hand I was quite good,” says as much as the environment needed in the country, and the first Muslim. He had already been found work at Wimbush Bakery in Small Heath, but Khan. “The hard ball didn’t scare me, to adapt to me. I realised that at quite the first to captain England Under-19s. despite coming from a cricket-mad nation he had no it was just like – bring it on! There I was as an a young age, and I was accepted. On the cricket field Khan won the NatWest Trophy and interest in his son’s new found passion for cricket. “I was fortunate, unless Mr Asian boy scoring “There were no issues, sport County Championship with Warwickshire, but it is off “A few boys would play cricket in the alleyways, so Bolland had an interest in cricket I crosses all ethnic divides – that is the the field where he has made his name and continued to I joined in,” says Khan. “We used milk crates as wickets, probably wouldn’t have been spotted.” a century and winning power of sport. There I was as break down stereotypes. and I carved my own bat out of a piece of fence. That is Unfortunately Khan’s father, the game for England an Asian boy scoring a century and First he became Cricket Foundation's CEO of Chance how it started.” Gulzar, never saw him play winning the game for England Under to Shine raising £50 million to help children play Remarkably, Khan developed a natural talent that professionally, as he died from a heart Under-19s – I am a hero, -19s – I am a hero, I was there on cricket in inner-city schools and now he is the first was only spotted when a teacher peered out of the staff attack at just 49. With Khan only 15 I was there on merit merit and everybody respected that.” non-white CEO of a county cricket club, as he tries to lift room one break time at Oldknow secondary school (now he saw cricket as his lifeline and The likes of Monty Panesar, Ravi Leicestershire from its recent moribund state. Small Heath School). pursued it with an even deeper desire. and everybody Bopara and current England spin Whether it is chiselling out cricket bats, or crafting “He came over and asked me: ‘Where did you learn “My mum came from a very respected that king Moeen Ali have followed in out success from a cash-strapped cricket club, Khan to play cricket like that?’ I said: ‘Just watching it on TV traditional Muslim background,” says Khan’s footsteps, but the 45-year-old has gained a reputation for making the best with sir’. He threw me a couple of balls and said come back at Khan. “She would support me, it was more my believes there is still more the sport can do to bring limited resources. 4pm today. So I did and he threw down a few more balls. uncles questioning why I was wasting my time hitting cricket-mad Asians into the fold. “When we started Chance to Shine lots of people said He said: ‘I think you might have something; I want to send a ball around.” “I think every county can do more to tap into the Asian it couldn’t work,” says Khan. “Similarly, when I was you for trials at Warwickshire Under-13s. I had no cricket Luckily he carried on wasting his time and was offered market,” says Khan, who has recently been appointed thinking about taking the job at Leicestershire nine out whites, and I had never faced a proper cricket ball, but a full-time contract by Warwickshire at 18. Growing up to the board of Sport England by Culture Secretary John of 10 people said I was crazy. I could probably have I turned up at Edgbaston for trials.” in England in the 1980s was hard for many Asians, with Whittingdale. “There is a lot of good work being done by gone to a job at a Test ground but what difference could Mr Bolland had unearthed a gem in his own racial abuse commonplace, but Khan didn’t find any the England Cricket Board and the counties in terms of

50 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 51 LCCC's grounds: a new future vision in progress

