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‘How can we persuade people who don’t believe anything? That’s the question for our times’
Opinion Fake news
Disinformation campaigns are distorting global news
Media organisations must take action to provide an antidote to this poison
The BBC was issued with a D-notice, a gagging order, last week to silence its reporting of the
gilets jaunes protests in France. Or so you might believe if you followed reports on
social media. This story was entirely false. But it’s a sign of how powerfully momentum gathers
behind misinformation — or deliberate attempts to mislead — that we have received freedom of
information requests demanding “the truth”.
Who is behind such reports? What do they hope to gain? To answer we need to look at the
technology that has profoundly transformed our media environment. And to recognise that, while
many fake news stories might seem laughable, the effects are deadly serious.
Last year, in India, an estimated 10 people were killed by lynch mobs after inflammatory reports
about child abduction gangs spread rapidly on WhatsApp. A video blamed as the catalyst purported
to show CCTV footage of a child being snatched by two men on a motorbike. It turned out to be a
cleverly edited clip from a Pakistani child safety campaign.
In Nigeria, police say false information and incendiary images on Facebook have contributed to
more than a dozen recent killings in an area torn by ethnic violence. This month Nigerians go to
the polls amid growing tensions. A BBC investigation highlighted that Facebook’s partners in
Nigeria had just four full-time fact checkers to review false information, on a platform used by
24m Nigerians.
In Myanmar, Facebook has removed hundreds of pages and accounts that were part of a systematic,
anti-Rohingya propaganda campaign.
Fake news is now the poison in the bloodstream of our societies — destabilising democracy and
undermining trust in institutions and the rule of law. It has become a powerful tool for profit
or political gain at all levels, from villages to repressive regimes. In the west we have
witnessed its power to distort public debates, fuel divisions and influence voters. In emerging
and developing economies, it can generate violence. In these countries, where digital literacy
is lower and democratic institutions more fragile, the rise of misinformation constitutes an
urgent crisis.
The threats will heighten as the weapons of deliberate disinformation become ever more
sophisticated — from state-sponsored troll factories, to armies of bots and malicious content
sowing community discord. With deepfake video manipulation technology, we are entering an era in
which technology can make any thing look believable.
If fake news is the poison, those who stand up for integrity and impartiality in news must be the
antidote. At the BBC, we are always looking for new ways to live up to these responsibilities.
We have introduced our international anti-disinformation initiative, Beyond Fake News. The BBC
Reality Check is now part of our daily news output. We’re investing in 150 new local politics
reporters around the UK.
Others in the media industry are also taking on fake news. But we are all playing catch-up with
the information manipulators and the playbooks they have perfected. It’s time for all of us who
believe that truth matters to come together around the values we share. The BBC has invited
media organisations from across the world to join us at a special conference this summer to
explore how we can tackle the global rise of misinformation, deliberate disinformation and bias.
The goal is to make a concrete action plan that we can implement quickly.
The response has been encouraging: newspaper groups, technology companies and social media
platforms are taking part. At the recent World Economic Forum, I found a powerful groundswell of
support for the initiative. Identifying practical measures to adopt will be tough. But failure
will be measured in the corrosion of democratic values and, in some places, lost lives. We must
act now, collectively, to turn the tide.
The writer is director-general of the BBC
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Traditional journalism has suffered but new forms have keen sense of mission
In 1859, Charles Dickens observed in his novel A Tale of Two Cities that the French
Revolution felt like the best of times and worst of times to be alive, since it was the age of
both wisdom and foolishness “the epoch of belief . . . the epoch of incredulity”.
A similar description might apply to western journalism today, as it navigates twin revolutions:
technological (the internet) and political (populism).
The “worst of times” aspects are obvious. During the last decade the media has faced a nasty
economic shock, as its 20th century advertising and business models have been upended by digital
platforms. Consider, for example, traditional US newspapers. In 2006 these generated $49bn in
advertising revenue, says Pew Research Center, after several decades of rising revenues. Today,
revenues have been cut in half as advertisers move from print to the digital world, including
not just new rivals (such as news and information website, Axios) but, most crucially, to
platforms and search engines. Pew calculates that platforms such as Facebook, Google, Twitter
and Amazon are grabbing two-thirds of all advertising dollars.
Newspapers have tried to offset this by moving online and boosting subscription revenue. For
some, it has worked. But US printed circulation has halved from a peak of about 60m in 1990 to
nearer 30m today and, while the digital consumption of news has soared, the field has become
increasingly crowded. Unsurprisingly, that has sparked a vicious shake-out of labour — and cut
the workforce from about 70,000 in 2008 to nearer 40,000 today.
In addition to that long-run economic shock, newspapers have faced a political and social shock,
too. Not only have journalists been labelled “the enemy” by President Donald Trump, but their
credibility among voters has also been crumbling.
Take a look at an annual poll conducted by Edelman, the public relations group. A decade ago,
when the financial crisis hit, the mainstream media were held in relatively high regard in the
western world. Thus, while public trust in institutions like banks and government collapsed in
2009 and 2010, media trust was initially stable.
Three years ago, however, trust in the media declined too, leaving it close to the levels for
bankers. This was partly because the rise of social media created a mood of empowerment among
consumers, prompting them to trust their peer group, rather than “experts”. One striking
development in Edelman’s 2017 survey was that more western world respondents said they trusted
social media and “owned” media (ie corporate websites) than traditional journalism.
