Karan Chadda

Social media, copywriting, building stronger businesses

business

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The age of muscular regulation

At $4.5bn BP’s fine for the Deepwater Horizon disaster is huge but unsurprising; the company had set aside a larger sum for this liability. The fine’s magnitude may, however, shift our focus from some recent developments that show the increasing boldness of regulators across all industries.

I’ve written before about the more muscular approach taken by regulators since the crash of 2007 and that trend has continued. Recent examples include the fines and continued investigations around Libor manipulation, this week’s launch of probes into alleged rigging of the UK gas market, and JP Morgan’s six-month ban from trading electricity in the US.

The change in regulation hasn’t just been seen in the actions of regulators. There is a new boldness in the comments they are willing to make to, and about, the industries they regulate. Last month, Andrew Haldane, an executive director at the Bank of England, spoke of morality and of “deep and rising inequality” when he addressed a gathering of the Occupy movement in London. Such comments would be almost unthinkable for a central banker only a few years ago. Similarly, this week, in a move that closely reflects the current political and public zeitgeist, the Financial Services Authority (FSA) told banks that it expects them to show bonus restraint this year.

This newfound boldness among regulators is not manifesting itself solely in the form of pressuring, pounding and punishing industry. The FSA, which on the one hand is warning banks about bonuses, investigating alleged market fixing and cracking the whip over PPI, is also easing capital and liquidity rules for the UK’s largest banks in an effort to boost lending. This move falls under the banner of macroprudential regulation, which is the current big thing among global regulators. The idea is appealing: regulators adjust how they manage an industry with the aim of providing benefits for the wider economy.

All these examples point to the dawn of a new age of muscular regulation, where industries find themselves increasingly challenged and guided by regulators. This is a big change from the light-touch regulation of previous years. Although the impact of this new era is hard to predict, there is a danger that as regulators become emboldened in using their powers, they may find themselves under pressure to respond to political and public opinion. It is a pressure regulators must resist if they are to strike the right balance between intervening to ensure a market is working efficiently without manipulating it for short-term, populist reasons.

This article originally appeared here on the Huffington Post.

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Technology will drive growth

When Martin Wolf, the FT’s venerable economics commentator, endorses a concept, it’s usually sensible to give it hearing. Today, he’s backing the idea that we’re a post-growth society. That the growth generated by the industrial revolution and advances of the 20th century simply cannot be matched by the changes being wrought by the current technological revolution.

The argument that jet engines, running water and electricity are all inventions and innovations that rapidly drove up productivity and that current technological innovations pale in comparison will appeal to many. It will receive a warm welcome from those who hark back to a time when we built things, who think the service sector part of the economy is illusory. However, it is wrong.

At first glance a lot of the benefits of technological innovation are incremental, but they enable productivity improvements far beyond those we have so far reaped. Capital is already global, yet despite the massive growth of cities, labour lags behind – people move around the world a fraction of the amount and the speed that resources do.

Technology mitigates this need for travel. It connects people in a way never before possible. It frees up time and forges closer bonds over greater bonds over greater distances. Very few companies have been able to capitalise on this yet but those who have, have found that international, collaborative working has driven innovation. GE is a prime example. Back in 2010, it created a private network to connect its 5,000 global marketers. It enabled people working in different divisions to share problems and create solutions that weren’t previously possible.

Collaborative workplace tools have the potential to change business structures and productivity in the same way the specialisation and rolling assembly lines did during previous periods of high innovation and growth.

A recent McKinsey Global Institute report stated that collaborative workplace tools could generate productivity gains of up to $1.3 tn in the consumer packaged goods, retail financial services, advanced manufacturing, and professional services sectors. There are hard numbers that support this prediction: Microsoft paid $1.2bn for Yammer, the social networking tool for businesses.

Collaborative tools are just one element of the changes that the internet and related technologies are enabling. Yet they alone have the potential to boost innovation and growth in key service sectors. The technological revolution is increasing not only our ability to innovate but the speed at which we can do so.

This article originally appeared here on the Huffington Post.

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Is unlimited growth a thing of the past?