trying to engage communities. In Leicester more than King wanted Khan to help raise £25 million Its impact saw Khan awarded an MBE in 2013 for cricket club in the country, and in division one. We have 50 per cent of the city is non-white, so there is a huge with the Government promising to match it, engage services to cricket and community and a private lunch recently been selected as one of five venues for the ICC amount we can do. with two million children and bring cricket to a with the Queen and Prince Philip. Women’s World Cup in 2017.” “I still think there is a bias towards public schoolboys third of state schools, where it had largely disappeared. “I thought it was a tax letter,” says Khan. “I didn’t After leading the first wave of Asian cricketers in county cricket for no other reason than they have the As somebody who had only ever played open it for three days. It was pretty incredible, there into the English game, Khan is hoping his move into the best facilities and the best coaches, cricket the Chance to Shine were only five of us in the room for two and half hours. boardroom will inspire more from the country’s while state schools have issues around campaign was a huge strategic and It was like sitting with your Grandma in a café putting the ethnic minority to follow him. teacher time and facilities. But it can By any measure the organisational challenge. world to rights.” “To be the only non-white CEO across any professional be done, inner-city Birmingham has campaign was a huge “I had three KPIs and I sort of The campaign also inspired Khan to learn more about sports organisation in this country is a pretty sad statistic,” INSIGHT produced 15 first-class cricketers in worked backwards from there,” says strategy and running an organisation and he enrolled says Khan. Small Heath – a three-mile radius success. It reached Khan. “Cricket has 39 county cricket to do an Executive MBA at Warwick Business School. “I implore Asians to not just think about the playing where I grew up.” 2.5 million children, boards across the country, so we had “Because I had no formal education I felt it side, but about the administration as well and get yourself After seven years at Warwickshire one million of them a natural network to work through would support me down the line, I felt I was ready for in a position of influence to do a lot more.” and then stints at Sussex and and then it was trying to work out academia,” says Khan. “I had a real thirst for learning Bringing more ethnic diversity into the country’s Derbyshire Khan decided to move girls, visited 10,000 how we build a scalable programme. and Warwick was right up there in terms of its recognition boardroom is one barrier that campaigners have tried into coaching at 31, before he received schools that had not Using the coaches from the board, as an institute.” to break for some time. Some are calling for positive a call out of the blue in 2005 that they were our delivery arm, we The MBA gave Khan the confidence to go for the CEO discrimination to end the cycle of white middle-aged men would change his life. played the game brought in Loughborough University position at Leicestershire when it arose, despite the appointing white middle-aged men. “An unassuming voice said: ‘Is this before and, Khan to evaluate the social and educational county not having won a first-class game for more than “I am not a huge fan of that,” says Khan. “There Wasim Khan?’ I said: ‘Yes’ and she impact of the programme. We were two years and suffering four consecutive annual losses. is more of an educational piece needed rather than forcing said: “I have Mervyn King, Governor believes, has left raising and spending £6 million a year Within a year he had turned a £250,000 loss into a profit. people’s hand. They may do it because they have to, of the Bank of England on the other a lasting legacy, of which only 17 per cent were on our “We are investing quite a lot into our ground, with but they will not really embrace it or place a value on it. line who would like to talk to you’. overheads, all the rest was directly new floodlights and stands, developing the culture Rather than telling people 25 per cent of boards should I wasn’t sure what I could teach especially in the rise back into the programme.” here, getting the right people doing the right be female or BME, people have to see the value, him about economics but the voice of women’s cricket By any measure the campaign jobs and empowering people, who were unhappy to be meritocracy is something I believe in. came on the line and said: ‘I have was a huge success. It reached here,” says Khan. “I like the idea of independent nomination boards. this vision of getting cricket back into state schools, 2.5 million children, one million of them girls, visited “We are selling a vision about where we want to be, De Montfort University is helping us do this, it has will you come and have a conversation with me?’ 10,000 schools that had not played the game before local companies are getting involved and for the first time been through it all before and has a very good board now.” “I thought it was quite bizarre, but I went to meet him and, Khan believes, has left a lasting legacy, especially we have a five-year naming rights for the ground. It might be the biggest barrier Khan has faced yet,

at the Bank of England the next day.” in the rise of women’s cricket. Melia © Ed “By 2019 our aim is to be the leading non-international but don’t bet against him breaking this one too.

52 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 53 Why I love my job Hugh Thomas, Co-Founder of Ugly Drinks

Hugh Thomas studied BSc Management at Warwick Business School and then went on to work for Heinz on its Ketchup and Beanz brands, and lead marketing at Vita Coco Coconut Water in the UK, before starting out on his own by setting up Ugly Drinks with friend Joe Benn

always knew I wanted to start the world and our team is the same. my own business. I remember We look for obstacles, because that in my teens trying to sell ‘sandwich is when you learn; getting the science Itoastee bags’ with my friend, George, of the drink right so it had a shelf life at a car boot sale in Redditch, and getting was a real hurdle we overcame. the flu in the process. I think we just For a start-up you need that about broke even! persistence to keep knocking on doors The inspiration for Ugly Drinks came and optimism that the next one will open. from noticing a general shift in public Having your own company is great; perception around sugar and sweeteners the ability to literally do whatever the in drinks. team’s imagination conjures up is a Joe and I are very conscious real joy, it is our call, Joe and I make of the health of the nation, diabetes the decisions. That freedom and ability and obesity levels are increasing, which to be creative is amazing. has an impact on the NHS – the numbers We have total autonomy, and are just staggering. although there is nobody there to help Also, we both worked in the drinks you if things go wrong, when you see industry with Vita Coco and we noticed your thoughts and decisions play out people were looking for the option in the marketplace it is exciting. One of of a drink without sugar or sweetener the best feelings was the first day when in it, but wasn’t water and still had we saw Ugly Drinks on the shelves in a flavour. When we looked on the Selfridges and seeing somebody buy shelves we couldn’t see anything like We look for obstacles, it for the first time. that anywhere. because that is when The Ugly brand draws inspiration INSIGHT There should be a choice for from chefs, and the way they mould consumers, so we wanted to create you learn... For a together cookery, science, marketing a fizzy drink that had all the fun of the start-up you need that and art, craft beer, street artists big brands, but was also healthy. We persistence to keep like David Choe, and filmmakers like want people to get excited about the Casey Neistat. drink, have that great taste and the knocking on doors Our mission is to make healthy bonus is it has no sugar or sweetener and optimism that the drinks accessible to as many people or anything artificial in it. We are filling as possible, geographically and through the gap between water and traditional next one will open the price. fizzy drinks, and it still gives you that Ugly stands for being beautifully ‘cold can’ moment. It is all consuming, a lifestyle that different; we champion individuality We started in 2015, developing an blurs the line between work and leisure and believe in people putting their unsweet fizzy drink infused with fruit time. I am always working, when I go stamp on the world in their own and launched it in 2016. to bars, store openings, the launches unique way. My job – alongside other founder of new clothing ranges, concerts, responsibilities – is to look after the or sport, I check new things out to marketing and brand, whether it is social understand the new trends in pop media, PR or anything out in the market. culture. As a brand you need to tell Watch Hugh's film Every day is different, we could be doing your story and have an emotional pull. ‘What I did next’ at in-store sampling, meeting PR agencies At WBS I was surrounded by wbs.ac.uk/go/core or out in the street selling cans. super-ambitious people from all over

