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Bangladesh’s Fundamentalist Challenge

APR 14, 2015

NEW DELHI – In February, while returning from a book fair at Dhaka University, Avijit Roy, a Bangladeshi-American blogger known for his atheism, and his wife were dragged from their rickshaw and hacked with machetes. The book fair, held annually to commemorate the 1952 protests that culminated in the Pakistani military opening fire on students at the university, is a typically Bengali response to violence. To turn the Nazi leader Hermann Göring’s notorious barb on its head, when Bengalis hear the word “gun,” they reach for their culture.

But Roy’s brutal murder (his wife was maimed, but survived) – together with the fatal stabbing of another atheist blogger, Washiqur Rahman, barely a month later – exposes another force at work in Bangladesh, one that is subverting the country’s tradition of secularism and intellectual discourse. That force is Salafist Islamic fundamentalism.

The change in Bangladesh is stark. The irreverent secularism and thoughtful inquiry reflected in the works of Roy and Washiqur have long been a hallmark of Bengali writing. A generation ago, their views would have been considered perfectly acceptable, if not mainstream, in the vibrant intellectual culture of Bengal (the Western portion of which is the Indian state of West Bengal).

That is no longer true. Backed by lavish financing from abroad, Salafist fundamentalism – an intolerant version of Islam at odds with the more moderate Sufi-influenced variant that prevailed in India for centuries – has been spreading across Bangladesh in recent years. While Bengal’s long secular tradition, which drove its efforts to break away from Pakistan, is still alive and well, the corrosive impact of the radical Islamists – who use force to silence those with whom they disagree – is undeniable.

Roy and Washiqur are far from the first Bengali intellectuals to face the Islamists’ particular brand of censorship. The writer Humayun Azad was severely injured in an attack at the annual book fair in 2004. (He survived, but died later that year in Germany.) Last year, the atheist blogger Ahmed Rajib Haider was, like Roy, hacked to death in Dhaka. Why engage in theoretical debates with your ideological opponents, the Islamists are saying, when one can simply shut them up for good?

Many Bangladeshi intellectuals have seen the writing on the wall and fled the country, sacrificing daily contact with their rich cultural heritage for the sake of self-preservation. The novelist Taslima Nasrin went into exile in 1994 to escape death threats from Islamist radicals; she now lives in Delhi. Daud Haider, a journalist and poet, languishes in Berlin.

Public intellectuals are not the only people in danger. Ordinary secular Muslims who turn to atheism are more vulnerable to charges of apostasy and, worse, blasphemy. In the old days, such charges might have attracted a fatwa or two and, at worst, social ostracism. Today, the threats – say, being murdered in cold blood on a crowded street – are more viscerally compelling.

For Muslim-majority Bangladesh, this struggle within Islam amounts to a battle for the soul of the country. But it is not an entirely new battle. Bangladesh has long faced the claim that, in accordance with the logic of the 1947 Partition of India, which produced what was then East Pakistan, it should be more Islamic. Others, opposing this claim, insist that the country must live up to the legacy of its 1971 secession from Pakistan, in a revolution that proclaimed Islam insufficient grounds for nationhood and asserted the primacy of Bangladesh’s secular culture and Bengali language over its allegiance to Islamabad.

This conflict is also reflected in the country’s often bitterly divisive politics. Each camp has taken its turn controlling the government, under two formidable female leaders: the Awami League’s Sheikh Hasina Wazed, the current prime minister, and her two-term predecessor, the Bangladesh Nationalist Party’s Begum Khaleda Zia.

Though the secularists are currently in power, Zia retains wide support, including among the Islamists. Her party boycotted the last election, and has provoked political violence that has claimed more than 100 lives this year and left hundreds more injured.

The recent killings have inflamed public opinion, sparking mass demonstrations to demand justice for the victims and more effective government protection of secularist writers. HT Imam, a senior adviser to Hasina, squarely challenged the police for their inaction on Roy’s murder, telling top police officers to “identify the black sheep among the force and bring them under law and justice to uphold your image.”

