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Organizations today face ten significant shifts. Here’s what to do about them

 

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Business leaders around the world are currently addressing not only economic volatility, geopolitical instability, and the lingering effects of the COVID-19 pandemic but also a range of organizational shifts that have significant implications for structures, processes, and people. The shifts include complex questions about how to organize for speed to shore up resilience, find the right balance between in-person and remote work models, address employees’ declining mental health,1 and build new institutional capabilities at a time of rapid technological change, among others.

To help CEOs and their leadership teams consider such questions, we have launched McKinsey’s The State of Organizations 2023 report. The report is an account of an ongoing research initiative that seeks both to pinpoint the most important shifts that organizations are grappling with and to provide some ideas and suggestions about how to approach them.

As part of the research, we conducted a survey of more than 2,500 business leaders around the world.2 Only half say their organizations are well prepared to anticipate and react to external shocks, and two-thirds see their organizations as overly complex and inefficient. We also spoke with business leaders to gather inspiring stories and best practices from beacons—organizations that have been able to adapt to recent economic and operational disruptions and forge new paths. Finally, we developed four points to consider in addressing the ten organizational shifts, leveraging the survey results, the quantitative research with executives, and insights from our work in the field and through existing McKinsey research.

The ten most significant shifts facing organizations today

Through the State of Organizations Survey, conversations with CEOs and their teams, and the findings of recent McKinsey research, we have identified ten of the most important organizational shifts that businesses need to address today. These shifts are both challenging and harbingers of opportunity, depending on how organizations address them.

1. Increasing speed, strengthening resilience.

2. ‘True hybrid’: The new balance of in-person and remote work.

3. Making way for applied AI

More: Full Report (92 pages)

Authors:  Patrick GuggenbergerDana MaorMichael Park, and Patrick Simon

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The Asian shipbuilding industry is going full speed ahead

 

By Marek Grzybowski

The shipbuilding industry is booming and shipowners are fighting for places on the docks. Unfortunately, but in Asian shipyards. European shipyards save themselves by orders for passenger ships, specialized ships and ships. Companies from the shipyard’s environment save themselves by selling the latest equipment and technologies to Asian shipyards.
– Demand for innovative ships is growing and it looks like the reopening of decommissioned shipyards, especially in China – announces Mohamed Rabie of SnP Broker Intermodal in the latest report.
Prices of ordered ships and on the secondary market remain high. Prices for new LNG carriers in June 2023 were around USD 218 million. Indicative prices for 5-year-old used LNG tankers in June 2023 were estimated at USD 200 million, Banchero Costa reports. This is important information for Poland, because we are planning to build an FSRU terminal in Gdańsk. And some terminals are built on the basis of modernized units purchased on the secondary market.
For comparison, Newcastlemax bulk carriers in June 2023 were contracted for approximately USD 66.5 million, and USD 60 million for the Standard Capesize. In June 2023, 5-year-old Newcastlemax ships cost USD 50 million, and Standard Capesize around USD 46.3 million.

High prices for new and used ships
In June this year, the shipyards demanded about USD 130 million for the VLCC vessel, USD 83 million for the Suezmax and USD 67.1 million for the Aframax for the new oil tankers. For the 5-year-old tanker, prices in June 2023 were estimated at around USD 97.6 million for VLCC, USD 69.2 million for Suezmax and around USD 64.2 million for Aframax.
Product prices remained stable. For example, in June this year, the MR2 tanker was contracted for approximately USD 46.6 million. On the other hand, the 5-year-old MR2 ship was offered in June 2023 for approximately USD 42.5 million, according to Banchero Costa experts in the latest reports.
– During the first 6 months of 2023, a total of 719 ships were contracted, of which 24.2% were bulk carriers, 23.09% were tankers (oil and products), 9.46% were containers, 5.01% were LPG tankers, and 4.31% LNG carriers, according to the latest Intermodal report.

The shipyard’s production capacity is increasing
– The shipyard’s production capacity is expected to be increased by 1.5 million CGT after the reopening of 12 shipyards in China. Thus, the 299 active shipyards in 2023 represent a total production capacity of 54 million CGT, believes Chara Georgousi.
Utilization of the 80 leading Asian shipyards is projected to increase to 83% in 2023 from 65% in 2022, while in 2024 it could increase to 91%. According to her, “Leading shipyards in South Korea and China are ahead of shipyards in Japan and other countries.”
The procurement structure for environmentally friendly ships is also changing. The number of units ordered with dual-fuel engines is increasing, the number of orders for power plants with scrubbers (washers) is decreasing. This is good news for European manufacturers of innovative engines, scrubbers and ship propulsion systems powered by batteries or LNG.
– In the first five months of 2023, 20% of the ordered ships will be able to use alternative fuels – says Antonis Tsimplakis – columnist for “Naftemporiki”. 6% of them will be fueled with gas from LNG tanks, 9% with methanol, and only 5% with LPG.

