insights

10 October 2022 I By Vladimir Lukic, Karalee Close, Michael Grebe, Romain de Laubier, Marc Roman Franke, Michael Leyh, Tauseef Charanya, and Clemens Nopp   

Of all the companies that have embarked on digital transformations, relatively few have generated the value they sought to build. Our recent research confirms that only the most digitally advanced companies produce substantial returns. The companies that trail face a widening value gap going forward. Many companies’ digital transformation efforts are now sufficiently mature that we can separate the value builders from the    rest of the pack. When we compare performance over the last three years, a clear digital value gap becomes apparent. This gap   is expected to expand as some companies build on their success, while those that have failed to transform find themselves trapped in a vicious cycle of underinvestment and lower value generation that causes them to fall further behind.

Our latest analysis of corporate investment in digital capabilities and the resulting performance shows that digitally advanced companies (the top 25% in our sample) continually outperform those that have transformed less successfully (the bottom 25%) on key financial metrics such as revenue growth and profitability. (See Exhibit 1 and the sidebar, “About Our Research.”)

The top companies achieve higher revenue growth from digital initiatives and higher EBIT. Since 2019, the compounding effect of the spread between top and bottom performers has resulted in a value advantage of 22 percentage points for digitally advanced companies. (Value is defined as revenue growth factored with average annual EBIT.) The future looks bleak for those that trail: if current trends continue, the cumulative value gap will triple to a 66-point margin for digitally advanced companies by 2025.

The latest findings are consistent with our earlier research into digital transfomrantion, which revealed that a new class of incumbent companies is making significant value gains: traditional businesses that have successfully executed a digital transformation and are showing progress in systematically building digital capabilities. These companies operate more like digital natives than their less digitally advanced peers, and they generate more value as a result. Their strength does not come only from tech and data—they have also rewired their operating models. They work in new ways, leveraging different incentives, overhauling their risk and security policies, and establishing new partnerships and alliances. They use agile cross-functional (business and tech) teams and organize their processes and teams to achieve defined outcomes, such as faster innovation, quicker speed to market, and lower costs through automation.

Because digitally advanced companies grow revenues more quickly, they have more funds available for investment each year. The higher-value-creating companies in our latest study continually increased the share of revenue invested in digital transformation, from an average of 9% in 2020 to 14% in 2021. Trailing companies invested as well but at lower levels, from 7% (2020) to 11% (2021). For a company with annual revenues of $40 billion, the difference in investment is $1.2 billion a year.

Digitally advanced companies also invest a bigger percentage of revenues in their digital programs. Since 2019, digital value creators have put 15 percentage points more funding to work in digital programs, creating an investment gap that will increase going forward. They have also set a flywheel spinning, as greater investment fuels the expanding value gap described above.

6 November 2022 I News release I Geneva, Switzerland and Sharm El-Sheik, Egypt I By WHO

On the eve of the pivotal climate talks at COP27, WHO issues a grim reminder that the climate crisis continues to make people sick and jeopardizes lives and that health must be at the core of these critical negotiations.

WHO believes the conference must conclude with progress on the four key goals of mitigation, adaptation, financing and collaboration to tackle the climate crisis. COP27 will be a crucial opportunity for the world to come together and re-commit to keeping the 1.5 °C Paris Agreement goal alive.

We welcome journalists and COP27 participants to join WHO at a series of high-level events and spend time in an innovative health pavilion space. Our focus will be placing the health threat from the climate crisis and the huge health gains that would come from stronger climate action at the centre of discussions. Climate change is already affecting people’s health and will continue to do so at an accelerating rate unless urgent action is taken.

“Climate change is making millions of people sick or more vulnerable to disease all over the world and the increasing destructiveness of extreme weather events disproportionately affects poor and marginalized communities,” says Dr Tedros Adhanom Ghebreyesus, WHO Director-General. “It is crucial that leaders and decision makers come together at COP27 to put health at the heart of the negotiations.”

Our health depends on the health of the ecosystems that surround us, and these ecosystems are now under threat from deforestation, agriculture and other changes in land use and rapid urban development. The encroachment ever further into animal habitats is increasing opportunities for viruses harmful to humans to make the transition from their animal host. Between 2030 and 2050, climate change is expected to cause approximately 250 000 additional deaths per year from malnutrition, malaria, diarrhoea and heat stress.

