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McKinsey – Global Economics Intelligence executive summary, February 2021

Countries are now able to assess the damage to economic growth wrought in 2020 by the restrictions put in place to control the spread of the COVID-19 virus. All GEI-surveyed economies went into reverse gear in the early months of the year; only China was able to control the virus sufficiently to come out of 2020 with positive economic growth (+2.3% year-over-year). The US economy experienced a GDP contraction of –3.5%; the eurozone as a whole contracted –5.4% (flash estimate), with contractions of –5.0% in Germany, –8.3% in France, –8.8% in Italy, and –11.0% in Spain. The Russian economy, propelled by energy exports, experienced a milder contraction of –3.1%; Brazil’s contraction is expected to be –4.7% and India’s –7.7%.

Economic activity mirrored the fluctuations in pandemic restrictions: many countries loosened restrictions after midyear and experienced strong third-quarter growth. As the number of COVID-19 cases surged again, measures were reimposed, curtailing growth in the last quarter of the year. China was, of course, the exception, as it had controlled the virus early in the second quarter; by the last quarter, the economy was humming at 6.5% y-o-y growth. To a certain extent, China’s success has radiated outward, with demand from China helping to support global manufacturing and trade. This dynamic was underscored in January and February by some deceleration in global indicators in consequence of the new-year holiday in China.

In the most recent available data, consumer-sentiment indicators were subdued or pessimistic in most surveyed economies; in China, however, consumer confidence strengthened. Retail-sales growth was very strong in the United States (+5.3% month-over-month), aided by individual stimulus payments; in China, retail sales expanded 4.6%; elsewhere, consumer spending retreated or is making slower progress (Exhibit 1).

As measured by global purchasing managers indexes (PMIs), growth in both manufacturing and services eased in January. Among surveyed economies, manufacturing PMIs remain strong. Services PMIs in the United States and Russia experienced strong growth; in China, the indicator slowed in advance of the new-year holiday; for the eurozone and Brazil, contraction is indicated.

World trade volumes now exceed prepandemic levels: as measured by the CPB World Trade Monitor, global volumes increased 0.6% in December 2020 and 1.6% in November; the indicator showed a trade expansion of 11.5% in the third quarter of 2020 and 4.0% in the fourth quarter (after contractions of –2.6% and –11.7% in the first and second quarters, respectively, figures revised). The Container Throughput Index declined slightly to 119 in December (121.1 in November); a seasonal retreat was measured in Chinese ports.

More: https://www.mckinsey.com/

About the authors:The data and analysis in McKinsey’s Global Economics Intelligence are developed by Alan FitzGerald, a director of client capabilities in McKinsey’s New York office; Krzysztof Kwiatkowski, a capabilities and insights specialist, and Vivien Singer, a capabilities and insights expert, both at the Waltham Client Capability Hub; and Sven Smit, a senior partner in the Amsterdam office.

The authors wish to thank Richard Bucci, Samuel Cudre, Debadrita Dhara, Pragun Harjai, Tomasz Mataczynski, Moira Pierce, Jose Maria Quiros, Erik Rong, Maricruz Vargas, and Yifei Liu for their contributions to this article.

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McK: Why business building is the new priority for growth

Business building is the top priority for organic growth at companies during the COVID-19 pandemic, and incumbents are launching new businesses with ever greater frequency, according to our new global survey. 1 The findings suggest that companies that prioritize business building tend to grow faster than their peers, respond with greater resilience to volatility and economic shocks, and, as they gain experience building businesses, see more success from it. But not all companies succeed: only 24 percent of new businesses launched in the past ten years are viable large-scale enterprises today.

To shed light on the differences between outperformers and also-rans, our survey included more than 800 company executives across a range of industries, sectors, and geographies. So far as we know, this was the first at-scale research to explore corporate business building. The survey revealed that an impressive 52 percent of executives consider business building a top-three (or higher) priority for growth. We also found that a small set of companies enjoy success rates two times higher than those of high-potential start-ups (24 percent versus 8, respectively). 2 The experience of these companies clarifies the winning approach to launching and scaling new businesses. As more companies adopt these successful practices, a new wave of innovation could arise from not just entrepreneurial efforts but also intrapreneurial ones. That would boost organic growth and improve the prospects of companies looking to jump into the top tier of performance.

The new priority for organic growth.

