5050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050The fifty ideasthat shapedbusiness today

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WWW. F T.COM 50 ID EAS

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This was the favorite quote of Bruce Henderson, BCG’s founder. It is the principle on which we were founded. We help the best and most ambitious companies in the world unlock insights and drive fundamental change to build lasting competitive advantage. And we use those same skills to support society through our work in the public sector and with our global Social Impact partners. Since our inception in 1963, we have grown from one man and a desk to more than 9,000 people, with offices in 43 countries and practices in all sectors of the economy. But our values and the aspiration for our clients remain unchanged. In collaboration with them, we chart new courses and mobilize the organization to create superior value and lasting change.

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What makes a great business idea? How can we tell whether itwill stand the test of time? And why do some new ideas havegreater influence than others in shaping the environment thatbusinesses operate in today?These are the questions that a distinguished panel of

judges have evaluated in drawing up a list of the 50 ideas thatmost shaped business today.Innovation – new ideas, reforms and other forms of change –

are, of course, vital in stimulating progress. The task of the panelwas to weigh the merits of ideas whose impact informs us aboutthe past, the present and the future.The selection was based on suggestions from our readers,

from the six judges (see page 58) and from FT writers aroundthe world.Some of the 50 top ideas that our judges agreed on would

have made anyone’s list and are easily predictable. The effects ofglobalisation and China’s adoption of market reforms, for exam-ple, will reverberate through time.The 50 ideas are too varied to present in the form of a hier-

archical ranking – that would be the equivalent of comparingapples with pears. The list includes concepts as dissimilar asworkplace diversity, barcodes and tax optimisation.To make it easier for readers to navigate their way through our

list, we have grouped the 50 ideas into separate themes, with anoverview to each section by a senior FT writer.Our panel of judges also took the step of identifying a handful

of the most likely candidates for key ideas likely to shape tomor-row’s business world. You can find these towards the end of thismagazine.We do not expect that everyone will agree with all of our

judges’ 50 top ideas, let alone the ones for the future. But ifnothing else the list will, we hope, inform the crucial, continuingdebate about how the world of business can become more effec-tive, efficient and relevant.We hope you enjoy the list – and do let us know if you feel

there is anything significant we have omitted.

Lionel BarberEditor

Lionel.Barber@ft.com

Foreword

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INtroductIoN

peopleWomen as employees, consumers andleaders • Workplace diversity • Theopen-plan office • Pensions and benefits •Environmentalism • Activism and NGOs

techNology: computerSMicrochip • Internet • Personal computing• Data analytics and search • Social media

techNology: ApplIcAtIoNSMobile communications • Imagingtechnology • Fibre optics • Barcodes •Robotics • Satellites

globAlISAtIoNGovernment regulation • China’s adoptionof market economics • Privatisation andthe rise of capitalism • Rule of law •Globalisation and trade blocs • Sellingto the next billion customers •Deregulation • Emergent economies andurbanisation • Education expansion •English as lingua franca

coNSumerSBrands • Online marketplace/ecommerce •Powerful consumers • Customersegmentation

eNergyChanging sources of energy

AvIAtIoNAir travel

bANkINg the FINANceTax optimisation • Modern corporatefinance • Consumer credit • Black-Scholesand algorithms • Corporate governance •Shareholder value • Entrepreneurs,venture capital and private equity

mANAgemeNtStrategic management • Corporate ethicsand reputation • Business educatorsand professional advisers • Leadershipculture

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Contents

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coNtrIbutorSJamil Anderlini, Beijing bureau chiefRob Budden, chief media correspondentBede BcCarthy, technology correspondentAndrew Bounds, northern correspondent andenterprise editorDella Bradshaw, business education editorChris Cook, assistant comment editorAnne-Sylvaine Chassany, private equitycorrespondentGuy Chazan, energy editorPilita Clark, environment correspondentNorma Cohen, demography CorrespondentClive Cookson, science editorRobert Cookson, digital media reporterJane Croft, law courts correspondentKevin Done, former aerospace correspondentAndrea Felsted, senior retail correspondentChris Giles, economics editorBrian Groom, UK business and employment editorEdwin Heathcote, architecture correspondentAndrew Hill, management editorVanessa Houlder, economics reporterAndrew Jack, pharmaceuticals correspondentRohit Jaggi, aircraft, car and motorcyclingcolumnist, and commissioning editorPatrick Jenkins, banking editorBarney Jopson, US retail correspondentAmy Kazmin, New Delhi correspondentStephanie Kirchgaessner, WashingtoncorrespondentLouise Lucas, consumer industries editorPeter Marsh, former manufacturing editorBrooke Masters, chief regulation correspondentSarah Murray, freelance journalistChris Nuttall, technology correspondentSarah Neville, public policy editorGideon Rachman, chief foreign affairscommentatorMichael Skapinker, Special Reports editorPhil Stafford, Trading Room editorMichael Stothard, capital markets correspondentJennifer Thompson, retail banking correspondentStefan Wagstyl, emerging markets editorRichard Waters, USWest Coast editorRobert Wright, US industry editorMartin Wolf, chief economic commentator

Special Reports editor Michael SkapinkerEditor Hugo GreenhalghCommissioning editor Rohit JaggiProduction editor George KyriakosArt director Sheila JackPicture editors Michael Crabtree, John WellingsSub-editors Philip Parrish, Elizabeth DurnoHead of B2B & World Reports Robert GrangeHead of strategic sales Patrick CollinsHead of project delivery Rachel HarrisAdvertising production Daniel Lesar

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bIotechNologyModern pharmaceuticals andbiotechnology • High-yield agriculture

copyrIghtCopyright and intellectual property

INduStrIAl proceSSContainerisation and global supplychains • Outsourcing/value chaindeconstruction • Process innovation

Future IdeASFuture of driving • Social enterprise •Unskilled workers • Cheap and freeinformation • Cashless future • Future ofdemographic change

JudgeS

WHAT IS AN IDEA?AND WHAT DOWE MEAN BY TODAY?“ “

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For videos and additional contentvisit www.FT.com/50ideas

What is an idea? And what do we mean by today? Thosewere the two questions that faced the six judges who chosethe top 50 ideas that shaped business today, after comb-ing through many suggestions from readers and FinancialTimes journalists.The judges quickly decided on a generous interpretation

of the word “idea”. We would go for inventions, innovations,social movements and legal and financial instruments –anything that helped make business what it is.“Today” was more complex. Clearly, there were many

inventions that have shaped not just modern business butmodern life: electricity, telephones, multi-storey buildings.How far back should we go in deciding what counted as anidea that shaped business today?As the chair of the judges, I initially suggested that we not

restrict ourselves. We should go back as far as we wished.Ideas such as Adam Smith’s division of labour clearly stillinfluenced business today. So did the legal concept of limitedliability; business would be unthinkable without it. But theother judges felt we needed to concentrate on the modernworld. Otherwise, why not include the invention of the wheel?So most of our 50 ideas ended up coming from the era

since the second world war.Another area of dispute was the influence of women.

The arrival of large numbers of women in the workforce isunarguably one of the principal business developments ofthe past 50 years. What was the idea that had made thatpossible? Was it the birth control pill, or the example ofwomen entering factories during two world wars?Some judges said this was the wrong approach. They said

slow progress in appointing women to company boards andsenior management positions meant women had not shapedbusiness as much as many hoped they would. Business wasstill dominated by men and male attitudes. But it seemedwrong to leave women out; women had influenced busi-ness in so many ways. So we settled in the end for women asemployees, consumers and leaders.

Michael SkapinkerEditor, Special Reports

Michael.Skapinker@ft.com

Introduction

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drivinG the car Industry u-turn.

We were the partners of choice – When it mattered most. By the end of 2008, the U.S. car industry was in need of urgent turnaround assistance. BCG was selected by the Presidential Automotive Taskforce to help in the assessment and recovery scenarios for both General Motors and Chrysler.

Our recommendation, which targeted operations as well as strategic choices, addressed critical areas but also revealed unforeseen strengths of each company, enabling innovative and customized solutions for both.

By 2011, GM and Chrysler were experiencing renewed success, and the market share of their streamlined brand portfolios was increasing. In recognition, BCG was named Turnaround Consulting Firm of the Year by the Atlas Turnaround Awards.

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PeopleThe rapidly increasing diversity ofsociety has filtered through tothe workplace and to how businessesrelate to the public, writes Sarah Neville

ft.com/50ideas | 9

the open-plan officesent a fashionablydemocratising message“ “

For generations, work –for all but a privilegedelite – meant a form ofservitude. Employeeswere supplicants with-out rights or protection– Bob Cratchits reliant

on the goodwill of their bosses tosecure a day off or a pay rise. But overthe past century a revolution has takenplace in the control people have overtheir working lives.

In the west, jobs have become partof an assumed right to self-actualisa-tion. By this creed, a job is part of whowe are and we are entitled not simplyto a salary but also to satisfaction.

The notion is that employees,cosseted by incentive schemes and tax-deductible gym memberships, will bemore likely to stay, and employers willhave a better chance of making a returnon investment in staff development.

In theory, such benign and respect-ful regimes also feed and breedemployee creativity. But in practice it isharder to hit upon the precise recipe.

As the culture of deference evapo-rated after the second world war, theopen-plan office became a pervasivefeature of working life. It sent a fash-ionably democratising message. Butprivacy and confidentiality – valuablenot only for doing business but alsofor managing a workforce – suffered.

The open-plan concept has alsospawned “hot desking”, in whichworkers are denied their own space,often in the name of increasing effi-ciency and teamwork. Many employees,however, feel alienated and infantilisedby being forbidden even to customisea work station with family pictures andpot plants.

The variety of people sitting behindthose desks, however, is likely to be fargreater than it was half a century ago.

A more diverse workplace has been oneof the most striking advances since the1960s.

In reality, however, discriminationcontinues, often the more insidiousfor being covert or even unconscious.Managers’ tendency to appoint othersin their image means many professionslack a large percentage of upper-ech-elon staff who are female, from ethnicminorities, gay or lesbian.

Pensions and other benefits haverevolutionised our sense of our careers,offering security undreamt of by previ-ous generations. In middle age, fear ofsacrificing future pension rights candeter employees from jumping ship,aiding the retention of institutionalknowledge.

But, as in so much else, the financialdownturn has blurred the picture. Theeconomic crisis has also altered the roleplayed by environmentalism in busi-ness thinking.

It first took root in the public con-sciousness in the 1970s and by the turnof this century, many large enterprisesfelt they had to adapt products or pro-cesses to fit the new sensibility. Duringa recession, however, most householdsfind it difficult to justify paying thehigher retail prices of green productsand worries about the environmenthave slipped down the hierarchy ofconcerns.

However, those who do care aboutthe environment tend to do so passion-ately – as many companies have discov-ered to their cost. Most companies nowgrasp the importance of dealing withnon-governmental organisations – inthe battle for public trust the NGOs arelikely to win out every time.

And ensuring you are seen to be intune with your customers’ concernsand value systems is, after all, the old-est and most potent business idea of all.

Fighting forthe cause:

companies canno longer ignore

activists suchas the Occupy

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The average office or business looksvery different to the way it did a cen-tury or even a generation ago. Whereonce in the western world white menpredominated, women and members ofethnic minorities now enrich the mix ofalmost every workplace.

In most developed countries, the1960s and 1970s brought equal pay andbroader anti-discrimination legislationdesigned to ensure men and womenreceived the same remuneration forperforming the same tasks.

These legal obligations have allowedbusinesses to play their part in thevaluable human endeavour of ensuringno one’s potential should be wasted duesolely to their gender or colour of skin.

But offering equal opportunitiescan also have enormous commercialbenefits. The most successful busi-nesses tend to be those that understandthe societal shifts that are defining theearly part of the 21st century.

The identification in recent yearsof the “pink pound” – the market forgoods and services in demand fromthe gay population – is a case in point.Moves to ban discrimination on thebasis of sexual orientation have led tolarger numbers of openly gay, lesbian P

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Making strides:the presenceof women hastransformedthe workplacein a short periodof timeThe recent call by Shinzo Abe, Japan’s

prime minister, for company boards tohave at least one female member high-lighted the dearth of women in Japan’scorporate sector. Even in Europe andthe US, women still fill only a smallpercentage of senior board positions.

Yet despite the frustration at thepersistent gender imbalance, it is easyto forget that the presence of womenhas transformed the workplace in ashort period of time. Of course, in oneway or another, women have long beenpart of industry – and not always aslabourers. In the 19th century, after aninjury left her husband bedridden andunable to oversee the building of NewYork’s Brooklyn Bridge, Emily WarrenRoebling managed the construction.

Significant progress occurred inEurope and the US in the 20th century.After countries started granting allwomen the vote, the first world warbrought women into factories. The roar-ing twenties also broke downmany cul-tural impediments to women working.

There were interruptions to thetrend, such as the Depression in the US,but during the second world war womenwere employed in unprecedented num-bers. Yet as late as the 1950s, UK and

US industries still adhered to “marriagebars” – requiring women to leave theirjobs as soon as they married. Britain’sforeign office abandoned the marriagebar only in 1972.

Communist revolutions transformedthe status of women. In his attempt tomodernise the Chinese economy, MaoZedong recognised that women neededequality if he was to bring them intothe workforce in sufficient numbers,while in Russia the ideal proletariatwoman was a working one.

Recent studies have found thatbusinesswomen bring distinct workingpractices to their role – from a facilityfor working at a steady pace to the abil-ity to maintain a complex web of rela-tionships and to use these to encourageparticipation and power-sharing.

Yet businesses still struggle toincrease female representation at seniorlevels. This is particularly true in Asia.McKinsey, the consultancy, has since2007 tracked the role of women in theglobal workforce. It has found that,on average, women account for just 6per cent of seats on boards in 10 Asianmarkets, compared with 17 per cent inEurope and 10 per cent in the US.

The quotas being considered bysome countries are the subject of hotdebate. For while most agree on theneed for a corporate gender balance,consensus on the strategy that willachieve this is still some way off.SarahMurray

women bring disTincT workingpracTices, such as a faciliTyfor working aT a sTeady pace“ “ideas

Women as employees,consumers andleaders

ideas

Workplacediversity

ideas

the open-planoffice

ft.com/50ideas | 11

Creative spaces:achieving abalance betweencommunicationand privacyis the key tosuccess

arranged as islands in a sea of carpetand pot plants.

In fact, this being Germany, thepatterns were a result of a rigorousstudy of how office workers groupedthemselves into units to address tasks.Instead of hosting ranks of clerks, theseoffices encouraged chatter, movementand informality. In this kind of layout acertain democracy prevailed. As work-ers were promoted, for example, theymight stay in or near the same spot,avoiding the envy and dislocation thatmight have resulted from a move to aseparate office.

In the US the landscape was solidi-fied into a version of the older formatas offices were sub-divided into cubi-cles while executives got window offices(corners remaining the biggest prize).Such arrangements ingeniously main-tained the worst of both worlds.

Germany, meanwhile, along withScandinavia, began to abandon theoriginal open-plan model as they foundthat employees desired more controlover their personal environment thanthe few personal items they wereallowed on their islands. Corporatecontinental Europe began to drift backto quieter, individual offices with win-dows that could be opened and directdaylight.

The other outcome of the open-plan system has been “hot desking” or“hotelling”, in which itinerant work-ers are expected to settle whereverthere is space for a laptop. It solves theproblems of inefficient occupancy butcreates new issues of personal spaceand a sense of belonging. This is linkedto the “creative” workspace model, inwhich workers float around a teeth-clenchingly cliched funscape of brightlycoloured breakout spaces, big kitchensand table football areas.

Today a hybrid of tech spacesand laboratories with their generousstaircases, landings, write-up spacesand canteens seems to be setting a newopen-plan pattern where cross-discipli-nary breakthroughs happen.

Change is inevitable and constantin the open-plan office, but that elusivecocktail of communication and privacyis the key. Edwin Heathcote

The open-plan office has become anurban archetype, engrained in ourconsciousness – an ineluctable andinescapable element of modernity.

But there is nothing particu-larly modern about the idea. Itoriginated towards the end ofthe 19th century, when construc-tion technology using steel beamsallowed architects to create big,column-free spaces. These becamethe clerical equivalent of the factoryfloor, with workers seated at rows ofdesks, overlooked by executives inenclosed, glazed offices.

Significant change came,perhaps surprisingly, in postwarGermany. Partly in reaction to theextreme order, surveillance andhierarchy of the Nazi regime, anew, more informal office designbegan to emerge. Quickborner, aconsultancy working alongside aHamburg office furniture manufac-turer, devised the Bürolandschaftconcept (the “office landscape”).This comprised seemingly randomclusters of desks and workspaces

and transgender employees whoseexpertise can be tapped.

In practice, however, women andsome ethnic minorities are failing tosecure an equal share of the top jobsin most workplaces. The disparity isstriking given that women increasinglyperform better than their male coun-terparts at every stage of academic life.

There is no single explanation forthis, but evidence of a widening gap inemployment rates as women get oldersuggests motherhood, combined withthe shortage of affordable childcare,is significant. Those who leave jobs toraise a family struggle to regain theirplace on the career ladder. Researchpublished by the European Commis-sion shows the gender employment gappeaks at 15 percentage points for thoseaged between 55 and 64. However,women’s failure to capture a propor-tionate share of the career spoils mightalso reflect their different choices andpriorities.

That most of those making seniorappointments in the developed worldtend to be white men can also makeit harder for those who do not fit theprevailing mould. The human tendencyto relate to those similar to our-selves can lead to appointments thatreinforce, rather than challenge, thestatus quo. Sarah Neville

in The german ‘officelandscape’ a cerTaindemocracy prevailed“ “

ideas

environmentalism

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When dozens of world leadersdescended on Rio de Janeiro last Junefor one of the biggest global environ-mental conferences in 20 years, observ-ers had a dilemma: should they stay inthe conference hall to watch the paradeof presidents and prime ministers? Orhead out to see executives fromMicro-soft and dozens of other companies atvarious parallel green business eventsdotted around the city?

Back at the first Rio Earth Summit in1992, relations between companies andenvironmental campaigners were moreprickly. Today, the rise of the digitallyempowered consumer and environ-mental activist has driven a profoundchange. Rarely does an executive voicepublicly any private reservations aboutrecycling or climate change.

Instead, companies now regularlycompete with each other to provetheir green credentials. Coca-Cola andPepsiCo, for instance, have spent manyyears and dollars trying to beat eachother in the race to make plastic bottlesfrom plants. Two other great rivals –Ford and General Motors – now battleover whose vehicles produce fewercarbon emissions.

More than 80 per cent of the world’s

Workplace pensions – the old-fash-ioned kind that set income in retire-ment as a percentage of the last yearof salary earned – sat at the core ofindustrial modernisation after thesecond world war.