Bangladesh is a democracy that upholds freedom of expression, but within limits. Though the government is seen as sympathetic to liberal intellectuals, it is also anxious to maintain law and order and avoid provoking the extremists. As a result, the government has not hesitated to try to curry favor with the Islamists by using legislation that prohibits “hurting religious sentiments” to harass and arrest atheists and liberals. The Islamists, however, want the government to pass a blasphemy law like that in Pakistan, which decrees death for religious dissent. Though the government has so far stoutly resisted this, its weak-kneed defense of secularism has raised fears that its resistance to theocratic pressure could collapse under sustained pressure.

It must continue to do so. Hasina – the daughter of Sheikh Mujibur Rahman, the “father” of independent Bangladesh who was assassinated in 1975 – knows that compromising with the Islamists will get her nowhere; she will never be acceptable to them. Her government must not succumb to the temptation to accommodate the extremists in the name of good governance (or in the cause of political survival).

The principles for which Bangladesh bled when it won its independence from Pakistan must not be compromised. If Hasina gives in to the machete-wielding Islamists, she will sacrifice the Bangladesh that her father fought to free. 

Shashi Tharoor, a former UN under-secretary-general and former Indian Minister of State for Human Resource Development and Minister of State for External Affairs

Una vacuna de 4,5$ contra el virus del papiloma humano (HPV), puede salvar 420.000 vidas

Stopping Women’s Next Biggest Killer

APR 14, 2015

 

GENEVA – For women, the act of bringing life into this world has historically meant risking their own lives, with the real prospect of death during childbirth. But, though great strides are being made in reducing maternal deaths in poor countries, those gains could be undone by a growing threat to women’s health. For the first time, the number of deaths caused by cervical cancer every year is poised to outstrip the total caused by childbirth.

The trend partly reflects the success of efforts to reduce maternal deaths. Since 1990, the number of women dying as a result of childbirth has been nearly halved, to 289,000 per year. Over the same period, however, annual deaths from cervical cancer have increased by almost 40%, to 266,000. Even as better standards of care continue to cut maternal mortality, cervical cancer deaths are expected to rise further. By 2035, the disease is expected to cause 416,000 women to die slowly and painfully every year – virtually all of them in developing countries (mostly Sub-Saharan Africa and South Asia).

The tragedy is that these deaths are almost entirely preventable. Human papillomavirus (HPV) vaccines, coupled with screening and treatment, could prevent the vast majority of cervical cancer cases. But almost 90% of the women who die from cervical cancer are in developing countries, where, for too many of them, screening services are unavailable, and treatment even less so.

As former Additional Secretary at the Ministry of Health and Family Welfare in India, the country with the largest number of cervical cancer deaths in the world, I have seen the impact of the disease with my own eyes. What is particularly devastating is how it also quashes hope. Women with HIV, for example, are particularly prone to the disease. Yet, with better treatments for HIV becoming available, women are now surviving HIV only to die from cervical cancer.

In 2010, the total global cost of cervical cancer was estimated to be around $2.7 billion per year. By 2030, this is expected to increase to $4.7 billion, unless we do something about it now.

Vaccines, fortunately, are becoming increasingly available. Safe and effective HPV vaccines have been on the market since 2006, protecting against HPV types 16 and 18, which cause 70% of all cervical cancer cases. Newly approved vaccines provide even greater protection.

In wealthy countries, HPV vaccines are often priced at more than $100 per dose. But Gavi, the Vaccine Alliance, has worked with manufacturers to reduce prices in developing countries. Recently, we secured a record-low price for HPV vaccines of $4.50 a dose, opening the door for millions of the poorest girls to be vaccinated in 27 countries. By 2020, we estimate that Gavi will have helped over 30 million girls in more than 40 developing countries receive vaccinations against HPV.