54 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 55 direction, but there are still some of Market Development, said fintech example, enable fintechs to design stumbling blocks.” and shifting consumer behaviour is phone apps that help customers Millennials expect everything in changing the use of cash, and helping manage their money better.” real-time, according to Volker Breuer, with financial inclusion, but more Andy Reiss, a former Cabinet CEO and Founder of Payfriendz, a was needed to move the unbanked – Office adviser and director of Cash reaches money transfer app where friends can said to be around two million people Fingleton Associates, a consultancy send money to each other in real-time. – away from cash. that advises on competition and Breuer says: “You push a button Cash accounts for less than 50 per regulation, believes for many and your friend instantly gets cent of all transactions, Dunne says, disruptive technologies, lower cost digital content – messages, photos or solutions can threaten incumbents. videos, why should digital payments “However, for payment systems, work differently?” some of which operate in relatively Apple Pay: uncompetitive markets, lower costs vanishing point eliminating the The sharing economy future need for may not be passed on to end users,” pin numbers says Reiss. The fintech revolution might be a worrying sign One problem the payment sector “PSD2 and other regulatory faced was that actual settlement interventions are poised to help for the traditional banks, but Jonny Paul finds it could cycles were still measured in days. new entrants break through the mean a cheaper and easier way to manage our finances “This involves risk mitigations competitive barriers. This could pave RESEARCH and therefore costs, but you can the way for more digital and mobile prevent this on the digital peer-to- alternatives to cash, as well as broader peer platforms,” he says. disruption across banking and other For Pinar Ozcan, Associate financial services.” re the days of schlepping century, fintech is quite simply high denomination notes that are Professor of Strategic Management at a bulging leather wallet essential in making financial services easy for the criminally inclined to WBS, the success of sharing but it is still the biggest way to pay Democratising banking brimming with a credit and work for the customer.” transport and launder. There has platforms, such as Uber and Airbnb, for lower value goods. However, we Adebit card or three, along Payment models and mobile been a move to ban the €500 note is playing an increasing role in the way are starting to see this moving With the huge inflow of investment, with the passport photo of a loved transactions are integral to the cashless with this in mind. consumers pay for goods and services. to contactless payments, especially fintechs are continually improving one and the dust-gathering gym drive. Mobile banking already lets “So much of the cash going She says: “Many of these sharing in urban areas. payment security and expanding membership, about to end? you check your balance, pay bills, around is related to fraud, and while platforms use mobile payment “Interestingly, the Bank of innovative mobile offerings that make Does the proliferation of fintech make payments and transfer money. this is slowly declining it still persists technology and so their growth will England continues to print cash and a more compelling case to transact start-ups churning out absurd in some sectors,” says Zachariadis. encourage the growth of PayTech. there are more ATMs than ever, with using digital devices. amounts of innovation threaten The digitally savvy “What may be the case one day These platforms encourage business more than 70,000 now across the While fintech is without doubt to disrupt the traditional banking is that carrying cash could be seen as at an individual level, rather than UK,” says Dunne. “This is because the champion of the movement model and shake up how we transact, Research published by the payment a sign of misconduct.” going through companies. Calling for people are still taking money out in towards cashless, the consumer is the and pay for goods and services? Are infrastructure provider VocaLink Zachariadis believes there is a lot a taxi through Uber or booking a much the same way. But if you look ultimate winner. With far more we edging ever closer to becoming shows that 84 per cent of UK of ground to cover before becoming room on Airbnb involves apps. All at retail, the amount of money choice, more rounded and tailored

a cashless society? residents own smartphones with 46 cashless, and each country has its done through mobile payment circulating in shops is far less.” solutions and agile and interactive RESEARCH The financial services sector has per cent using them for mobile own pace. technology, allowing you to send a According to Payments UK cash ways to engage with the financial seen an explosion of activity in recent banking. People are generally more “Payment innovation and the payment with one click.” machines will remain the main system, outcomes for consumers can years, with fintech start-ups digitally-savvy today and want a adoption of technologies of exchange The introduction of Apple Pay, method by which consumers acquire only get better. assiduously fusing innovation with faster, smarter experience and certainly help as people move towards and other digital wallets that cash over the next 10 years. However, “In the increasingly digital and technology to provide digital competitively priced products. mobile payments, and abandon cash aggregate electronically our plastic the trade body says cash payments therefore cashless society, there solutions that disrupt prior processes, Fintech is providing solutions that and plastic,” he says. “The more cards, could further challenge the are set to decline by 30 per cent is a terrific chance to address many practices and products. reshape the entire consumer these are being accepted at the point banking model. Providing more by 2024, from 18.1 billion in 2014 of the issues around financial Transforming the consumer experience, encouraging interaction, of sale, the closer we will get.” payment agility, easy access and the to 12.6 billion. This would see cash inclusion that have for years appeared experience and way we approach our inclusion and better outcomes. Certain demographics use cash, ability to make transactions seamless represent around 33 per cent of the unsolvable,” says Alex Letts, founder finances is the ultimate objective. Markos Zachariadis, Assistant such as lower income groups, and will and swift, could entice the more cash total volume of consumer payments, of Ffrees, the current account that Speaking at Fintech Week in Professor of Management and continue to do so, argues Lisa Moyle, persistent to go digital. down from 53 per cent in 2014. doesn’t do credit checks. London, Economic Secretary to the Information Systems at Warwick techUK’s Head of Programme, MasterCard is looking at taking The government and regulators are “Digital banking companies like Treasury Harriett Baldwin lauded the Business School and co-founder Financial Services and Payments. biometric recognition to a new level hugely supportive of giving fintechs Ffrees are working off a low-cost work of the UK’s fintechs, stating of the WBS PayTech Conference, says “The products and service by allowing consumers to make access to the payment system digital footprint. They have a they had increased competition and that cash is still the most popular way offerings will have an impact, but online payments simply by snapping infrastructure to improve competition generational opportunity to offer choice in banking, helping customers to transact globally, but as of 2015 there needs to be more understanding a selfie. This could mean cards and and consumer choice. democratised access to fairly priced and businesses to get better services. cashless payments were more popular as to why they still use cash,” says PIN numbers will be something our “As a Government, we've also products and services that the legacy “Fintech helps normal people in the UK than cash. Moyle. “Financial and digital children snigger at as we reminisce been working on how fintechs can operational model of the established in their daily lives,” she said. “It gives In modern economies, cash inclusion also needs to be addressed about how we used to put plastic into make better use of bank data on banks simply cannot deliver.” them extra choices; it makes their can sometimes be deemed as having further and the underlying payment holes in the wall then type in digits behalf of customers, by creating an So cashless means cheaper everyday tasks simpler; it improves a more suspicious and sinister structure needs to move to real-time to access our money. open API standard in UK banking,” banking as well? Most people would