In the US and the UK especially,officials set wage and price controls tocontain the threat of destabilising infla-tionary spirals amid postwar recon-struction. But those controls coincidedwith a manpower shortage – pensionbenefits could be used to attract andretain workers. Both countries experi-enced a surge in birth rates. With grow-ing numbers of workers contributing toretirement savings and few pensionerscollecting benefits, along with double-digit returns on investments, pensionpromises were a low-cost incentive. Inaddition, high marginal corporate andpersonal tax rates made pension contri-butions cost-effective.

So well funded were the UK’s pen-sion schemes that retirement fundsbecame the primary tool for financingcorporate restructuring.

Data from the UK’s Office forNational Statistics suggest workplacepension participation peaked in 1987when there were 10.6m members ofdefined-benefit pension schemes.

By then, however, jobs for lifewere becoming outdated. Laws werechanged, so employers had to providesome inflation-proofing on benefits.Total active membership fell slightly to10.3m up to 1995.

By 2001 new accounting rules thatforced companies to make the cost ofpension promises clearer coincidedwith the bursting of the dotcom bubblein share prices and the subsequentcollapse in interest rates. Corporatepension schemes became cash drains.

Moreover, rising longevity raised thecost of pension promises that had beenmade years earlier. In 2003, the aver-age US male worker could expect tospend 18.1 years in retirement, against

11.5 years in 1950. In the UK, it isestimated life expectancy for a male atage 65 will rise from 13.7 years in 1996to 19.5 years in 2056 and for a femalefrom 17.4 years to 23.4 years.

In the UK’s private sector, thereare now fewer than 2m active schememembers and about 80 per cent ofschemes are closed to new members.

The days of defined-benefit provi-sion have largely come to an end.While much of the blame is placed ona combination of government regula-tion, accounting rules and the vagariesof markets, there are good reasons toquestion whether they remain suited tothe workplace of the 21st century.Norma Cohen

ideas

pensionsand benefits

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When a top Bank of England officialsaid last year that the Occupy move-ment had been right to attack the globalfinancial system, no one objected.Business leaders know that activists andcampaigners often command greaterpublic support than they do.

“Occupy has been successful in itsefforts to popularise the problems ofthe global financial system for one verysimple reason: they are right,” AndyHaldane, the BoE’s executive directorfor financial stability, told a meeting ofstudents, protesters and bankers.

The Occupy movement, whosemembers camped on the streets of NewYork and outside London’s St Paul’scathedral, has not had the stayingpower its supporters hoped for and itsbusiness opponents feared.

But the occupiers are part of a longtradition. Businesses have had toanswer to, and occasionally co-operatewith, campaigners for years.

Activist groups have changed companypolicies. Nestlé, the food company, hadto limit its marketing of infant milk

formula in the face of protests that it wasencouraging mothers in the developingworld to feed their babies contaminatedwater rather than breast milk.

In the 1990s, Shell bowed to pressurefrom environmental group Greenpeaceto break up its Brent Spar oil-storagefacility on land rather than at sea, whichit had thought was better for theenvironment. Greenpeace later admit-ted it had got some of its figures wrong.

The Brent Spar affair told businesssomething important: the public wasmore likely to believe non-governmen-tal organisations than companies –even, in many cases, when companieshad the stronger arguments.

Faced with the difficulty of gettingtheir views across, many companiesopted to co-operate with the campaign-ers. They used NGOs to verify theirproducts, to demonstrate they werekind to rainforests, fair to small farmersor were not depleting fish stocks.

Sportswear and clothing manufac-turers worked hard to persuadecampaigners they were inspecting theirsubcontractors’ factories to ensureabuse of workers and employment ofminors were not taking place. Nikepublished the names and addresses ofits subcontractors online and encour-aged campaigners to tell it where itneeded to do more.

In private, companies sometimesgrumble that NGOs are not subject tothe same scrutiny and their claims areoften not challenged. Companies know,however, that, rightly or wrongly, thepublic trusts NGOs more.

The Edelman Trust Barometer, anannual measure of attitudes to differentinstitutions, found this year that whiletrust in business generally was quitehigh, only 18 per cent of the publicworldwide trusted business leaders totell them the truth. More than 50 percent of people trusted NGOs in mostcountries surveyed, but that figure wasfar higher in emerging markets. InMexico, 83 per cent trusted NGOs. InChina the figure was 81 per cent.

Assessing the likely environmentaland social impact of any corporatepolicy is an intrinsic aspect of doingbusiness today.Michael Skapinker

500 biggest companies by market valuenow report information about theirimpact on the environment to CDP, aLondon-based non-profit group thatencourages such voluntary reporting. Itsays the overall number of companiesmaking such disclosure has soaredfrom 135 in 2003 to 4,112 in 2012.

But it would be a mistake to ascribeall of this green effort to a sudden urgeto do planetary good. Much is drivenby a desire to save on energy costs andother expenses, and quite a bit purelyfor marketing purposes. Still, a numberare genuine, and now that companiessuch as Google are spending nearly$1bn on renewable energy projects, andPuma is eyeing synthetic leather forits famous footwear, the relationshipbetween business and the environmen-tal movement is clearly entering a verydifferent phase. Pilita Clark

Hong Kong haze:companies are

using issues suchas climate changeto cut energy costsor for marketing

purposes

The public is morelikely To believe ngosThan companies“ “

ideas

activismand ngos

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It is 62 years since J Lyons, abaker and catering companyonce famous in Britain forits tea shops, turned on theworld’s first commercial elec-tronic computer.

The machine went on toperform, in rudimentary form, manyof the functions of a modern informa-tion technology system, from payrollcalculations to managing daily orderscoming in from the company’s shops.

The rest, as they say, is history. ITnow sits at the heart of the modern cor-poration – globally co-ordinated andresponding instantly to market signals.

Yet the information revolution alsothreatens to devour the traditionalcorporation, as the latest advances intechnology increase the pace of change.

Primitive forms of information stor-age and processing were harnessed forbusiness use long before the emergenceof electronic computing. Punched cardsruled from the early 19th century, whenthey were used to control textile looms,to the middle of the 20th, when theyprovided a medium for storing dataand simple computer programs.

However, it was only with thearrival of general-purpose program-mable computers that the full force ofIT hit business. A remorseless declinesince then in the prices of informationprocessing and storage, as well as com-munications, has brought it out of theback-room and turned it into some-thing on which most of a company’sworkers and customers now depend.

Mobile communications and socialnetworking represent the latest phase.The upshot is a digitally savvy – andpermanently connected – populationof customers and employees. Manyhave also learnt how to tap into newinformation networks. As a result,large parts of the media, marketing andretailing industries are facing pro-

The microchip, or integrated circuit,has been the basic building block ofscientific and technological progresssince the second half of the 20thcentury. Its invisible powers have beenan enormous boon to business almostfrom the start.

First created in 1958, the chip haslaunched space missions, modernisedcorporations, revolutionised worldtrading and, through progressive min-iaturisation, put power that was oncethe province of room-sized supercom-puters into a smartphone that can fit inthe palm of a hand.

Jack Kilby of Texas Instrumentsand Robert Noyce, co-founder of Intel(short for Integrated Electronics), arejointly credited with coming up withthe integrated circuit, by differentmeans, at about the same time.

The transistor had appeared a dec-ade earlier, an invention at Bell Labsthat could finally replace the bulky and

found changes as digitally empoweredcustomers change the way they shop orseek to be entertained.

Other technology revolutions on thehorizon also threaten to have a hugeimpact on business. It is true of alltransformative new technologies thattheir true long-range effects are seldomanticipated at the outset.

Their first users see them as tackingexisting tasks more efficiently, ratherthan as tools that make entirely newthings possible. And as establishedbusinesses often discover to their cost,it is new market entrants who are oftenthe first to find out how to exploit thesenew technologies.

Technology:computers

PHOTO:CHARLIE

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Computerised information processeshave become an essential part ofa company’s operation, regardlessof its size, creating a digitally savvypopulation of employees as well ascustomers, says Richard Waters

ideas

microchip

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expensive vacuum tubes used in elec-tronics in the first half of the century.

That transistors and their circuitboards would quickly be superseded bymicrochips in importance shows thepace of innovation in the latter half ofthe last century.

Ever more complex electricalcircuits were being designed for thetransistor, but soldering componentsand wires together proved expensivein time and money, while connectionswere prone to failure.

Kilby and Noyce figured out thatcomponents and wires could be madefrom one material – silicon – andshaped as well as combined together ona single chip.

The modern process known asphotolithography “prints” chip designson silicon wafers as ultraviolet light ispassed through stencils, or masks, thatdetail the circuitry.

The latest chips from Intel havecircuit widths of just 22 billionths of ametre and, while Intel’s first micropro-cessor in 1971 had 2,250 transistors,6m of them from 22-nanometre chipscould now fit on the full stop at the endof this sentence.

The benefits for business are tangi-ble – and highly visible. The chip pow-ers the personal computer, the tabletand the smartphone that have becomethe main tools of employees. It is atthe heart of the servers that run theinternet, store our data and carry outecommerce transactions.

More powerful computing is makingit increasingly possible for businessesto predict weather patterns, makeenergy discoveries, develop more effec-tive drugs and analyse their sales andcustomer behaviour for the “big data”clues to their future success. In littlemore than half a century, the chip hasbecome the very heart of business.Chris Nuttall

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It’s personal: apost-PC era couldmean laptopsand personalcomputers aresucceeded bytablets andsmartphones

the pC replaCed typewritersby giving businessesspreadsheets, databases,and word proCessing“ “

The internet was not designed for busi-ness – and it shows. Based on a proto-col for enabling easy interconnectionof existing communication networks,its founders took a “lowest commondenominator” approach in order toensure the broadest possible adoption.

One result of this was the lack ofan in-built method of authenticatingusers, adding to the security vulner-abilities that have left businesses moreexposed to online threats like denial ofservice attacks and intellectual propertytheft. Yet the same ease of interconnec-tion also ensured the rapid adoption ofthe medium, turning the network-of-networks into one of the most powerfulforces on the evolution of business overthe past quarter of a century.

At first, the internet was seen pri-marily as a new, low-cost channel forexisting businesses to reach their cus-tomers. Its disruptive power, however,quickly became apparent.

A collapse in digital distribution costs– and the sudden availability of a globalonline audience – drastically loweredthe barriers to entry to many informa-tion-based industries. The result was aninvestment mania in internet start-upsthat produced the dotcom boom andbust of the late 1990s.

The second wave of online inno-vation that followed has proved lessvolatile. Rather than simply transfer-ring existing ways of doing business tocyberspace, many of the new busi-ness approaches have sought to takeadvantage of the medium’s particularcharacteristics.

Harnessing communication andinteraction between users, for instance,has become a key to many forms ofonline business success. Marketing is inthe process of being transformed froma one-way form of communicationinto a two-way conversation in whichcustomers talk back – or to each other.Media companies have found that audi-ences often prefer content created by

themselves or their friends – and thatthey demand the right to choose thetime and the device on which they seekinformation or entertainment, break-ing old programming models.

The spread of touch-screen smart-phones following the debut of theiPhone in 2007 has brought a newtwist. Companies that were still learn-ing the new digital rules of the roadthat followed the first phase of internetadoption now find themselves with acompletely new set of challenges tomaster, as “mobile first” becomes themantra for connected businesses.RichardWaters

The move from mainframe to personalcomputers democratised the use ofcomputers, making their power avail-able to individuals rather than beingconfined to governments, academiaand big corporations.

Personal computers gave businessesnew flexibility and toolsets. Spread-sheets, databases, word processing andcomputer-aided design increased pro-ductivity and replaced the typewriter,the calculator and the drawing board.

The desktop computer was a hob-byist’s pursuit in the 1970s, notablyat the Homebrew Computer Club inSilicon Valley, where Steve Wozniakand Steve Jobs showed off the Apple Iand Apple II home computers.

IBM’s introduction of the PersonalComputer in 1981, which cementedthe term PC, was partly inspired bythe success of the Apple II. It usedoff-the-shelf components, includingan Intel processor, along with an oper-ating system from Microsoft, to bringthe product to market quickly.

This first PC was too expensive forconsumers at $3,000, but its 64kbof memory and floppy disk driveappealed to businesses looking tomodernise their processes.

It was Xerox’s Palo Alto ResearchCenter in Silicon Valley that came upwith the mouse and graphical userinterface, but it took Jobs and theMacintosh, introduced in 1984, toexploit these and make them the pre-ferred companion of the keyboard.

Affordable, battery-poweredlaptops have been around sincethe mid-80s, but this century theyhave become challenged by tabletsand smartphones in what is beingdescribed as a post-PC era.

And yet the PC still plays a domi-nant role in the workplace. With newinterfaces emphasising gestures, voiceand touch being introduced, businessis likely to find new uses for the PC forsome time to come. Chris Nuttall

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Light of publicity:people arespending moreof their time onsocial media,with companiesalso followingsuit afterrealising thatthey can reacha vast audiencewith limited cost

searCh advertising, barelyinvented a deCade ago, nowaCCounts for nearly a halfof all online ad spending“ “

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When hackers took over the Twitteraccount of Associated Press in April,they triggered a sell-off that wiped bil-lions of dollars off the value of globalstock markets.

The anonymous saboteurs sent abogus tweet from AP’s main account toits 1.9m followers, saying: “Breaking:Two Explosions in the White Houseand Barack Obama is injured.” Marketsrebounded as people realised the tweetwas fake, but the incident was one ofthe most dramatic demonstrationsyet of the influence that social mediawields over business and finance.

From London to Delhi, people are

The systematic application of data tobusiness management had its first flow-ering a century ago, with the birth ofdisciplines such as “scientific manage-ment” and market research.

Yet an explosion of the amount ofinformation available online – anda similar rapid increase in the datathat could theoretically be capturedand analysed for business use – hasushered in a new golden age in the twindisciplines of information retrieval anddata analysis.

Making sense of all the digital infor-mation has already produced one of thebusiness success stories of the age inthe form of Google. By helping internetusers find the needle in the haystack,search has also proved a boon for otherbusinesses, making it easier for themto be discovered amid the online crush.Search advertising, barely invented adecade ago, now accounts for nearly ahalf of all online ad spending as a result.

Meanwhile, thanks largely to theplummeting costs of collecting and stor-ing information, the volume of raw databeing produced has increased expo-nentially. About 90 per cent of the datacurrently in existence was created in justthe past two years, according to IBM.

That has made “big data” the latestbuzzword in the information technol-ogy world, as businesses look for newinsights about their customers andmarkets. Data scientists – business ana-lysts with the skills to extract meaningfrom the deluge of information – havebecome highly sought-after as a result.

The application of big data analysisto business is starting to bring a morescientific dimension to many aspectsof decision-making as the suppositionson which managers were once forced torely are being put to the test.

At the same time, the ability todraw on data from areas that onceseemed unrelated is starting to yieldvaluable business intelligence. Howpeople behave on social media sites, for

instance, is now being studied for cluesabout their creditworthiness by someonline lenders.

The latest advances in data analyticsinvolve the application of real-timeanalysis to very large bodies ofinformation, turning business decision-making into a far more dynamic pro-

spending an increasing amount oftime on social media platforms suchas Twitter, LinkedIn and Facebook,which has 1.1bn monthly active users,half of whom use the site every day.

In China, where foreign socialnetworks are blocked, homegrownplatforms such as Sina Weibo areflourishing. A survey by consultancyMcKinsey last summer found thatnine in 10 Chinese internet users hadvisited a social media site during thepast six months, compared with 67per cent in the US.

Companies have been quick tofollow their customers on to socialmedia platforms, attracted by theability to engage directly with theiraudiences and at a lower cost thanthrough traditional media such astelevision and newspapers.

Coca-Cola has 65m “likes” onFacebook and about 800,000 follow-ers on Twitter. The ease of sharingcontent on these platforms means awell-judged post has the potential to“go viral” and reach a vast audience.

However, social media campaignscan go wrong. McDonald’s last yearlaunched a Twitter campaign thatasked customers to share their expe-riences dining at the fast food chain.But it backfired when people used itto highlight their horror stories.

Despite the occasional mis-step,brands are continuing to pour moneyinto social media. The $10bn valu-ation that investors have placed onTwitter is testament to that.

Facebook, which has a marketcapitalisation of $64bn, has a massivedatabase of consumer information butis only starting to make money fromthat through advertising.Robert Cookson

cess. In some markets, for instance,pricing is rapidly becoming amoment-to-moment decision – withalgorithms rather than human beingsmaking the split-second decisionsabout when to raise or lower pricesin response to demand and other fac-tors. RichardWaters

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Movement andcommunica-tions are at theheart of modernindustrialsociety and thebusinesses that

thrive on it. People expect to receiverelevant information and entertain-ment wherever they are – at homeor travelling across continents – andcompanies have to keep track of theirgoods as they progress around factoriesand along supply chains.

Over the past 25 years, particularlythe past decade, a group of tracking,communicating, imaging and read-ing technologies have come togetherto make this possible. They are basedon computing and electronics with astrong strand of materials science – as,for example, in the development of thinglass strands that can transmit laserpulses over vast distances with littleloss of light.

Light (optoelectronics) and radiotransmissions have together trans-formed telecommunications. For

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Faster, smaller and, above all, smarter,electronic technologies havedramatically redefined time anddistance for businesses and theiremployees. Clive Cookson introducessix of the most significant

Game changer: robots lined up for the 2013 RoboCup football tournament

Of all the technologies that affectbusiness, mobile communicationsare perhaps the most revolutionary.Although the first mobile phone wasdemonstrated in 1973, it was not untilthe mid-1990s that they began to beadopted more widely. From that point,working life would never be the same.

First, there was the car phone,which allowed salespeople to keep intouch with the office and clients whileon the road and respond more quicklyto opportunities. Then came mobilephones – not exactly pocketable, butthey would fit in a briefcase. Text mes-saging – originally a service feature formobile phones – soon took off.

But it was the arrival of mobile datathat really transformed business. Theonce ubiquitous BlackBerry – initiallygiven to employees as a second devicealongside their phone – introducedthe concept of “always-on” working.Employees could respond to emails,which were by then the mainstay ofbusiness communication – anywhere.

Laptops soon became equippedwith mobile data, and fast public WiFisprouted up in cities. By the time theiPad arrived in 2010, offering a trulyportable alternative to boxy companylaptops, the barriers between work andhome life had been demolished. If youwere awake, you were online.

The technology kept pace. Over thepast 12 years, WAP, GPRS, Edge, 3Gand now LTE have allowed us to sendlarger documents, pictures and morerecently even hold videoconferencesfrom almost any location.

The revolution is not only internal.The relationship with the customer has

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long-distance point-to-point communi-cations, nothing can beat the reliabilityand capacity of fibre optics (though weshould remember that the vast majorityof the world’s homes and businessesstill depend on old-fashioned metalwires for local connections).

Mobile communications, of course,use radio. The technological key herewas the development of a cell-basedsystem of microwave transmitters andreceivers that pass the user seamlesslyfrom one to the next. With each newgeneration of mobile technology, datacapacity has vastly increased, provid-ing the infrastructure for all the socialmedia that have sprung up recently.