Another factor behind this has been the deliberate campaign by Mr Trump to erode media
credibility with a stream of derogatory attacks sent directly to his followers, thus bypassing
traditional journalism channels. The sheer volume, at all hours of the day and night, of his
aggressive tweets, for example, has left many areas of the media feeling destabilised and its
executives defensive.
As we move further into 2019, however, it seems that the picture could be changing; or, more
specifically, after the initial sense of shock from the technological and political revolutions,
the media industry is not just adapting, but rallying too. This year 65 per cent of people in
the US and Europe said they trusted traditional media, twice the number who trusted social media
(and slightly above the level of trust in search engines). This is the biggest gap between trust
in social and traditional media seen, and comes as 73 per cent of respondents said they worried
about “fake news”.
Meanwhile, the level of “engagement” with news has jumped an astonishing 22 points from 50 per
cent to 72 per cent, with a particularly stark rise among US and European women.
Demonisation by Mr Trump and other populist leaders has proved to be an effective marketing device
To be sure, this is unevenly spread: in the US trust among Democrats, for example, is dramatically higher than among Republicans (69 per cent and 33 per cent, respectively). There is also an intriguing gender split. The Edelman data suggest that women are more engaged than men. Moreover, there is little sign that those readers who are deeply disengaged and actively hostile to the mainstream media will shift their position soon — least of all given sniping from politicians such as Mr Trump.
As a cynic (or critic of the media) might observe, this is only one set of findings. But it seems to indicate bigger trends. The recent wave of social media privacy and manipulation scandals has left many users disenchanted with such platforms.
And while the early political attacks on the media sparked a defensive, introspective mood, they now appear to be galvanising the industry into more confident action. Consumer support has risen accordingly. Over the past year publications such as the New York Times, Washington Post, Wall Street Journal and, indeed, the Financial Times have seen sharp rises in online subscriptions and circulation.
There has been an explosion of experimentation with new forms of journalism, such as podcasts, for example. Indeed, if you were to judge the state of the media world from its wave of investigations, industry experimentation and the wider public consumption of content, some might argue that this is actually the “best of times” to be a journalist. The sense of mission has rarely been more intense.
Will this translate into a healthy business model? Some publications, such as The New York Times and the FT report that surging digital subscriptions are driving revenue growth. Others, like The Washington Post, are more coy about their revenues, partly because they are being supported by quasi-philanthropist owners. Still others, such as The Guardian in the UK, are tapping into the wave of consumer loyalty, by asking readers to make donations.
One thing that is clear is that the twin technological and political revolutions are unlikely to end soon. At the same time, the demonisation by Mr Trump and other populist leaders of traditional media has proved to be an effective marketing device — and rallying call — for the cause of journalism. Therein lies the paradox of 2019 and a sign that this story has quite a long way to run.
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The age of scepticism: from distrust to ‘deepfake’
‘How can we persuade people who don’t believe anything? That’s the question for our times’
It’s hard now to fathom how naive we were in 2016. That spring, I was bowled over when I first saw the Leave campaign’s slogan for Brexit: “We send the EU £350 million a week — let’s fund our NHS instead.” I thought it must be mostly true, because you couldn’t just stick a false slogan on your campaign bus, could you? Hardly anyone then had heard the term “fake news”.
Don’t worry, Brexiters: I’m not trying to relitigate the 2016 referendum. Rather, the point is how our relationship to words has changed since. Time moves faster nowadays, as technological change speeds up. In just two years, most people have learnt to distrust words from anyone outside their immediate circle (which is bad news for those of us in the word-selling business). If Brexiters made their NHS promise today, few would believe it. But once everyone has become sceptical, how do they inform themselves about the world?
In 2016, most people already distrusted the media and political parties. Yet many still believed Facebook friends and populists. Donald Trump, in particular, posed as a truth-teller. When he announced his presidential candidacy by warning against Mexican “rapists”, he was deliberately breaking a speech taboo: he was signalling that he would say things that “elites” were hiding, and that like all populists, he would offer entertainment. In his words: “I have the best words.”
But since then, even populist words have been devalued. Only 19 per cent of Americans now consider Trump “a source of unbiased and trustworthy information”, said a USC Dornsife/Los Angeles Times poll last month. The figure was just 55 per cent even among likely Republican voters. Trump’s supporters commonly say they like his policies but wish he’d tweet less. Moreover, he has got boring. No entertainer can sustain a two-year, 24-hour, all-media show. His views on attorney Robert Mueller’s “WITCH HUNT” are getting old.
Meanwhile, in Britain, Brexiters’ words have collided with reality: it turns out the UK can’t take back control even of the Tory party. Similarly, Italy’s populist government is demonstrating that borrowing more money doesn’t make everyone richer; it simply raises borrowing rates. Just as populists are now distrusted, so too is all information on Facebook, after the panics over fake news. “Use of Facebook for news has been falling since 2016 in many countries,” including a 20-point slump among younger Americans, says this year’s Reuters Institute Digital News Report.
The only words that many people now believe are those from close friends and relatives. Peer-to-peer text messages will probably help decide November’s US midterm elections. Especially in developing countries, people increasingly get news from the encrypted messaging app WhatsApp (owned by Facebook). On WhatsApp, you can only message contacts whose phone numbers you have, so it feels like a private conversation between friends, a more intimate circle than Facebook.