Alternative fuel course
Market analysis conducted by Intermodal shows that from 2022, most new ships ordered are equipped with some kind of emission reduction technology or with “off-the-shelf” technologies for the use of alternative fuels. According to Intermodal, this trend will continue in the coming years.
Today, in the case of the active fleet, approximately 0.54% of ships use alternative fuels, while in the shipyard order book the percentage that will use alternative fuels reaches 14.69%.
– Currently, 911 ships use LNG as fuel, 182 ships use LPG, 127 ships use methanol and only 27 ships use hydrogen. Of the current order backlog, 10.31% of ships will be powered by LNG, 2.03% by methanol, 1.91% by LPG and just 0.42% by hydrogen, according to Tsimplakis.

China is the leader – orders increased by 67.7%
Published by the China Association of the National Shipbuilding Industry (CANSI) Statistics after the first half of this year. reported that there was an increase in the number of new contracts in Chinese shipyards by 67.7%. Among them, export orders account for 92.8% of contracts.
Orders for the construction of new ships rose sharply this year. Container ships and LNG carriers still dominate the docks of Chinese shipyards. More oil and product tanker contracts have emerged.
– In the first half of the year, Chinese shipyard workers delivered ships with a carrying capacity of 21.13 million tons, which means an increase of 14.2% year on year – reports CANSI.
In the first six months, China’s shipbuilding output accounted for 49.6% of world output. However, the portfolio for new orders for shipbuilding accounted for 72.6% of global contracts, which corresponded to 53.2% of the deadweight capacity in the global market.

More: BSSC

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Manufacturing activity falls further – EY ITEM Club comments

  • The manufacturing downturn deepened in July, with the sector’s Purchasing Managers’ Index (PMI) heading further into contractionary territory. And with the impact of higher interest rates on household and corporate budgets growing, the EY ITEM Club doesn’t expect a significant uptick in manufacturing activity this year.
  • The S&P Global/CIPS survey also pointed to another fall in input cost inflation in the goods sector, adding to other leading indicators showing growing evidence of disinflation. But given the Bank of England’s focus on inflation in the services sector, this probably won’t have much bearing on its next interest rate decision later this week.

Martin Beck, Chief Economic Advisor to the EY ITEM Club, says: “July’s final S&P Global/CIPS manufacturing survey reported another decline in activity, with the PMI falling to 45.3 from 46.5 in June. The index was dragged down by a significant decline in production, with survey respondents suggesting that mounting uncertainty from rising interest rates had led to a softening in demand both at home and from abroad.

“But the fall in the PMI balance looks to have been exaggerated by some overstocked firms choosing to cut purchases amid improving supply chains, leading to a further fall in supplier delivery times. The PMI is also prone to being affected by sentiment, so the weight of recent bad news about rising mortgage rates may have depressed the outlook of survey respondents and dragged on the PMI.

“Beyond the survey’s disappointing set of backward-looking balances, its forward-looking indicators didn’t offer much positivity either. Respondents reported a large fall in new business, suggesting that manufacturing output is likely to remain weak in the near-term. Goods producers are likely to struggle over the rest of this year as rising borrowing costs and still-high inflation continue to squeeze household and corporate budgets.

“One area where the survey did offer some brighter news was on costs. Input cost inflation fell outright for the third consecutive month as pressures on transport and energy prices eased. But manufacturers appear to be attempting to rebuild margins rather than pass lower costs onto consumers, with factory gate charges remaining flat. Falling cost pressures should be welcomed by the Monetary Policy Committee (MPC), but the committee is unlikely to place much weight on the results of today’s survey. Instead, the MPC’s attention is likely to be focused on the much bigger services sector, where inflation has come down recently, but remains uncomfortably high. Therefore, the EY ITEM Club still expects the MPC to raise Bank Rate by 25bps later this week.”

More: EY

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Gary Miles, CEO of Gentrack, tells delegates at Future of Utilities that the world needs to learn lessons from Australia’s “energy as a service” model

Utilities can’t afford to wait to transform, the benefits significantly outweigh the risks

IT transformation will be critical to deliver the energy transition. Gary Miles, CEO of Gentrack, tells delegates at Future of Utilities that the world needs to learn lessons from Australia’s “energy as a service” model.