The economic benefits of vaccines are substantial. It takes time and significant investment to set up effective screening and treatment services. And, given that even high-income countries struggle to meet the cost of cancer treatments, prevention is clearly a far more efficient option. Moreover, cervical cancer strikes women during their most economically productive years, when their contribution to society and the economy is greatest. The disease does not just destroy lives; it also impoverishes families and undermines economic growth.

A recommendation last year by the World Health Organization’s Strategic Advisory Group of Experts on Immunization promises to boost vaccines’ cost-effectiveness further, by calling for just two doses of the HPV vaccine, rather than the three doses previously thought to be required. This will not only reduce the overall cost of vaccine procurement and delivery; it will also make it easier for health-care workers and the girls themselves.

A study published by WHO and the London School of Hygiene and Tropical Medicine in June predicts that vaccinating 58 million girls in 179 countries would prevent 690,000 cases of cervical cancer and 420,000 deaths from the disease. Unfortunately, the study also found that of the 33 countries where HPV vaccines are most likely to have the greatest effect in preventing cancer, 26 had not yet introduced the vaccine.

There is much work to be done. We should congratulate ourselves for nearly halving the maternal death rate since 1990. But we must keep the threat of cervical cancer firmly in our sights. It is imperative to act now to ensure that every girl has access to HPV vaccines and a healthy future free from cervical cancer, no matter where she lives. 

Anuradha Gupta is Deputy CEO of Gavi, the Vaccine Alliance.

Próxima estación: Asian Infrastructure Investment Bank (AIIb)

 

Asia’s Multilateralism

APR 13, 2015 

NEW YORK – The International Monetary Fund and the World Bank are poised to hold their annual meetings, but the big news in global economic governance will not be made in Washington DC in the coming days. Indeed, that news was made last month, when the United Kingdom, Germany, France, and Italy joined more than 30 other countries as founding members of the Asian Infrastructure Investment Bank (AIIB). The $50 billion AIIB, launched by China, will help meet Asia’s enormous infrastructure needs, which are well beyond the capacity of today’s institutional arrangements to finance.

One would have thought that the AIIB’s launch, and the decision of so many governments to support it, would be a cause for universal celebration. And for the IMF, the World Bank, and many others, it was. But, puzzlingly, wealthy European countries’ decision to join provoked the ire of American officials. Indeed, one unnamed American source accused the UK of “constant accommodation” of China. Covertly, the United States put pressure on countries around the world to stay away.

In fact, America’s opposition to the AIIB is inconsistent with its stated economic priorities in Asia. Sadly, it seems to be another case of America’s insecurity about its global influence trumping its idealistic rhetoric – this time possibly undermining an important opportunity to strengthen Asia’s developing economies.

China itself is a testament to the extent to which infrastructure investment can contribute to development. Last month, I visited formerly remote areas of the country that are now prosperous as a result of the connectivity – and thus the freer flow of people, goods, and ideas – that such investments have delivered.

The AIIB would bring similar benefits to other parts of Asia, which deepens the irony of US opposition. President Barack Obama’s administration is championing the virtues of trade; but, in developing countries, lack of infrastructure is a far more serious barrier to trade than tariffs.

There is a further major global advantage to a fund like the AIIB: right now, the world suffers from insufficient aggregate demand. Financial markets have proven unequal to the task of recycling savings from places where incomes exceed consumption to places where investment is needed.

When he was Chair of the US Federal Reserve, Ben Bernanke mistakenly described the problem as a “global saving glut.” But in a world with such huge infrastructure needs, the problem is not a surplus of savings or a deficiency of good investment opportunities. The problem is a financial system that has excelled at enabling market manipulation, speculation, and insider trading, but has failed at its core task: intermediating savings and investment on a global scale. That is why the AIIB could bring a small but badly needed boost to global aggregate demand.