In Brazil — which leads the world for distrust of online information — almost all internet users have WhatsApp. Nearly half use it for news. But a lot of the “news” their friends send them is fake. Ahead of Brazil’s presidential run-off on October 28, Brazilian WhatsApp is full of false rumours: for instance, that Manuela d’Ávila, running mate of socialist candidate Fernando Haddad, was involved in last month’s stabbing of far-right candidate Jair Bolsonaro.
If you hear a story like this from a friend, it becomes credible. Even a crudely edited video of Brazil’s former president Lula da Silva supposedly making unpatriotic remarks went viral, though almost any teenager could have made it. Bárbara Libório, of fact-checking company Aos Fatos, warns that many Brazilians will cast their vote “based on information that is untrue”. In Brazil or elsewhere, there will be a 2018 or 2019 WhatsApp political scandal to match the US’s Facebook scandal of 2016. Then, once people realise their friends have been spamming them with falsehoods, even the most intimate relationships will be contaminated.
A communications adviser told me that clients now ask him: how can we persuade people who don’t believe anything? That’s the question for our times. His answer is: give them experiences. Let them test-drive the car, or try the perfume, because people still believe the evidence of their senses. After all, the popular gold standard of truth is, “I saw it with my own eyes.” Eyes matter all the more as the once wordy internet becomes dominated by videos. After 20 years of using laptops chiefly to send text, people now use mobile phones chiefly to send images. Younger generations are shunning Facebook in favour of image-based Instagram (also owned by Facebook) and Snapchat.
But they won’t trust their own eyes for much longer. Soon, manipulators using artificial intelligence will produce “deepfake” videos that look entirely authentic but aren’t: a speech, say, by a presidential candidate, ostensibly in his own voice, confessing to paedophilia.
Deepfakes could plunge us into an era of total scepticism. Then the issue will be the one identified by Umberto Eco more than 20 years ago: “The genuine problem . . . does not consist of proving something false but in proving that the authentic object is authentic.” Nobody will be sure what is real. Many won’t even care.
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No sector is immune from disruption and market leaders have to stay aware of industry changes in order to react quickly and take advantage of new opportunities.
AI to electric engines meld with internet infrastructure to open new possibilities
The Big Read Retail & Consumer industry
Big brands turn to big data to rekindle growth
Criticised for being slow, consumer goods groups are using new technologies to fend off challengers
Most foodies and wellness junkies have probably sampled kombucha, eaten jackfruit and tried CBD
oil in the past few years as these once obscure products infiltrate the mainstream. But the
truly hip will soon move on to sipping on pea milk, taking gaba supplements, and smearing their
faces with bakuchiol.
Those are predictions from Black Swan, a London-based start-up that hoovers up data from social
media, online forums, product review websites as well as other sources and then analyses it to
divine what consumers want. Its artificial intelligence software purports to sift signal from
noise to figure out which early trends are destined for mass adoption.
Black Swan has signed up 16 big consumer goods companies as clients in the past six months alone,
including PepsiCo, Danone and McDonald’s, putting it on track to double revenue this year to
reach £30m.
It is growing quickly because it offers something the leading consumer goods companies, whose
revenue growth has slowed to a trickle in recent years, desperately need: an understanding of
what fickle shoppers will buy in the future, as well as insights into how to best pitch products
to them.
“It is like getting a crystal ball that we all have wanted for the past 20 years,” says Elaine
Rodrigo, head of consumer insights and strategy for French yoghurt maker Danone.
Black Swan is one of a range of tech companies that are disrupting how market research is done
inside the very industry that invented the discipline in the 1920s. From its early days,
when Procter & Gamble sent staff out to quiz American housewives about how they cleaned their
homes, cooked meals or did laundry, the field has evolved to help consumer goods companies
decide what products to make, as well as how to price and market them.
For all their record of product innovation, the industry is now trying to shake off the
impression that it has become slow, bureaucratic and unimaginative. The makers of well-known
foods, drinks and household brands have faced generally slower growth since 2012, which has made
it clear that the big companies can no longer dictate consumer tastes as easily as they did in
the past.
Worse, they are often caught off guard by trends such as veganism or high-protein “Paleo” diets
and then have to scramble to respond when new brands start to take market share. Their complex
supply chains, internal processes and adherence to quality and health standards also means that
launching new products often takes a year or more, while a challenger brand might only take
months to come to market.
Critics point to how the emergence of HaloTop, an American no-sugar, low-calorie ice-cream,
surprised Unilever and Nestlé, or how meat jerky has taken off at the expense of traditional
crisps.
Now some in the industry are betting that modernising market research can rekindle
growth. Leading consumer goods companies want to upgrade decades-old techniques, such as
consumer surveys, focus groups and retail sales data, which are seen as too slow, too expensive
and often incomplete.
Enter start-ups such as Black Swan. They are using newer methods including
online polls that can be done in a few days instead of taking the usual four-six weeks. One such
provider, Zappi, has signed up dozens of consumer companies to its self-service platform. It
allows marketers to set up their own studies and quickly test ideas with panels of people
selected by age, income, or location. Other start-ups, such as London-based Streetbees, allow
companies to conduct one-on-one video interviews via smartphone that can be arranged at a
moment’s notice with consumers anywhere from Moscow to Oregon.