their quality of life. In the 21st purpose, Zachariadis says, especially payments. We are moving in the right © 2015 Apple Inc. Chris Dunne, VocaLink’s Director said Baldwin. “This would, for give up their wallets for that.

56 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 57 The end of capitalism? Mark Piesing explores how Uber has unleashed a movement that could change the face of how

RESEARCH we live and work

ioting taxi drivers, smear campaigns against And this process has a name. It is called ‘Uberisation’. journalists, and an ever-growing number of lawsuits. While Uberisation may mean different things to a venture Welcome to the world of Uber. capitalist and a licensed taxi driver, it is a process that has R Love it or hate it, nothing seems able to stop a number of components everyone can agree on. It combines the growth of Uber, the disruptive Silicon the use of real-time data, mobile stop buying so many cars, because there would be no reason or Airbnb. You hardly notice these apps are there.” Valley ride-hailing company whose payments, instant gratification, use to want to own a car when you could get such an on-demand Moreover, the loose coupling gives services like these ambitions are as great as its name. What Uberisation of workers or buildings not employed service at such low cost. an additional competitive edge as employing workers It operates in more than 350 cities means to me is that or owned by a company (described as “If ownership becomes less important and ownership or leasing buildings is very expensive. If an Uber driver and 60 countries, with 1.1 million – and being ‘decoupled’), and dynamic pricing, is important for capitalism as we know it to function, well then… makes a mistake or if an Airbnb property isn’t satisfactory growing – active drivers, and by early the premium services to create a new low-cost, on-demand “The same is true for Airbnb. I have a four-bedroom house then they can be quickly replaced. 2016 was valued at $62 billion. we buy are easier economy that could manage what Karl with an annex and I could rent it out to the bowling players Henfridsson warns that there is a downside to this.

The secret of its success is an Marx failed to do and bring about the in Victoria Park in the summer. Now Airbnb provides me He says: “In the industrial revolutions of the past, we have RESEARCH app that allows customers to summon for us to find and use end of capitalism as we know it. with the mechanism to choose who I let stay and earn £50–70 been able to compensate workers with new jobs, but not the nearest Uber driver at the touch by decreasing both “What Uberisation means to me for a night. It is good for the economy as I am reusing empty necessarily this time. of their smartphone screen to take is that the premium services we buy space and it’s good for me as every pound I earn is profit. “We may have to change our mindset as to the nature them wherever they want. The price of our search costs as are easier for us to find and use “It won’t destroy hotels, but it will reduce their number.” of work, as this kind of digital technology will release a lot the journey rises and falls with demand a customer and the by decreasing both our search costs What is more, the network effect is a phenomenon by of people from tedious labour-intensive jobs and replace – known as ‘peak pricing’ – and at the marketing costs of the as a customer and the marketing which a service like Uber or Airbnb becomes more valuable them with – what? The future is unclear. end of the journey driver and passenger costs of the seller to near zero,” the more people use it, and this effect, Henfridsson believes, “One solution might be a universal basic income, can, eBay-like, rate each other. Clients seller to near zero says Ola Henfridsson, Professor of accounts for their strategies of growing as quickly as they but someone still has to pay for that." can even track the car as it threads its Information Systems and Management can, as well as the winner-takes-all culture that they have He believes home energy may be another industry that way through the traffic towards them. It’s addictive. at Warwick Business School. “Digital technology enables to competitors, regulators and journalists. will be Uberised as new technology will allow homeowners a market to develop between people that might not have to generate solar power and store the energy for use during Uberisation existed before, and this has been called the sharing economy. Losing jobs the dark. This will create a market for homeowners to share “I use my BMW for an above average 40 minutes a day energy with other homeowners and this market will be very Airbnb, founded one year before Uber, uses the same and for the rest of the time it stays in the parking lot. From However, critics argue that rather than a revolutionary new difficult for power companies to compete with. Education business model. It is a website and app for people to list, an economic standpoint this is very inefficient. However, economic system, it is classic red-in-tooth-and-claw capitalism may be another vulnerable area. find and rent rooms, and by the start of 2016 it had 1.5 million what if I could safely rent it out while it is parked and know that makes its money by getting in between consumer “This may mark the emergence of a new economic listings in 34,000 cities and 190 countries. In 2015 it was valued that it would be back by 5pm? Well, I would. and supplier. Henfridsson concedes they may have a point. system that will spell the end of capitalism and the birth at more than $20 billion. It even provoked similar reactions “That’s what Uber does. It destroys traditional business “It is a difference in degree rather than in kind, as these of collaborative commerce,” says Henfridsson. from hotel and B&B owners fearful for their own livelihoods models [in this case the car hire company]. It may even start services operate in a very lean and efficient way,” says “Whatever it is, Uberisation is an economic force that as Uber did from minicab drivers. to destroy capitalism itself as the autonomous vehicles that Henfridsson. “Just think about the number of people employed it is going to be very hard to stop despite the protests There are many other companies all with ambitions companies like Google and Uber are developing don’t need in the market and distribution systems of a traditional of taxi drivers and regulators. If it’s not Uber itself, it will