So we should welcome China’s initiative to multilateralize the flow of funds. Indeed, it replicates American policy in the period following World War II, when the World Bank was founded to multilaterize development funds that were overwhelmingly coming from the US (a move that also helped to create a cadre of first-class international civil servants and development professionals).

The World Bank’s assistance was sometimes overburdened by prevailing ideology; for example, the free-market Washington Consensus policies foisted on recipients actually led to deindustrialization and declining income in Sub-Saharan Africa. Nonetheless, US assistance was, overall, far more effective than it would have been had it not been multilateralized. Had these resources been channeled through America’s own aid agency, policymaking would have been subject to the vagaries of development thinking (or the absence of reflection) from one administration to another.

New attempts to multilateralize flows of assistance (including the BRICS countries’ launch of the New Development Bank last July) are similarly likely to contribute significantly to global development. Some years ago, the Asian Development Bank defended the virtues of competitive pluralism. The AIIB offers a chance to test that idea in development finance itself.

Perhaps America’s opposition to the AIIB is an example of an economic phenomenon that I have often observed: firms want greater competition everywhere except in their own industry. This position has already exacted a heavy price: had there been a more competitive marketplace of ideas, the flawed Washington Consensus might never have become a consensus at all.

America’s opposition to the AIIB is not unprecedented; in fact, it is akin to the successful US opposition to Japan’s generous New Miyazawa Initiative of the late 1990s, which offered $80 billion to help countries in the East Asian crisis. Then, as now, it was not as if the US were offering an alternative source of funding. It simply wanted hegemony. In an increasingly multipolar world, it wanted to remain the G-1. The lack of money, combined with America’s insistence on flawed ideas about how to respond to the crisis, caused the downturn to be far deeper and longer than it should have been.

That said, US opposition to the AIIB is harder to fathom, given that infrastructure policy is much less subject to the influence of ideology and special interests than other policymaking areas, such as those dominated by the US at the World Bank. Moreover, the need for environmental and social safeguards in infrastructure investment is more likely to be addressed effectively within a multilateral framework.

The UK, France, Italy, Germany, and the others who have decided to join the AIIB should be congratulated. One hopes that other countries, both in Europe and Asia, will join as well, helping to fulfill the ambition that infrastructure improvements can raise living standards in other parts of the region, as they have already done in China.

Europa: un enorme cuerpo, para un cabeza muy pequeña

 

Why Europe Needs to Save Greece

APR 12, 2015

STOCKHOLM – The fundamental problem underlying Greece’s economic crisis is a Greek problem: the country’s deep-rooted unwillingness to modernize. Greece was subject to a long period of domination by the Ottoman Empire. Its entrenched political and economic networks are deeply corrupt. A meritocratic bureaucracy has not emerged. Even as trust in government institutions has eroded, a culture of dependency has taken hold.

The Greeks, it can be argued, have not earned the right to be saved. And yet a Greek exit from the euro is not the best option for either Greece or for the European Union. Whether or not the Greeks are deserving of assistance, it is in Europe’s interest to help them.

The OECD, the European Commission, the International Monetary Fund, and the World Bank have emphasized, in report after report, the fundamental inability of Greece’s economy to produce long-term sustainable growth. The country’s education system is sub-par and underfunded. Its investments in research and development are inadequate. Its export sector is small. Productivity growth has been slow.

Greece’s heavy regulatory burden, well described by the World Bank’s indicators on the ease of doing business, represents a significant entry barrier in many sectors, effectively closing off entire industries and occupations to competition. As a result, Greece’s economy struggles to reallocate resources, including workers, given the rigidity of the labor market.

After Greece was allowed to enter the eurozone, interest-rate convergence, combined with inflated property prices, fueled an increase in household debt and caused the construction sector to overheat, placing the economy on an unsustainable path. In the years before the beginning of the financial crisis, current-account deficits and bubbly asset prices pushed annual GDP growth up to 4.3%. Meanwhile, public spending rose to Swedish levels, while tax revenues remained Mediterranean.