Because radio waves travel instraight lines and the earth’s surface iscurved, long-distance radio commu-nications require the signals either tobounce off a satellite or to be transmit-ted in a series of hops along a line-of-sight chain of microwave towers.

The latter option might sound cum-bersome, but some specialist businessareas are keen to take advantage of thefact that light travels faster throughthe air than along glass fibres. In, forinstance, high-frequency financial trad-ing, it can pay to shave millisecondsoff data transmission times betweengeographically separate markets.

Satellites boosted the developmentof the long-distance telecoms indus-try and are still important for mobilecommunications in remote areas. Buttoday their largest commercial role is intelevision broadcasting.

Alongside mobile communications,electronic processing of images andother visible information has been atransformational technology for a widesweep of businesses. This covers farmore than digital photography, whichfirst threw film photography into near-terminal decline and then helped topopularise smartphones.

Imaging lies at the heart of the hugemedical devices industry. In additionto two-dimensional X-rays, doctors canlook at patients with newer techniquesthat reveal much more about what isgoing on inside the body, from CAT(computer axial tomography) andultrasound to MRI (magnetic reso-nance imaging) and PET (positronemission tomography) scans. Computeranalysis of the images permits diagno-ses that would have been impossiblewith traditional radiography.

Image analysis has also made possi-ble a new wave of security and iden-tification applications, such as facialrecognition. And automatic reading ofprinted tracking labels – barcodes andtheir later manifestations, such as QR(quick response) codes – has trans-formed retailing and logistics.

Computer vision will also be essen-tial to the development of robotics, thelast of this group of six top technologiesthat have shaped business. Blind andinflexible industrial robots have trans-formed some manufacturing opera-tions, such as car production, but thereis scope for more intelligent and adapt-able robots with senses of sight andtouch that can adapt to, for example,irregular or unexpected movements ona production line.

Then there is the prospect of newrobotic markets, such as humanoidsthat can act as personal companionsor domestic assistants. Aerial robotsinspired by birds or insects could flyto places inaccessible to conventionalpiloted craft. And fish-like aquaticrobots could penetrate waters beyondthe capabilities of boats or submarines.

We cannot predict what futuretechnologies will come out of military,academic or industrial research. But onpast form we can be confident businesspeople will exploit any commercialopportunities that arise.

By the time the iPadarrived, the BarriersBetween work and homeliFe had Been demolished“ “

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barcodes and the newer quick responsecodes to identify places, products andpromotions. Such technology hasturned stock and supply-chain logisticsinto an exact science. In the giant ware-houses of internet retailer Amazon,every action is recorded by a scanner.

Soon devices will be able to scan ourbodies and use clever software to showus how a pair of jeans will look on us,without us having to leave our chair.

Imaging has spawned entire areas ofwork – photographers, retouchers andprinters – and product lines for equip-ment and lighting. And as analogueimaging has given way to digital, somegiants of the past have fallen, such asPolaroid and Kodak.

In the office, the humble faxmachine – a breakthrough device whenit appeared that had the then revolu-tionary ability to scan documents andsend them across phone networks – isalready obsolete. But its stablemate, thephotocopier, is not.

The imaging category also includesultrasound, used to detect flaws inobjects as diverse as precision engi-neered components and babies in the

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been transformed, most profoundly inthe retail sector. Shoppers can browse,buy and pay with their mobile phones.Mailing lists and catalogues have beenreplaced by flash offers by email or text.

Customer service is no longer justa two-way conversation. People cantweet their dissatisfaction, or checka competitor’s price by scanning thebarcode with their phone. In exchange,retailers can know their customer asnever before. They can track purchasesor respond to a complaint before acustomer has left the shop.

In the media and advertising, com-panies are finding new ways to reachmobile audiences. A large proportion ofmusic and software is now sold throughapp stores rather than over the counter.In healthcare, mobile technology has thepotential to allow real-time monitoringof our bodies throughout our lives.

Machine-to-machine communica-tion (the “internet of things”) is alsotaking off. Before long, electricity smartmeters will feed real-time energy usedata back to the grid, or car parts willsend maintenance data back to servicecentres, for example. BedeMcCarthy

Fibre optics – the science of trappinglight and directing it from one pointto another – is often associated withcutting-edge technology, when in factits use dates back to the 1840s whenFrench academics discovered that lighttrapped in a stream of water couldtravel around bends.

However, it was perhaps not untilthe mid 1960s, when German physicistManfred Börner started sending datausing light instead of electrons, that itsfundamental importance to businessemerged. Today, a single fibre scarcelythicker than a human hair can carryabout 90,000 television channels. Thetechnology is also immune to electricalinterference and environmental noise,safe to use around explosive fumes and

Ever since printers were first able toreproduce drawings, advertisers havebeen using images to communicatedesire to their customers instantly andwith impact.

The use of images gave rise to cata-logues and mail order shopping – theparents of today’s ecommerce and retailsites. The product photography thatmakes these inanimate objects desir-able has helped technology companiessuch as Apple both create and targetconsumers’ seemingly endless obses-sion with shiny new products.

In the world of commerce, bigger isbetter, so printing technology has beenpushed to the limit, allowing imagesto cover the sides of skyscrapers or anairliner’s fuselage, for example. Every-where we turn we are confronted withimages – and most of them are sellingsomething.

Imaging has allowed scanning – of

difficult to wire-tap. Little wonder,then, that it is optical fibres that formthe backbone of the internet, ferryingdata along submarine cables that con-nect every continent except Antarctica.

The speed, size and bandwidth offibre optic technology has been trans-formational for business. Colleagueson different continents can collaboratevia services such as videoconferencingand screen sharing, giving new mean-ing to the concepts of multinationalcompanies and home-working.

Without fibre optics, the internetmight not have kept pace with thedevelopment of the electronic officewith its VoIP (voice over internetprotocol) phones and the older emailsystems replaced by cloud-based ver-sions. Fibre optics have also enabledthe birth of the consumer internet anddigital media, which have demon-strated a hunger for bandwidth thatfew could have predicted when coppercables were being laid.

soon devices will BeaBle to scan oUr Bodiesand show Us how a PairoF Jeans will look“ “

Getting smart:mobile phonesnow let you shopand let the shopsknowmoreabout you

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womb. And radar,which made possible today’s busybut safe airspace. And for companiesthat make things, the ability to scan aprototype, feed the image directly intoa computer-assisted manufacturingprocess and turn out exact replicas hasslashed time and costs, allowing farquicker reactions to changing marketconditions.

Imaging has redefined securityand identity checks. And with facialrecognition technology now in modernsmartphones, a person’s image hasbecome the key to their digital life.

There is more to come. In the ageof Instagram, the online photo hostingservice, people increasingly communi-cate using pictures rather than wordsor speech.

The first version of the Google Glasswearable imaging device will let youtake a picture by blinking, and it willnot be long before we will be able torecord our life in high-definition video.

Some call this the death of privacy.That may be, but it is also the birth of anew commerce. BedeMcCarthy

In the office itself, fibre optic cablinguses a fraction of the space of tradi-tional network and telephony infra-structure, meaning higher ceilings andmore spacious office designs.

In medicine, fibre optics can notonly shine light into inaccessible placesbut are also used for endoscopes, thetiny cameras used for internal exami-nations and surgery that have trans-formed the medical industry. Theyhave led to the widespread use of lessinvasive keyhole surgery, which in turnhas reduced patient stays and cut costsfor hospitals.

In manufacturing, products canbe built with tiny fibre optic sensorsthat measure strain, temperature andpressure. These give manufacturersreal-time intelligence about the perfor-mance of their products after they ship.For example, the health of an aircraftengine can be monitored, in some cir-cumstances even enabling engineers topredict failures. BedeMcCarthy

Few retailers, manufacturers or dis-tributors could run a business todaywithout tracking individual items bycomputer, whether they be groceriesat a supermarket checkout, goods ona production line or parcels at a postalsorting office.

The original – and still the mostfamiliar – tracking device is themachine-readable barcode. Althoughsimple barcodes were introduced inthe late 1960s to track rail wagons andfactory components, the technology’sbreakthrough came in the 1970s whenthe US supermarket industry decidedthe time had come to introduce astandardised system for automatingcheckouts. The initial frontrunner wasa “bullseye” system proposed by RCA,in which an 11-digit product code wasencoded in concentric rings. But trialsshowed this to be unreliable and theeventual winner was a linear codedeveloped by IBM, with data encodedin the width and spacing of parallelblack and white lines read by a laserscanner.

By the 1980sthe linearsystem hadbeen adoptedworldwide, withinformationallocated accord-ing to an agreeduniversal productcode (UPC).

From the shop-per’s point of view, themost obvious benefit ofbarcodes is that – when

they are working properly – they speedup the checkout process. For retailers,this means they can employ fewer staffat the tills – an accelerating trend nowthat many chains are encouraging, orforcing, customers to scan their ownpurchases at a self-service machine.

More important advantages forcompanies lie in their being able totrack and re-order stock, respondquickly to changes in demand and alterprices far faster than is possible withmanual pricing systems.

Although the UPC remains thedominant form of barcode, manyother codes are in use for more spe-cialised commercial applications, frombooks and libraries to pharmaceuticalpackaging.

The familiar linear barcodeexemplified by the UPC reads acrossfrom left to right in one dimension.But the main growth area in labels isnow in 2D or matrix codes that canhold much more data; they are printedas a grid with tiny black and whitesquares that are read both horizontallyand vertically.

The most important 2D system isthe QR (quick response) code. It wasinvented for the Japanese car industry

but has recently spread rapidly asthe de facto standard for label-ling objects with information andinternet links that can be readwith mobile phones – laying thefoundations for the so-called“internet of things”.

At the same time, radiofrequency identification(RFID) tags – smart labelsthat can be read withoutan optical scanner orcamera needing to havea line of sight to thecode – are multiply-ing rapidly in manyfields of commerce,supplementing oreven replacingbarcodes.Clive Cookson

the UPc Barcode readsin one dimension, BUtthe Growth area isin 2d or matriX codes“ “

Sent on itsway: the faxmachine was abreakthroughimaging devicebut is obsolete

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Robots may have yet to show they cantake over the world – a vision of manyscience fiction writers – but they havemade a considerable mark on the fieldof manufacturing.

Industrial robots – program-mable, multifunctional manipulators– are ubiquitous in factories makingproducts from cars to chemicals. Thesystems take care of tasks that, if themachines had never been invented,would have been left to humans.

Jobs commonly performed by robotsinclude welding car bodies, screwingtogether electronic devices and liftingany number of different items betweenmachines at various stages of production.

It is a mistake, however, to blamerobots for declining employment inmanufacturing. Without the pro-ductivity improvements robots havemade possible, the companies that usethese devices, often with a few humanemployees to supplement their work,would struggle to be competitive.Indeed, without robots the companiesmight not be in business at all.

The Czech Karel Capek’s 1920 playR.U.R., which was translated into Eng-lish three years later, coined the word“robot”. The main character was Ros-sum, an engineer who made androidmachines with a wonderful capacity forwork. These robots, which start off asservants of mankind, eventually learnto think for themselves and overcometheir human masters.

In the business world, robots havehad a less dramatic though still event-ful history. Industrial robots were firstmade in the early 1960s by the long-since-disappeared Unimation of theUS. Today, the biggest makers of robotsinclude ABB of Switzerland, Germany’sKuka and Fanuc of Japan.

Robots’ capabilities are increasingyear by year, including their abilityto sense their surroundings throughvision and touch systems. As a result,they can show some measure of adapt-

ing to their environment,such as “watching” for compo-nents approaching on a transferline in irregular movements andgrabbing them at the appro-priate time.

Small companies, such asRethink Robotics, basedin Boston, have started toproduce fairly cheap, highlyadaptable robots that canwork alongside humans.These machines use techniques of“smart” computing, or artificial intel-ligence, to offer a considerable amountof autonomous thinking. But trulyautonomous robots – ones with thethinking power of the average human –have still to evolve. Peter Marsh

In October 1957 the Soviet Unionshocked the world by launching its firstman-made satellite, Sputnik. Less thanfive years later space technology wentcommercial when the US launchedTelstar 1, the first communicationssatellite, which transmitted televisionbroadcasts and telephone calls acrossthe Atlantic.

In 2012, 50 years after Telstar 1 wentinto orbit, commercial space activi-ties were worth more than $200bn

worldwide. Long-distance telephonyhad driven the expansion of commer-cial satellites in their early years, butwith high-capacity fibre optic cablesproviding the backbone for intercon-tinental telecommunications, satellitebroadcasting makes up the largest partof the space market.

Direct broadcasting from spaceto homes began in the 1980s, whentechnology made it possible to buildsufficiently powerful and reliable“geostationary” satellites. In thisorbit, 36,000km above the equator, aspacecraft appears to hover over onepoint on earth and its broadcasts cantherefore be picked up with a fixedreceiving dish.

The second great businessopportunity based on satellites isnavigation. This originated as theGlobal Positioning System (GPS), amilitary project created by the USDepartment of Defense during the1970s and made freely available forcivilian use in the 1990s. Russia hassomething similar called Glonass, andEurope and China are building theirown systems.

In contrast to satellite broadcast-ing and telecommunications, sat navuses constellations of spacecraft thatwhizz around the earth in lower orbits.A user’s position is determined by thetime taken for radio signals to travelbetween the receiver and four or moresatellites equipped with ultra-accurateatomic clocks.

Many business activities havebecome dependent on sat nav, from allforms of transport to mobile commu-nications.

A third multibillion-dollarcommercial sector emerging fromsatellite technology is earth observa-tion, or remote sensing. Like sat nav,this originated in defence research anddevelopment. Pictures once generatedby satellites for espionage purposes arenow commercially available for map-ping applications, such as Google Earth.

Observations from environmentalmonitoring and meteorological satel-lites are also feeding growing businesssectors, such as commercial weatherforecasting. Clive Cookson

commercial sPaceactivities are nowworth$200Bn worldwide“ “

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Global reach:robots haveyet to conquerthe world, butsatellites havebecome essentialto broadcasting

BIg. BIgger. sImplest.

Redefining how fast, adaptive, and simple a global bank can be.Duplication. Spiraling costs. Stretched accountability lines. “Cats cradles” of national, regional, and functional complexity. All symptoms of a company that had grown worldwide without a fit-for-purpose operating model or structure.

Where transformation of “back-office to front-office” IT and operations had failed, we worked together with our client to solve the core issues, fundamentally transform the bank’s anatomy, and mobilize the organization.

Revenue per customer rose nearly 20% while total costs decreased by 10%, amounting to billions of dollars in savings in just 15 months. Simultaneously, the bank became leaner, fleeter, and more able to respond to shifts in its global environment.

For additional insight, please visit

bcgperspectives.com

Globalisation

For all its benefits in spreading wealth,globalisation has not come withoutdrawbacks, making the processone of the most complex forces ofmodern times, writes Martin Wolf

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Globalisation has createdhuGe increases in prosperity,notably in emerGinG markets“ “

Globalisationis the greateconomic themeof the pastthree decades,affecting notjust business

but much of the world as a whole.Behind it are technical factors suchas the revolution in informationand communications technology,and market-oriented liberalisation– principally of trade and financebut also to some extent of move-ment of people.

Globalisation has created hugeincreases in prosperity, notablyin emerging markets, above all inChina. It has reshaped the activi-ties of business, creating integratedchains of innovation, production,marketing and distribution. Yetit has also caused huge stresses

as production has shifted to low-wage economies, “winner-takes-all”

markets have increased inequality anddestabilising speculation has unleashedhuge global financial crises.

In response, the financial sector isbeing re-regulated. New currents inpost-crisis regulation risk balkanisingthe global banking industry.

Even the impulse towards trade lib-eralisation has slowed, though not yetreversed, as unemployment has soaredin high-income countries gripped by theglobal and eurozone financial crises.

Some might fear a collapse of thisera of globalisation, as happened in thelate 19th and early 20th centuries. Yetthe position today is not so dire. Whatwe are seeing, instead, are inevitabletensions between two powerful forces.

On the one hand, the market econ-omy seeks opportunities across nationalborders. Most manufacturing, financeand any service that can be digitised are

highly tradable. On the other hand, polit-ical institutions, regulatory frameworksand human loyalties are national or evenlocal. Destabilising this uneasy balancehas been a loss of trust in the justice andefficiency of the market economy.

The 1980s and 1990s saw the col-lapse of Soviet communism and theabandonment of state planning inChina and India; the completion of theUruguay Round of trade negotiations,which incorporated emerging countriesinto the trading system; abandonmentof exchange controls in almost all high-income countries and many emergingeconomies; privatisation of state-ownedenterprises; and the emergence of amass consumer market across the globe.

This was the heyday of marketoptimism, unleashed by the US and theUK and, more importantly (and morepragmatically), China and India. Sincethen, financial crises have underminedsuch easy confidence. The Asian crisismade many emerging economies waryof the embrace of global market forces.The crisis in the high-income countriesis now doing the same to them.

Yet the forces driving globalisationremain powerful. They include the riseof English as a world language; thecross-border movements of people seek-ing better education and jobs; the rise ofa planetary economic and business eliterunning global companies and living inglobal hub cities; and the trans-borderflows of ideas, including religion.

The backlash against globalisation isalso real, though. The desire to regulatemarkets more tightly, reduce inequalitiesand achieve a greater measure of per-sonal economic security are all potent.

The outcome will probably be acomplex balance of globalisation andregulation. The glad, confident morn-ing of the global market economy haspassed into a cloud-covered day.

In classic economics, the “tragedy of thecommons” is the proposition that indi-viduals acting in their own self-interestwill foul or deplete shared resources.Outside intervention, the theory goes, isnecessary to protect the things that ben-efit everyone but are owned by no one.

The late 19th century provideddramatic demonstration of theprinciple as rapid industrialisationtransformed Europe and NorthAmerica. Innovations flourishedand vast fortunes were made – butpollution fouled the air, workers hadto toil in appalling conditions anddangerous products were foisted onan unwary public.

The catastrophic 1911 TriangleShirtwaist factory fire in New York ledto a wholesale revamping of occupa-tional safety regulations, and otherworker and consumer protection rulesfollowed. Oil, financial and railroadmonopolies inspired the creation ofcompetition authorities.

The Depression then sparkedcomprehensive financial reforms.That has been echoed more recently,with tough new regulations aimed atpreventing a repeat of the 2008 bankcollapses. The financial services sectoris also being reshaped by tougherenforcement of existing regulations,especially against market abuse andmis-selling of retail products.

The proliferation of regulation doeshave downsides. Most rules increasecosts and make it harder for new busi-nesses to start. Participants in regu-lated markets can also become overde-pendent on the rules. BrookeMasters

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The sudden inclusion of one-fifth ofhumanity into the global labour marketand the willingness of those new work-ers to toil for a pittance has been oneof the most fundamental shifts in theworld economy. Particularly in high-cost developed economies, observersdescribed a giant sucking sound asmanufacturing jobs went to China.