The direct damage costs to health (i.e., excluding costs in health-determining sectors such as agriculture and water and sanitation), is estimated to be between US$ 2–4 billion per year by 2030. The rise in global temperature that has already occurred is leading to extreme weather events that bring intense heatwaves and droughts, devastating floods and increasingly powerful hurricanes and tropical storms. The combination of these factors means the impact on human health is increasing and is likely to accelerate. But there is room for hope, particularly if governments take action now to honour the pledges made at Glasgow in November 2021 and to go further in resolving the climate crisis.

WHO is calling on governments to lead a just, equitable and fast phase out of fossil fuels and transition to a clean energy future. There has also been encouraging progress on commitments to decarbonization and WHO is calling for the creation of a fossil fuel non-proliferation treaty that would see coal and other fossil fuels harmful to the atmosphere phased out in a just and equitable way. This would represent one of the most significant contributions to climate change mitigation. Improvement in human health is something that all citizens can contribute to, whether through the promotion of more urban green spaces, which facilitate climate mitigation and adaptation while decreasing the exposure to air pollution, or campaigning for local traffic restrictions and the enhancement of local transport systems. Community engagement and participation on climate change is essential to building resilience and strengthening food and health systems, and this is particularly important for vulnerable communities and small island developing states (SIDS), who are bearing the brunt of extreme weather events.

Thirty-one million people in the greater Horn of Africa are facing acute hunger and 11 million children are facing acute malnutrition as the region faces one of the worst droughts in recent decades. Climate change already has an impact on food security and if current trends persist, it will only get worse. The floods in Pakistan are a result of climate change and have devasted vast swathes of the country. The impact will be felt for years to come. Over 33 million people have been affected and almost 1500 health centres damaged. But even communities and regions less familiar with extreme weather must increase their resilience, as we have seen with flooding and heatwaves recently in central Europe. WHO encourages everyone to work with their local leaders on these issues and take action in their communities.

­Climate policy must now put health at the centre and promote climate change mitigation policies that bring health benefits simultaneously. Health-focused climate policy would help bring about a planet that has cleaner air, more abundant and safer freshwater and food, more effective and fairer health and social protection systems and, as a result, healthier people.

Investment in clean energy will yield health gains that repay those investments twice over. There are proven interventions able to reduce emissions of short-lived climate pollutants, for instance applying higher standards for vehicle emissions, which have been calculated to save approximately 2.4 million lives per year, through improved air quality and reduce global warming by about 0.5 °C by 2050. The cost of renewable sources of energy has decreased significantly in the last few years, and solar energy is now cheaper than coal or gas in most major economies.

3 February 2022 I By Stuart Jackson I Forbes 

Over the past 15 years, there has been massive value creation in digital and high-tech industries. As of this writing, just five tech companies — Facebook, Amazon, Apple, Microsoft and Google – have a combined market capitalization of almost $9 trillion. At the same time, the wealth created by these companies is being recycled into “unicorns” — companies that achieve a valuation of over $1 billion before they even go public. The reason for calling them unicorns was that achieving this valuation pre-IPO was so rare, it was unlikely to see more than a handful. But as of January, there were more than 900 of them. The aggregate valuation of these unicorns was $3.24 trillion.

So what do you do if you are a more traditional business, a manufacturer of consumer or industrial goods, a shipping company, a distributor or another business-to-business services company? Can you aspire to similar valuations? The answer is you need to look hard at ways to bring new technologies to old-tech businesses, not only because this provides opportunities for all sorts of new value creation, but also because if you don’t, it is very possible the next unicorn will be targeting your business with a new tech-enabled business model.

A great example of a low-tech industry that found a way to harness technology is the business of exercise equipment for gyms and homes. With a few exceptions, this has traditionally been a tough business with low margins, weak brands and limited product differentiation. Even worse, consumers were not often enamored with the products the industry produced. The joke was that most of the exercise people got from the machines came from moving the equipment into their home and then taking it out five or six years later when they sold it or moved.

That all got turned upside-down when a new company, Peloton, entered the market a decade ago with its interactive new product features. Here was a business model with high product differentiation, high margins from a recurring revenue stream and, most importantly, customers who fell in love with the product. In just a few years, the company went from nothing to being the highest revenue company in the home equipment sector with revenue around $4 billion. A punishing year has reversed many of its gains — stemming from several factors including customers returning to the gym after a year of pandemic lockdowns and admitted missteps on pricing that made its products seem like inaccessible luxury items. But the company still has many advantages. Of more significance, it opened the way for a new, technology- and experience-driven model for fitness equipment.