In the eight years that I served on the EU’s Economic and Financial Affairs Council, I worked alongside seven Greek ministers, every one of whom at some point admitted that the country’s deficit numbers had to be revised upward. Each time, the minister insisted that it would never happen again. But it did. Indeed, the pre-crisis deficit for 2008 was eventually revised to 9.9% of GDP – more than 5% higher than the figure originally presented to the Council.

And yet, as bad as Greece’s economy and political culture may be, the consequences of the country’s exit from the euro are simply too dire to consider. In the end, such an outcome would be the result of a political decision, and the European values at stake in that decision trump any economic considerations.

For starters, a Greek exit from the euro would be a devastating blow to Greece. Without the support of the European Central Bank, the country’s banking system would be shut off from international markets. The overall use of the euro-system liquidity assistance to Greece came close to €90 billion ($96 billion) in early 2015. The government would have to close the banks for a week or two, print emergency currency, strictly limit households’ access to their deposits, and introduce capital controls. When the market opened again, the new drachma would depreciate by 30-40% before finding an equilibrium.

To make matters worse, the economic crisis could lead to a political meltdown, making it impossible to enact the structural reforms that Greece desperately needs. Indeed, one of the main causes of the country’s deep economic problems is its dysfunctional political system. The period of fiscal restructuring – during which the deficit was cut from 9.9% of GDP in 2008 to 8.9% in 2012 – already sparked considerable civil unrest. A deeper economic crisis could spark a sharp rise in social and political instability. Ejecting such a precarious democracy from the eurozone would be deeply irresponsible.

Europe also needs to consider the geopolitical environment. Increased tension caused by the conflict in Ukraine risks destabilizing other parts of the continent. Expelling Greece into such an unstable international environment would leave the region more vulnerable to those – particularly Russia’s current leaders – who believe they would benefit from a weaker, less unified Europe.

There are more important questions raised by the crisis in Greece than whether the country deserves to be rescued by European taxpayers. At stake are fundamental values and strategic considerations that are central to the European project. Europe is simply more European with a stable partner in Athens.

Anders Borg, a former Swedish finance minister, is Chair of the World Economic Forum’s Global Financial System Initiative.

Importante Primavera la del 2015: China y las Instituciones Financiera Mundiales

American Leadership in a Multipolar World

APR 10, 2015

LONDON – Giving up the spotlight is never easy. The United States, like many aging celebrities, is struggling to share the stage with new faces, especially China. The upcoming meetings of the International Monetary Fund and the World Bank – two institutions dominated by the US and its Western allies – provide an ideal opportunity to change that.

The US must come to terms with the reality that the world has changed. The longer the US remains in a state of denial, the more damage it will do to its interests and its global influence, which remains substantial, if more constrained than before.

The world no longer adheres to the static Cold War order, with two blocs locked in open but guarded confrontation. Nor does it work according to the Pax Americana that dominated in the decade after the Soviet Union’s collapse, when the US briefly emerged as the sole superpower.

Today’s world is underpinned by a multipolar order, which emerged from the rise of developing economies – most notably China – as major actors in trade and finance. The US – not to mention the other G-7 countries – now must compete and cooperate not only with China, but also with India, Brazil, and others through expanded forums like the G-20.

To this end, the US must show leadership and adaptability. It cannot refuse to support China’s efforts to expand its role in global governance. Nor should it issue harsh rebukes to its allies when they do not follow suit, as it did when the United Kingdom announced its intention to join the new China-led Asian Infrastructure Investment Bank.

The US seems to be stuck in the Bretton Woods system, the rules-based order – underpinned by the IMF and the World Bank, with the US dollar at its heart – that emerged after World War II. The Bretton Woods system institutionalized America’s geopolitical supremacy, leaving the old imperial power, the UK, to step aside – a step that it took graciously, if a little desperately, given its grave postwar economic situation.