On the other hand, the cost to west-ern consumers of everything from tele-visions to T-shirts plummeted as Chinabecame the workshop of the world.

As China produced more and moreof the world’s goods it developed aseemingly insatiable appetite for rawmaterials. By the mid-1990s it becamea net importer of oil and other indus-trial commodities, driving the com-modity super-cycle of the past decade.

But the trend towards an open marketeconomy and integration into the globalsystem has not been entirely smooth.Most economists believe China’s export-oriented, investment-intensive growthmodel is running out of steam and thatthe country stands at a crossroads.

Famed Chinese economist and freemarket advocate Wu Jinglian has saidChina must either launch bold newreforms to introduce a truly market-based economy, or possibly slip insteadinto a sordid form of crony capitalism.

In today’s China, it seems the catis neither black nor white but a dirtyshade of grey. Jamil Anderlini P

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Time to reflect:intense growthhas broughtChina to acrossroads andit must decide onmarket reforms,say economists

To many outside China, the country’simpressive economic growth over thepast three decades is the natural resultof a decision to abandon Communismand adopt free-market economics.

But that decision was never made,and to this day China’s increasingly cap-italist leaders speak reverentially aboutMarxist-Leninist Mao Zedong thoughtand refer to their system as “socialism(with Chinese characteristics)”.

One of the most transformativeglobal developments of recent decadesis still not fully acknowledged by thosewho made it happen. The future of thatexperiment remains a topic of debate atthe highest levels of China’s authoritar-ian political structure.

“The ambivalence of the leadershiphas led to a messy stir-fry of Leninismand a market economy,” says LeslieYoung, professor of economics at CheungKong Graduate School of Business inBeijing. “Allowing the ruling hierarchyto make money while maintaining nos-talgia for Marxism has resulted in theparty never fully legitimising the assetsthey control as private property.”

It all began in 1978 when the oldCommunist guerrilla Deng Xiaoping

solidified his grip on the party andlaunched a modernisation programmefollowing the death of Mao and the endof the disastrous cultural revolution.

In explaining his adoption of whatwere effectively capitalist ideas, Deng issaid to have told comrades: “It doesn’tmatter whether the cat is black orwhite, as long as it catches rats.”

But right up to his death in 1997 hefaced staunch opposition from conserv-ative hardliners in the party and nei-ther he nor his successors ever stoppeddescribing the system as “socialist”.

The first steps in what becameknown as “reform and opening” weretaken in the countryside, where tensof millions had died in the great leapforward of the late 1950s as Mao col-lectivised the land and forced peasantfarmers to produce steel.

Beginning in the late 1970s, the partybroke up the communes and allowedhouseholds to farm their own plots ofland. Peasant farmers and state factorieswere allowed to sell anything theyproduced beyond state quotas – andprivate businesses began to flourish.

This continued throughout the 1980s,but it was in the wake of the 1989 mas-sacre of protesters in Beijing’s Tianan-men Square and the demise of the SovietUnion that the isolated and uncertainChinese leadership launched privatisa-tion and price reforms, adopting marketeconomics in practice, if not name.

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New lines onownership: theUK’s sale of stateassets such astelecoms in the1980s becamea worldwidephenomenon

in forcing inefficient and often corruptstate-owned enterprises to modernisein both former communist countriesand market economies.

Over time, many studies showed itwas not the change of ownership thatmost drove efficiencies but open-ing markets to competition. Whereprivatisation has been least successful,such as in the cronyism that accom-panied Russia’s transition to capital-ism, state monopolies were seized bysmall groups with vested interestsbut without the liberalising force ofcompetition. Greater competition hastransformed, for example, communica-tions services around the world.

Many countries, including the UK,have few state-owned companies yetto privatise, apart from banks that thestate was forced to nationalise in thefinancial crisis, but there is pressure formany crisis economies in the eurozoneto sell government-owned assets toimprove their efficiency and reducegross public sector debt. In China, theworld’s second largest economy, theprocess of attracting private capital toits large state-owned enterprises has along way to go. Chris Giles

Privatisation has a long history, startingwith monarchs and rulers selling stateassets and licences to private individu-als. But more recently it was an ideathat blossomed in the 1980s.

The UK’s Thatcher governments,between 1979 and 1990, embarked onselling state assets in mass public offer-ings of shares, swapping ongoing profitstreams of nationalised industries forwindfall revenues that were used toplug holes in fragile public finances.

In the process of marketing theequity, the UK government created anarmy of small shareholders.

This did not quite succeed incementing capitalism into the heartsof the British public, but it certainlycreated a culture that respected theprimacy of market forces in many areaspreviously thought to be the preserve ofgovernment.

Starting in 1979 with the sale ofa tranche of BP, the oil producer,one after another of the command-ing heights of the economy was sold.Telecoms, gas, electricity, the railways,the national airline, steelmaking, waterand sewerage provision, coal miningand shipbuilding were all to follow.

This became a global phenomenonafter the fall of the Berlin Wall in 1989and the end of Soviet communism. Pri-vatisation was seen as an essential tool

Countries guarantee the ruleoF lawwhen they provide Fairand equal laws appliCable to all“ “

The rule of law is seen as the founda-tion of a civilised society. It is crucialin fostering an environment in whichbusiness can flourish.

In a recent speech on litigationfunding Lord Neuberger, presidentof the UK’s Supreme Court, empha-sised the importance of the rule oflaw: “Investors need to know that thepolitical elite will not expropriate theirprofits or their businesses at will.

“Individuals and business have tobe able to enforce contracts, to protecttheir intellectual property and to obtaineffective redress not merely againstother individuals and business but alsoagainst the state.”

As Adam Smith put it in his 1776Inquiry into the Nature and Causes of

the Wealth of Nations, economic activ-ity and innovation will thrive only in anenvironment that affords secure propertyrights and effective freedom of contract.

Having a transparent legal systemand an independent judiciary in whichno one, including the government, isabove the law is seen as key to retain-ing business confidence. In countrieswith strong legal systems such as theUK and US, the rich and powerful can,and are, prosecuted in the courts, andgovernment decisions are regularlychallenged by independent judges.

“There is a close correlation betweena high prevalence of corruption and aweak rule of law,” says Robert Bar-rington, executive director of Transpar-ency International UK, an anti-corrup-tion organisation. “Therefore, wherethere is a strong rule of law, corruptionis likely to be less and there is a generalpattern of strong independent institu-tions like the judiciary, an independentmedia and law enforcement.”

Countries guarantee the rule of lawwhen they provide fair and equal lawsapplicable to all, a legal system accessi-ble to all and an effective court system.

Confidence in the integrity of the UKlegal system is high – as demonstratedby litigants from the former SovietUnion opting to have civil disputesheard in the English courts.

Russia slipped from 63rd out of 142countries ranked for economic com-petitiveness by the World EconomicForum in 2011 to 66th a year later, duein part to corruption and a lack of legalreform. The jailing of Mikhail Khodor-kovsky, Russia’s one-time richest man,is one case where questions have beenraised about the impartiality of theRussian justice system.

Likewise in some of Africa’s min-eral- and oil-rich nations, their naturalassets have often proved a curse in thepast, fomenting coups and conflict, andundermining the rule of law.

Other jurisdictions, notably Chileand Brazil, have been held up as makingstrides in improving the rule of law. Bra-zil, for example, has introduced the fichalimpa (“clean slate”) law, which preventspeople convicted of crimes from runningfor public office. Jane Croft

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Proponents of deregulation have longargued that loosening government’shold over industry enhances competi-tion and efficiency, while burdensomeregulations overwhelm companies inred tape and ultimately stymie growth.

The chief arguments againstderegulation are that consumers canpay the price when companies or wholeindustries operate without independentoversight, opening the door to environ-mental and safety problems and evenfinancial crises. The philosophy behindderegulation was most clearly articu-

the poor are nolonger seen just aspassive aid reCipients“ “

The word “globalisation” becamepopular in the 1980s because it seemedto capture the new world in whichbusiness was operating. Since then it isnot just stock markets that have goneglobal. The economist Philippe Legrainhas calculated that by 2010 Chinaexported as much in six hours as it hadin the whole of 1978.

That year is significant because itmarked the start of the modern era ofglobalisation, with Deng Xiaoping’sreform and opening of the Chineseeconomy, beginning in December 1978.

Over the next 20 years, other coun-tries took significant steps to facilitateglobalisation and new regional tradeblocs were formed.

The UK, under prime ministerMargaret Thatcher, abolished exchangecontrols, laying the foundation forthe rise of London as the pre-eminentglobal financial centre. The EU createda single market. The US, Canada andMexico created the North AmericanFree Trade Agreement, and LatinAmerican countries such as Brazil andArgentina embraced the “Washingtonconsensus” of market-driven reforms.

In 1989, the Berlin Wall came down,meaning the communist half of Europecould embrace global capitalism.And in 1991, India turned its back oninward-looking economic policies andembraced liberal economic reforms.In 1995, the World Trade Organiza-

tion was formed to police the rapidlyexpanding global trade system.

But it was international businessthat gave globalisation meaning. Overthe past 30 years, international tradehas grown about twice as fast as theglobal economy. China has emergedas a new hub, both as a market anda maker. Yet one of the most strik-ing facets of globalisation is the sheercomplexity and geographical extent ofglobal supply chains.

The next step will be the expansionof south-south trade and the rise ofmultinationals from former emerg-ing markets, such as Brazil, India andChina itself. Globalisation is becomingtruly global. Gideon Rachman

Until recently, the world’s poor wereseen as people in need of largesse,whether from the state, large phil-anthropic organisations or smallcommunity groups. Today, the poorare no longer seen just as passive aidrecipients but as a new consumer classwilling to pay for goods and services– if these products are packaged, andpriced appropriately.

The radical notion that selling to thepoor can be profitable – and can helpto alleviate poverty – was most activelypropagated by the late CK Prahalad,an Indian-born professor of corporatestrategy at the University of Michigan.

His 2006 book The Fortune at theBottom of the Pyramid argued thattreating the 4bn people in the world liv-ing on less than $2.50 a day as potentialconsumers – and developing businessmodels to serve their needs – was “atthe heart of the solution to poverty”.

Even before that, some individualsand companies had seen the potential.In the 1980s, Muhammad Yunus, aBangladeshi economist, founded hispioneering Grameen Bank, which pro-vided small loans to poor rural womenat interest rates higher than commer-cial banks – from which the women

could not borrow anyway – but lowerthan the local money-lenders.

In India, Hindustan Lever, an armof consumer goods giant Unilever,in the 1990s started selling sachetsof shampoo, tea and other consumerbasics for one rupee – which even thepoorest Indian could afford.

In Brazil, Casas Bahia becamethe country’s largest retailer byallowing cash-strapped working-classconsumers to pay for household itemsin small instalments.

Philanthropic organisations havealso been affected by the new mantraof market-based solutions to intrac-table problems. Charities such as theMichael & Susan Dell Foundationare putting their resources into socialbusinesses that provide services such ashealth and educational support or evenclean drinking water, through busi-nesses that charge small user fees.

Of course, debate still rages overthe ethics of profiting from the poor.Most mainstream companies see littleproblem with earning returns forshareholders if they can succeed incracking the bottom of the pyramidmarket. Other companies with astronger social mission tend to followYunus’s belief that profits should beploughed back into the business toallow it to expand and serve more cus-tomers. Amy Kazmin

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Globalisationand tradeblocs

The rise of the emerging markets hasprofoundly changed the global economyover the past 20 years. Led by China,emerging nations have increased theirshare of world output from 37 per centin 2000 to more than 50 per cent; theirrole in trade from 20 per cent to nearly40 per cent, and their share of globalstock market capitalisation from lessthan 5 per cent to 15 per cent.

This trend has both fed off andstimulated another world-changingtrend – urbanisation. Half of the world’spopulation now lives in cities, withincreasing industrialisation raising thepace to take that figure to an expected70 per cent by 2030. Last year, theemerging economies grew at an average5.1 per cent; 7.8 per cent in China’s case.The developed world managed just 1.2per cent. For 2013, the InternationalMonetary Fund expects 5.9 per cent foremerging states, against 1.2 per cent forthe rich countries.

China’s Huawei and ZTE rankamong the world’s top five telecomsinfrastructure manufacturers. Brazilian-led Anheuser-Busch InBev and SouthAfrica’s SABMiller rank among theworld’s top five brewers. Mexico’s GrupoBimbo is the world’s largest baker.

China, which in 2010 overtook Japanas the world’s second-largest economyby GDP, is forecast to replace the USas number one in the next 15 years orso. By 2050, the top five are likely to beChina, India, the US, Brazil and Russia.

However, Malaysia, Singapore, SouthKorea, Taiwan, Thailand and HongKong are the only six emerging econo-mies to have maintained annual GDPgrowth rates of 5 per cent or more forfour decades. That said, in 2013 growthin emerging markets is more diversethan it ever has been, with new coun-tries coming to the fore as others slowdown. The developed world, dominantsince the industrial revolution two cen-turies ago, is giving way to a new order.Stefan Wagstyl

Looking up:Brazil is forecastfor economicstardom butgrowth has notbeen consistent

lated by economist Milton Friedman,who in the 1960s called for the scope ofgovernment to be “limited”.

The deregulation of US industrybegan in earnest under the 1980sadministration of Ronald Reagan,when relaxation of rules governingtransportation led to vast changesin government’s oversight of banks,telecommunications, energy and themedia over the following decades.

Deregulation, whether at the handsof Reagan or Margaret Thatcher inthe UK, who oversaw radical financialreform, is seen as a conservative idea.

But in the US it was Bill Clinton,the Democratic president in the 1990s,who embarked on one of the mostsignificant regulatory changes in ageneration, and one that is still debatedtoday.

The reversal of the Depression-erabanking rule known as the Glass-Steagall Act, which forbade the combi-nation of investment and commercialbanks, was supposed to make WallStreet banks more competitive andrelevant. And it did.

This deregulatory push was champi-oned by Alan Greenspan, the then USFederal Reserve chairman, and RobertRubin, Clinton’s Treasury secretary. Itallowed banks to merge, grow and bemore complex and highly leveraged.

Today, the decision to do away withthe 1930s rule is seen as a contributorto the 2008 financial crisis, though notnecessarily to its immediate causes,such as the boom in subprime lending.

Just how far has public opinionshifted on the repeal of Glass-Steagall?Last year a champion of the 1990sreform, Sandy Weill, the former Citi-bank chief executive, created waveswhen he disavowed the change instructure. “What we should probablydo is… have banks do something that’snot going to risk the taxpayer dollars,that’s not too big to fail.”

Today even some Republicans chal-lenge the existence of banks that are sobig that they pose a risk to sharehold-ers, because the US economy could notafford to see them fail and thereforewould have to bail them out in anothercrisis. Stephanie Kirchgaessner

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report, The Benefits of the English Lan-guage for Individuals and Societies:Quantitative Indicators from Cam-eroon, Nigeria, Rwanda, Bangladeshand Pakistan, found English speakersin those countries earned 25 per centmore than colleagues who didn’t speakthe language. In Rwanda, in some jobsthe difference was 181 per cent.

Does this mean native Englishspeakers can expect to get the bestjobs? Not necessarily. First, they aremore likely to be monoglot – to speakno languages other than English. Non-native English-speaking business high-flyers can manage in both English andtheir own language, which is helpful indealing with local customers.

Second, studies have shown inter-national business gatherings in Englishoften proceed more smoothly whenthere are no native English speakersaround. The native English speak-ers often speak too quickly and usemetaphors the others do not under-stand. Jean-Paul Nerrière, a Frenchformer IBM executive who observedthis at many meetings, promoted whathe called Globish, composed of 1,500English words he said were perfectlyadequate for business purposes.

But could English be supplanted byanother global business language, suchas Mandarin? It could happen, butgiven the time and effort learning a newlanguage requires, it is difficult to seeEnglish being supplanted for at leastseveral decades. Michael Skapinker P

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The stunning expansion of highereducation constitutes one of the biggestchanges to the world in the past 100or so years. In 1900, there were only500,000 students in the world; today,the figure is 100m. From less than 1 percent of school-leavers, the ratio hasjumped to one in five.

While the level of higher education,and its quality, is not the same every-where, the surge has happened acrossthe world. One must look as far afieldas Afghanistan under the Taliban tofind a country that has significantlyshrunk its higher education system inrecent decades.

There has long been resistanceamong business leaders to the expan-sion of education. In 1899 in the US,the president of Stanford University feltobliged to dispel the myth that “educa-tion is of no value to a businessman”.

There are concerns about whetherlabour markets can swallow all of thesegraduates, and about whether degreerequirements for relatively lowly jobswill inhibit social mobility.

But there is little doubt that innova-tion in developed countries is fuelledby the massive increase in the basiceducation of its citizens. Indeed, thewest’s universities attract great innova-tors from the developing world. This hasdrastic effects on society and economies.

As Evan Schofer and John Meyer,sociologists at Stanford, argue: “Themodern world is knit together in anelite power structure of people moreschooled in a cosmopolitan worldculture than in their own local one, andlinked more tightly to each other thanto their own populations.”

The concentration of excellentuniversities in the developed worldmeans the best and brightest of theemerging world aspire to leave theirhomelands for a spell – and many donot return. The expansion has createdeffects that support existing elites andsuccessful countries.

What do Airbus, Nokia and Rwandahave in common? They all regardEnglish as their preferred language. Asa European aircraft manufacturer withFrench, German, British and Spanishroots, Airbus has always used Englishas its common language. Nokia, themobile phone maker based in Finland,uses the language as its gateway tothe world. And Rwanda has adoptedEnglish as an official language and pro-motes its use in its education system.

There have been languages beforethat have been widely spoken. In hisbook The Last Lingua Franca, NicholasOstler writes that in 100AD a travellercould go from Spain to the Hindu Kushspeaking Greek all the way. But no lan-guage has ever been spoken in as manyplaces as English is today.

When a Brazilian meets a German,they will almost certainly speak to eachother in English. In business confer-ences from Berlin to São Paulo, it istaken for granted that speeches will bein English. In many sectors, such asbanking and management consultancy,it would be impossible to rise to the topwithout fluent English.

Such is English’s importance in busi-ness that those who speak it can earnsignificantly more. A British Council

those who speakenglish Can earnsigniFiCantly more“ “

Change may be coming, how-ever. Online courses tend to be alittle flimsy and lack the communityexperience of college life, but they aregrowing increasingly sophisticated.Within the next 20 years it may be pos-sible to get the full university experi-ence at home.

Harvard, Oxford and Cambridgewill never be troubled by the rise ofonline higher education. But if thequality and prestige of online coursesstart to catch up with those of lesseruniversities, the expansion of the pastcentury may have nothing on growth inthe next one. Chris Cook

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here’s your change.

Trapped in a classic “doom loop” with poor performance preventing much-needed investments, a grocery retailer was locked in a downward spiral.

Working together with the new ambitious management, we helped make the turnaround possible. The solution was an insight-driven, hands-on approach that enabled an improved customer experience and greatly increased efficiencies.