Even before the pandemic, our own experience indicated that business building had become more important for incumbent companies looking to use innovative business models, products, and services to meet the threats and opportunities of a digitizing world. The COVID-19 crisis has accelerated and intensified that trend. In many industries, the pandemic has rewritten rules and upended assumptions, all while diminishing—or threatening to diminish—existing revenue streams. Replacing lost revenues, of course, requires finding new forms of growth. And while M&A remains an essential part of the growth playbook, P/E multiples remain high, and acquisitions can be expensive. Moreover, organic growth often creates greater excess returns to shareholders than dealmaking does, even during more normal times.

We studied four different approaches to organic growth and found that business building was the most effective among them. 3 Some 74 percent of companies that chose business building as their main strategy grew at rates above the average of their industries. Only 58 percent of the companies that prioritized different strategies did. No wonder so many executives ranked business building as a top-three priority for 2020 (Exhibit 1). And these companies are putting their money where their priorities are, allocating, on average, one-third of their organic-growth capital to business building—more than twice as much as the laggards do. The shift to business building isn’t confined to a few sectors or regions. In all those we surveyed, companies give business building pride of place on the corporate agenda (Exhibits 2 and 3).

More: https://www.mckinsey.com/business-functions/

About the authors: Shaun Collins is a consultant in McKinsey’s Boston office, where Upasana Unni is an associate partner; Ralf Dreischmeier is a senior partner in the London office; and Ari Libarikian is a senior partner in the New York office. The authors wish to thank Paige Frank and Anton Kärrman for their contributions to this article.

 

 

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How to become ‘tech forward’

A technology-transformation approach that works

Whether it’s been the shift to online working, the spike in online demand, or the increase in cyber assaults, technology has emerged as a critical business capability. That reality has injected a renewed importance and new urgency into modernizing the technology function. Companies can no longer afford the long timelines and often-disappointing business returns that have hampered many of the large tech-transformation projects of the past.

Instead, some technology leaders have pursued a new approach that is comprehensive enough to account for the myriad interlinkages of modern technology joined at the hip with the business so that change delivers value, and self-funded so that the scope of the change can continue to expand. We think of this comprehensive approach as “tech forward.”

Counteracting the most devastating tech-transformation failure modes

Some companies are starting to see real impact from their tech transformations. In a recent McKinsey study, some 50 percent of surveyed companies reported moderate to significant impact on realizing new revenue streams, almost 70 percent reported impact on increasing existing revenue streams, and 76 percent reported impact on reducing costs. 1

Tech transformations, nonetheless, remain notoriously difficult and complex. Though many companies are transforming their tech organizations, about 50 percent of them report that they’re still in the pilot phase (small tech teams working with advanced technologies but isolated from the rest of the technology function). 2

To understand better what successful tech transformations look like—as well as what the most important pitfalls are—we spoke with nearly 700 CIOs at some of the largest companies across the world. These conversations illuminated a number of consistent factors that most consistently kill off even the most promising tech transformations and revealed antidotes to address them. Following are three of the most common failure modes.

Piecemeal activity and limited scope

There is no shortage of technology-transformation initiatives, all of them with good intentions and promising payoffs. In fact, our latest analysis shows that companies are expanding the range of tech-related transformations (Exhibit 1).

What a ‘tech forward’ transformation looks like

Detailed conversations with CIOs as well as our own experience helping businesses execute complex technology transformations yielded a broad array of insights, best practices, and guidelines. We’ve synthesized them into a “tech forward” model that highlights three interconnected vectors, within which are ten specific “plays,” or domains of activity (Exhibit 2).

Vector #1: A reimagined role for technology that’s focused on the business

Vector #2: A technology delivery model built for flexibility and speed

Vector #3: A future-proof foundation of core tech systems that support innovation, collaboration, and security

To plot a company’s tech-transformation road map, we find the following questions particularly helpful:

  • What is your expectation from technology?
  • Which strategic outcomes are most critical (for example, speed and quality of delivery)?
  • Which are the most urgent pain points and what causes them?

The following questions help executives understand the current state of the technology function and its experience with transformation programs:

  • Which, if any, of the ten plays from the tech-forward approach are in place, and what is their maturity?
  • Is transforming your company’s tech one of the top two priorities in your C-suite? If not, why not?
  • How well does the technology function support your company’s strategic objectives or digital ambitions?
  • What tech-transformation efforts has your company launched to date? What effect have they had? What went well, and what didn’t?
  • What factors might restrict the pace of your tech-transformation efforts? In particular, how much capital and other resources can the company devote to tech transformation?