Over the years, however, the Bretton Woods system, with its mix of liberal multilateralism and market-oriented economic policies, has come to symbolize the Anglo-American dominance of the global economy that much of the world now criticizes, especially since the global financial crisis. In particular, the Washington Consensus – the set of free-market principles that influences the policies of the IMF, the World Bank, the US, and the UK – has generated considerable resentment, especially after the Asian financial crisis of the 1990s.

Against this backdrop, it is hardly surprising that China has been using its growing global influence to help engineer a new economic order – one in which the US dollar does not reign supreme. Zhou Xiaochuan, the governor of the People’s Bank of China, China’s central bank, has repeatedly called for a shift toward an international monetary system that allows for the use of multiple currencies for payments and investment. Such an approach would reduce the risk and impact of liquidity crises, while decoupling the international monetary system from the “economic conditions and sovereign interests of any single country.”

Of course, China believes that its own currency, the renminbi, should eventually play a central role in this new monetary system, so that it reflects China’s role not only as a leading engine of global economic growth, but also as the world’s largest creditor. Indeed, together with the other systemically important economies (the US, the UK, Japan, and the eurozone) China drives trends that, for better or worse, extend far beyond its borders.

Since 2009, China’s leadership has been pursuing a set of policies that encourage the use of the renminbi in regional trade and reduce its dependence on the dollar in international payments. But expanding the renminbi’s role in the international monetary system is just the first step toward institutionalizing a multipolar world order. China has also spearheaded the establishment of new multilateral institutions, with AIIB following on the heels of the New Development Bank, created with other major emerging economies (Brazil, Russia, India, and South Africa).

By taking these steps, China’s leaders have called attention to the inadequacy of the existing international monetary system, and its institutional framework, in today’s complex, multipolar world economy. In particular, China’s agenda highlights questions about America’s capacity to provide the needed liquidity to support international trade and finance.

To be sure, the US is right to wonder whether the new order that China hopes to build will be as open and rules-based as the American-led order – the one that gave China the market access it needed to achieve its spectacular economic rise. But the answer to that question can be found only by engaging China on the issue of reform of global governance – not by denying that change is needed at all.

As the US stubbornly pursues a policy of containment toward China – exemplified in its fight against the AIIB’s establishment, its relentless accusations of currency manipulation, and its refusal to ratify IMF reforms that would increase China’s influence – it risks losing its ability to shape what comes next. The result could be a world of fragmented blocs – an outcome that would undermine not only global prosperity, but also cooperation on shared challenges.

The Spring Meetings of the IMF and the World Bank offer an important opportunity to signal a new approach toward China. And there could be no more credible signal than US support for the renminbi’s addition to the basket of currencies that the IMF uses to value its international reserve asset, the Special Drawing Right. America will be in the spotlight once again. But how will it perform? 

Paola Subacchi is Research Director of International Economics at Chatham House and Professor of Economics at the University of Bologna.

En la frontera de la singularidad

en el año 2525

 

Creative Self-Disruption

LAGUNA BEACH – Like many readers, I still vividly recall when Nokia was the dominant player in mobile phones, with over 40% of the market, and Apple was just a computer company. I remember when Amazon was known only for books, and when dirty taxis or high-priced limousines were the only alternative to public transport or my own car. And I recall when the Four Seasons, Ritz Carltons, and St. Regises of this world competed with one another – not with Airbnb.

Now, I may be old, but I am not that old. These changes happened recently – and fast. How did they occur? Will the pace of change remain so rapid – or even accelerate further? And how should companies respond?

An industry can be transformed by top-down economic, financial, political, and regulatory changes. But companies like Airbnb, Amazon, Apple, and Uber exemplify a different kind of transformation: agile players invade other, seemingly unrelated industries and brilliantly exploit huge but previously unseen opportunities. Importantly and counter-intuitively, doing so serves their own core competencies, rather than those of the industry that they seek to disrupt.