The results of the mobilization went beyond what customers could see and feel in the stores. Cost reductions were 30–40% above initial estimates; the firm’s EBIT grew by more than 25% annually; and its stock price increased 70% since BCG involvement. Absenteeism and staff turnover were also reduced, while the boost to morale created a winning culture.

Turning around a $30+ billion grocery retailer. From front to back.

For additional insight, please visit

bcgperspectives.com

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Consumers

A world of increasinglywell-informed and wealthyconsumers is driving arevolution in how goods aremade, marketed and sold,writes Louise Lucas

strings. Membership of clubs, whetherexclusive drinking houses or super-markets’ everyone-qualifies loyaltyschemes, allows purveyors of goods totrack our habits and learn our tastes,thus encouraging us to buy more.

Supermarket loyalty cards prove thepoint. Buying nappies, for example, willflag you up as a new parent and thusa potential customer for infant ricecereal, rattles or soft toothbrushes forbarely existent baby teeth.

Again, power works both ways. Alongwith more money, consumers havegreater leverage in the form of price com-parison websites and smartphone apps ina world where austerity looms large.

It is perhaps fitting that peoplepower, which has been a powerfulagent for change in the political dynas-ties of the Philippines and swaths of theArab world, is alive and kicking in theshopping aisles of the west.

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From the immediatepostwar era, whenshortages, rationingand black-marketdealings defined theconsciousness in muchof Europe, to the

freshly minted middle classes prolifer-ating across Asia, Latin America andAfrica, the ability to see, want and buyis an integral part of the human psyche.Manufacturers of goods – both thosewe need and those we could comfort-ably do without – have monetised thiswith abandon.

Thus, more than a century afterthe first Ford motor car rolled off theassembly line, there are now more than1bn cars on the planet. In China alone,120m passenger cars ply the roads; thisin a country whose roads not two dec-ades ago were dominated by bicycles.

However, the capriciousness of con-sumers, and the size of their wallets,makes this two-way traffic. In 2011, forthe first time since the second worldwar, Italians bought more bikes thancars – a big turnaround for the countrythat spawned marques such as Fiat,Ferrari and Lamborghini and wherecar ownership became a symbol of the1960s economic miracle.

Or take fashion. The desire for cheapbut chic clothes has, over the past twodecades or so, resulted in disposablefashion and the rise of stores sellingof-the-moment kit that, with T-shirtsgoing for $5-$10, are clamouring forattention on the world’s high streets.

Some, such as Zara of Spain, havenew stock arriving on a weekly basis,enticing customers to come in andupdate their looks each weekend. Awealth of supply chains make thateasier: switching suppliers for westernEuropean branches from, say, China tothe Czech Republic makes just-in-timeshopping easy. If bright orange is sud-

denly in, tangerine bikinis can be onthe hangers within days.

The luxury sector does not movequite as fast but is no less covetable.That market, whether for yachts, frocksor safaris, is set to hit $1.5tn this year,roughly matching the entire economicoutput of Spain or Australia, accordingto Boston Consulting Group.

Luxury goods and services havethe merit of being about more thankeeping you warm or – in the case ofa $1,000 bottle of aged Scotch whisky,sating a thirst. These are status symbolsthat, in the natural order of things, gowith accumulating wealth.

This is seen in the rapidly growingsales of luxury goods in the likes ofChina, which accounts for 10 per centof the global market. Chinese travellingoverseas make a further 12 per cent ofpurchases, according to Altagamma,the Italian luxury industry association.

Manufacturers have played to this,carefully segmenting their productranges. In retail too, supermarketsmight offer basic ready meals alongsidemiddle-of-the road versions and pricier,hopefully nicer, top-of-the-range ones.And designers have diffusion or “littlesister” lines, or offerings of $60 per-fumes to those who are unable to splashout $2,000 on a bag, for example.

Distillers have also perfected theart, selling vintage whiskies in crys-tal bottles, monogrammed if desired.Diageo, the world’s biggest distillerand the name behind Johnnie WalkerScotch (bottles from £18 to £100,000,for the Diamond Jubilee limited edi-tion), has perfected this art, servingsome of its priciest concoctions in theJohnnie Walker House in Beijing andShanghai.

These clubhouses, redolent of deca-dent 1920s Shanghai, illustrate anotherway manufacturers and retailers areexerting their pull on consumers’ purse

consumers have greaterleverage in the form of pricecomparisons in a worldwhere austerity looms large“ “

“In a single day, how many really non-signifying fields do we cross?” RolandBarthes, the French semiotician,parlayed everything from Greta Garbo’sface to laundry soap through his prism.But brands, those all-important nameswe covet, consume and then consumesome more, remain among modernsociety’s most prevalent signifiers.

Brands are everywhere: shoutingfrom the television (through adverts andproduct placements), billboards andthe moment you enter a shop. Not fornothing is an early signifier in The GreatGatsby, F Scott Fitzgerald’s novel andnow a Baz Luhrmann-directed film, theenormous yellow spectacles advertising

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For followers offashion: onlineshopping nowaccounts for£1 of every £8spent in the UK

online marketplaces haveproduced great advancesin consumers’ ability toresearch and price-check“ “

From the ability to post productreviews on social media sites to com-paring the best prices on smartphoneswhile in a shop, consumers have neverhad so much power.

While in the past it was retailerswho decided what customers wantedto buy and then put the goods in shops,today consumers hold the upper hand.

Much of this has been driven by theability to buy online. According to retailresearch group Verdict, uK online salesthis year are set to account for £1 ofevery £8. Internet sales are also power-ing ahead in the uS where, accordingto Bain & Company, the consultancy,online will account for just under 12per cent of total sales by 2015.

Some retail analysts suggest thatwith the rise of tablet computers andsmartphones a second internet boomhas taken place, as consumers canshop online more easily and frequently.Conlumino, the retail consultancy, saysmobile accounted for 10.9 per cent ofuK online retail sales in 2012.

Smartphones are alsoenabling consumers to checkprices online. They can be inone store but checking theprice of a product in a com-petitor’s shop. This takes awayfrom the retailer one of thetraditional givens – that if aconsumer was in your store atleast you had some influenceover them. Not any more.

The first product sold on eBay, theauction website, was a broken laserpointer. In September 1995 its founder,Pierre Omidyar, posted it for sale on awebsite he first named AuctionWeb.The pointer sold for $14.83. WhenOmidyar asked whether the buyerunderstood that the pointer did notwork, he was reportedly told: “I’m acollector of broken laser pointers.”

Two months earlier Jeff Bezos hadopened Amazon.com, but Omidyarwas more interested in the business ofhelping others sell online – by creatingan open-access marketplace where theycould be matched with buyers.

In part he used old ideas: the auc-tion and the outdoor marketplace.What was new about the eBay onlineflea market was that it tested whetherstrangers could build enough trust overthe internet to trade with each other. Itsounded unlikely to many at the time.Today, it seems ludicrous to doubt.

Trust was built by sellers whooffered product photos, contact phonenumbers and shipping details. And bypayment systems, public scoreboardsfor customer service and policingmechanisms. Now, online marketplacesare a fixture of global retail.

No bazaar is without rogues andcounterfeits. But online marketplaceshave produced great advances in con-sumers’ ability to research, price-checkand buy a wider range of products.

Even Amazon got in on the act. Itwants to offer the world’s largest selec-tion of merchandise, but only wants

to hold the more popular goods. In2000, it opened its own marketplace– and so-called third-party sellers nowaccount for 40 per cent of the salesvolume on its website.

Many sellers are ordinary folk clear-ing out household junk. Online mar-ketplaces give them an easy way to turnthat into cash. In an era of economicvolatility and environmental stress,that is an underappreciated form ofrecycling. Barney Jopson

the all-seeing optician TJ Eckleburg.Branding is part of our culture

as well as business. There is even amuseum of brands in London, hous-ing the collection of more than 12,000labels, packages and posters of “con-sumer historian” Robert Opie.

A brand, says Don Williams, chiefcreative officer of pi global, the brand-ing consultancy, is “a distinctive entitywhich communicates its values, what itstands for, what it does, how it’s differ-ent, what it looks like, how it behaves…nations are brands, religions arebrands, actually… WE are brands”.

Brands, their purveyors believe,build loyalty and ensure we stick withDove shampoo, Toyota cars or AppleiPhones, for example. Manufacturersof consumer goods, such as Procter &Gamble of the uS and Anglo-Dutchunilever, spend 10-15 per cent of saleson advertising and promotion – muchof this brand building.

Monetising that brand loyalty isever more important for businesses,whether it be supermarket loyalty cardsor licensing marques – those remote-controlled Ferrari toy cars or Samsungon the shirts of Chelsea footballers.

Some companies are taking this tonew levels. Ferrari and Harley-David-son are among those making a decentchunk of their revenues from brandedgoods alongside their cars and motor-bikes, for instance. Deluxe designershave perfumes – usually licensed out –from Gucci’s Guilty to Prada’s Candy.

Office addresses, or rather the build-ings that house them, are increasinglybrands in their own right – London’sThe Shard or Kuala Lumpur’s PetronasTowers, for instance.

“The world revolves around brands;unless you’re standing naked in a field,you’re surrounded by brands and brandidentities,” says Williams.

Perhaps subconsciously – for thisis how signifiers work – he is echoingBarthes. “Here I am, before the sea; itis true that it bears no message. But onthe beach, what material for semiol-ogy! Flags, slogans, signals,signboards, clothes, suntan even,which are so many messages tome.” Louise Lucas

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Try before youbuy: so-called‘fit-lifters’ willbuy online aftervisiting a retailstore

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Segmenting customers has long beena stock-in-trade for marketing people.But an idea that changed the entiredynamics came in 1995, when Tesco,the uK’s biggest retailer, launched theClubcard, a customer loyalty schemethat gave it a mass of data to mineabout how people shop.

Clubcard was developed by TerryLeahy, a marketing man by backgroundwho was to become Tesco chief execu-tive in 1997. The scheme could not onlyanalyse consumer habits but also spotgaps in Tesco’s offerings.

A similar approach has beenadopted around the world; in the uSby, for example, Kroger, the supermar-ket chain. Meanwhile, in the intenselycompetitive uK supermarket sector,Tesco’s rival J Sainsbury uses the Nec-tar loyalty programme.

In a market where shoppers arebombarded by vouchers and coupons,the loyalty schemes help retailers tailoroffers to their customers.

Janet Smith, Tesco’s head of grouployalty, has described untargeted offers,such as coupons printed in newspapers,as “bland”. In contrast, offers usingClubcard data give “customers dis-counts on the things they want to buy”.

Justin King, Sainsbury chief execu-tive, has said: “If you target [money-offvouchers], you will give customerscoupons they value… It works verypowerfully.” But a new frontier in seg-mentation is opening up: the informa-tion provided by online searches, or theproducts shoppers buy via the internet.

Online searches can be used to builda detailed profile of a customer. Forexample, if a shopper is of a particularage or gender, he or she may need tobuy certain products. This data couldthen be used to send consumers spe-cific offers or promotions.

The Office of Fair Trading, the uKconsumer protection watchdog, is look-ing at whether online retailers are per-sonalising prices to customers, based onfactors such as their browsing history.

Personalised pricing takes customersegmentation a stage further. Thetheory is that retailers may not offerjust discounts and promotions, but alsoadjust the prices they offer to a websitevisitor based on the visitor’s past onlinebehaviour or location.

The OFT first looked at this issuein 2010 but found no evidence of thistype of personalised pricing in the uK,although it recognised the area wasstill evolving. Consequently, it wantsto understand the changes that havetaken place since the 2010 study, toensure regulatory controls keep pacewith technology and business strategy.Andrea Felsted

This is leading to the concept ofshowrooming, whereby shoppers goto a shop to test or examine a prod-uct before buying elsewhere, usuallyonline. According to a survey fromTNS, part of Kantar, the consumerresearch group, 33 per cent of peopleworldwide admit to showrooming.

When it comes to the nuances ofshowrooming, some 43 per cent ofpeople use their mobile to read productreviews while in store, but 31 per centuse their mobiles to compare prices,according to TNS. Some 14 per centuse their phones to check availability inother stores, while 14 per cent examinewhether it is easier to order online.

In the uS, some shoe retailers, frus-trated at consumers who try on shoesfor fit in physical stores but buy themcheaper online, have dubbed theseshoppers “fit-lifters”. But TNS saysstores can still engage shoppers – andnudge them to the tills – even when theyare surfing on their smartphones in theshops. It found that 38 per cent of peo-ple are interested in redeeming couponson their mobile phones, while 30 percent would like to receive coupons whenthey walk past a product.

David Suddens, chief executive ofR Griggs Group, the maker of Dr Mar-tens footwear, says with the rise ofmulti-channel, it is the way of the worldfor retailers. “We have to let consumersdo what they will do,” he says.Andrea Felsted

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custOmersegmentAtiOn

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Ever since the industrial revolutionthe world has relied on fossil fuels forenergy. Coal, oil and natural gas havebeen the mainstay of our economies,powering industries, fuelling our trans-port and heating our homes.

But a new sight is emerging in thewestern industrial landscape: windturbines and solar panels. Renewa-bles’ share of the world’s energy mixis increasing and challenging thehegemony of fossil fuels.

The rise of solar has been particularlystriking. Ten years ago, installed globalphotovoltaic capacity was about 2.8GW.By last year, that had grown to 102GW– enough to meet the energy needsof more than 30m European homes.Installed wind capacity has grown from39GW to 282GW over the same period.

This is not the first shift in energyuse. In the 19thcentury, wood gave way

Energy

PHOTO:GETTY

Sunny outlook:solar power hasgrown almost40-fold over thepast decade

THE SURGE IN SHALEPRODUCTION HAS LEDTO A mANUfACTURINGRENAISSANCE IN THE US“ “

ideas

CHANGING sourCesof eNerGy

power has emerged from the shadow ofChernobyl to stage a surprising come-back – one that was almost derailed byJapan’s 2011 Fukushima disaster but isnow back on track. Though countriesincluding Germany have turned theirbacks on nuclear, others, including theUK, see it as a vital component of theenergy mix. China alone has 28 reac-tors under construction.

Yet despite the inroads made bywind, solar, biofuels and nuclear,energy continues to be dominated byfossil fuels. ExxonMobil, the oil major,says coal, oil and gas will account for80 per cent of the energy mix in 2040 –little different from now. That is partlya result of growing confidence aboutthe outlook for oil and gas supplies.

Driving this is the shale revolution.Techniques such as horizontal drillingand hydraulic fracturing (fracking) –in which water, sand and chemicalsare injected into shale rock to releasethe oil and gas trapped inside – haveopened up vast energy reserves previ-ously thought uneconomic.

The surge in shale production haspushed down US natural gas prices andprompted a manufacturing renaissancein the US as industries such as petro-chemicals take advantage of cheapergas. The boom has been replicated inthe oil sector, as crude production soarsin places such as North Dakota’s Bak-ken Shale. The US could be almost self-sufficient in energy by 2035, overtakingSaudi Arabia and Russia to becomethe world’s largest oil producer by thesecond half of this decade, according tothe International Energy Agency.

The race is on to emulate the US,with Ukraine, China and Argentinaall investing heavily to develop theirunconventional resources. And with theoil majors also investing more and moreto find and extract crude oil and gas, itis too soon to write off fossil fuels.

to coal as industrialisation gatheredpace, and the power industry switchedfrom oil to natural gas after the oil priceshocks of the 1970s. But the move torenewables is the only big power changedriven largely by government policy.

The reason for that state support isclimate change. Low-carbon technolo-gies are seen as key to slowing globalwarming. That gives countries an incen-tive to support renewable energy, eventhough it is much harder to harvest andcostlier than electricity generated fromfossil fuels. Though some subsidies havebeen withdrawn since the financial crisisof 2008, in countries such as Germanythey are still substantial.

Germany has become a renewablesjuggernaut. It hopes to generate at least35 per cent of its electricity from greensources by 2020. But last year renew-able power generators earned about¤20bn for electricity that was worthmuch less on the wholesale market –and consumers paid for the difference.

The growth of renewables is justpart of a broader narrative of growingdiversity in energy supplies. Nuclear

Renewables are today’s growth story, but fossil fuels still dominate, writes Guy Chazan

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38 | ft.com/50ideas

Aviation

pHOTO:GETTY

High numbers:3bn passengerseach year andmore than athird of worldtrade by valuetravel by air

Warren Buffett, the legendaryUS investor and a leading scepticabout investing in airlines, famouslyobserved that if a far-sighted capital-ist had been present in Kitty Hawk inthe US in 1903 at the birth of poweredflight, he would have done his suc-cessors a favour by shooting downOrville Wright. Despite an occasionallapse investing in commercial avia-tion, Buffett believes airlines are theworst sort of business, growing rapidly,requiring abundant capital to fosterthe growth, and then earning little orno money. He has, however, been along-term investor in flight-trainingservices and business jets.

The industry’s high fixed costs makeairlines very vulnerable to economicfluctuations, its workers tend to beorganised in strong trades unions andit has been forced into budget pricingfor short-haul travel.

The sector has achieved a measly0.1 per cent average net profit marginin the past 40 years and has failed tocover its cost of capital since the adventof the jet age. It faces key monopolysuppliers in the shape of airports andair traffic control providers and anestablished duopoly – Boeing and Air-bus – as makers of new aircraft. Rivalaircraft builders in Canada, China andRussia are emerging only very slowly.

The industry remains highly frag-mented. Consolidation is occurringon a national basis, as in the US in thepast couple of years, and on a regionalbasis within the European Union, butmergers and acquisitions on a globalscale are still prevented by the strait-jacket of international regulation dat-ing back to 1944.

For long years airlines have spe-cialised in shooting themselves in the

So what is it that the airlines don’t getabout air travel? Seven, going on eightdecades of jet-propelled air trans-port have supported the creation ofthe global village. Flying connects. Itmakes global business a reality.

About 3bn passengers a year taketo the world’s airways for business orpleasure. Virtual meetings and businesscontacts, virtual friendships and relation-ships may all be possible, but they clearlycannot substitute for the real thing.

It can be a hassle getting to andthrough the airport, and the in-flightexperience may be less than glamorousdepending on which end of the aircraftyou can afford, but modern life is hardto imagine without air travel.

More than a third of world trade,by value, travels by air. Whether it isFrench beans from Kenya or aspara-gus from peru, air transport allowsthe incredible range of fresh produceavailable on the world’s supermar-ket shelves regardless of the season.Critical, time-sensitive deliveries arepossible only by air.

Debate may rage about the iniqui-ties of food miles, the environmentalimpact of air travel, the scourge ordelights of modern tourism – itself alifeline for many emerging economies– but we are hooked. Air transport ispart of the fabric of our lives.

It is a key factor shaping the modernworld, and yet the airlines themselves –uniquely in the aviation supply chain –have still not worked out how to makeany money from all this activity.

foot by failing to control capacity in adesperate chase after market share –although the long and wearying yearsof weakness in the global economyappear finally to have instilled somediscipline.