Another example is logistics, an industry the world has come to rely on more than ever in the era of Covid-19. Logistics companies have been embracing a range of digital technologies in recent years, particularly in the area of telematics. This refers to the use of connected sensors that provide real-time information on the location and condition of vehicles and shipments. Telematics can be used to provide real-time updates, make adjustments for delays and adjust delivery routes where needed. UPS developed the telematics platform ORION, which is claimed to save around 100 million miles per year, while also providing higher levels of reliability and customer information.

There are businesses in all kinds of relatively low-tech sectors similarly embracing digital technologies to bring new functionality and value to their offerings. This is happening in every sector of the economy. One of my favorite examples is auto salvage, where companies such as IAA have shifted from a business involving live auctions of insurance-owned wrecked cars — sold mostly to local dealers and salvage yards — to an entirely online business model with digital evaluation tools and buyers from across the globe. There have been similar transitions in everything from dental products to storage containers, retailers to metals producers, industrial distributors to leisure products. In some cases, working with a consulting firm can help accelerate the adoption of new capabilities, but such accelerations can only add value after the company acknowledges the need for change.

Making the leap to embrace new technologies is where most companies struggle. For every success, we see 10 more businesses that are simply too slow to change. I think part of the reason is that over the past 15 years, so many companies have been beaten down by demands for cost-cutting by cost-conscious corporate purchasing groups or retail buyers and have become excessively focused on reducing costs. Under those circumstances, it is hard to embrace adding cost, which new technologies almost always do, at least initially. This reluctance to spend is what creates opportunities for well-funded new challengers to come in with a different approach.

These are exciting but perilous times. The opportunities for all types of companies to capture new growth and value creation from digital technologies have never been greater. But the risks of obsolescence and decline for those too slow to adapt have equally never been more dangerous than they are today.

10 March 2022 I By Olivia Rockeman I Bloomberg 

U.S. consumer price gains accelerated in February to a fresh 40-year high on rising gasoline, food and housing costs, with inflation poised to rise even further following Russia’s invasion of Ukraine. The consumer price index jumped 7.9% from a year earlier following a 7.5% annual gain in January, Labor Department data showed Thursday. The widely followed inflation gauge rose 0.8% in February from a month earlier, reflecting higher gasoline, food and shelter costs. Both readings matched the median projections of economists in a Bloomberg survey.

The figures show an inflation cloud over the economy that’s proved more persistent and expansive. The price spike has pushed the Federal Reserve to end two years of near-zero interest rates, likely starting with a quarter-point hike next week. It’s also sunk President Joe Biden’s approval ratings ahead of November’s midterm elections that may cost Democrats their thin congressional majorities, especially as inflation outpaces wage gains.

While February was once forecast as the peak for U.S. inflation, now readings are set to increase to above 8%, according to some economists. That’s because the Ukraine war and Biden’s ban on Russia energy imports tightened oil supplies and sent prices of U.S. retail gasoline and other commodities to some of the highest on record this month.

“Inflation is not likely to roll over and begin to come down for several more months,” Michael Gapen, chief U.S. economist at Barclays Plc said on Bloomberg Television. “This sets the stage for where we are now. And we need to see how long this conflict plays out and how disruptive the sanctions regime actually is.” 

The geopolitical situation adds uncertainty to the central bank’s rate hiking cycle over the coming year. Fed officials could take a more hawkish stance if energy shocks lead to higher and more persistent inflation, but they also may take a more cautious approach if sinking consumer sentiment and declining real wages begin to weigh on growth as the war drags on. 

“There is a cost to the Fed being gradual: Future inflation is best predicted by lagged values of past inflation, and a more gradual Fed now likely mean a more aggressive Fed later.” Anna Wong and Andrew Husby, economists.

The S&P 500 opened lower and the yield on the 10-year Treasury note rose.

The February CPI data showed that gasoline prices climbed 6.6% from the prior month and accounted for almost a third of the monthly increase. Some of that may reflect energy price spikes resulting from the first days of Russia’s invasion during the last week of the month. The impact will be more fully captured in the March CPI report. So far this month, the retail price of a regular-grade gasoline has increased 19.3% to $4.32 a gallon, according to American Automobile Association data.

Food prices climbed 1% from the prior month, the largest advance since April 2020, the CPI report showed. Compared with February last year, the 7.9% jump was the biggest since 1981. While the war’s full impact on the U.S. economy remains unclear, soaring costs of oil, grains and metals are likely to feed through to other commodities and ultimately consumer prices. The Biden administration on Tuesday banned Russian oil imports into the U.S., a move that will add to energy price pressures.  

