WBD here I come!!

Yesterday I got an unexpected call from Germany with the incredible news that I was granted a sponsorship in order to attend the 13th World Business Dialogue. As the several posts about different topics in this blog were the reason for granting me the sponsorship, I decided that the most reasonable thing to do was to thank for it here, in my blog.

I am really looking forward to discussing all the topics in this blog (and many others) with students from all around the world. I'm sure that a fertile exchange of ideas is the best way to get to innovative solutions for complex problems. I want to be part of a global solution and this is a great opportunity to start walking seriously through that path.

Firstly, I want to thank the sponsors that allow people that can not afford the flight to the conference to attend it, making possible the intelectual and personal development of these individuals (including me!). Secondly, I want to thank the organizing team who dedicated long hours taking care of every detail in order to get important speakers, numerous sponsors and carefully preparing what I am sure is going to be an unforgetable experience.

Once again, thank you all!

Intrapreneurship: An interesting Trend

This is just a quick post about this attractive alternative to combine rigid, well-known structures with creative and innovative entrepreneurs. The idea is that big corporation have some people that work as entrepreneurs for them but they do not have to worry about expenses that does not have to do with the core of their business (administrative, legal, accountant, etc.) because the big company can deal with that plus the advantage of economies of scale.

In my next post, I will go a little bit deeper about this idea, but I believe that it is worth thinking about it as a possible alternative to give rigid corporations a doses of flexibility in order to survive (and be sustainable, ideally) in an ever changing environment.

I just want to leave you with the following extract:

September 30, 1985, interview with Stephen Jobs in Newsweek: "The Macintosh team was what is commonly known as intrapreneurship-only a few years before the term was coined - a group of people going in essence back to the garage, but in a large company".

I will enlarge this idea, shortly. Have a nice weekend!

Global Crisis, Local Effects: How does the financial crisis affect Argentina and other developing countries?

Note: this post was originally written for the World Business Dialogue official blog (not online yet, but I'll let you know when it is). That's why you may find it a little longer and more technical than usual posts.

We are all aware of the fact that the current crisis (probably the worst since the
Great Depression) started in the US financial market which is the center of a network of interconnected financial systems. As a consequence, the crisis spread rapidly and became global in nature. Nevertheless, the impacts and effects of the crisis vary from country to country because they have different institutions, economic structures, idiosyncrasies and histories which condition the macroeconomic outcomes. Today, I will discuss a little bit how the crisis affects developing countries in general and Argentina in particular.

To begin with, there is a fundamental difference in the way financial crises arise in developed and developing countries. In developed countries, they follow a classical Minskyan boom-and-bust cycle governed by endogenous recurring elements which are the agents’ risk perceptions and expectations (this model successfully explains how the current crisis was originated in the US). On the other hand, in developing countries, there is an important differentiating aspect which is that the booming cycle is not triggered by internal financial innovations. Instead, it is driven by macroeconomic policies that promote speculation and arbitrage between domestic and foreign assets. A typical example of these policies is the predetermination of exchange rates which triggered the Argentinean financial crisis in 2001. Nevertheless, we have already stated that the current crisis was originated in the US. As a consequence, this point is not strictly relevant for the current analysis but should definitively be taken into account when adopting measures towards global sustainability.

Another crucial aspect to analyze is the way the current crisis was transmitted from US to developing countries. Probably the main transmission channel for developing countries that specialize in manufacturing and services was the contraction of the world trade volume. Other countries that specialize in primary industries (such as Argentina with its cattle farming and agriculture) were strongly affected by the decreasing trend of commodities’ prices particularly since the end of the commodity price boom in the middle 2008. In the financial field, we have the combined effect of the clash of multinational companies that bring down stock prices all over the world plus the rapid spread atmosphere of uncertainty created by the partial failure of big investors’ portfolios. A last transmission channel for the crisis (not important in Argentina but with some relevance in smaller countries of Latin America) are the remittances. With this I mean that with a less active US economy, the money that immigrants can send to their families in their home countries decreases, consequently affecting these countries’ economies.