The threats to the viability of airtravel have at times appeared positivelybiblical in scope. Giovanni Bisignani,former chief executive of the Inter-national Air Transport Association,has talked of the four horsemen of theapocalypse bearing down on the indus-try, from war and terrorism to pesti-lence (swine flu and Sars) and reces-sion, only for a fifth rider to appear inthe shape of a soaring oil price.

But to be fair, the airlines have notbeen idle. They have done much torestructure. In 2002 the industry couldbarely break even at around $20 abarrel of oil. Now it can break even at$110. That is enormous progress.

profitable or not, most forecastsindicate an inexorable continuinggrowth in air travel. Short-haul flightsincreasingly take place with low-costcarriers. In the long-haul segment,more and more travel is routed via theever-stronger Gulf hubs.

And, one day, air travel may againallow passage through an airport leav-ing one’s hair shampoo, deodorants andtoothpaste packed in the carry-on bag.

Virtual meetings, businesscontacts and relationshipsmay all be possible but theyare no substitute“ “

airlines have changed the world – but profits remain firmly earthbound. By Kevin Done

ideas

air travel

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ft.com/50ideas | 41

PHOTO:AFP

If any self-respecting invest-ment bankers had been askedsix years ago to name thegreatest financial innovationof recent times, they wouldprobably not have hesitated toname the collateralised debt

obligation – a clever structure based onthousands of chopped-up mortgagesand mortgage-backed securities.

The demand for the high, supposedlysafe, investment returns that came withCDOs allowed them to grow strato-spherically in the decade up to 2007.

Today, even the bankers who madetheir millions in that business are coyabout letting the discredited three-letteracronym pass their lips. The popular-ity of CDOs in turn fuelled growth inthe underlying loans, many of themultimately concentrated in high-risksubprime mortgages to poor Americanswho were soon struggling to keep uprepayments. As anyone with even apassing interest in finance will know,this was how the seeds of the financialcrisis were sown. Simple securitisation,repackaging loans into new bonds, isedging back into fashion as fund man-agers seek investments that will gener-ate a little income amid stubbornly lowinterest rates. But the CDO – and themore abstruse derivatives it generated– is certainly not high on many people’sbest-inventions list any more.

There is even some recognitionamong investment bankers that PaulVolcker, the US policymaker and formerFederal Reserve governor, might havehad a point when he talked about thesimple cash machine, or ATM. “Themost important financial innovationthat I have seen the past 20 years is theautomatic teller machine,” he said at theheight of the financial crisis in 2009.“That really helps people and preventsvisits to the bank and it is a real conveni-ence. Howmany other innovations can

you tell me of that have been as impor-tant to the individual as the ATM?”

With investment banking sounfashionable these days, other retailinnovations are also popular contend-ers for the greatest inventions awards.Online banking via a smartphone, forexample, is now taken for granted bymillions. But it is particularly powerfulin emerging markets, creating a virtualinfrastructure for a fast, efficient spreadof credit and broader financial services.That is especially true in Africa, wheretechnology has allowed banks and theircustomers to leapfrog the expensive andtime-consuming process of building upvast branch networks to support growth.

For many, the best big-picture inno-vation of the last millennium was thecreation of the capital market. Four-teenth-century Venice and 16th-centuryBelgium can both lay claim to the con-cept. But whatever the roots, there couldscarcely be a more apposite touchstone,especially in Europe, as the region strug-gles to escape the eurozone financialcrisis and rebuild economic growth.

The region’s politicians and centralbankers alike are desperate to move thefinancing of the European economy intoline with that of the US, where aboutthree-quarters of company fundingcomes not from banks but from capitalmarkets, rather than the meagre quarterthat Europe can boast. The crisis taughtEuropean leaders a powerful lessonabout the vulnerability of an economythat relies on bank finance when banksare themselves so vulnerable to failure.

It is far from clear that this shift willhappen, whatever the political will. Whoknows? Perhaps quantitative easing, theBasel III rulebook on bank capital andthe European Central Bank’s longer-term refinancing operation – all innova-tive responses to the crisis – will oneday be recognised as the best financialinventions of recent years.

Bankingand financeThe quest for financial innovationhas seen the introduction of thenow-indispensable ATM, but also gavebirth to synthetic debt instrumentswhich a few years later wereassociated with the global financialcrisis, says Patrick Jenkins

Towards the end of the 20th century,as companies sharpened their focus onshareholder value, they stopped seeingtax as a cost of doing business andstarted to see their tax departmentsas potential profit centres that couldboost their bottom line.

The result was an explosion ofaggressive tax planning in whichcompanies used artificial schemes andshelters. When tax authorities foughtback, multinationals pursued a differ-ent line of attack, exploiting the grow-ing tax competition between countries.

Companies put divisions, activi-ties and even head offices in low-taxcountries. As companies became moreinternational, they felt less bound bynational loyalties.

Tax-efficient structures allowingprofits to be shifted to low-tax coun-tries became the norm for many largemultinationals.

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Many scrambled to centralise their“intangible assets” – the intellectualproperty, brands, trademarks andknow-how that account for 80 percent of the value of big companies – inlow-tax countries such as Singapore,Switzerland and the Irish Republic.As royalty payments soared – up from$2.8bn to $180bn globally between1970 and 2009 – more taxable profitsflowed out of high-tax regimes.

Governments struggled to keep up.International tax rules designed for anera that pre-dated the global, internet-enabled economy did little to stop tensof billions of earnings falling throughthe cracks.

The backlash was fierce. The budgetcrisis that followed the financial crisisfocused attention on businesses notpaying their “fair share”.

Austerity sharpened the public’sanger. In some countries, compa-nies accused of tax-dodging facedintense criticism from politicians, andeven consumer boycotts. Develop-ment charities blamed corporate taxavoidance for poverty in developingcountries. P

HOTOS:GETTy

Fair share:consumers werefast to boycottcompaniesaccused ofdodging tax

The advent of the securitisation marketand the high-yield bond market in the1970s and 1980s changed the face ofwestern capitalism.

Investment bankers grew rich, butthe main change was that companiescould borrow more freely. This meantthey could grow faster, take more risksand hire new people.

ideas

moderncorporatefinance

ideas

taxoptimisation

The changed climate has forcedcompanies to reappraise theirapproach to tax planning.

There is a growing realisation thatan aggressive strategy can damage abusiness’s reputation.

But multinationals will be reluc-tant to give up on minimising theircorporate tax bills, potentially one ofthe biggest costs they face.

The tide may turn, but it has not yetdone so. Vanessa Houlder

ft.com/50ideas | 43

Trading places:certain productswere specificallydesigned tospread theirrisk across thefinancial sector

challenges for both new and old provid-ers. First, the jolt of the financial crisis– combined with stagnant wage growthand employment uncertainty – hasleft consumer spending sluggish andmany customers focusing on meetingrepayments rather than taking on newdebt.

Second, increased regulatory scru-tiny after low interest rates and a rapidexpansion of bank lending prompted asurge in household debt to unsustain-able levels in the years before 2008.

Partly for these reasons, those look-ing to develop retail loan portfolios areturning to the growing middle-classesof markets such as India, Russia andeastern Europe. Those areas are wherethe next burst of growth in consumercredit is likely to come from.Jennifer Thompson

The history of consumer credit is astory of rising living standards, theemergence of an affluent and aspira-tional middle-class and commercialinnovation.

While allowing buyers time to payhas always been a basic tool of com-merce, consumer credit in its modernguise of instalment plans, consumerloans and, eventually, the credit cardwas a byproduct of the Industrial Revo-lution, a period which heralded a newera in consumerism.

The factory workers who swelledcities such as Manchester, Bristol andNew york to make clothing and table-ware, and later televisions, refrigera-tors and cars, became a new breed ofconsumers as well as producers.

Delayed payment for certain goodsand services was made possible bywages paid at regular intervals, even ifthese remained relatively low.

Meanwhile, consumption becamethe new creed and credit fuelled thesales of goods, which in turn spurredprofitability and economic growth. Andthat increased consumption helped toraise living standards.

Credit became ever more sophis-ticated, with American Express andBank of America launching credit cardsin 1958. While demand in the US andEurope has been blunted since thefinancial crisis, consumer credit is oncemore in a phase of innovation.

New models such as peer-to-peer lending platforms, which allowindividuals to lend to each other andto small businesses, have emerged,with the promise that they are ableto provide credit as the biggest banksdeleverage.

More controversially, there has beenthe rise of a crop of payday loan compa-nies, which have come under fire frompoliticians and consumer groups forthe high interest rates they charge.

However, there are two principal

DelAyeD pAyMenT for cerTAingooDs AnD services wAsMADe possible by wAges pAiDAT regulAr inTervAls“ “

Everyone was touched by theseinnovations. Companies had morechoice on financing. In the US in par-ticular, borrowing increasingly camefrom the public markets rather thanthe banking sector, a model that existsto this day and has been slowly migrat-ing to Europe.

High-yield – or “junk” – bonds arethe debt issued by lower-quality com-panies with a higher chance of default-ing. Securitisation is the packaging upof debts and other income streams intoa single marketable product, notion-ally spreading risk across the financialsector.

In the boom times before the finan-cial crisis, however, these structuredproducts designed to lubricate thewheels of financing became devices toallow investors to add embarrassinglevels of risk to their portfolios. A vastacronym soup of instruments emergedthat few truly understood.

It was the collateralised debt obliga-tions backed by subprime mortgagesin the US that were the final undoingof a banking system that had lost trackof what was happening to structuredproducts and who owned them.

High-yield bonds – popularised byAmerican trader Michael Milken in the1980s to allow highly leveraged andother less creditworthy companies toborrow – do not emerge spotless either.

The decade culminated in scan-dal with the collapse of a raft oflower-rated issuers, Milken in jail forsecurities fraud and the Wall Streetinvestment bank he worked for, DrexelBurnham Lambert, in ruins.

But these rough-and-tumble instru-ments did expand the realm of whatwas possible.

Some argue the reason why the USis doing better than Europe today isin part because it has more of thesecomplex structured products, so itscompanies can borrow more liberallyand therefore grow faster.

In Europe, the market in asset-backed securities is largely dead,making companies more reliant forfinancing on the banks – which arethemselves stricken.Michael Stothard

Trading and risk have always beenintertwined, with merchants constantlyseeking ways to reduce their exposureto unforeseen events. As the DutchGolden Age of the 17th century began,merchants in Amsterdam and Antwerpbegan using options – which gave theholder the right to buy or sell a securityat a set price – as an insurance. Similarproducts such as warrants were tradedon stocks inWall Street in the 1920s,but were never “mathematically” priced.

That changed in 1973. Two USacademics, Fischer Black and MyronScholes, backed by a third, Robert Mer-ton, published a paper that contained amodel to calculate fair market value forcall options. It gave traders a suppos-edly objective method of comparingoption prices.

Two years earlier, US presidentRichard Nixon had removed the abilityto exchange the dollar into gold, end-ing the international system of fixedexchange rates. Less than two yearslater, the world would be dealing withinflation triggered by oil price shocks.

ideas

Black-scholesand algorithms

ideas

consumercredit

Of all the 50 ideas profiled in thispublication, shareholder value enjoys aparticular distinction. Jack Welch, for-mer chief executive of General Electricand one-time champion of shareholdervalue, called it “the dumbest idea in theworld”.

yet it has been one of the mostinfluential – and looks likely to remainso. Shareholder value originally rose toprominence to solve what Adam Smith,the Scottish economist, called the“agency problem” – that managers of acompany might follow a course whichwas detrimental to the company’sowners. Shareholder value was a way

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PHOTOS:BLOOM

BERG;AP

Independent directors, quotas forwomen, chairmen to watch over chiefexecutives… it is striking how much ofthe time spent talking about companiesis spent talking about how they shouldbe governed.

Whenever there is a corporate crisis –whether it is the fraud involving drinkscompany Guinness in the 1980s, or thecollapse of investment bank LehmanBrothers in 2008 – the cry goes up forbetter oversight by corporate boards.

Corporate governance has beenone of the most influential corporatemovements of the past 30 years. Theoverwhelming drive has been to staffcorporate boards with independentthinkers who can rein in hubristic chiefexecutives and prevent company direc-tors from succumbing to “groupthink”,the tendency to echo each other’s viewswhile the company pursues a disastrouscourse. Properly governed boards havealso been given the task of keepingchief executive pay under control.

whenever There is AcorporATe crisis, Thecry goes up for beTTeroversighT by The boArDs“ “

The accompanying interest rate volatil-ity meant investors needed to hedgetheir risk, and led to a demand formore options and other derivatives.

In the following decade, futures andoptions, at one time used by farmersto lock in the price of physical com-modities, increasingly became used forfinancial products.

Volumes exploded. But the signifi-cance of the formula has been hotlydebated. Some ask whether it is reallypossible to calculate the “true” price orvalue of any object.

The biggest blow came in 1997with the failure of Long-Term CapitalManagement, the hedge fund that hadMerton and Scholes on its board. Thefund had spectacular early returns.But the unexpected Russian sovereigndefault in 1998 upset its calculationsand it needed a bailout from the Fed-eral Reserve after it lost $4.6bn in amatter of months.

In a 2008 paper, Espen GaarderHaug and Nassim Nicholas Talebargued that Black and Scholes onlycame up with a theoretical argumentbuilt on a new way of “deriving” the1900 formula of Frenchman LouisBachelier. Philip Stafford

of ensuring that managers served theinterest of those who employed themrather than their own.

Shareholder value faced two prin-cipal objections. The first was that themethods used to enforce it did notseem to work very well. Share options,for example, were meant to ensure thatchief executives only did well when theshareholders did. Instead, many criticsblamed share options and other incen-tives for managers manipulating com-pany performance to ensure they didbest for themselves. That was what ledto Welch’s “dumbest idea” comment inthe wake of the financial and bankingcollapse. “Shareholder value is a result,not a strategy,” he said. “your mainconstituencies are your employees, yourcustomers and your products.”

This led directly to the second objec-tion to shareholder value: that it gives

JackWelch:the influentialformer GE chiefhas said thatshareholdervalue is a result,not a strategy

One of the early attempts at corporategovernance reform, the UK’s 1992 Cad-bury Report, was followed by many othersaround the world. There is, however, nounanimity over what constitutes good cor-porate governance. In the UK, the separa-tion of the chairman and chief executive’srole is seen as an unalloyed good. In theUS, powerful chief executives, such asJamie Dimon, chief executive of JPMor-gan Chase, have seen off demands thatthey split their role with a chairman.

The latest battle on the corporate gov-ernance front is for the appointment ofwomen to boards. That women are scan-dalously under-represented on boards inmost countries is undeniable.

But advocates of increased femalerepresentation go further. They saywomen would bring a different way oflooking at the world and would preventcompanies from making the same oldmistakes.

yet years of reform have failed toprevent repeated examples of companyexcess, fraud or financial collapse. Look-ing for more female directors would givecompanies access to more talent. It isunreasonable to expect women boardmembers to succeed where so many menhave failed.Michael Skapinker

too much primacy to just one groupwith an interest in the company. Whatof all the others? The late SumantraGhoshal of London Business Schoolargued that employees were far moreimportant to a company’s success thanshareholders. Critics of the shareholdervalue idea argue that many share-holders have little commitment to acompany, particularly in an era of high-frequency trading.

However, shareholder value islikely to endure as a powerful idea.First, it gives managers somethingagainst which they can be measured.Other managerial responsibilities – toemployees, customers or the community– are numerically less precise. Second,many ordinary people rely on compa-nies doing well for their shareholdersbecause their own pensions and invest-ments depend on it.Michael Skapinker

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shareholdervalue

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corporategovernance

ft.com/50ideas | 45

When Harvard professor GeorgesDoriot and his partners foundedAmerican Research and DevelopmentCorporation in 1946, raising $3.5m toback startups, they planted the seedof what is now a $3.3tn private equityindustry, financing everything fromentrepreneurs to infrastructure pro-jects and property.

Doriot was the first to create away to pool capital from institutionssuch as insurers and endowments tofund financially risky innovations inexchange for a stake in their futures.

The same year, also in the US,John Hay Whitney and his partnerBenno Schmidt started JH Whitney& Company, providing money for newcompanies on the assumption that thefailure of most would be compensatedfor by the great success of a handful.

Before this new breed of investorsappeared, entrepreneurs had to turn towealthy individuals to fund their ideas.Doriot paved the way for the profes-sionalisation and growth of the venturecapital and, later, the private equityindustries on a grander scale.

As public pension plans, insur-ers and endowments poured moreand more cash into the asset class theindustry’s impact grew.

Investment firms started targetingbigger, more established companies,using cheap credit to maximise theirreturns. Leveraged buyouts – which nowrepresent $1.3tn of total private equityassets – included the $30bn takeoverof RJR Nabisco by Kohlberg KravisRoberts in 1988. But private equity alsobecame a synonym for cost-cutting,layoffs and break-up. The large levels ofdebt made some companies vulnerableto downturns. And managers’ rising feeshave irked investors, while the fortunesthey made in a short time combinedwith their favourable fiscal treatmenthave led governments to tax themmore.Anne-Sylvaine Chassany

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entrepreneursventure capital andprivate equity

How the mightyfall: the collapseof LehmanBrothersreignited calls forboard oversight

46 | ft.com/50ideas

Peter Drucker, who didmore than most to pro-mote the study of mod-ern management, oncepointed out that whenKarl Marx’s collabora-tor Friedrich Engels

was running a mill in the 19th century,its 300 employees had no managers assuch, only “charge hands” who enforceddiscipline on “proletarians”.

As Drucker wrote in The New Reali-ties (1989) management’s “fundamentaltask” is to “make people capable of jointperformance through common goals,common values, the right structure,and the training and developmentthey need to perform and to respondto change”. Management, he contin-ued, explains why “for the first time inhuman history, we can employ largenumbers of knowledgeable, skilledpeople in productive work”.

In other words, “management” has afair claim to be the most revolutionarybusiness idea of the past 150 years – ifonly managers could pin it down andapply it.

Harvard Business Review hasdubbed the years between 1911 – whenFrederick Winslow Taylor published hisbook The Principles of Scientific Man-agement – and 2011 “The ManagementCentury”. Taylor’s breakthrough was tosee that production line productivitycould be improved by using “scientific”methods of organisation.

The approach has been criticisedfor imposing a mechanistic regime onworkers in the interests of pure effi-ciency, but it triggered more researchinto psychological and sociologicalways to make manufacturing moreproductive.

Plenty of management techniqueshave helped to improve the ability ofmanagers to fulfil their fundamentaltask. China-based car manufacturers,

for example, are using the productionline efficiency methods pioneered byJapan’s Toyota and others.

But the overarching managementideas that have shaped the way inwhich people run any large organisa-tion – and plenty of small ones – aremostly broader and more changeable.