Then there are more data-rich, artificial intelligence tools that bring new quantitative rigour
to a once fuzzy field. Examples include Signals Analytics, founded by two veterans of Israeli
military intelligence, and Tastewise, a platform that analyses menus, blogs and online recipes
to predict food trends.
The start-ups are challenging the leading market research agencies that have long worked for the
big consumer goods groups, namely WPP’s Kantar, Ipsos and Nielsen. The old guard all saw their
revenues and profits fall last year, in large part because of how technology is changing their
businesses.
“In the insights industry, there is a real gap between what has been traditionally available and
what we need today,” says Tim Warner, who heads PepsiCo’s consumer and market research in Europe
and parts of Africa.
“There is a real burning platform feeling now,” he says, referring to a famous Nokia memo warning
about disruption from the iPhone. “People want faster, more precise tools. The old methods that
were invented before the digital era are not agile, precise, and predictive enough for our
current needs.”
The stakes are high for consumer goods giants because online shopping and social media have
lowered barriers to entry and eroded the advantages that used to come with scale. New upstart
brands and local players have flooded into every category from beer and ice-cream to cosmetics
and razors, positioning themselves as either more authentic, healthier or more environmentally
conscious than traditional brands.
As a result, average revenue growth at the top 30 global consumer goods companies fell to just
0.4 per cent annually in 2013-18, from 4.5 per cent for 2007-2012, according to Bain & Company.
Average growth in annual operating profits has halved over the same period.
In the US, large consumer goods companies have lost 2.4 percentage points of market share to
smaller companies and private label products since 2013, according to Boston Consulting Group.
Meanwhile, Unilever recently admitted it was losing share across about half of its business,
with steeper losses seen in packaged foods compared with household goods and beauty products.
The changed reality prompted Jorge Paulo Lemann, one of the billionaires behind investment
firm 3G Capital, which owns Kraft Heinz and Burger King, to liken himself to a “terrified
dinosaur”. “We bought brands and we thought they would last for ever,” he said at an investment
conference last year. “Now, we have to totally adjust to new demands from clients.”
After a decade when the industry has been dominated by the intense cost-cutting
ethos pioneered by 3G, the search for quicker and better consumer insight is part of a new
emphasis on investment. “In the past, data and insights were often seen as a cost centre and
targeted for cuts. But now it has become a strategic asset,” says Mr Warner.
PepsiCo started working with start-ups and tech providers last year as it looked for better ways
to understand its customers. The huge snack and soda group behind brands from Doritos to
Gatorade took nearly nine months to figure out what it really needed, and realised that no one
company offered a solution off the shelf.
So instead PepsiCo decided to work with five start-ups to build a set of tools knitted together
in a proprietary platform that could be used by anyone at the company to spot trends earlier and
quickly test out their ideas for products, packaging and advertising messages. It dubbed the
system ADA, after Ada Lovelace, a Victorian-era scientist who is credited with writing the
world’s first computer programme.
In addition to Black Swan for trend-spotting, Pepsi is also working with Zappi for quick polling
and testing, and VoxPopMe to collect interviews with consumers. Two other London based
start-ups, Been There Done That and Discover.ai focus more on product positioning and marketing
messages.
One of the first projects to use Pepsi’s new market research tools was the healthier snack brand
called Off the Eaten Path, which uses vegetables such as beans and peas to create crisps with no
artificial colours or preservatives. When it wanted to launch a third product for the line last
year, ADA identified seaweed as a trend ingredient that would attract health-conscious
consumers. The new snack, rice and seaweed crispy curls flavoured with sweet chilli and lime,
hit supermarket shelves just under 10 months later, which is relatively quick for a new product
launch at a big food company.
This year, PepsiCo used the tools to create two flavours that aimed to modernise the Walkers
crisp brand. Ingredient and flavour options were ranked according to the volume and quality of
online conversations, as well as the potential for scale. They were then mapped against other
sources of data to refine the best flavours for launch. The result: the BBQ Pulled Pork and
Walkers Spicy Sriracha flavours.
“ADA allows us to get input from consumers really rapidly, in a more iterative way than in the
past,” says PepsiCo’s Mr Warner. “When you’re developing a product, its packaging and
advertising, you can test all of it, get really quick consumer input, or validate an idea, which
helps guide decisions around what we do and don’t do.”
While such product testing may sound simple, it was not common practice among big consumer goods
companies. Instead of being a central part of the innovation process, market research was often
a separate department that did not interact regularly with sales people or brand managers.
Instead of delving deep into consumers’ minds, people there spent much of their time writing
briefs to commission external groups such as Kantar and Ipsos to go out and research the ideas
that came from the marketing side.
“Up until relatively recently, market research was all about mitigating risk of the decisions
that the business had already made,” says Stan Sthanunathan, who has led consumer insights at
Unilever since 2013. “Today our role has changed to anticipating consumers’ desires and creating
their needs.”
For its part, Unilever is not solely relying on start-ups. About five years ago, the company built a system to listen to consumers via social media, telephone helplines and rating sites, and today it has more than 30 teams of people doing such work in various markets. They monitor online chatter and feed back to brands on what they are picking up, but can also be commissioned by other parts of the business to monitor consumer perspectives on a specific issue.