to be the Uber of this or that. drivers, so taxi services like Uber will be so cheap that we will Meepian/Shutterstock Natee industry and the number of people employed by Uber be something else.”

58 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 59 message communications with patients and hospital tackle potentially deadly hospital infections, in a study also environments could save millions of pounds of public involving Imperial College London and the University of Miami. money and improve wellbeing. Simple handwashing is vital in preventing hospital-acquired In 2010 Vlaev co-authored the MINDSPACE report infections, but numerous studies have shown alarmingly that preceded the UK Government’s Behavioural Insights low rates in both staff and visitors. Team – better known as the ‘Nudge Unit’ and now a private Previous efforts to address the issue have concentrated company part-owned by the Cabinet Office. on educational campaigns and have achieved only temporary “The fundamental insight from behavioural economics and modest improvements. is that correcting human behaviour to make people less Vlaev’s study, published in the journal Health Psychology, biased and more rational is too difficult,” he says. instead explored the potential of “psychological priming” “So let’s go with the grain of human nature and play to alter behaviour without the conscious awareness on these irrational behaviours to benefit the individual of the people targeted. or society. That’s the philosophy of nudge theory.” More than 400 people were observed entering the Vlaev and colleagues from Imperial College London, surgical intensive care unit at a Miami teaching hospital. the Department of Health and the Nudge Unit, have shown Only 15 per cent of a control group of 120 – who were how the content of a text message can reduce non-attendance not given any kind of nudge – washed their hands. But the rate of hospital appointments. was three times as high (47 per cent) among 160 individuals Around five million NHS text exposed to a clean, citrus smell pumped reminders per month are sent out through an aroma dispenser. to outpatients, yet in 2014-15 around 5.6 So let’s go with Another 124 people were exposed million (nearly one in 10) NHS outpatient the grain of human to a photograph of a pair of eyes above appointments were missed in England. the hand gel dispenser. In this group, The National Audit Office estimated nature and play hand washing doubled to 33 per cent the cost at up to £225 million. Jeremy on these irrational when the eyes were male but there was Hunt, the Health Secretary, has claimed behaviours to benefit no positive impact if they were female. it is much higher and said in 2015 Previous studies suggest men exert that he would not “have a problem the individual more social influence than women but in principle” with charging people or society. That’s the researchers cautioned that the male for missed appointments. photo also featured more facial muscles, Surveys indicate that most patients the philosophy which could have implied anger. who don’t attend simply forget, but of nudge theory “They’re not consciously aware previous research had not investigated of the eyes but subconsciously Robin Yapp investigates how findings in behavioural the wording of text reminders. they’re being watched,” says Vlaev science are being applied in healthcare with surprisingly In two trials involving almost 20,000 patients, Vlaev of people influenced by the experiment. and colleagues found texts spelling out the cost to the NHS While more women than men washed their hands simple changes producing huge effects of not attending (around £160) had a significant positive effect. in the control group, no significant differences were seen RESEARCH Missed appointments were a quarter lower among patients in how the sexes were influenced by the smell or the eyes.

