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Posted-on January 2020 By Greg Williams
Over the past two years different factors have combined that fundamentally challenge the idea of what large companies do. The climate crisis, MeToo movement, increased awareness of income inequality and an understanding that diversity and inclusion are not just an item for the corporate social responsibility (CSR) check-list have combined to fundamentally realign the fundamentals of large organisations around new sets of values beyond fiduciary duty to shareholders.
In August last year, Business Roundtable – a DC-based industry group whose members include the CEOs of the largest companies in the US – released a statement with a renewed mission, one that put customers and employees before shareholders and pledged commitment to diversity and inclusion.
2019 also marked increased activity from employees of large tech companies worried about the ethical implications of their technology and the inaction of the boards of, say, Amazon to take a meaningful stand on issues such as climate change. Meanwhile, the B Corp movement – companies that seek profit but are certified to environmental and social-impact standards – continue to grow and demonstrate that having purpose at their core and clear environmental, social and governance can help drive growth, increase employee engagement and make organisations attractive to investors.
This year is likely to see more of the same, with institutional investors being put under pressure to ensure that they are decarbonising their portfolio, smart employers changing mindset to view employee welfare as an investment rather than a cost, consumers abandoning brands that take a stand on issues such as the environment, diversity and ethical practices in the marketplace. 2020 marks what the UN has described as the “decade of delivery” for its sustainable delivery goals, meaning that we will see a shift from light-touch CSR not just because it’s the right thing to do, but because it will be the key to growing market share and profitability.
In November 2019, Uber CEO Dara Khosrowshahi announced that the ride hailing company would turn a profit in 2021 on so-called ‘adjusted earnings’ (meaning those before interest tax, depreciation and amoritisation). The news must have come as some consolation to Uber shareholders, who will also have been buoyed by increased revenues towards the end 2019. But the startup remains essentially a furnace to burn cash – including a staggering $5 billion in Q2 – and its stock continued to decline in value throughout the second half of last year. As its SoftBank stablemate WeWork discovered, venture capitalists might be willing to subsidise a loss-making business, but public markets bring a very different type of attitude and scrutiny.
Khosrowshahi and the Uber board face a significant challenge – one that many other tech companies with questionable valuations will have to grapple with in 2020; namely, a shift in strategy from a singular focus on growth to one on profit. Uber’s losses are due to its aggressive expansion into multiple markets. A path to profitability is likely to involve a very different approach: retreat from some geographies in order to focus on those in which it can win and don’t get drawn into costly battles in other marketplaces such as food delivery by trying to compete with other well-funded startups such as DoorDash and Deliveroo.
Uber’s vulnerability stems from the fact that its model offers no barrier to entry – it owns no assets and doesn’t employ anybody – and it faces regulatory challenges both from central and local governments. However, it dominates multiple marketplaces. In the coming year, many other high-profile tech unicorns will face similar challenges. They’ll will do well to focus on being smaller, profitable companies than larger ones promising jam tomorrow.
One of the biggest automotive announcements of 2019 occurred not at the annual industry blowout, the Frankfurt motor show, but the night before, when Volkswagen revealed a new vehicle that could have an impact on the company equivalent to the Golf or original Beetle. The ID.3 is the company’s first pure electric vehicle and its hardware will form the basis for 15 million vehicles from other brands owned by the Wolfsburg-based company – such as Audi, Skoda and Seat – by 2028.
Volkswagen is not alone by placing a big bet on electric vehicles – pretty much every major manufacturer is rolling out production EVs that have been developed from the ground up and will appeal to a range of consumers, from pick-up trucks to family saloons, SUVs to city runarounds. In Europe, EV sales are expected to rise 35 per cent in the first nine months of 2020, thanks to government subsidies in countries such as Germany, although China, the world’s largest EV market is cooling. Challenges remain: many consumers are still concerned about a lack of charging infrastructure and the re-election of fossil-friendly president Trump in November would likely damage EV sales.
The digitisation of economies famously brought about the idea that you could hire someone in Iceland to look after your computing stack, run your business through an Estonian identity, outsource back office operations to India and manufacture your products in a Chinese factory you’ve never visited. The world, it was said, was levelling up and flattening out.
While, to some degree, this remains true, 15 years after the publication of Thomas Friedman’s The World is Flat, the fracturing of the US-China relationship, the rise of populism in Europe, an isolationist United States, nationalist India and Russia potentially decoupling itself from the global network could lead to a fracturing of the internet.
The academics Kieran O’Hara and Wendy Hall have argued that there are five possible versions of the internet – the Silicon Valley version with a free flow of data as a philosophical and engineering ideal, a Brussels version that cherishes freedom but is more heavily regulated and leans towards consumer protection, a DC “commercial internet” that champions the free-market, a paternal version in Beijing and a Moscow “spoiler model” that exploits the free flow of data.
With the US boycotting Huawei technology and banning Tik Tok from government-issue phones, the ramping up of regulation from Brussels and Berlin, and increasing incidents of governments requesting that user data must be stored on local servers and the UK’s decoupling from the EU, technology and geopolitics will be increasingly intertwined in 2020.
The last 20 years has been marked by the steady development of information technology – from the graphical interface, through the development of the floppy disk and the PC era to the internet, the cloud, mobile and, more recently, new breakthroughs in artificial intelligence.
Over the coming decade we will see similar progress in biology as it moves from being a science to an engineering discipline. Just as the semiconductor was developed in Silicon Valley in the 1960s and 1970s, so what will happen over the coming decade in biology will reshape our world through it becoming a computational domain.
While it’s true that a system that has taken billions of years to evolve is vastly complex, breakthroughs such as CRISPR, genomics and the application of machine learning to detect cancers will enable researchers to bring an engineering mindset to biology. For instance, modern medicine has largely used surgery, chemotherapy, radiation and drugs to treat cancer. In the past few years, however, immunotherapy – which enhances the body’s own immune system to fight tumours – has been used in trials with success. Two Car T-Cell therapies for treating leukemia have been approved by the FDA in the US, and other forms of immunotherapy are demonstrating promise.
One of the benefits of applying an engineering approach is that disciplines such as materials, chemical, electrical, mechanical and data bring new approaches. And not only to medicine. As professor and investor Vijay Pande notes in our annual trends report, the WIRED World in 2020, biology is being reengineered to transform the way we produce food – from nonotechnology being applied to create protective ‘peel’ on fruit to plant-based ‘meat’, manufacturing processes are being designed using nature’s own processes to address global problems such as food waste, overfishing and the toxic side-effects of industrial agriculture. Beyond this, bioengineering can be applied to create new materials and to even ‘grow’ buildings. Bioengineering as a discipline is set to bloom.'
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