The FT judges chose leadership,ethics, strategic management and thespread of business educators and advis-ers for the list of the 50 big businessideas. But we steered clear of singlingout individual management theories.

Even successful managementtheories, such as those espoused byTom Peters and Robert Waterman inIn Search of Excellence or by Jim Col-lins and Jerry Porras in Built to Last,tarnish with time, as the companiesstudied fail to keep up with the latestbusiness trends.

Management writers would loveto think that their ideas shape busi-ness. Some theories, including thosementioned above, did affect manag-ers’ thinking and practice, particularlybetween 1990 and 2000 as globalisa-tion took hold. But unlike solid inven-tions that can be installed and put towork until the next upgrade – such asfibre optics, robotics or the microchip –“management” is a concept which usersmust constantly reshape to meet neworganisational challenges.

As Charles Handy, the veteran man-agement thinker, now in his 80s, toldthe FT in a recent interview: “The mostthat I can do is to cast [managers’]problems and opportunities in a differ-ent light so they see them more clearly.But what they do about it and what theanswers are, no, I don’t have them. SoI’m never going to have three rules forsuccess, or this is the answer to leader-ship… that’s impertinent and boundto be wrong anyway most of the timebecause… every problem is different.”

Management

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Many management theories,even if influential, become outdated –but the most innovative thinkingon how to run organisationsrecognises the constantly changingnature of business, says Andrew Hill

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‘management’ is a conceptwhich users must constantlyreshape to meet neworganisational challenges“ “

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If management was the broad ideathat allowed large companies to berun efficiently, strategic managementwas the vital refinement that permit-ted managers and their companies to“compete, win and survive”, to quoteWalter Kiechel’s lively account of thisrevolution in The Lords of Strategy.

Michael Porter, the Harvard uni-versity academic, is the central figurein defining the concept. The pillars ofstrategic management are underpinnedby his two books, Competitive Strategy(1980), which defined the “five basicforces” that determine the state ofcompetition in any industry – customerpower, supplier power, the threat ofnew entrants, substitute products andrivalry between established com-petitors – and Competitive Advantage(1985), which told chief executives howto retain their lead over rivals.

As one of our judges said in select-ing “strategic management” for the list:before the development of the conceptof strategic competitive advantage, andhow to analyse it, “you just ‘did business’”.

But Porter’s ideas stood in the mid-dle of a five-decade development ofstrategy as a tool, honed by consultan-cies such as McKinsey and taught bymanagement schools.

In the process, strategic planningdeveloped first as a separate step instrategic management and later as acontinuous process of evaluation andre-evaluation of the competitive forces.

As an idea, however, strategic man-agement has proved hard to do welland worryingly easy to get wrong. AsRichard Rumelt wrote in his 2011 bookGood Strategy/Bad Strategy, “the gapbetween good strategy and the jumbleof things people label as ‘strategy’ hasgrown over the years.” He pointed outthat many organisations fail becausetheir leaders think it is enough to layout vision statements and lists of objec-tives without addressing the criticalquestion of how to reach those goals.

Debate still rages about whether thediscipline can, or even should, be codi-fied or professionalised, even as strat-egy evolves. For the future, RichardWhittington of oxford university’s SaïdBusiness School has suggested openinga new phase of study. He differentiates“small strategy” – about the financialperformance of companies in competi-tive industries – from “big strategy”.

The latter applies to organisationsthat have wider impact, such as “state-owned oligopolies, eccentric familybehemoths and control-hungry entre-preneurs”, but fall outside the normalarea of research. AndrewHill

It is easy to forget that as recently asthe 1980s, many businesspeople andbusiness academics thought of ethics asat best optional, at worst irrelevant tocompanies’ central task of maximisingshareholder value (see page 12).

But business schools scrambled tointroduce or upgrade courses in eth-ics as part of their MBA programmesfollowing the 2001 Enron scandal.The backwash of the financial crisishas given further impetus to attemptsby companies to clean up their act. In2009, the idea of an “MBA oath”, outlin-ing values and ideals to which managersshould adhere, began to take root.

In parallel, a series of crises hasprompted companies to re-examine howthey manage their reputations, in prepa-ration for, and in reaction to, mishapsand mistakes. BP’s clumsy response tothe 2010 Deepwater Horizon oil rig dis-aster and Toyota’s poorly handled prod-uct recalls have become case studies inreputation mismanagement. The trans-parency brought by social media (seepage 17) – which allows critics, insideand outside the business, to amplifyethical, environmental or reputationalproblems – has given added impetus tocompanies’ attempts to improve theircorporate culture.

50 ideasmanagement

Disaster strikes:BP’s DeepwaterHorizon responsehas becomea case studyin reputationmismanagement

ideas

corporateethics andreputation

ideas

strategicmanagement

ideas

leadershipculture

Quiet thinkers:recent researchsuggests moreself-effacingchief executivesperform better

coMpanies have realisedthere is no short-terMfix for ethical andreputational daMage“ “

School professor who founded theMonitor Group.

That continues, with the consul-tancy firms having scooped up a thirdof all graduates from top-ranked MBAprogrammes in the past 20 years tofeed demand from the corporate worldfor advice. In 2012, in spite of, or per-haps because of, the economic crisis,McKinsey was still the top recruiter inmany of the best business schools inthe uS and Europe.

Corporate universities have alsoflourished, with companies such asGeneral Electric training their ownmanagers, helped by hand-picked pro-fessors. Growth in these in the uS andEurope has stalled since the financialcrisis of 2008.

But the economic climate is not theonly threat to campus-based temples tobusiness knowhow.

one of the biggest disruptive forcesof the past year has been the rise ineducational technology, enabling theonline distribution of Moocs – massiveopen online courses.

Their promise, which is yet to betested in the corporate world, is thatthey will bring the teaching of theworld’s top professors to the desktopfor free.Della Bradshaw

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The idea of what constitutes greatbusiness leadership has changed moreradically in the past 30 years than inthe previous five decades and is in theprocess of changing again.

A shift from managerial capitalismto investor capitalism, particularly inthe uS, placed a premium on visionary,entrepreneurial, charismatic leaders,often endowed with imperial powers byhopeful shareholders and boards.

With that shift in the 1980s and1990s came a wave of popular businessliterature, equating chief executives towarlike leaders, from Alexander theGreat to General George Patton, and a

to success. often, lower-profile chiefexecutives, frequently appointed frominside the company, performed better.“Self-effacing, quiet, reserved, even shy– these leaders are a paradoxical blendof personal humility and professionalwill,” Collins wrote. “They are more likeLincoln and Socrates than Patton.”

What Nicholson describes as our“infatuation” with leadership is unlikelyto go away: the short-term success ofbank chiefs, so soon after the cautionarytales of Enron and others, proves that.But radical thinkers such as Gary Hamelsuggest the future of many companieswill be as networked organisations,linked by social media, in which apremium is placed on teamwork. Suchan evolution will put more emphasis onpeople-centred management and leader-ship qualities such as integrity, compe-tence and adaptability. AndrewHill

The first master of business adminis-tration programmes sprang up morethan 100 years ago at the Ivy Leagueuniversities in the uS. Some 50 yearslater the growth in executive coursesbegan, as the uS government investedin intensive management programmesto retrain military personnel returningto work after the second world war.

But it was not until the 1980s thatmanagement consultancies and busi-ness school gurus really got their teethinto the corporate world.

The crossover between manage-ment consultancies and business schoolprofessors dates back to the turn of the20th century.

Arthur D Little, the consultingfirm, was set up by a professor fromthe Massachusetts Institute of Tech-nology, and McKinsey by a professorfrom the university of Chicago. Sometop management gurus have movedseamlessly between business schooland consultancy, perhaps most notablyMichael Porter, the Harvard Business

revival of interest in ancient “manage-ment” texts such as Sun Tzu’s The Art ofWar and Machiavelli’s The Prince.

But, as Nigel Nicholson of LondonBusiness School has written in hislatest book The ‘I’ of Leadership, “thelesson of history for leadership is thatwhatever worked yesterday won’t nec-essarily work tomorrow.”

The bubble in charismatic chiefexecutives started to deflate in the early2000s, pierced by corporate fraudsat uS companies such as Enron andWorldCom. The recent financial crisislaid low a further generation of aggres-sive leaders of the biggest banks.

Research by writers such as JimCollins (Good to Great) and RakeshKhurana (Searching for a CorporateSavior) has shown the appointmentof a charismatic outside boss will notnecessarily put a company on the path

Gradually, companies have realisedthere is no short-term fix for ethicaland reputational damage. Rebuilding acorporate culture – as Barclays, hit bythe Libor interest rate-rigging scan-dal, is discovering – takes time. Nor iscorporate social responsibility, in itsoriginal form as a philanthropic effortseparated from the business itself, suf-ficient to offset any perceived lapses inthe core management of a company.

Instead, advocates of “creatingshared value” – such as academicMichael Porter and consultant MarkKramer – urge businesses to feed avirtuous cycle of good behaviour andmutual self-interest. By investing inthe communities they serve, companiessuch as Nestlé, unilever and Glaxo-SmithKline are managing to improvetheir reputation, develop their busi-ness, and create the conditions forfuture growth of the overall economy.

In the same pragmatic spirit, Arch-bishop Vincent Nichols, head of theCatholic Church in England andWales,has urged corporate leaders to harnessboth the desire for profit maximisationand the need to do good, principledbusiness. The question, of course, ishow to balance these two essentials ofmodern capitalism. AndrewHill

ideas

businesseducators andprofessionaladvisers

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Biotechnology

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Search for aformula: thebiotech sectorspends morethan $40bn ayear on R&D

In 1798 Thomas Malthus, the Britishtheorist, postulated that the world’spopulation would eventually outstripthe planet’s ability to produce sufficientfood for all, leading to widespreadfamine and death.

Nowhere did this dismal predictionseem likelier than India in the 1950sand early 1960s, when increases ingrain production failed to keep pacewith population growth, forcing NewDelhi to depend on imported food aid.

It can trace its roots toEurope’s apothecaries inthe Middle Ages and the19th-century dye and bulkchemical producers ofGermany’s Ruhr valley, butthe pharmaceutical sector has

become a significant global industry inits own right.

Academic researchers and doctorsmake most breakthroughs, but thesector has supported the commerciali-sation of drugs that have contributedto a significant extension in the qualityand length of life, with such benefits ashigher productivity.

Drugs to reduce cholesterol andhypertension have eased the threat ofheart disease. Treatments for asthma,HIV and rheumatoid arthritis haveturned debilitating illnesses into moremanageable chronic diseases. An effec-tive cure for malaria exists and one forhepatitis C is in sight.

The sector employs hundreds ofthousands of skilled staff, pays largesums in taxes, supports a global ecosys-tem of suppliers and spends more than$40bn a year on research and develop-ment – typically 10-20 per cent of salesis reinvested, the highest proportion ofany industry.

But big pharma companies arevictims of their own success. Newscientific breakthroughs have slowed,while rising regulatory and otherbarriers increase the costs of clinicaldevelopment.

Selling more high-priced, high-margin drugs has left a hole to be filled,with generic competition escalatingand health services balking at the bill.

The sector is busy trimming costs,re-examining pricing policies and out-sourcing research to universities andsmaller biotech companies.

Treatments to offset the effectsof ageing remain one of the biggest

When Greg Winter was a young sci-entist carrying out laboratory work inthe 1970s, he saw the potential of usingantibodies to tackle infection but had noidea of the extent to which his researchwould eventually be commercialised.

His efforts to “humanise” monoclo-nal antibodies (MABs) derived frommice, to tackle disease without exces-sive side-effects, paved the way for amodern category of medicines that hashelped build the modern biotechnologyindustry and resuscitate large pharma-ceutical companies.

Initially, much of the focus was onapplications in cancer, and drugs suchas Avastin for breast and colon cancerare among the results.

MABs exist in multiple sclerosis,asthma and beyond, while the mostimportant impact has been in the treat-ment of rheumatoid arthritis, leading toblockbusters such as Humira, the firstfully humanMAB, which is now theworld’s second-best-selling medicine,generating more than $9bn in revenueslast year. The success highlights howcomplex, global and uncertain theprocess of biotech drug development is,relying on academic and government-funded research, and the vagaries ofcommercial support for development.

The UKMedical Research Councilfunded the original work in the 1970sof César Milstein and Georges Köhlerto isolate MABs, for which they wonthe Nobel prize. Winter humanisedthem, and his colleague Michael

ideas

ModernpharMaceuticalsand biotechnology

Neuberger developed a new techniqueto help. To date, the MRC has receivedsome £600m in royalties as a result.

Winter says that traditional bigpharma companies were initiallysceptical, and it was smaller US biotechcompanies – notably Genentech andCentocor (now known as JanssenBiotech) – that worked to develop thesepioneering biological treatments.

One of Winter’s own companies,Cambridge Antibody Technologies,which developed Humira, was acquiredin 2006 by AstraZeneca, which in turnlicensed the drug to Abbott Laborato-ries. Its success was so great that inves-tors’ concerns that it would destabilisethe rest of the business helped triggerthe spin-off last year of Abbott’s phar-maceutical arm into AbbVie.

Today, large pharmaceutical com-panies are keener than ever to buybiotech companies or license theirmost promising products. MABs andother biological drugs have providedan important shot in the arm for thesurvival of an industry dominated bychemicals until just a few years ago.Andrew Jack

Big pharma faces new challenges, says Andrew Jack

ideas

high-yieldagriculture

research challenges. But big pharmaitself is in search of a remedy for itsown ageing process.

Copyright

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the green revolutionbrought high-tech farmingtechniques to millions ofsmall farmers across asia“ “

Recent “patent wars” between mobilephone makers Apple, Samsung, HTCand others over smartphone technol-ogy have highlighted the importance ofbusinesses being able to protect theirintellectual property rights.

Copyright law and patents are vitalto a thriving knowledge-based econ-omy. For small companies that haveinvested in research and developmentand want to protect their assets, copy-right and design laws are in practicethe most cost-effective method.

Larger companies are more likely toapply for patent applications, which areseen as a more effective and expensiveform of protection, particularly insectors such as media and informationtechnology where advances can givethem a significant advantage.

Disputes usually follow the inven-tion of new technology. Up until theearly 20th century such legal battlesoccurred after the emergence of thetelegraph and the radio – and even overmechanical farm equipment.

Now, in another period of rapidtechnological change, patent wars arecentred on makers of internet technol-ogy, pharmaceuticals, music and films.

A high-quality patent system is vitalto limit expensive litigation and ensureintellectual property is not devalued.As James Dyson, founder of the Dysontechnology company, wrote last year:“We need to recall the inspiration behindpatents. They are a spur for invention.They reward an inventor’s investmentwith a fixed monopoly and in returnthey make their technology public.”

Keith Hodkinson, chairman of lawfirmMarks & Clerk, says there tend to

ideas

be more patent disputes during a reces-sion as companies experience pressureon their margins and seek to recoupincome.

“Patent litigation usually follows bigwaves of innovation,” he says. “Also, ifyou have paid large sums to govern-ment – such as for 4G licences – youneed to protect that investment.”

As countries move from being man-ufacturing hubs to knowledge-basedeconomies, they become more inter-ested in protecting their inventions.In 2011, a record number of interna-tional patent applications were filed –181,900, up 10.7 per cent on 2010.

“As countries become more inno-vative they become more and moreinterested in intellectual propertyprotection,” Hodkinson adds.

Fast-growing economies are begin-ning to appreciate the importance oflegal protection for intellectual prop-erty. China introduced its first patentlaw only in the mid-1980s, but recentlyovertook Japan in terms of the numberof patents filed.

The value of patents can be seenin the trend for buying patents frombankrupt companies such as Nortel,the telecoms group. Eastman Kodak’sdigital imaging patents are expected tobe among its most valuable holdings.When Google bought Motorola for$9.5bn last year, there was some inter-est in the estimated 25,000 patents theinternet search company would inherit.

But the growing number of disputeshas led many executives and the judici-ary to complain about the hundredsof patent cases that have become acostly distraction for large technologycompanies. Some have pointed out thatlitigation threatens to stifle innovation.Companies known as “trolls” are beingset up specifically to buy patents andmount opportunistic lawsuits againstsuccessful groups. Jane Croft

Years ofplenty: maizeproduction inIndia, which isself-sufficient infood grain

Fears of imminent famine intensifiedafter two droughts in the mid-1960s.

Today, however, India is self-suffi-cient in food grain. The turnaroundis the fruit of the Green Revolution,which brought high-yielding hybridseeds and other high-tech, intensivefarming techniques to millions of smallfarmers across Asia.

The Green Revolution was driven byphilanthropic organisations (the Rock-efeller and Ford foundations), interna-tional agricultural research institutesthat developed the new high-yieldingseed varieties, and governments thatploughed money into fertilisers, irriga-tion networks and pesticides.

The transformation of many Asiancountries from subsistence to surplusfood producers has created businessopportunities. Commodity traders suchas Glencore, Cargill, Archer DanielsMidland, Noble Group and LouisDreyfus have made billions of dollarsfrom the processing, storage, trans-portation and distribution of wheat,oilseeds, sugar and agricultural goods.

Production of high-yielding seeds– dominated by Monsanto, DuPontand Syngenta – fertiliser and modernirrigation systems is also big business.

The Green Revolution has its critics.In India, many believe intensive cultiva-tion has damaged land fertility andstrained north India’s water table, whilemany small farmers have been ruinedby investing in expensive seeds thatfail if there is not enough rain. But theavoidance of Malthus’s dire prophesy iscertainly reason to cheer. AmyKazmin

innovation must be protected, writes Jane Croftcopyright andintellectualproperty

52 | ft.com/50Ideas

Within a year ofHenry Ford’sintroduc-tion of thefirst modernassembly lineat his factory

near Detroit in 1913, the system hadslashed the time to build a Model T Fordfrom 12.5 man hours to just 93 minutes.

A century later, industrial engineersare still trying to reduce the inflexibilityin Ford’s system. The most eye-catch-ing innovation is 3D printing, whichcould eventually make products as var-ied as Ford’s Model Ts were identical.But even now information technologyis cutting waste and boosting flexibilityin many forms of manufacturing.

General Motors’ Orion assemblyplant, 30km north of Ford’s old Model Tplant, was redesigned to maximise itsefficiency. Workers installing wiring,pipes and other small parts now receiveindividual, tailored component kits justas the relevant car body arrives, provid-ing far more flexibility to vary output.

The plant also encapsulates some lessobvious innovations borrowed from thelean manufacturing philosophy devel-oped by Toyota of Japan. The assemblyline is shorter, reducing the capital tiedup in it, with the freed-up space used tobring in many parts suppliers, reflect-ing the shortening of supply chains inother manufacturing processes.

Orion has also brought back to theUS work that had been done overseas– a nascent trend that also reducesconcerns heightened since the 2011 tsu-nami in Japan and floods in Thailand.

The tsunami knocked out plantsthat were the sole source of someproducts. In an irony that might haveamused Henry Ford – whose Model Tswere famously always the same colour– some black paints supplied to Fordwere among the supplies affected.