who received such a text compared to those who got Vlaev has secured a £212,000 grant from the Health RESEARCH a standard SMS about location, date and time. Foundation to carry out a larger version of the study Texts giving a general warning that not attending “wastes at Birmingham Heartlands Hospital. NHS money” or asking patients to “be fair to others” if they In a smaller study he also found evidence that the power wished to cancel or rearrange resulted in far less improvement. of social norms could help to tackle dangerous drinking. The study was carried out in London, which has a particular Students who drink to excess were more likely to request Can SMS problem with non-attendance, at Barts Health NHS Trust, alcohol-related health information on learning how their with texts sent five days before appointments to the 20 drinking ranked among their peers than when told how per cent of patients for whom mobile numbers were available. it compared to official guidelines. If the impact was the same across England, the intervention Healthcare is just one of many areas in which behavioural could prevent 400,000 cases of non-attendance a year. insights are coming to the fore; many UK government This calculation was based on having mobile contact details departments, the European Commission and the White for one in five patients, so if more were available the savings House have embraced the field, along with a growing save the NHS? could be huge. number of major companies. Furthermore, altering SMS messages could hardly be “It brings insights from psychology into the laws ith a rapidly ageing population and a mood Given this sobering outlook, the potential to cut waste simpler and incurs no additional cost, simply “piggybacking of economics to give us a richer understanding of what’s of economic uncertainty that refuses to go through small behavioural changes in patients or healthcare on the existing service” in Vlaev’s words. going on and maybe enable us to predict better what away, the need for a more efficient National staff has rightly risen up the agenda. He now plans to investigate the principle with letters rather will happen,” says Vlaev. WHealth Service (NHS) in the UK has been Ivo Vlaev, Professor of Behavioural Science at Warwick than texts and has also applied for funding to test it with GP “I think big organisations would benefit from having a chief brought into sharp focus. Business School, is playing a central role in shaping the appointments in the Midlands. behavioural officer – a CBO, in addition to a CFO and CEO.” A report by The Health Foundation, an independent debate with research that combines elements of psychology, “If it also works in primary care and with letters, I don’t By showing how painless changes can trigger behavioural charity, predicted an NHS funding shortfall of £2 billion neuroscience and economics. think we’d need any further evidence,” says Vlaev. shifts that serve the greater good, Vlaev is ensuring the healthy

in 2020/21, rising to £9 billion a decade later. His recent studies highlight how simple tweaks to text guteksk7/Shutterstock He has also investigated the power of nudging to help level of interest in this field continues to grow.

60 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 61 Making sense of ourselves

Lucy Hodges gets her shoes off to sample how the world of acting can help students become

RESEARCH better business leaders

The WBS Create space, breaking he belief that creativity lies at the heart of business a boardroom or give a convincing presentation. with traditional is central to the work of Warwick Business School. To make this a reality WBS has built a drama studio, teaching methods For the last five years the creative arts, and drama known as the ‘create space’, the first business school Tin particular, have been on the MBA curriculum in the UK, and possibly the world, to do this. It provides and available to undergraduates, as well. a room in which business students can be creative, rehearsing This idea that business and the arts make happy bedfellows and acting out their plays – and is available to all faculty may sound counter-intuitive but an emphasis on the arts in the business school to explore new approaches This space helps students to explore their unconscious can dramatically shift how we think, from one situation creates better managers, says Deniz Ucbasaran, Associate to teaching and learning. biases and ingrained expectations, he says. Learning the to the next. Dean for Pedagogy. People with careers in large organisations Housed in the new £25 million extension, it has four craft of acting takes this further. “This means that we are not stuck with a particular need creative ideas to succeed and one way to do that projectors and screens, a sprung floor and a ceiling-mounted “Actors are trained to develop an acute awareness of their repertoire of thoughts and behaviours; we can retrain is to give them literature to read or a play to take part in. camera to film all the drama. bodies, their voice, facial expression, emotions and words ourselves to play a different role or character.” Thus, students at WBS are given the chance to perform Inside, Teaching Fellow Piers Ibbotson, a former Royal in order to be able to create the effects on the audience Chater, whose MOOC (Massive Open Online Course) in Sophocles’ Antigone or Shakespeare’s King Lear, learning Shakespeare Company actor and director, imparts his craft. that their performance requires,” says Ibbotson. The Mind is Flat on the FutureLearn platform is set to be

in an intensely direct way the The create space is a “deconditioning “This knowledge is profoundly useful to all of us. Every day, turned into a book of the same title, argues that our everyday RESEARCH importance of listening to others, making chamber,” he says, in which students as participants in organisational life we are required to affect conception of how our mind works is profoundly misleading. compromises – and becoming WBS believes that are encouraged to unlearn the habits others, to influence, to persuade and to encourage. Being able Chater, who is an adviser to the ‘Nudge Unit’, which began a better leader. Or they read Henry V, creativity – defined as they have acquired in life and learn to achieve these effects with integrity and grace is at the heart as a UK Cabinet think-tank and now works with governments which is really a play about strategic new ways of behaving in order of good leadership.” around the world, argues that we are victims of an “illusion management, how to implement a acting in or on the to become convincing leaders. Students across the curriculum go through the same of mental depth.” project and how to deal with setbacks, world in new and Simply entering the space challenges process as actors learning their craft. We imagine that our thoughts and behaviour arise from according to Ucbasaran. All useful, if you people’s conditioned responses because “You need to get skills into your body, your fingers hidden motives and beliefs, but in reality we have to continually are seeking a career in a big corporation. significant ways – is a it is so different from the usual lecture – your imagination,” writes Ibbotson in his book The Illusion make sense of ourselves, actively creating our own “character” WBS believes that creativity – defined powerful and universal theatre or seminar room, says Ibbotson, of Leadership. “And this can only be done experientially.” and working out which “story” we are in. as acting in or on the world in new and who is the author of The Illusion To motivate people and get them on board or to get This is where Chater’s research links to what is being taught significant ways – is a powerful and force throughout the of Leadership: Directing Creativity a team fired up by an idea, managers need to take great in the create space. universal force throughout the business business world in Business and the Arts. “There are no care of how they express themselves. “Theatrical techniques are among the most powerful world. Ucbasaran argues that the worlds chairs, the room is curved, and almost In the create space students are learning this self-discipline methods we have for helping us make better sense of arts and business are intrinsically linked and have been but not quite round,” says Ibbotson, one of several in the WBS and awareness, just as actors do, though Ibbotson points out of ourselves, working together with other people, and throughout history. Create team with a drama and theatre background including that the secret to great acting is not to act at all. training ourselves to let go of unhelpful or even destructive Initially, business students can find acting out a dramatic two National Teaching Fellows. “It has a flat floor with a surface It is a notion that has some support from behavioural habits of thought,” says Chater. role mystifying, not to say terrifying. But, they soon get the that encourages you to run or jump or walk about. science. Research by Nick Chater, Professor of Behavioural “Playing with new ways of thinking, behaving and hang of it and end up learning more than if they simply “There are curtains to change the light and the texture Science at WBS, suggests we are all acting, all the time. interacting with others, can help us become more thoughtful, engaged in playing the role of a marketing manager of the walls and there is state-of-the-art technology to create “We are almost improvisation actors playing a role,” ethical and effective managers.” or CEO of a company. light and sound, or fill the space with images. Everything about says Chater. “We’re continually improvising our beliefs, Students are learning through experience the truth Moreover, they benefit from the dramatic skills explained it is designed to offer a different context to the one we are preferences and attitudes. This means that situations we are of Shakespeare’s famous line: “All the world's a stage, by professional actors, understanding how to influence conditioned to accept as a teaching space.” in, and the ‘role’ we think we are supposed to be playing, and all the men and women merely players.”

