Work, business & professional services

The outsourcing of intelligence

Companies have been outsourcing call centres, back-office jobs and routine business processes for years so what about something more cerebral? Is it possible to outsource the human brain? The question seems ridiculous but computers can analyse data and then recommend specific decisions as well as people. This is not a new idea. GE has been using decision-making algorithms since the 1990s and several firms, such as Mu sigma, Market RX and Infosys, are starting to develop credible decision-making expertise. Questions or decisions that can be outsourced include: whether to invest in new stores (and where), how to set prices for subsets of customers or where to spend promotional budgets. Given the shortage of good analytical thinkers in Western companies and the abundance of well-educated software programmers in nations such as India, the idea makes sense. However, if companies outsource production, sales, distribution, marketing, R&D and thinking (and then sell and lease back assets), what exactly are they left with? The only thing I can think of is brands.

 

Corporate memory

Did you know you can buy a pen that transfers your scribbling to a digital file and records any conversation had while writing. Useful? Frightening? Maybe both. In the future it is conceivable that everything you say in a meeting will be recorded for posterity and will be searchable by anyone. This could be useful. If you miss a meeting you’ll be able to find it and listen to (or perhaps watch) it later. If you are threatened with a lawsuit, you will be able to defend yourself by proving that certain things were or weren’t said. But do you really want your every utterance to be remembered forever? What if you make a stupid suggestion in a meeting and minutes later it ends up on YouTube? Imagine if companies use verbal expression and body language software to analyse when people are lying. Talk about total recall.

 

Mission-controlled firms

Is there a credible alternative to the shareholder-centric corporate model? This question is more frequently asked these days as holes in the free market capitalist system become evident. There is one 19th century model quietly re-emerging over the last few years. This is the social business as a profit-making company. Examples include stakeholder - or community-owned firms, such as cooperatives, where the people that a firm serves own the business. Examples include Salud Coop in Columbia (provides healthcare to 25% of the Columbian population), John Lewis in the UK (revenues GBP 6.8 billion), Rabobank Group in the Netherlands and the Mondragon Coop (the seventh largest business in Spain). Clearly, stakeholder-governed firms have their weaknesses (e.g. access to capital) but shareholder-driven firms do too (e.g. short-term growth pressures, hostile acquisitions and the fact ownership is often separated from control). A second form of social enterprise is the mission-controlled firm.

These are companies, such as The New York Times, Interface Inc and Novo Nordisk A/S, which operate with an explicit social mission in mind. The New York Times (a family owned business) serves an informed electorate, while Novo Nordisk is eliminating diabetes. In all cases, the mission is clearly articulated and the company charter sets out how governance procedures will operate. Another structure is the public-private hybrid. This includes for-profit philanthropy firms, such as Google.org and Grameen Danone. The latter is a 50:50 joint venture between Grameen Bank and Groupe Danone and the mission is affordable nutrition for the children of Bangladesh. The firm seeks to recover its costs but is fundamentally driven by a social mission, not revenue or profit targets: a mere 1% dividend is paid to investors. Few consider the structure of commercial enterprises in most countries, largely because laws make it difficult for profit-seeking firms to operate under any other system. Maybe it’s time for this to change. The law needs to recognise that firms are about people and the wider world, as well as capital and property.

A diaspora of US talent

Following 9/11, US companies have been engaged in a war against US politicians and lawmakers to get talented foreigners into the US to work for them. This is getting particularly difficult because opportunities in China and India are now as good as, or better than, those in the US. However, a future concern may be the flow of talented American-born and educated individuals away from the US. For example, Singapore has been especially successful in recruiting US academics and researchers and recently tempted the world’s #1 seismologist away from Cal Tech. Silicon Valley is similarly losing a stream of smart people and even US farmers are being tempted to move to countries, such as Brazil. Clearly, the US government (and other governments) could employ regulations to stop this. One idea would be to require students attending state-funded US universities to stay in the US for a set period after they graduate. However, this could backfire because students would simply opt for foreign university, making the situation even worse. Watch this space (as they say) but do not assume that newly minted graduates (or anyone else) owe any allegiance to the country in which they were born or educated.

The return of state capitalism

Is the recent nationalisation of UK banks and the US government intervention in the banking and automobile sectors a short-term reaction to the global financial crisis or part of a much wider long-term trend? Two years ago, most people believed direct government management of industries or firms was long dead. The Soviet Union had tried it and failed and China was rapidly moving away from direct state-control. In the UK, the idea seemed as dead as the coal and steel industries that were once under direct government control. So what’s going to happen next? Nobody knows but there is every chance that ideas such as public wealth, public investment and public enterprise, will all return with a vengeance.