Transitioning to a low carbon world involves huge upstream and midstream investment in solar, wind turbines and grid infrastructure to cleanly and reliably deliver electrons to people and businesses. But, as Gary Miles, CEO of Gentrack, made clear in his keynote presentation at the recent Future of Utilities Energy Transition conference, the IT systems which underpin the workings of the modern retailers and gen-tailers must transform to adapt to the decentralisation and decarbonisation challenges ahead.

Get this right and there’s huge upside, both for the utility provider and the customer. “Amazing customer experience, digital first engagement, lower debt, more than 99.5% accurate billing and reduced cost to serve, with automation helping to deliver 30-40% lower cost-to-serve,” said Miles

Miles is a newcomer to the energy industry, having spent most of his career in the telecoms industry. “Telecoms had the largest impact on GDP in the world over the last 30 years, delivering information and education to billions of people,” said Miles. “It’s been an amazing vehicle of progress for the world.”

“The energy industry today is more dynamic than the telecoms space. The pace of change is accelerating and the existential need to modernize is more profound.”

By comparison, few people would consider utility providers to be hubs of innovation. Yet this would, said Miles, be a misconception. “From time-of-use tariffing to virtual power plants there is an innovation highway ahead of energy suppliers and the industry today is more dynamic than the telecoms space was,” he said. “The pace of change is accelerating, and the complexity is enormous, but so are the opportunities.”

To illustrate his point, Miles highlighted the success stories from Australia, which, having been hard hit by blackouts, is now powering ahead with renewable and decentralised energy. The Australian Energy Market Operator and Energy Networks predict that generation from decentralised sources will be up to around 45% by 2040 – indeed, the country is already the number one in the world for solar PV per capita. This isn’t just about being blessed with good weather – after all, the country is also rich in oil, gas and coal – but about policy and investment.

Energy decentralisation graph

Government policy has accelerated the uptake of solar and battery systems, which in turn is leading to innovations in customer propositions.

Energy as a service

“One of the more recent innovations we’re seeing, powered by technology, is leveraging flexible behind-the-meter load from Solar and EVs,” Miles says, highlighting the work of Gentrack client Energy Australia. They offer householders installations of solar PV and battery systems with zero up-front cost, and at the end of seven years they own the system. The solar option is highly popular, and the battery roll out is also growing fast; around 140,000 homes already have batteries, with the number installed expected to rise to 800,000 by 2025.

Most importantly, for the consumer this is a super simple and very affordable proposition.”

“Consumers pay a flat energy rate for seven years on an ‘energy as a service’ model,” Miles explained. “Energy Australia leverages their ability to aggregate this flexible load and bid it into the grid as a virtual power plant, so they can take advantage of wholesale revenue streams. Most importantly, for the consumer this is a super simple and very affordable proposition.”

“Your systems need to deliver a simple customer experience in the face of extreme complexity”

This is key, and it’s why the IT side is just as important as the panels and batteries. To work, the hugely complex, multi-faceted and vastly expensive energy transition must be presented to the end-user as simple, reliable and good value for money. “Your systems need to deliver a simple customer experience in the face of extreme complexity,” said Miles.

While telcos responded to the cyclical waves of innovation that would routinely hit every eight years or so by renewing and reinventing their IT infrastructure, Miles believes that the systems powering much of the energy industry are stagnant and act as a brake, rather than an accelerant, on progress.

“The IT systems of many retailers are old and broken,” he told delegates. “The systems are 20-30 years old and they’re leaking and creaking. The shift to upgrade and transform has happened in leading markets with huge success as retailers move off of these antiquated systems. The rest of the world is due to follow as it sees that such transformations are both achievable and able to deliver significant results.”

Existing legacy systems are, quite simply, not fit for purpose if the energy transition is to be achievable to any meaningful timescale.

“Today, leading utilities are telling us that their legacy systems are like cement in their businesses,” he said. “Those platforms are literally weighing their organisations down and stopping them from moving forwards.”

“Leading utilities are telling us that their legacy systems are like cement in their business.”

Investing for a smarter, greener future

The good news is that this overdue investment is now being made. Miles cited statistics from a leading industry analyst that suggest that all of the utilities companies will upgrade their systems in this decade and the first 20% will choose a replacement system by 2026.

And this comes with a kicker in the tail. “If you don’t do it, you will fall further and further behind,” he said, stressing this wasn’t just an energy company issue; water companies need to make this investment too.