62 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 63 reasons, the flow of ideas, services and products seems There is now recognition that repeated structural to be out of kilter with whatever appetite there is for innovation. reorganisation, which the Government says it has ended, Researchers at Warwick Business School are urging a fresh may have damaged the level and availability of organisational perspective on this issue to try to get supply and demand into knowledge in the health service. better alignment. The starting point, they argue, is to focus on One casualty has been the Chief Knowledge Officer (CKO), the demand side and develop an understanding of how people a role widely adopted by NHS bodies following the Darzi – health managers, doctors and patients – behave when they report on quality improvement in 2008, but rapidly eroded are seeking new solutions to problems; how they discover after the Lansley reforms just four years later. and absorb innovations; how they ‘mobilise’ knowledge. Although views differ on the lasting value of the CKO, “The way this was traditionally looked at was with some critics seeing it as too top-down, there is consensus in terms of knowledge transfer,” says on the importance of key individuals in Jacky Swan, Professor of Organisational knowledge mobilisation – not necessarily Behaviour at WBS and an editor early adopters of innovation, but opinion of the book, Mobilizing Knowledge leaders who have credibility within in Healthcare: Challenges for an organisation and with peers beyond. Management and Organization. They may also shape the organisation’s “Something was created culture and its receptiveness in a laboratory by researchers and then to innovation. pushed out through a linear sequence This emerges in Swan and colleagues’ of steps to passive and grateful users. book in an analysis of how health sector It was thought of as a pipeline. managers use knowledge. Gerry The reality is much more complex, Richmond McGivern, another of the book’s many involving a process of transformation House, WBS contributors, led a study at six Department and interactions of multiple individual of Health sites of their “epistemic fit”, or how and collective actors.” the stances they took on epistemology The simple linear model of – or knowledge theory – determined knowledge transfer was refined during There is now what innovations they adopted. David Brindle looks at why innovations that will the 1990s in response to the evidence- recognition that The best fit, found at an independent improve healthcare are not being adopted more based medicine (EBM) movement, charitable trust providing specialist which believed that doctors and other repeated structural clinical services, was attributed to widely throughout the UK's National Health Service clinicians would increasingly seek out the influence of a chief executive RESEARCH reorganisation, which knowledge to improve the quality and other directors, both executive of care they offered. the Government says and non-executive, who encouraged This led to the idea, developed it has ended, may an ‘open’ approach to the acquisition in Canada and elsewhere, of knowledge of management knowledge. ‘translation’, a more dynamic and have damaged the “Individuals do make a difference,” iterative form of transfer. But neither level and availability says McGivern, Professor of