Unilever has about 700 people working in market research. Although that number has shrunk by a third in the past four years, Mr Sthanunathan says his staff were producing more analysis than ever before because the new tools were more cost effective.
For example, instead of commissioning an “in-home use test” that follows 400 people using its Cif kitchen cleaner and a competitor product, Unilever can now just mine product reviews on Amazon to compare Cif’s product performance and that of its peers.
Another new tool at Unilever is called Idea Swipe, which was inspired by the dating app Tinder. It puts a new product idea in front of consumers on their smartphones — say, for an ice-cream flavour incorporating breakfast cereals — and asks them to swipe right if they like it and swipe left if they do not. The company says the app delivers better quality data more quickly than older survey techniques, and it has tested about 5,000 ideas in more than 25 countries since it was launched a year ago.
It is still too early to tell whether the adoption of digital tools to predict consumer trends and improve marketing will really be enough to help spur faster growth in the sector. Bain & Company says organic sales growth at the top 30 global companies hit 2.9 per cent last year — the best performance since 2013 — as the global economy expanded. François Faelli, who heads Bain’s consumer practice, says the big players “have upped their innovation game” and that it is now starting to pay off.
Others are more sceptical. Elio Leoni Sceti, a veteran industry executive who last year co-founded The Craftory investment firm to back challenger brands, thinks that big companies remain too disconnected from consumers. Their supply chains are slow and they remain too focused on physical retail channels instead of online, he says. Nor do their brands have the authenticity or sense of mission that power the newcomers, like the Craftory’s recent investment in TomboyX, which makes body positive underwear for people of all sizes and gender identities.
“Even if the big guys get good consumer insights, they often don’t listen to them,” says Mr Sceti.
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Smart companies will use innovation to augment rather than replace human intelligence
For the first 250 metres it all goes well. I am in Singapore, in the back of a prototype
driverless car, gazing at the other side of the road. Then our car decides to veer slowly into
the path of the oncoming rubbish truck.
Our emergency driver lunges for the wheel, yanks us back to safety, then tells me the game plan.
This isn’t a vanilla driverless car, he explains, it is a do-it-yourself driverless car, made
with off-the-shelf technology, and the goal is to get it on the road as fast as possible.
But the car, which works a treat for the rest of the day, is only step one. Step two is to fully
automate Singapore’s economy. Step three is to put all citizens on universal basic incomes. Step
four is to use facial recognition technologies to close off the city to unwanted foreign
migrants. It is a straight line, in other words, from the technological to the economic to the
social, then the political.
If the 2010s were the decade of the unicorn — the mythical beast of the $1bn tech start-up — the
2020s appear poised for a unicorn stampede. With Timandra Harkness, the co-presenter of our BBC
Radio 4 show FutureProofing, I have spent the past three years scanning the horizon for what is
coming in terms of disruptive technologies. The cupboard isn’t bare: eggless synthetic biology
scrambled eggs, stem cell rejuvenation, weaponised nanobots, the colonisation of Mars,
passenger-bearing mega-drones and brain-to-brain communication systems.
Across disparate fields, from artificial intelligence to robotics, from 3D printing to
nanotechnology, from genetics to quantum computing, a pattern is emerging: technological
developments are starting not just to accelerate but to amplify one another.
They are poised to reshape the business landscape. The core capacity we are going to need to
survive, says Astro Teller, the so-called Captain of Moonshots at X, Google’s research unit, may
be dynamic stability — the velocity to stay upright.
The question is: What are the problems we are looking to solve?
But as the rubbish-truck economy of Henry Ford’s fossil-driven mass production starts to yield
to the age of the algorithm, what is the impact on business and society? Where does this
rollercoaster look like it is going to take us?
My hunch it is not just speed that matters, it is direction. If technology is not the answer but
the amplifier of intent, there is a primary question we have to answer: What are the problems we
are looking to solve?
It looks like there are two different directions emerging. We have the option to prize artificial
over human intelligence, to deploy technology in a centralised model that solves for shareholder
value at the expense of jobs, that automates — according to projections by University of Oxford
academics Carl Benedikt Frey and Michael Osborne — 47 per cent of US and UK white-collar jobs by
2035.
This would hit national balance sheets with the double whammy of lower tax revenues and surging
welfare costs, and set the stage — with increased inequality and the perception of an economy no
longer working for the many — for broader support for challenger populist movements.
But there is also another option: to do the opposite, not to replace human intelligence but to
augment it. Go back 1,000 years and the means of production was the land, and the barrier to
entry was the wall. For the past 200 years the means of production has been the factory, and the
barrier to entry the capital to own it. But with this new set of technologies, from APIs, the
cloud and open data, to the sharing economy and micro-printing, the barriers to entry are
dropping fast.
The potential is there, to unlock a new wave of cognitive surplus and put power in people’s
hands to drive innovations across the challenges that confront us, from distributed solar energy
to data-driven banking for the unbanked, from 3D-printed ultra-low-cost housing to sensor-based
micro-irrigation for drought-resilient agriculture.
What does real boldness look like for me as we head into the 2020s? It is boldness not just of execution but of intent.
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China and new tech generation shake old notions of good branding
AI to electric engines meld with internet infrastructure to open new possibilities
At first glance, global brands are in robust health, with the top 100 rising in combined value
to $4.7tn and US technology companies led by Amazon, Apple and Google spanning the globe. But
there has rarely been more to worry those who own and invest in consumer brands.