The current COVID-19 crisis, of course, is having a significant impact on how CIOs and businesses manage tech transformations. Despite the pressures it has added to costs, however, the urgency to get moving and transform has never been higher, according to many CIOs. But while the demands placed on the technology function have grown, so too have the opportunities. Experience suggests that the most effective transformations are not only comprehensive, covering the function’s role, delivery model, and core systems, but also sequenced to ensure that changes that reinforce each other are carried out together. With up-front planning focused on business value and careful delivery, a company can bring its technology function forward and gain the capabilities to thrive in challenging digital markets.

About the author(s)

Anusha Dhasarathy is a partner in McKinsey’s Chicago office, where Isha Gill is an associate partner and Naufal Khan is a senior partner; Sriram Sekar is a senior expert in the New Jersey office, where Steve Van Kuiken is a senior partner.

More: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/how-to-become-tech-forward-a-technology-transformation-approach-that-works

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Athens Journal of Business & Economics

We are glad to announce that the January issue (Volume 7, Issue 1, January 2021) of the Athens Journal of Business & Economics (AJBE) has been uploaded: https://www.athensjournals.gr/ajbe/v7i1. Below you can find the table of contents. The AJBE sponsors the following academic events:

  • 14th Annual International Conference on Global Studies, 18-21 December 2020, Athens, Greece (https://www.atiner.gr/cbc)
  • 8th Annual International Conference on Business, Law & Economics, 3-6 May 2021, Athens, Greece (https://www.atiner.gr/ble)
  • 16th Annual International Symposium on Economic Theory, Policy and Application, 28-30 June & 1 July 2021, Athens, Greece (https://www.atiner.gr/economics)
  • 19th Annual International Conference on Management, 28-30 June & 1 July 2021, Athens, Greece (https://www.atiner.gr/management)
  • 19th Annual International Conference on Marketing, 28-30 June & 1 July 2021, Athens, Greece (https://www.atiner.gr/marketing)
  • 19th Annual International Conference on Accounting, 5-8 July 2021, Athens, Greece (https://www.atiner.gr/accounting)
  • 19th Annual International Conference on Finance, 5-8 July 2021, Athens, Greece (https://www.atiner.gr/finance)
  • 8th Annual International Conference on SΜΕs, Entrepreneurship and Innovation: Management – Marketing – Economic – Social Aspects 26-29 July 2021, Athens, Greece (https://www.atiner.gr/sme)

You are more than welcome to submit a proposal for presentation. Please note that the program of the December conference on Global Studies is available at: https://www.atiner.gr/2020cbc-pro. Late submissions for this event will be accepted by the end of November. ATINER has decided to offer the option of remote (online or pre-recorded) presentation for those who cannot travel for objective or subjective reasons. If you need more information, please let me know, and our administration will send it to you including the abstract submission form. Finally, you are welcome to contribute to the AJBE with an original research paper.

TABLE OF CONTENTS
Download the entire issue (PDF)
Front Pages i-viii
Labor Productivity in France: Is the Slowdown of its Growth Inevitable or are there Levers to fight it?
Catherine Bruneau & Pierre-Luis Girard
9
The Never-Ending Quest for the European Fiscal Policy’s Objectives: Stability vs. Convergence or Stability and Convergence?
Carlo Klein
41
Sustainable Governance and Knowledge-based Economy – Prerequisites for Sustainable Development of the Developing and Transitional Economies
Kristina Jovanova
67
Outcomes from Building Transparency in Governance in a Smart City Project in India: A Case Study of Panaji, Goa
Mridula Goel & Sheetal Thomas
85
The Sustainable Development Goals and Leading European Retailers
Peter Jones & Daphne Comfort
105

Dr Zoe Boutsioli
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Dr Zoe Boutsioli  Vice President of Publications ATINER (A World Association of Academics and Researchers).
25 Years of Non-Euclidean Improvement “Our city is open to the world, we never expel a foreigner from learning or seeing” “τήν τε γὰρ πόλιν κοινὴν παρέχομεν, καὶ οὐκ ἔστιν ὅτε ξενηλασίαις ἀπείργομέν τινά ἢ μαθήματος ἢ θεάματος” Pericles’ Funeral Oration from Thucydides, “The Peloponnesian War”. Come to open to the world Athens to learn about Democracy in the city where its theory was first developed and taught and see the place (phnyx) where it was first practiced.

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BCG Six Steps to Bridge the Responsible AI Gap

As artificial intelligence assumes a more central role in countless aspects of business and society, so has the need for ensuring its responsible use. AI has dramatically improved financial performance, employee experience, and product and service quality for millions of customers and citizens, but it has also inflicted harm. AI systems have offered lower credit card limits to women than men despite similar financial profiles. Digital ads have demonstrated racial bias in housing and mortgage offers. Users have tricked chatbots into making offensive and racist comments. Algorithms have produced inaccurate diagnoses and recommendations for cancer treatments.