In addition, there is an essential difference between developed and developing countries concerning governments’ capabilities to conduct stabilization policies once the financial crisis is made evident. In developed countries, the crisis generally entails an increase in the demand for money and public bonds which are considered safer assets than risky banks, shares or stock options. Hence, the financing of public expenditure towards economic reactivation is promoted. Whereas in developing countries, the people do not consider their domestic public bonds and money as safe assets, so they demand developed countries’ money and bonds. Thus, the recent financial crisis led to an outflow of capital from developing to developed economies.

Particularly in Argentina, this decrease in domestic capital for economic reactivation and other public expenditures with more political objectives, led the government to take a set of decisions which exacerbated the effects of the crisis to fields outside the economic and financial ones. To start with, an increase in the withholding taxes to the agro industry provoked a massive strike causing the exportation of the national main industry to cease for months, entailing unfavorable effects for the whole economy and some social tension as well. Moreover, the public office in charge of statistics lied about the inflation index in order to maintain the virtual value of the domestic money but instead brought a popular disbelief in the official information. In addition, these policies and others were taken directly by the executive power (because they were considered “emergency measures”) and did not follow the conventional legislative path. This brought unreal division of powers, causing an institutional crisis and a regulatory environment too unstable to attract foreign investors.

In the near future, Argentina and many other developing countries have to work really hard on different aspects if they want to emerge in a relatively favorable position from this crisis. Among the most important aspects to work on, I would highlight the need to improve the external image by serious long term political planning and solid institutions that will attract foreign investors. Furthermore, in a world were the Keynesian concepts in contexts of uncertainty are regaining prominence, economies should rethink the relevance of domestic markets and regional integration (such as Argentina in the MERCOSUR). Nevertheless, in order to reach an effective integration, regional political conflicts must be overcome once and for all.

The Fun Theory

Throughout the different posts, we’ve been discussing different aspects of sustainability and the various stakeholders involved in it: different parts of the company, government, non-profitable organizations, suppliers, consumers, etc. One of the common conclusions of this analysis is that changes must be achieved. Some of these changes may be achieved through political regulations, others by managerial decisions and other by changing the mental models in the average consumer. Today, I want to share with you an innovative way of modifying people’s behavior called “The Fun Theory”.

"Fun can obviously change behavior for the better.
We call it the Fun Theory"

This is an initiative of Volkswagen in which people are made to choose the better alternative by making it more fun. For example, making it fun to take the stairs over the escalator; or making it fun to recycle instead of throwing bottles to the trash. The interesting thing is that in the last post I wrote about this company that makes people to recycle by paying them. Here people recycle because it is fun, another big engine of human behavior.

These two different points of view may be combined towards a way of modifying effectively the behavior of individuals towards collective sustainability.

One important difference between the two points of view is that giving people money will be effective with no dependence on time while the fun theory is highly time dependant. With this I mean that people will always need discounts in the grocery store while the “piano staircase” may lose its “fun component” with time. So, the fun theory must be dynamic and reinvent itself with time. Nevertheless, I believe that by combining the main characteristics of the two perspectives (and some more) true changes may be achieved.

If you are interested in continue reading about the fun theory, go to http://www.thefuntheory.com/

Getting People to Recycle

As I commented on the past post, I will present to you a brief case about RECYCLE BANK (RB) that changed the perspective about recycling with very good results in some US cities (probably other companies did the same in other parts of the world but I will refer to RB as representative of them all). It is important to remind the reader that when I mention “sustainability” in the blog it refers to a broader concept than just recycling, nevertheless, it is important to mention this case because some points may be extrapolable.

Before the RB concept, recycling was for romantics in the sense that the average family with three kids and both parents having a day job didn’t have time to think about it. So if you asked people that recycled why did they do it, the common answers mentioned the environment or future generations; something really deep and important, but definitively not for everyone. But there is a more important question. If you ask people that do NOT recycle the following question: “If I pay you a reasonable amount to recycle, would you recycle?” more than 90% say yes. As a consequence of this undeniable fact, RB acts as a link between four important players in this game. The city, that reduces garbage related costs and the recurrent trouble of waste disposal places. The treating plants, that increase their flux of product. Local businesses willing to enhance their environmental friendly image and people willing to get discounts in these businesses.