The most unsettling event this year for branded goods companies and marketers was the $15.4bn
impairment of Kraft Heinz assets in February. Reliable US Kraft food and drink brands such as
Velveeta and Kool-Aid turned out to have little appeal to those who are not American baby
boomers.
This is not to say that US consumer brands are fading; quite the opposite to judge by the 2019
list. Generation Z brands such as Netflix and Instagram, founded in 1997 and 2010 respectively,
leapt up the ranking, while Google and Facebook continue to occupy the top 10.
But a large part of the value of a brand is endurance. The value of the name spans generations
and can be relied upon to pull consumers. “If you think about it, people do not change their
habits that much,” Warren Buffett said earlier this year, and he carefully built Berkshire
Hathaway’s investments around long-lasting brands such as Coca-Cola and Geico.
Judged by that measure, old brands are under stress. The best are rising in value but their ranks
turn over faster than before, with new entrants in technology and luxury pushing out stalwarts.
“A diamond is forever” was the inimitable 1948 De Beers advertising slogan — but a brand is not.
Globalisation is one reason for brand volatility. All except three of the top 20 in the BrandZ
ranking are from the US, and the continent’s brand hegemony over Europe is not threatened. But
China’s transition into the world’s biggest market for online retailing and service is shaking
it.
Alibaba and Tencent are top 10 brands, and others such as Xiaomi and Meituan have entered the top
100. Chinese companies have shown they can create new services, rather than just adapting US
innovation, and they are starting to become global brands, with 15 Chinese brands in the top
100.
A second, connected, factor is technology. Rapid innovation in consumer technology and the
internet has shaken up the brand rankings over the past two decades and created such powerful
entities in Amazon, Apple, Google and Facebook that there are calls for an antitrust response.
But technology does not stand still — fresh developments from artificial intelligence to electric
engines are combining with global internet infrastructure to open new possibilities in many
fields. Uber is advancing from ride-hailing to working on providing vertical take-off flying
taxis in cities.
A third reason is generational change. Both the millennial generation and younger consumers seek
different qualities in consumer goods and services than the baby boom generation, leading to
rapid brand upheaval in sectors from food and drink to travel and beauty.
That is obvious both from the troubles of Kraft Heinz, in which Berkshire has a stake, and the
ascendancy of Gen Z brands such as Instagram. A mobile photo sharing site would not have been
possible until recently. Instagram was bought by Facebook for $1bn in 2012, but its brand value
alone is now estimated at $28.2bn.
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Innovative organisations are empowering employees to make critical decisions without the need for rigid hierarchies. Teams need common sources of accurate information to adapt in fast-changing industries.
The fitness brand boss listens to her clients and staff to build relationships
Opinion Management
This is change management — without all the risk and upheaval
Experiments allow leaders to unleash fresh thinking, without a massive redesign
Many leaders who sit at the top of large departments and organisations are hungry for innovation.
But they are often uncertain where to start and it can be tempting to avoid the risk associated
with change by finding all the reasons why it cannot happen.
But Oliver Burrows, chief data officer at the Bank of England, is not one of those executives. He
knew, as many leaders do, that the workload of his department would increase, but resources
would not.
As the post-2008 financial crisis regulatory environment demanded more data collection, greater
detail and more analysis, his team of 150 risked being swamped. Just making people work harder
was not a sustainable strategy so he needed to develop ways to cope with the increased demand.
Like many large, traditional organisations, his department was hierarchical and complex. The easy
assumption would have been that significant change would be difficult, political and perhaps
more trouble than it was worth. But Mr Burrows was determined to try.
“When I dug into the governance, I discovered that, at my level, we have quite a lot of freedom
to decide how to achieve our objectives,” he says. “But it can be a social norm not to use it.”
What Mr Burrows did not do was to map out a new department structure or summon his leadership
team to a lavish off-site. Instead, he was excited by the idea of loosening the hierarchical
culture of his department and developing small experiments that the whole team could try in
order to create smarter ways of working.
Mr Burrows put a call out to his team. This was an experiment in itself — and one that revealed
far more appetite for innovation than he had expected. People were excited by inventing change,
rather than having it thrust upon them.
Together, the volunteers mapped out 12 experiments, some of which worked and some of which, Mr
Burrows shrugs, did not. “I made the decision to open up our senior management meetings to
anyone who wanted to sit in,” he says. “At first, lots turned up but over time they drifted off.
Turns out, it wasn’t all that exciting.”
Other experiments were more successful. “We also made the annual appraisal process a lot more
participatory,” says Mr Burrows, “that worked really well.” Then there were “some technical
coding projects” that Mr Burrows says no one in the management team would have thought of, or
been brave enough to try. “They just tried them and they worked,” he says. “I’m really proud of
that. Everyone was.”
But the “big win” was sourcing strategy ideas from the bottom up. “In the past, people thought
strategy was the preserve of management types — which meant not them. But there were just so
many good ideas out there.”
Without a massive, expensive, bold departmental redesign, Mr Burrows had liberated significant
creativity among his team. He had found new ideas and new sources for ideas, producing change
while conducting business as usual.
Yet when I suggested a similar process to an executive vice-president at a FTSE 100 company, he
looked at me aghast. Experiments? Asking people for help? In his eyes, that would be an
expression of weakness, admitting that he did not have all the answers. But of course, he did
not have all the answers and the hierarchy in his head stopped him from reaching into his
organisation to find them.