EBM nor, more recently, the vogue for Organisational Analysis at WBS, RESEARCH Health stuck patient empowerment through ‘voice, of organisational “but they have to be in the right choice and control’ appears to have knowledge in place at the right time to do that.” strengthened our understanding of the To illustrate his point, he draws demand side of the equation sufficiently the health service on another of the study sites, a former to bring it into productive balance. primary care trust where its medical in the slow lane An influential NHS paper in 2011, Innovation director had been highly influential in crafting an open Health and Wealth, posited that successful diffusion epistemic stance. of innovations came when there was in fact a three-way After the 2008 financial crisis, however, the trust’s nything up to a third of people prescribed drugs for “this area of epilepsy care warrants further improvement.” balance of top-down pressures, bottom-up pressures and Chief Executive imposed a much tougher discipline requiring epilepsy are misdiagnosed, it is reckoned. Quite apart Why is the British health service so slow at adopting new what it termed horizontal pressures – things like collaboration, proof of financial return on all innovation. A whole-systems from the human cost, the UK’s cash-strapped NHS concepts and technologies? The UK pioneered development competition and peer influence. learning initiative, seen previously as a promising solution Acould be wasting as much as £268 million a year. of the MRI scanner, yet it has just 500 of the world total It is these horizontal factors that play a key to an ingrained local problem of GPs’ failure to work together, So if there was a simple way of helping prevent misdiagnosis, of 20,000 machines, performing less than two per cent part in the new book’s exposition of knowledge mobilisation, could not pass the test. you might think it would be adopted with alacrity. of all scans and operating at two-thirds the average rate. which it argues is achieved “with words and deeds” and very “It fell out of fit with the prevailing way of thinking In January 2012, the National Institute for Health and Care It’s a classic example of what is called the ‘knowing-doing often through everyday encounters and conversations as in the organisation and, as we say in the book, was 'summarily Excellence (NICE) recommended that all adolescents with gap’ – and the NHS seems to have an especially bad case much as in response to strategic initiatives. executed’,” says McGivern. an epilepsy diagnosis be assigned a named clinician to smooth of gap-itis. In the end, success or failure of knowledge mobilisation “In very tight financial circumstances, lack of hard, their transition to adult services and verify their diagnosis There is no shortage of analysis of why this should can depend on something as mundane as availability quantitative evidence may be used to justify non-mobilisation at a transition clinic. be. Suggestions range from poor access to evidence, of a meeting room, says Swan. of knowledge. Knowledge brokers need to be able to adapt.” But, three years later, the proportion of hospital trusts data and metrics to lack of financial incentives to innovate “Understanding what it is that people do, where they In this uncertain and fast-changing post-crash world running such clinics had risen only from 30 per cent to 38 and insufficient celebration of innovators. Another way of go to, the importance of social space – all of this is part the challenge of adapting knowledge to fit demand

per cent. As NICE observes, in its typically understated way, looking at it is as a supply and demand challenge: for whatever Images/Alamy | Elmtree Konuk/iStock Levent of what we need to know about processes and practices.” and circumstances is going to be harder than ever.

64 | core | INSIDE CONTEMPORARY BUSINESS www.wbs.ac.uk | core | 65 Wild West of the internet

With the Internet of Things set to bring our whole house and car online Mark Piesing discovers how stopping

RESEARCH our data being hacked will be even more difficult

ll it can take is an absent-minded click on an to the Internet and use it to share data with each other. Many attachment that appears to have been sent from of the early IoT devices marketed so far have been shown a friend and you can find yourself locked out to be pretty easy to hack – and alarmingly this includes cars. Aof your own computer or your files encrypted. “We face a tricky problem as we want personal security, This frightening scenario is down to malicious software, freedom from state surveillance, and an open internet, or malware, known as ransomware – the only way to release but it seems impossible to have it all,” says Skilton. “Some are your computer is to pay a ransom to the criminals who sent it. even saying that privacy is gone for good, so get used to it. One particularly nasty piece of ransomware called Cryptowall The law certainly hasn’t caught up with what legislation has been estimated to have made $325 million so far. Now a digital economy actually needs. you would hope that the companies that look after your “It is the ‘wild west’ out there, but we can do some things personal data would not make similar mistakes – but you to protect ourselves, like checking the identity of those who would be wrong. Famously, in July 2015 hackers stole the appear to be sending us an email with something as a simple personal details of 32 million members of Ashley Madison, as a phone call to make sure they are who they say they are. a site for people looking for an affair, and then released it all Or even just choosing reliable and well-known cloud services online. It is still unknown how the hackers gained access. or website brands that encrypt their data. If you are using In October 2015, UK mobile network TalkTalk fell victim unknown website services you can be vulnerable to computer to a so-called ‘brute force attack’ when hackers breached viruses or other unwanted attention to your personal data.”

RESEARCH the security of a poorly designed part of its website to steal New projects are growing up in response, such as HAT the unencrypted personal details of 156,000 customers (the Hub-of-All-Things). Led by the University of Warwick and and the bank details of 15,000. The cost to the company involving five other UK universities, it looks to allow people was £60 million and 101,000 disgruntled customers. However, to keep all their personal data in one place securely, instead of both of these are minnows compared to the hack of the being dotted around the internet. It will allow people to use their personal details of 80 million customers from US healthcare data to get better deals with banks and shops instead of it being insurance giant Anthem earlier in 2015. owned by internet giants such as Facebook, who sell it to “Hacking has become big business because, in the digital advertisers. It is also working with app developers to design new economy, personal data is worth a lot of money,” says Mark online services for users, so people can monetise their own data. Skilton, Professor of Practice at Warwick Business School. Skilton adds: “Every new human innovation that breaks the old “This is only going to get worse as we become more connected. paradigm also breaks the rules that were designed for it, but we There is a continuum of threats, from brute force attacks that have as a species all the creativity we need to respond to it.” occur in broad daylight through to malware, which can be on your computer for years without you knowing it. New technology like the Internet of Things (IoT) also brings new opportunities for hacking that haven’t been seen before.” Watch Mark Skilton's film ‘What is the IoT is a vision of the future in which tens of thousands Internet of Things’ at wbs.ac.uk/go/core of devices, from fridges to traffic lights and cars, are connected

66 | core | INSIDE CONTEMPORARY BUSINESS