To counter such AI fails, companies have recognized the need to develop and operate AI systems that work in the service of good while achieving transformative business impact—thinking beyond barebones algorithmic fairness and bias in order to identify potential second- and third-order effects on safety, privacy, and society at large. These are all elements of what has become known as Responsible AI.

Companies know they need to develop this capability, and many have already created Responsible AI principles to guide their actions. The big challenge lies in execution. Companies often don’t recognize, or know how to bridge, the gulf between principles and tangible actions—what we call crossing the “Responsible AI Gap.” To help cross the divide, we have distilled our learnings from engagements with multiple organizations into six basic steps that companies can follow.

The Upside of Responsible AI

Concern is growing both inside and outside boardrooms about the ethical risks associated with AI systems. A survey conducted by the Center for the Governance of AI at the University of Oxford showed that 82% of respondents believe that AI should be carefully managed. Two-thirds of internet users surveyed by the Brookings Institution feel that companies should have an AI code of ethics and review board.

Much of this concern has arisen from failures of AI systems that have received widespread media attention. Executives have begun to understand the risks that poorly designed AI systems can create—from costly litigation to financial losses. The reputational damage and employee disengagement that result from public AI lapses can have far-reaching effects.

But companies should not view Responsible AI simply as a risk-avoidance mechanism. Doing so misses the upside potential that companies can realize by pursuing it. In addition to representing an authentic and ethical “True North” to guide initiatives, Responsible AI can generate financial rewards that justify the investment.

A Stronger Bottom Line. Companies that practice Responsible AI—and let their clients and users know they do so—have the potential to increase market share and long-term profitability. Responsible AI can be used to build high-performing systems with more reliable and explainable outcomes. When based on the authentic and ethical strengths of an organization, these outcomes help build greater trust, improve customer loyalty, and ultimately boost revenues. Major companies such as Salesforce, Microsoft, and Google have publicized the robust steps they have taken to implement Responsible AI. And for good reason: people weigh ethics three times more heavily than competence when assessing a company’s trustworthiness, according to Edelman research. Lack of trust carries a heavy financial cost. In the US, BCG research shows that companies lost one-third of revenue from affected customers in the year following a data misuse incident.

Brand Differentiation. Increasingly, companies have grown more focused on staying true to their purpose and their foundational principles. And customers are increasingly making choices to do business with companies whose demonstrated values are aligned with their own. Companies that deliver what BCG calls total societal impact (TSI)—the aggregate of their impact on society—boast higher margins and valuations. Organizations must make sure that their AI initiatives are aligned with what they truly value and the positive impact they seek to make through their purpose. The benefit of focusing strictly on compliance pales in comparison with the value gained from strengthening connections to customers and employees in an increasingly competitive business environment.

Improved Recruiting and Retention. Responsible AI helps attract the elite digital talent that is critical to the success of firms worldwide. In the UK, one in six AI workers has quit his or her job rather than having to play a role in the development of potentially harmful products. That’s more than three times the rate of the technology sector as a whole, according to research from Doteveryone. In addition to inspiring the employees who build and deploy AI, implementing AI systems in a responsible manner can also empower workers across the entire organization. For example, Responsible AI can help ensure that AI systems schedule workers in ways that balance employee and company objectives. By building more sustainable schedules, companies will see employee turnover fall, reducing the costs of hiring and training—over $80 billion annually in the US alone.

More: https://www.bcg.com/

By Steven MillsElias Baltassis, Maximiliano Santinelli, Cathy CarlisiSylvain Duranton, and Andrea Gallego

BCG GAMMA is BCG’s global team dedicated to applying artificial intelligence and advanced analytics to business at leading companies and organizations. The team includes 800-plus data scientists and engineers who apply AI and advanced analytics expertise (e.g., machine learning, deep learning, optimization, simulation, text and image analytics) to build solutions that transform business performance. BCG GAMMA’s approach builds value and competitive advantage at the intersection of data science, technology, people, business expertise, processes and ways of working. For more information, please visit our web page.

Authors: Steven Mills, Partner & Associate Director, Data Science, Washington, DC: Elias Baltassis, Partner & Director, Paris; Maximiliano Santinelli, Associate Director, Data Science, Boston; Cathy Carlisi, Managing Director, BrightHouse, Atlanta; Sylvain Duranton, Managing Director & Senior Partner, Global Leader, BCG GAMMA, Paris, Andrea Gallego, Partner & Chief Technology Officer, BCG GAMMA, Boston