For years, management theorists and consultants have created such sturm und drang around change
that some managers have become averse to the risk it involves.
But “experiments” sound less risky. They can be low-cost and quick, and even those that do not
deliver magnificent breakthroughs reveal aspects of the organisation that may have been
previously misunderstood. Even more important, experiments signal an openness to change which
may release fresher thinking.
It is easy to fall back on the excuse that nothing can be done. In a separate instance, a friend
came to me for advice about a colleague whose behaviour routinely breached ethical guidelines.
Over time, this disturbed her and she considered leaving the company. So I challenged her: what
had she done to improve the situation? She was a leader, surely she could try one experiment.
When next I saw her, she had considered the possibilities and tried one. The result? She was
promoted to chief operating officer.
It struck me then, and it still strikes me now, how all leaders have power but very few know how
to use it. People with ideas but no power lurk restless throughout organisations, but people
with power and no ideas frequently sit atop of them. Nothing meaningful happens until the two
dare to collaborate. Whoever takes the first step is the real leader.
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What kind of superhero would succeed as a corporate leader?
Collective strength and cohesion of the whole team is the true organisational superpower
“You almost need a Marvel superhero to run the bank,” one analyst commented last week after John Flint was suddenly ousted as chief executive of HSBC.
It made me wonder: when senior executives gather, do they speculate about the superpower they would most like to possess? And if headhunters were to prepare a shortlist of superheroes for the next big corporate job, which ones would they try to tempt away from saving the world with the promise of an annual trip to Davos and a benchmark-busting long-term incentive plan?
The enhanced abilities of some superheroes and supervillains come straight from leadership handbooks.
Inspirational Avenger Captain America is an expert military tactician, blessed with extraordinary agility, a quality much sought after in would-be corporate leaders. Evil robot Ultron boasts strength, speed and stamina to overcome the energy-sapping long-haul travel schedule that reportedly helped do in HSBC’s Mr Flint. (Ultron can also “make calculations with superhuman speed and accuracy”, according to one fan site, which might recommend him for chief financial officer if the top job is unavailable).
Chief executives are always receiving glib advice to spot patterns in weak signals, so Spider-Man or Black Panther’s powers of “precognition” would come in handy. Such traits would make it easier for a new HSBC chief executive to monitor a global company with nearly 250,000 staff.
Any chief executive would envy The Thing’s rocklike skin, an important defence against the rough and tumble of volatile markets, not to mention the brickbats of analysts and the media. Just occasionally, after a particularly poor quarter, they may even want to draw on the Invisible Woman’s signature superpower or the shape-shifting abilities of anti-hero Loki.
Then there are the superfluous powers. Some superskills — I’m thinking of Ant Man’s ability to communicate telepathically with insects or even Spider-Man’s web-shooters — are of less use in the weekly strategy meeting.
Others are positively counter-productive. There will be times when, as the boss, you might yearn for the retractable adamantium claws of Wolverine, if only to put a bit of force behind your often ignored commands. You may even wish to fix colleagues with the hellfire of a “penance stare” like Ghost Rider, who visits his wrath on the wicked like an overzealous compliance officer.
A gentler style of management is generally preferred in the boardroom these days, though. Staff may whisper “you wouldn’t like him when he’s angry” about the ambitious and seemingly mild-mannered middle manager, but Hulk-style vengeance-seeking tends to disqualify candidates from the leadership fast track.
As for “genius-level intellect”, a quality shared by many Marvel characters, this is more of a handicap to achieving high corporate office. EQ is as important as IQ for the 21st century chief executive. John Cryan, the ill-fated former chief executive of Deutsche Bank, was noted for his “enormous brain” — an attribute shared with Avenger Iron Man — but he could not think the German lender out of its predicament. Mr Flint himself was “respected for his quiet intelligence”, according to a damning-with-faint-praise note by the Financial Times Lex column.
Let’s face it, most corporate bosses fall into the category of more minor characters listed on Marvel’s official website, which include an Administrator and “the woman known as Appraiser”, whose less-than-thrilling role seems to have been to determine the value of mutants. A job at one of the Big Four audit firms awaits her.
Similarly, everybody knows a long-serving chief executive who has “performed his duty for untold millennia” like the sorcerer called Aged Genghis, whose mind was “long ago consumed by mystic forces”. It is to protect against such superannuated superheroes that the UK governance code suggests a nine-year limit on directors before they are deemed to be no longer independent.
In truth, though, while the analyst’s comment was a throwaway line, it says more about the unmanageably broad scope of some modern multinationals than it does about the dearth of executives with the superhuman skills to lead them.
The collective strength and cohesion of the whole team at the top is the true organisational superpower. Irrespective of title or place in the nominal hierarchy, teams perform better when the chief executive defers to fellow executives best-equipped to tackle a particular challenge. Marvel’s fantasy world has a model and a motto for this, too: Avengers, assemble!
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Melanie Whelan: Thinking ahead to stay at the front of the pack
The fitness brand boss listens to her clients and staff to build relationships
In the business of fitness, exercise fads come and go.
The way to make sure that your company endures, says Melanie Whelan, chief executive of cycle
fitness brand SoulCycle, is to tap into basic instincts.
