Decisions, digitisation and drift
Rolling uncertainty ‘In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing’. This statement by Teddy Roosevelt highlights the danger of inaction. Within the readership of this blog are people with strongly held views on both sides of Brexit, but I am yet to find those who favour continued uncertainty. In a recent speech, Monetary Policy Committee member Michael Saunders expressed this point with clarity. Only 12% of firms believe that we will achieve a clear path on Brexit this year. The mean timeframe in which firms believe that this will happen has remained constant since the referendum vote – always 4 quarters hence. The point that Saunders makes is that if firms have confidence that it would take a long time to resolve this position, they would get on with things. It is the rolling short term uncertainty that is particularly damaging. The response of most businesses has been to adopt indefinite defensive strategies (reducing leverage, controlling costs and disposing of assets) in place of expansive strategies (acquisitions, product launches and innovation spending). The consequence is a lack of investment, amplified by a self-fulfilling feedback loop (no investment > no growth > weaker figures > more defensive strategy > no investment), the results of which are now being felt in the UK macro data. Whilst most firms are concerned about the downside uncertainty of the ultimate Brexit outcome, for the time being it is the uncertainty itself which is the most damaging.
Outward Migrations With talent acquisition and retention perennially landing at the top of the what-do-employers-want assessments, and with long commutes holding a similar position in the table of what employees don’t want, the decision to locate offices close to talent becomes a no-brainer. So that means putting them in the city centres, right? Increasingly, wrong. To take London as an example, there is only one age group for which there is a net inflow, that being 20-29; in every other category there are net outflows. The 15-19 group are significant net out-movers (of outer London and minor net in-movers to inner London), due to the passage to university. Lazy rhetoric about urbanisation unhelpfully conflates the UK’s position with that of China or India; in the UK, we’re moving to the suburbs and smaller towns. In the US, the position is the same. A report last week in the Wall Street Journal analysing recently released census figures points to the fourth consecutive year of net outflows from the large American cities. Affordability and quality of life are the drivers of this trend. More flexible working schedules and technology are key enablers. So, if your workforce is very young (UK average = 41) or if you’re happy to have a well-stocked graduate pool at the expense of a disgruntled partnership, then focus on the city centres. For everyone else, a strategy of offices on top of rail hubs, and some satellite provision might be the better option.
Innovation underground You might be surprised to learn that Transport for London has one of the most significant retail estates in the capital by number of units. These units are characteristically small ones, and are located in areas of high footfall, where space comes at a premium and is traded off against operational capacity. The need for innovative design is high, as is the opportunity for retailers that get it right. Having shortlisted 10 concepts, TfL this week announced Sook as the winner of its retail innovation competition. Sook ‘transforms empty spaces into digitally enhanced playgrounds for anyone to use for as long as they want’. More specifically, Sook’s proposition is built around a customisable ‘digital wallpaper’, which allows pop-ups to quickly and cost effectively fit out a unit digitally. Rather than decorating and making good, the technology is demountable; and hence attractive to those temporary operators who want to make a splash without spending a fortune. Areas of transitional high footfall such as underground stations are well suited to brand concepts, where stock is kept to a minimum and engagement / advertising is a core part of the proposition. Digital feels like an obvious solution.
Play nicely The world can be a competitive place and competing is at the heart of business strategy. However, within the workplace there is a danger that a bit of healthy rivalry with one’s co-workers can quickly tip into re-enactments of the Running Man or the Hunger Games. This week a new study from De Montfort University highlights that it’s not just the human workers that should be concerned. The study, which tracked employee interactions with new robotic workers in both Norway and the UK, revealed notable cultural differences. The Norwegians developed an affection for their tin teammates, giving them fun names and interacting with them. Meanwhile in the UK… we Brits were found to deliberately stand in their way and carry out minor acts of sabotage. So, next time the photocopier breaks or your computer freezes, instead of hitting them, consider being more Norwegian. Sit them down for a cup of tea, compliment them on previous achievements, assure them that there is room for both of you to succeed. And then pull the plug out of the wall.