The venerable Martin Wolf, the FT’s hugely respected chief economics commentator, has written a very thought-provoking article looking at a study by Robert Gordon of  Northwestern University. One of the central arguments is that the technology revolution will not drive growth in the way previous industrial revolutions have. It is an argument that many in the technology and public policy circles will disagree with, but the article is sensible, thoughtful and a must-read.

Is unlimited growth a thing of the past?

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BlackBerry – a managed decline?

RIM’s chief executive has announced his new strategy for the ailing mobile devices firm: they are going to focus on the business sector. For RIM’s new strategy to work they will need to subvert some key IT trends, some of which have already taken hold and will be difficult to uproot.

BlackBerry smartphones, although still selling in large numbers and a leader in some segments, have seen their popularity decline in the face of competition from Apple, Samsung and others. Something had to change. Moreover, with BlackBerry’s heritage as a provider of devices to businesses, it makes sense to focus on a market you know and one where you have a strong foothold.

There are two challenges, however, which might make this new strategy one of managed decline rather than renewed growth: tight IT budgets; and the consumerisation of IT.

In terms of IT budgets, the story is simple: money’s tight and there is lots to do. According to Gartner, budgets are still below their peak and, as economic uncertainty persists, companies are keeping a tight rein on costs. This problem is compounded by the need for companies to keep up with the changing IT landscape. The rise of cloud computing, trends toward home working, the need to integrate tablet computers and securing networks from data loss – both internal through the greater use of cloud computing and external as hacktivists overtake hackers in their strike rate – are all big issues that need addressing. Shortly, in Europe at least, there will new data protection legislation that will require new compliance regimes. This all points to tight IT budgets becoming tighter.

Many companies have found that there’s a way to minimise some costs and get a boost in productivity: let your employees buy their own mobile devices and use them for work. Indeed I’m writing this on a tablet computer, from which I can also access work emails and my calendar. I have similar functionality on my phone. When working from home I can access the work network from my laptop using a virtual desktop.

The trend, which encompasses a number of other factors such as the development of more consumer-centric software, is grandly called the consumerisation of IT. My employer isn’t alone in doing this. A recent study by Accenture found that 40% of employees use personal devices to access work information. That number is set to grow and will do so rapidly; it has more than doubled in the past two years.

There are security issues in allowing employees to access work data on their personal devices, but systems exist and will continue to develop which minimise or mitigate these. The benefits are clear: a flexible, responsive, always connected workforce.

As people use their personal smartphones, tablets and laptops to access their work data, it is inevitable that IT departments will spend less and less of hardware and more on systems that prevent data loss while enabling access from a variety of personal devices.

Blackberry used to set the trends, then they tried to follow them with the launch of touchscreen phones and tablet computers, now they’re trying to fight them. I’m not sure they’ll succeed.

This post originally appeared on the Huffington Post.

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Some thoughts on Visa’s repositioning

PR week recently reported that Visa Europe has retained Hill & Knowlton to promote Visa as a technology company to consumers and the business community. This is an interesting move. Traditionally seen as a payments company, why would Visa want to reposition itself?

My initial thoughts run to three possible reasons.

Firstly, I think consumers often perceive Visa to be a financial services company, in particular a credit card provider. The public’s dislike of financial services is obvious and “banker bashing” continues among politicians and commentators. Visa’s reputation might improve if it were to break the association with financial services and make people understand that although Visa processes financial transactions, it doesn’t charge interest or lend money.

My second thought involves mobile payments. Last night, I attended an excellent event called Digital Surrey where PayPal UK’s head of social media, Jon Bishop, spoke about the mobile web. His words on mobile payments in Africa and on NFC particularly struck a chord with me. He pointed out that people are, and will increasingly, use mobile devices to purchase products and services. With this in mind, it is obvious that if Visa is to maintain its dominant position within payments, it will need to convince businesses to use its technology rather than allow other companies to enter into payments (even if Visa still processes the underlying transactions).

Finally, there’s the money. Visa Europe is owned by its members – banks and other payments providers – however, Visa Inc. is a listed company. Perhaps Visa Europe wants to promote itself as a technology company not to reposition itself but rather to increase its profile overall in preparation for it to be floated at some future point.