“What we give you is a place to cry and to yell, and to be in the dark and go inside yourself,
and that is ultimately pretty tribal,” she muses.
SoulCycle, founded in 2006, was the first in a wave of cycling workout companies. Its cycling
studios attract celebrity clients and Wall Street bankers. In a darkened room, 50-odd cyclists
pedal to thumping music for up to an hour while listening to an instructor, who acts as part
motivational coach, part DJ.
Most customers are women — but Ms Whelan is one of few female bosses in the fitness industry.
“I’m looking forward to the day when the times have shifted,” she says, remembering her first day
on the engineering course at Brown University when she was one of 10 women in a room of 150 men.
“The only way through it is through it, so I continued to raise my hand [in class],” she says. A
banner on her office wall reads “Figure It Out”.
As cycle fitness has boomed, new contenders, notably Peloton, have entered the market. Peloton
sells bikes for home use with live or on-demand online workouts. Ms Whelan has had to evolve
what SoulCycle does.
Data from Second Measure, which analyses credit and debit transactions, shows that despite
SoulCycle’s early gains, recent growth has slowed. In the first quarter of 2017, SoulCycle had
three times as many customers — people who made a purchase within the period — as Peloton. In
the first quarter of this year, Peloton had 2.4 times as many as SoulCycle.
Peloton, which achieved a $4bn valuation in its last funding round, is pulling away from the
pack. This month it confidentially filed documents for an initial public offering in New York.
Ms Whelan, who is 41 and rides in SoulCycle classes four to five times a week, insists that
despite speculation that Peloton is eating into its market share, SoulCycle is still a “high
growth” company. It opened seven studios last year, and hosts about 20,000 riders a day.
It is, she says, more holistic than its rival: “[Peloton] creates an in-home end-use, individual,
hardware, software fitness experience. What we do is bring communities together around a shared
experience. We create real love and passion.”
Ms Whelan does not rule out SoulCycle producing its own in-home product, however, “Watch our
space,” she says.
In October last year she launched a partnership with Apple Music along with a SoulCycle festival,
where a mass of cyclists pound bikes to live music performances. A retail arm, which started as
an “afterthought”, is now one of the fastest-growing parts of the business.
But SoulCycle’s aborted IPO has encouraged doubters. Last year the company quietly retracted
documents submitted in 2015 for a listing. Ms Whelan denies that this was a negative move.
“Our IPO filing was very opportunistic. The capital market was really hot for consumer brands.
But at the end of that summer there was a market condition shift. And because the company is
profitable, because our shareholders are long-term thinkers, and because we have the balance
sheet to execute our strategic plan on our own, we just decided the timing wasn’t right to go
public.”
Ms Whelan says an attitude of “reckless optimism” has stood her well — though that has not always
been the case. In her first management job at gym group Equinox, which bought SoulCycle in 2012,
she was asked to step away from managing three profit and loss accounts handled by older
employees.
“I came in and wrongly assumed that my job was to have an opinion on their businesses.” Instead,
she realised that what she should have done was “listen and build relationships”, something she
now does as much as she can either through WhatsApp channels with employees or by working at the
reception desks in SoulCycle’s studios. “You’ve got to meet people where they are,” she says.
Ms Whelan was appointed SoulCycle’s CEO after three years as chief operating officer. She took
over from the three founders, something that can be a fraught process, but Ms Whelan says hers
was a staged and smooth progression.
“We had a year together where they were chief creative officers and I was CEO. That was 2016 and
we met in 2008, so we’ve known each other for eight years and been working together for five.”
She says they had been so much in “build mode” that all she had to do was “continue to grow”.
A big challenge was changing her perspective from operations to big-picture strategy: “The
biggest growth hurdle for me [was] to let go of the day-to-day business and start thinking one,
two, three years ahead.”
The numbers suggest she has succeeded. When she took over as COO there were six SoulCycle
studios, all in New York. Now there are more than 90 across the US, Canada and as of June, the
UK — with plans to expand further in the US and Europe this year.
Her other challenge was appearing credible despite her age — she took over at SoulCycle when she
was 38. She sought advice from other CEOs such as AOL’s Tim Armstrong and Randy Garutti of Shake
Shack. She also made sure to overprepare, a tactic she describes as “a weapon”.
SoulCycle is, Ms Whelan claims, a hospitality business more than a fitness brand and so she
prioritises meticulous and systematic customer research. New locations are decided by listening
to customers. SoulCycle analysis teams are sent in 12 months ahead of a potential market launch
to monitor everything from traffic patterns to music tastes.
But one thing she will not change is the check-in process for classes, which she refuses to
digitise. “We will always do it off a list so that we can build a relationship with you and ask
you questions. It’s people that people are looking for in this digital age,” she says.
Three questions for Melanie Whelan
Who is your leadership hero?
My parents showed me how to live and work by example. My dad was an entrepreneur, founding
several companies in the service industry while I was growing up, and I remember my mom
running the company payroll from our living room floor.
If you were not a leader, what would you be?
Nothing makes me happier than singing in my car, my shower or a SoulCycle class, so maybe a
pop star. But for now, I’m perfectly happy with my day (and night and weekend) job.
What was the first leadership lesson you learnt?
Listening is the most undervalued leadership skill. Whether it’s with your teams, your
customers, your riders or your advisers, you should always make the time and space to listen
to those around you. Great ideas come from everywhere.
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