It was in 1937, when waiting to drop offa load of wool at port in Hoboken, NewJersey, that Malcolm McLean is saidto have conceived an idea that trans-formed the transport of goods.

McLean, a lifelong entrepreneur,had to wait most of the day to deliverthe wool bales in his truck. He satwatching stevedores unloading trucks,putting bales into slings and hoistingthem piece by piece on to vessels.

It would be much simpler, he rea-soned, to take off the rear half of histruck and put that on the ship. “It struckme that I was looking at a lot of wastedtime and money,” he recalled later.

The epiphany prompted McLean tofound Sea-Land, the world’s first con-tainer shipping line, to carry boxes bysea without loading or unloading themat port. The first ship, the Ideal X, setoff in April 1956, carrying 58 contain-ers and a load of oil from Port Eliza-beth, New Jersey, to Houston, Texas.According to industry legend, the heavyregulation of the trucking sector meantthe trip cost the same as driving a sin-gle truck to Houston.

The effects would transform thebusiness of moving manufactured andsemi-finished goods. Ships could loadand unload within hours rather thandays or weeks. Quicker loading madelarger ships possible but required big-ger ports downriver from city centres.

However, the technology’s most last-ing legacy stems from Sea-Land’s con-tract to containerise US military logis-tics during the Vietnam war. Sea-Landtook to dropping off empty containersin Japan on the way back across thePacific. The resulting opening-up of the

Industrialprocess

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The drive towards greater flexibility and reduction of waste continues, writes Robert Wright

The vast container ships that sail intothe ports of most developed countriesare often thought to be full of cheapelectronics, toys and other finishedgoods, bound for shop shelves. Thetruth is more complicated, however.Many of the containers bring compo-nents, chemicals and other semi-fin-ished parts for industrial processes.

Those components are moving alongproduction lines that stretch aroundthe world. The question is how funda-mentally the vast changes in the worldeconomy following the 2008 financialcrisis – and a series of shocks to supplychains following recent natural disas-ters – will reshape the system.

Many companies have started tocarry less stock, concerned that theymight again be left with significantunsold inventory in a downturn. Thathas further increased the pressure onshippers to deliver goods to a tightschedule.

Ideas

containerisationand globalsupply chains

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outsourcing/value chaindeconstruction

US electronics market to cheap, Japa-nese-made goods was a key step towardsthe integration of Asian manufacturersinto a globalised world economy.

yet it is only now that shipping linesare achieving the full efficiency benefitsof McLean’s innovation. This year, Den-mark’s Maersk Line will take delivery ofthe first of 20 ships capable of carrying18,000 containers – more than twice asmany as the largest ships 10 years ago.

Last decade’s Asian export boom ledto overordering of ships and a slumpin vessel earnings, but those conditionsshow no sign of halting the wider adop-tion of McLean’s simple but world-transforming idea. RobertWright

ft.com/50Ideas | 53

Hitting the spot:programmablelogic controllershave brought alevel of accuracyto productionlines far greaterthan humans canachieve

The history of the control of industrialprocesses has been tied inextricably tothe evolution of the computer.

In the early days of large-scaleindustrial production, the control ofprocesses, for making products fromchocolate to cement, was done byhumans. A person would set in motiona series of manufacturing steps – forexample, adding ingredients to a mix-ture to make a end product such as afoodstuff or an industrial chemical.

On the basis of set factors, suchas the time normally regarded as theoptimum for a specific process, thehuman controller would either stop theprocess or alter it – adding another setof raw materials or increasing the tem-perature of the reaction, for example.

Over time, mechanical or electronicsystems have replaced the human ele-ment in this procedure. The biggestchanges have come about as a resultof the growing sophistication of small,

componenTs are movingalong producTionlines ThaT sTreTcharound The world“ “

cheap electronic computers – a develop-ment that gathered pace from the 1950s– followed by the advent of devicescalled programmable logic controllers(PLCs), devised in the late 1960s. Theseare computing systems that take ininformation from input devices, suchas industrial sensors, and process dataaccording to sets of software.

As a result of the processing, instruc-tions are provided to output devices oractuators – gears, levers and controlvalves, for instance – to change theconditions of a specific reaction or setof processes. In this way, increasinglysmaller, cheaper and more sophisticatedcomputers can be used to monitor andadjust the way products are made acrossa huge range of industrial processes.

The “father” of the PLC is normallyregarded as Dick Morley, an engineerwho worked in the US for a smallcompany called Bedford Associates.In 1968 an engineering team run byMorley drew up what is considered thefirst set of blueprints for how a PLCwould work.

The initial customer for the deviceswas General Motors, the US automo-tive group, which used the systems tocontrol parts of some production lines.

Modern PLCs use much the sameprinciples to these early devices, butthey rely on appreciably faster andsmarter computing devices linkedsometimes to hundreds if not thou-sands of sensors and actuators.

Such PLCs can control not justthe production of discrete products,such as car parts, but also the entireoperation of production lines makingitems such as steel or plastics through“continuous flow” procedures.

As a result, the degree of accuracythat can be achieved is many timesgreater than in the days when humansby themselves were in charge.Peter Marsh

Ideas

processinnovation

“We’re in a just-in-time world,” saysScott Davis, chief executive of UPS, theparcel and logistics company, a majorbeneficiary of the outsourcing trend.

Many manufacturers, facing risingwages in China and struggling to makequick changes to their product lines,have moved some operations to Mexico,Turkey and other countries nearer theworld’s biggest consumer economies.

High oil prices are also a factor. Lesstime-critical goods that once went byair often move by ship or truck instead.And overall growth in freight move-ments is no longer outpacing economicgrowth to the same degree as it did formuch of the past decade.

Many of the essentials of the inter-national supply chain remain much asthey were during the outsourcing boomof the 2000s, but are focused on serv-ing consumers in a wider range of mar-kets. Logistics operators are scramblingto acquire or set up better deliveryoperations in emerging markets.

“With projections that they will add1m people a week for the next 30 years,we’re going to see cross-border tradestay very strong for years to come,”Davis says. RobertWright

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One of the more visible of mankind’schanges to the fabric of the planet canbe attributed to the motor car. Not onlyare vehicles to be found in almost everylandscape, but the infrastructure thatsupports them is also inescapable. Theribbons of roads binding cities, townsand villages together are a testimonyto people’s infatuation with personaltransport.

But the growth in the car populationfrom near-zero to much more than 1bnin little more than a century comes ata price. Vehicles that are still marketedby manufacturers as freedom machinesare, in many places around the planet,transformed by traffic to barely mobilecages.

Combine that with environmentalconcerns about even today’s muchgreener vehicles, and the tide of publicopinion about cars may well have turned– at least in much of the developedworld. Mountain villagers in Nepal stillcompete to be the first to have a motor-cycle parked outside their front door,and China is buying cars at a rate fasterthan any other country – but manyyoung people in developed nations lackany interest in learning to drive.

This increasing trend is worryingthe carmakers. The answer of Germa-ny’s BMW, for example, is a version ofthe car-sharing schemes run by Zipcarand others that are set to grow furtherand encourage use if not ownership.

Electric cars will become moreprevalent, fast-improving batterytechnology reversing the slow take-upnow – although there is still mileage inimproving internal combustion engines.But the way users interact with their

Social enterprise is attempting tochange the world by harnessing theinnovation and discipline of businessto tackle poverty, climate change andother challenges.

Peter Holbrook, chief executive ofSocial Enterprise UK and chairmanof the Social Enterprise World Forum,says these businesses’ “primary purposeis to tackle a social or environmentalproblem”. That distinguishes themfrom a stock-market-quoted company,whose legal responsibility is to itsshareholders first.

Pants to Poverty, which makes un-

cars will undergo a more fundamentalchange. Cutting down on accidentswill become an ever greater part ofregulation-enforced vehicle design– and the logical extension of that isgiving the task of driving to computers.In the same way that autopilots havebecome essential on airliners, contribut-ing hugely to safety, technology such aslane-assist and automatic braking willgo from being driver aids to taking overthe whole task. Such vehicles will revo-lutionise the way we use cars and whatwe do with the time we spend in them,as well as speed traffic flows by talkingto each other.

Another answer to congestion,though, lies with two-wheelers.Enclosed, crash-protective, weather-proof, small motorbikes would takeup less road space, save commutingtime, and help to save the planet. Thatcombination would indeed represent apoint further on in our love affair withvehicles.Rohit Jaggi

Futureideas

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Our judges’ pick of the ideasmost likely to shape tomorrow’sworld of business

We have tO getbeyOnd philanthrOpy.tO be sustainablemeans making a prOfit“ “

future ofdriving

socialenterprise

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y

Economies thatsucceed will bethose that canraise skill levelsmost effectively

Increased access to cheap – and oftenfree – information has already had animpact on business and society.

Social media such as Twitterplayed an influential role in the “ArabSpring”, helping topple govern-ments in the Middle East and Africa.Wikileaks sparked global contro-versy by publishing sensitive govern-ment and commercial information.

The free, and mostly illegal, shar-ing of films and music on the webhas inflicted significant damage oncontent owners. Google and yahooand other content aggregators withuser-friendly search capabilities haveincreased the availability of free in-formation online. This has led manyconsumers to cut down on readingnewspapers and magazines.

Meanwhile governments are

cheap andfree information

derwear using Fair Trade-certified cot-ton and guaranteeing workers a decentwage, is a riposte to the sweatshops ofBangladesh. Its products are premiumbut some consumers are willing to payfor minimum welfare standards.

Social enterprise works even betterin the developing world, where thestate is less effective. “There is hugeappetite for social enterprises in latinAmerica and Africa,” Holbrook says.

In Brazil, a charity founded a busi-ness making battery-powered hearingaids that can be recharged by sunlight,reducing their cost for millions.

“It would take a lot of philanthropyto solve that problem,” he says. “Wehave to get beyond philanthropy. To besustainable means making a profit.”

But government can play a role.The UK leads the world, with 62,000social enterprises, employing 800,000people and contributing £24bn to theeconomy, according to 2011 figures.

The new localism and Social Valueacts require public authorities to con-sider not just value for money but howmuch would be retained in a commu-nity when awarding contracts.

New forms of finance are emergingtoo. Big Society Capital, an investmentfund launched in 2012, has £600m tohelp create amarket. Some investors inthe US andUK have embraced social im-pact bonds, which pay out if the businessfunded reduces government expenditure.

Even russian oligarchs are inter-ested. Vagit Alekperov, the lukoil headworth $14.8bn, has talked to Holbrookabout funding social enterprise.Andrew Bounds

If there is one business opportunitythat could build prosperity and improvelives across the globe, it would surely beto raise the education and skill levels ofthose who currently lack them.

A certain amount of low-skilledlabour will always be needed to cleanoffices and homes, pick crops, serve inshops and manufacture simple goods.

But as economies become technolog-ically more complex, those that succeedwill inevitably be those that can raiseskill levels most effectively.

The task is daunting. According tothe International labour Organisation,China rates just 4 per cent of its work-force as highly qualified. Only 36 percent of workers have a lower secondary-school qualification. The remaining 60per cent have few or no skills. In Indiahalf of the country’s population overthe age of 25 has had no education andan additional third has at best primaryschooling. Four out of five new entrantsto the workforce have never had anyopportunity for skills training.

Even in developed countries, wherethe low-skilled are a minority, they havebeen, along with young people, hardesthit by the financial crisis. According tothe OECD club of mostly rich nations,low-skilled employment has declined byfive percentage points more than overallemployment since the crisis began.

That does not mean we shoulddespair. Unesco says average years of

unskilledworkers schooling for 15-24-year-olds in devel-

oping countries rose from 3.15 in 1950to more than 8.5 in 2010 and averageyears of schooling for 15-24-year-oldsin industrialised countries rose fromalmost seven years to more than 10.

Though a slow process the IlOsays what is needed is better matchingof supply to demand for skills, help-ing workers and enterprises adjust tochange, and anticipating future skillsneeded. Brian Groom

in india, four out of fiveentrants to the labourmarket have never hadany skills training“ “

Lower birthrates and risinglife expectancypresentsignificantchallenges

Some have asentimentalattachment tocoinage whileothers arguethat handlingcash makes formore prudentspending

is not issued or guaranteed by a centralbank or government.

The benefit of NFC technology forconsumers is simplicity. The advantagefor retailers and companies is thatmaking it easier for customers to partwith their cash makes it more likelythey will do so. Others argue that acashless world will curb corruption andthe underground economy.

But are these enough to banish coin-age from the realm of daily life entirelyand leave it to the numismatists? Theevidence suggests not. The introduc-tion of the modern credit card in 1958and the wider use of plastic did not killcash, with customers preferring to havea variety of methods to pay with.

They are also sentimental. As withbooks and paper, currency can be athing of beauty as well as carrying theweight of legal guarantee. Others arguethat handling cash makes for more pru-dent spending, while living on plasticencourages a slide into using credit.

Nor will the absence of cash neces-sarily curb crime: apart from criminalsmoving further online, phones and pre-paid cards can still be stolen.

Cash may no longer be king, but it isunlikely to disappear entirely from theNFC-enabled, electronic world.Jennifer Thompson

ft.com/50ideas | 57

When the global population passed7bn recently, the addition of about 1bnpeople in little over a decade markedthe most rapid period of growth inrecorded time.

But even more significant is that thebirthrate in most industrialised andsome emerging economies is slowingsharply while numbers of elderly arerising very rapidly.

Within the developed world, whereold age social security systems pre-dominate, life expectancy has risenfrom about 66 years at birth in 1950-55to 77 years today. According to George

each retiree will halve. That also meansslowing GDP growth.

The issue is global. In China, afertility rate of 1.6 children per womanmeans a working age population thathas already peaked. In Japan, fallingbirths and rising longevity have createda post-60 group that accounts for abouta third of its total population.

Immigration can help make up someof the shortfall in workers – a strategyJapan has assiduously avoided. Gov-ernments can also raise pension agesand boost female participation in theworkforce, with affordable child careand flexible working hours.

These shifts present substantialrisk. But for businesses that can adapttheir strategies early to take account ofdemographic change, the opportunitiescould also be enormous.Norma Cohen

The use of plastic to pay for even thesmallest of daily purchases such as abus trip has been on the rise for years.

The introduction of near-field com-munications (NFC) also means we willincreasingly never see the money weown in a tangible form and begin toregard this situation as the norm.

NFC, a short-range wireless tech-nology that enables two-way transac-

tions between tags and readers heldclose to each other, is already inuse with travel cards and somebank cards.But the dominance of smart-phones, which can accommo-date NFC chips, has raisedthe probability that consum-

ers are on the cusp of moving toa “wave and pay” model, cut-ting out the need for cash.

Some argue that cash is,if not dead, at least dying,

and traditional forms ofmoney are already underassault elsewhere. Bitcoin,largely a digital currency,

Magnus, an economist who has special-ised in demographic change, rising lifeexpectancy at older ages is “an existen-tial threat to the economic and politicalframework we built after the secondworld war”.

Social security systems that dependon contributions from workers to paypensions are under threat. Globally, onaverage, total fertility rates – live birthsper woman – have fallen from 4.95 in1950-55 to 2.52 in 2005-10. yet 2.1 isneeded to keep a population stable.

UN data indicates that the percent-age of the world’s population aged over60 will double from 11 per cent today to22 per cent by 2050, while the percent-age of elderly who are 80 and over willgrow from 14 per cent to 20 per cent.

Worldwide, the number of peopleof working age available to support

future ofdemographicchange

cashlessfuture

50 ideasfuture ideas

putting pressure on science journals tomake academic papers – often fundedby taxpayers – publicly available forfree. This risks hurting the academicpublishing sector led by reed Elsevier.

In reaction, companies are experi-menting with new business models.

Following wider adoption of legiti-mate digital outlets such as Apple’siTunes and streaming services such asSpotify and Deezer, the global musicindustry returned to growth last yearfor the first time since 1999.

A growing number of newspapersnow operate a paywall as they seeknew ways to monetise their content.Some allow access to a certain numberof articles before payment is required.Google is unveiling a subscription ser-vice for some of its youTube specialistvideo channels to add a second revenuestream beyond online advertising.

IDC, a market intelligence firm,predicts people accessing the internetvia a personal computer in the US willshrink to 225m in 2016 from 240mlast year – while numbers accessing theinternet via tablet and smartphone willgrow from 174m to 265m. If contentowners can find compelling, imagina-tive and simple ways of charging forthis content, they could attract a newbreed of paying users. Rob Budden

Judges

58 FT.COM 50IDEAS

MICHAEL SKAPINKERThe chairman of the judging panel,Michael Skapinker is an assistanteditor of the FT and editor of FTSpecial Reports. He writesa weekly column on businessand society that appears in thenewspaper and online.

ANDREW HILLAndrew Hill is an associate editor ofthe FT and the management editor,writing a weekly column. In the pasthe has also been financial editor andCity editor, as well as New York bureauchief, and correspondent in Brusselsand Milan.

CHRIS MCKENNAChris McKenna is an academic at theSaïd Business School of OxfordUniversity, specialising in businesshistory and professional service firms.He is a writer of business books, andhis work has featured in a number ofnewspapers and magazines. He is alsoa fellow of Brasenose College, Oxford,and has also taught in the US as wellas France.

BARONESS KINGSMILLBaroness Kingsmill CBE is a memberof the House of Lords who after a20-year legal career became deputychair of the Competition Commissionbetween 1996 and 2004. She is anadviser to a number of internationalcompanies and is a non-executivedirector of various British, Europeanand US boards. She also writes acolumn for Management Today.

LUCY KELLAWAYLucy Kellaway is an associate editorof the FT and a managementcolumnist. For 18 years her weeklycolumn has poked funs at fads andjargon, and she has celebrated the upsand downs of office life both in hercolumn and in her books.

RICH LESSERRich Lesser is the president and chiefexecutive of The Boston ConsultingGroup, the global managementconsulting firm. Before becomingchief executive this year he wasBCG’s chairman for North and SouthAmerica. His client work has focusedon innovation, strategy and large-scaletransformation in the healthcare andconsumer sectors.

For additional insight, please visit

bcgperspectives.com

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We support society the same way we engage with our corporate clients – by unlocking insights and driving fundamental change to deliver lasting value. But what do you do when the competitor is a deadly and adaptive parasite?

BCG has been a part of the fight against malaria for the last 15 years, helping write the global plan to eradicate the disease and supporting partners’ implementation around the world.

We have helped set priorities; focus investments; reconstruct the supply model of drugs, mosquito nets, and programs; and strengthen the organizations leading the charge. The global community has reduced childhood deaths from malaria by one-third between 2000 and 2010, saving more than one million lives.

Helping more than 200 organizations move faster than a disease.

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For 50 years, The Boston Consulting Group has been helping leaders anticipate and respond to a changing world. Today, radical shifts in the global economy, magnified by a relentless rise in uncertainty, require bolder moves, fitter organizations, and better execution. We partner with clients to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises.

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