Indeed, rather than using existing approaches and processes to compete, these entrants created radical new game plans, rewriting the target industry’s rules. Their creativity and passion enabled them to subdue – and in some cases even destroy – less adaptable giants remarkably quickly.

Central to these companies’ success has been their understanding of a fundamental trend affecting nearly all industries: individual empowerment through the Internet, app technology, digitalization, and social media. Most traditional companies, meanwhile, remain focused on their macro environment, at the expense of responding adequately to the new micro-level forces in play.

If existing companies hope to compete in this new environment, shaped by both top-down and bottom-up forces, they will to have to adapt, preempting disruptive new players by figuring out how to disrupt themselves. Otherwise, they could face a fate similar to Nokia, which was disintermediated by one tech company (Apple) and acquired by another (Microsoft).

In this effort, companies must recognize that both demand and supply factors are or will be driving the transformation of their competitive landscapes. On the demand side, consumers expect a lot more from the products and services they use. They want speed, productivity, and convenience. They want easy connectivity and expanded scope for customization. And, as the success of services like TripAdvisor show, they want to be more engaged, with companies responding faster to their feedback with real improvements.

On the supply side, technological advances are toppling long-standing entry barriers. The online car service Uber adapted existing technologies to transform a long-sheltered industry that too often provided lousy and expensive service. Airbnb’s “supply” of rooms far exceeds anything to which traditional hotels could reasonably aspire.

An existing company would have to be highly specialized, well protected, or foolish to ignore these disruptions. But, while some well-established companies in traditional industries are already looking for ways to adapt, others still need to do a lot more.

One traditional industry in which progress is being made is the automotive branch, where companies are pursuing digitalization. Though new entrants could undoubtedly disrupt incumbents’ production platforms – Elon Musk’s Tesla Motors is a clear example – they are rare. These days, the more pervasive competitive threat comes from companies in other domains that can erode the customer value proposition after the car is sold.

Automotive companies are recognizing that, over time, the digital experience in the cars they produce will command a larger share of the consumer surplus, owing largely to the potential for substantial profit margins and economies of scale. As a result, they are adapting their vehicles to the new sharing economy, helping people to remain well-connected in the car, expanding the scope of after-sale services, and preparing for the shift away from individual car ownership toward car sharing.

Banks are also adapting, but much more slowly and hesitantly. If they are to make progress, they must move beyond simply providing apps and online banking. Their aim should be holistic engagement of clients, who seek not only convenience and security, but also more control over their financial destiny.

In these and many other industries, the competitive landscape is undoubtedly becoming more complicated and unpredictable. But four general guidelines can help managers effectively adapt their mindsets and business models to facilitate orderly and constructive self-disruption.

· First, companies should modernize core competencies by benchmarking beyond the narrow confines of their industry.

· Second, they should increase their focus on customers, including by soliciting and responding to feedback in an engaging way.

· Third, managers should recognize the value of the data collected in their companies’ everyday operations, and ensure that it is managed intelligently and securely.

· Finally, the micro-level forces that have the potential to drive segment-wide transformations should be internalized at every level of the company.

Companies that apply these guidelines stand a better chance of adapting to what is driving today’s rapid reconfiguration of entire industries. The bottom line, once again, is supply and demand: More than ever, people want – indeed, feel empowered to expect – cheaper, smarter, safer, and more efficient tools to live a more self-directed life. Companies that fail to deliver will find that their days are numbered.

Mohamed A. El-Erian, Chief Economic Adviser at Allianz and a member of its International Executive Committee, is Chairman of President Barack Obama’s Global Development Council.

https://youtu.be/b9bRdvBRnMM

What’s an Industry?

LONDON – Carmakers are afraid of Apple. YouTube, Netflix, and Amazon are upending the television industry. Skype, Facebook, Twitter, Snapchat, and others have changed consumers’ notions of how – and how much it costs – to communicate with one another. Sectors and industry delineations as we know them are breaking down.