Wage increases as a result of a tight labor market haven’t been keeping up with inflation. Inflation-adjusted average hourly earnings dropped 2.6% in February from a year earlier, the largest drop since May and the 11th straight decrease, separate data showed Thursday. The report showed that prices for merchandise continued their climb in February, while annual growth in services costs accelerated. On a year-over-year basis, goods inflation rose by 13%, the most since 1980. That included the largest-ever annual increase in prices of new cars and trucks.

Services costs increased 4.8% from a year ago, the biggest advance since 1991. 

Shelter costs -- which are considered to be a more structural component of the CPI and make up about a third of the overall index -- rose 0.5% from the prior month, the most since November. Rent of primary residence increased 0.6% on a monthly basis, the largest advance since 1987.

Motor-vehicle repair costs shot up by a record 4.3% from January, and an index of personal care jumped an unprecedented 1.2%. The prices of hotel stays and airfares rebounded in February following the omicron-related pullback in economic activity in December and January.

4 November 2022 I By Evan Bush I NBC News

McMurdo Station in Antarctica had 73 total confirmed cases as of Thursday afternoon, a reminder that Covid is still a threat to close-knit workplaces and that the virus is still roiling scientific research in remote sites. An outbreak of Covid at the McMurdo Station in Antarctica has disrupted life for researchers and support staffers at the southern end of the world. McMurdo Station had 73 total confirmed cases as of Thursday afternoon, according to a statement provided to NBC News by Amanda Hallberg Greenwell, a National Science Foundation spokesperson. The research station has a population of 885, the statement said, meaning more than 8% of those have tested positive for the coronavirus so far. 

The outbreak is a reminder that Covid is still a threat to close-knit workplaces and that the virus is still roiling scientific research in remote sites. Cases of Covid could disrupt aircraft operations at McMurdo and make it more difficult for scientists to reach the areas they would like to study. Many researchers travel to Antarctica in November to begin field work during the continent’s summer months. Because McMurdo is such a remote location, stringent measures were implemented during past field seasons to keep Covid from circulating. Many of those measures were reduced this season, as the research community attempted to get back to a more normal status.  

“The strict protocols of prior seasons, which required multiple PCR tests, charter flights and 14-day quarantines, were relaxed, given the widely available and highly effective vaccines that have greatly reduced the incidence of COVID, and the severity of COVID if contracted,” Hallberg Greenwell, the head of the office of legislative and public affairs at the foundation, said in the statement. 

Visitors to McMurdo must complete a physical qualification process. This season, the process screened out people at high risk for Covid. Those deployed to McMurdo must receive a bivalent booster dose of the vaccine, a measure that was added as a qualification process requirement Oct. 15. Some scientists traveling to McMurdo this season were informed they may end up living with people who have contracted Covid, according to an email obtained by NBC News and sent by a manager with Leidos, a contractor that supports the U.S. Antarctic Program. 

“At present, COVID is moving its way through the community,” a Leidos science implementation manager wrote in the email. “As COVID cases and population at McMurdo Station continue to increase, individuals may be assigned to rooms with COVID positive roommates.”

The email encouraged physical distancing and the use of masks. The foundation said it was considering adding protocols to limit the spread of Covid. An on-site medical clinic is available to provide care to those who get sick. 

“The situation is being actively monitored so appropriate action can be taken as needed to protect the health and safety of all of those deployed,” Hallberg Greenwell said in the statement. “If someone is ill, with symptoms they think may be COVID-19 or any other illness, they are advised to contact the medical clinic. A medical provider will individually assess the patient and provide the needed medical care.”

2 November 2022 I By Nadia Tamez - Robledo I EdSurge 

When a school or district decides to cut a check for an edtech product, the end goal isn’t about owning a shiny new piece of hardware or app. The administrators who sign off are thinking about how students will benefit long-term from more support in the classroom. But where in the conversation are the people implementing those tools: the teachers? And how much say do they—or should they—have in edtech decisions?

For both questions, as it turns out, it depends on who you ask.

In a survey released earlier this year, the edtech company Clever found that 85 percent of administrators say teachers are involved in choosing tools. When the company asked teachers, more than 60 percent said they were hardly ever—or never—involved in those choices.

As we started asking educators, administrators and experts about the issue as part of an investigation into how tachers inform the development of edtech products, everyone agreed: teacher voice should be part of edtech decisions.