So, the system is pretty simple: depending on how much each household recycles, they get points to use as discounts in the businesses engaged. And the company gets money sharing the earnings with the city and with the treating plants. It’s easy, clear and people are getting paid to recycle.

How can the same thing be done towards true sustainability?

“I’ve got the power” by the Consumer

Starting a new year, same topic but a different subtopic. Today, I will like to talk a little bit about a very important (the most?) shareholder of every company: the consumer (note that “consumer” refers to goods’ consumers and also services’ customers). Each and every one of us acts like a consumer at some point. Keep in mind that every other shareholder of a company is also a consumer (of that company or of another one). So, what can we do towards sustainability from our “consumer” position?

First, we must realize that we are very powerful. Obviously, the power of the consumer varies with the industry we are talking about (recall Porter’s five forces), but, in general terms, the consumers are the ones that decide which companies will survive and which ones won’t. So, in an ideal world, we can choose to consume from sustainable companies and that will solve the problem. But, of course, this is completely utopic since consumers would need a lot of information in order to make the right choice (long term policies of the company, environmental care, developing plans) which is difficult to access or demands more time than what consumers are willing to spend. Therefore, there should be a way to motivate consumers to choose “sustainable products” when faced with a decision. (In the next post I will talk about how “Recycle Bank” faced this problem).

We learned in microeconomics courses that perfectly rational consumers (an idealized model) make decisions based on price and satisfaction. In the short term, it is probable that prices from sustainable companies may be a little higher due to research costs, environmentally friendly product and processes and commitment to human resources. So, in order to get consumers to pick “sustainable products”, the satisfaction of choosing them must be increased as well. In some developed countries, consumers are starting to evaluate some things at the decision moment (if it has biodegradable packaging or the condition of the workers in the factories in Asia) that were unthinkable 20 years before. This is a good start but these consumers are not representative of the mean “Consumer”. Therefore, efforts must be made in thinking about how to get the “Average Joe Consumer” to pick the sustainable offer.

Social Networking Services for Businesses (PART TWO)

So, I will continue going through some common characteristics of these types of services and outlining their advantages (as I see them).

One important feature is that every member of the organization has one profile with professional and personal information. This creates more personal communication since you are not sending a message to an email address but to a person that you know his face, his age, etc. Besides, common hobbies or tastes among members of the company can create a better relation between them that may increase the collaboration within the organization. The fact that anyone in the company may find out quickly how many daughters the president has or if the CEO is a fan of sailing, impacts the sense of belonging to the company which increases satisfaction and productivity.

There is also a calendar feature that mostly works similar to Google Calendars in the sense that anyone uploads their availability (that can be seen by anyone else) and if I want to arrange a meeting between some members of the company, it automatically tells me which are the possible time slots to hold it. This makes things fasters, avoiding long email chains to adjust the time to everyone availability.

When a new worker enters the company, the SNS plays a very important role. It grants the newcomer with instant access to working info in all the company. He or she can rapidly find out what his or her office mate is working on and other similar stuff. This entails a faster adjustment of new members and a quicker learning curve about companies’ procedures.

The SNS is also a very valuable tool for managers since it can give very relevant info. For example, the SNS can output in an ordered fashion which are the most active workers or the most popular projects within the company (by using a rating system similar to the “like it” in Facebook). Furthermore, managers can also find out the amount of internal communication between workers and can team together workers that easily communicate between them, increasing team productivity.

Finally (although the list can be made much longer), the SNS gives everyone easy access to past files that may be useful for future projects. It is easy to find spread sheets designed by someone

else and change the data (not to invent twice the same thing) or to access to past databases fast and efficiently by a simple search engine. This decreases the amount of duplicated work, increasing productivity within the company.

Well everyone, that’s it for today. Have a wonderful New Year’s Eve, enjoy it with friends and family, and I wish a more sustainable 2010 for everyone!!