Once upon a time, those delineations established a fairly clear-cut world. Car companies made cars, and they were in the automotive industry. Phone companies ensured that we could speak to one another over great distances, and they were in the telecommunications sector. Broadcasting companies made television shows, and they were in the media sector.

Everything was neat and orderly. Analysts could easily categorize companies and tell the markets what they were worth, boards could oversee firms with a view to shareholders’ happiness, and all was right in the world. Until it wasn’t.

That world – in which clearly defined sectors enable easy classification of what a company does – is disappearing before our eyes. Is Apple a technology company or a luxury watchmaker? Is Google a search-engine firm or an up-and-coming car company manufacturing driverless vehicles?

But, for every Apple or Google, there are companies that seemed innovative but became obsolete or fell behind. Kodak and Nokia, for example, provide a cautionary tale for companies that began life as innovators.

Nokia, in particular, was long held up as a case study in corporate reinvention – the very epitome of constant, top-to-bottom change. Here was a company that entered and exited sectors as needed: paper, tires, rubber boots, and telecoms. And yet it has lost its way; with the sale of its mobile-phone business to Microsoft, many doubt that it can recover and reinvent itself yet again. (Of course, even if Nokia has run out of road, its loss may be Finland’s long-term gain, as startups begin to blossom from the minds of the company’s highly skilled ex-workers.)

Many traditional companies, too, have fallen behind because they hewed too closely to their traditional definitions. Like Kodak, other storied brands have not innovated: Polaroid, Radio Shack, Borders, Aquascutum, Blockbuster, and the list goes on. Their managers thought they were doing the right thing: not losing sight of the “core business.” Their board members knew the industry and had all the right credentials to oversee the managers.

But both managers and board members were wearing blinders. They did not make room around the table for those who could see that the company’s destiny did not lie only straight ahead, but also off to the side.

Too many companies are too slow to have tough conversations about strategy and to ask whether the right people are in place to push them hard enough and far enough, showing them vistas that are not visible from where they feel most comfortable. Complacency has never been an option; but in an environment in which startups can overturn an entire sector in the space of a few years, what once seemed like sound strategy can now amount to resting on one’s laurels.

Traditional companies are only now coming to terms with the reality that early-stage companies might challenge them in a serious way. Swiss watchmaker Tag Heuer, for example, has just announced that it will create a partnership with Google to catch up in the high-stakes battle for the world’s wrists.

Many traditional companies, however, continue to believe that being toppled by upstarts can happen only in the “technology” sector. But what sector does not rely on technology? How many companies that could be classified as technology companies could also be classified as something else? As the e-commerce website Etsy prepares for its IPO, should analysts call it a technology company or a retail company? The biotechnology company 23andMe is moving beyond genetic spit tests and into the competitive and pricey world of drug discovery. Pharmaceutical companies ignore that at their peril. Banking and finance, oil and gas, higher education – no sector is immune.

Perhaps inevitably, even those firms that are most responsible for blurring the lines between sectors are not immune to the consequences. In a legal case between Apple and A123, a manufacturer of batteries for electric cars, A123 accuses Apple of violating a non-compete agreement that its engineers signed. One defense strategy that Apple is using is to argue that it is not violating the agreement, because it is in a different industry.

But, in a world in which a computer company that has already revolutionized the music business and the telecommunications sector, and that now makes watches, could soon start manufacturing electric cars, one can only ask, “What is an industry?”

Obviously, Apple has been asking that question for years. Traditional companies must learn to ask it as well. An idea catches on, money piles in, and before anyone can check their analogue wristwatch, the ground has shifted. 

Lucy P. Marcus,

founder and CEO of Marcus Venture Consulting, Ltd., is Professor of Leadership and Governance at IE Business School and a non-executive board director of Atlantia SpA.

MAR 28, 2015