These investments in IT are part of the enabling technologies for the energy transition. Because clean energy isn’t just about turbines and solar; as demonstrated by Energy Australia, it’s about building a grid that can deal with intermittency and distributed generation, flexing and adapting and hedging to changing inputs and outputs, offering dynamic pricing and giving more power to consumers – who are becoming generators in their own right.

Get this right and there’s huge upside, both for the utility provider and the customer. “Amazing customer experience, digital first engagement, lower debt, more than 99.5% accurate billing and reduced cost to serve, with automation helping to deliver 30-40% lower cost-to-serve,” said Miles.

What’s more, this kind of digital transformation can be done relatively quickly, using low-code, no-code technologies. “It means you can be launching innovative propositions and new services in days rather than months,” he said.

The energy transition is going to require constant innovation and systems will need to be able to flex, whether it’s in response to new technologies, customer behaviours or market conditions. Future optionality can come from being part of an open ecosystem, enabling companies to partner with specialists and leverage existing capabilities. This is a new way of thinking and working for many in the utilities sector but it’s going to be essential to deliver perhaps one of the biggest challenges facing humanity: the transition to a low/no carbon future.

“The world needs to look at places like Victoria in Australia, and make that leap,” stressed Miles. “The time to do this was yesterday.”

As delegates at the conference would no doubt agree, the next best time is now.

More: MarketForceLive

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Arne Vatnøy: The idea behind Norwegian Offshore Wind is that we are industry driven

Norwegian Offshore Wind Cluster –  to maximize opportunities for the Norwegian OWI
 Marek Grzybowski (5) questions to Arne Vatnøy, Communication Manager,  Norwegian Offshore Wind
An exclusive interview to Baltic Journalist Maritime Club  of the Baltic Sea & Space Cluster  (BSSC)

The dynamic between the small startups, SMEs and the large international companies is core of collaboration in the Norwegian Offshore Wind cluster. The organization has several meeting places where are organized B2Bs between the cluster members, and they are also represented in our working groups for different markets and supply chain issues.

The idea behind Norwegian Offshore Wind is that the Norwegian Offshore Wind is industry driven. All the working groups are led be a representative from Cluster  member companies. With the position that Norway has as pioneers withing the floating offshore wind industry, it is natural that the Norway is the host country of the global flagship event for floating wind.

Marek Grzybowski: The Norwegian government’s target is 30 GW by 2040. Multiconsult’s mapping shows much greater potential for the construction of new offshore wind farms along the entire coast. Norwegian Offshore Wind, together with developers Equinor, Source Galileo, Hafslund and Deep Wind Offshore, commissioned the preparation of the report. Is it possible to build 338 GW of offshore wind energy in Norway?

Arne Vatnøy, Norwegian Offshore Wind: This report shows that there are large areas we need to examine further in the process of finding new areas for offshore wind development. The industry supports the government´s ambitious goal of 30 GW by 2040, and we will contribute constructively with input in the process of finding the best suited areas. We see that there is a large potential, especially within floating offshore wind, and the industry will continue to provide new insight that will bring the development forward.

Marek Grzybowski: The report places particular emphasis on cooperation with other maritime industries. What are the industries? How will industries related to the blue economy work together?

Arne Vatnøy, Norwegian Offshore Wind: In Norway, we have a good dialogue with the fishing organizations, and this is vital to succeed with further offshore wind development. When we are going to find new areas for offshore wind we need insight and knowledge that secure coexistence. We work together with different interest groups in the government´s coexistence group, and we are also facilitating debates, discussions, seminars and meeting places with all the industries related to the blue economy. At this year´s Floating Wind Days, coexistence is of course high on the agenda.

Marek Grzybowski: Norwegian Offshore Wind achieved ARENA Pro Cluster status through Norwegian Innovation Clusters in 2021. Norwegian Offshore Wind Cluster members range from small start-ups to international companies. What is the cooperation of these companies in the Cluster? How does the cluster achieve the synergy effect?

Arne Vatnøy, Norwegian Offshore Wind: The dynamic between the small startups, SMEs and the large international companies is core of collaboration in our organization. We have several meeting places where we organize B2Bs between our members, and they are also represented in our working groups for different markets and supply chain issues. All the consortia applying for the Norwegain offshore wind parks are represented in our cluster, and they are working together to influence policy makers and authorities in our Developers Forum.

Marek Grzybowski: There are 17 working groups in the Norwegian Offshore Wind cluster. There is also a steering committee in the cluster. Why was this structure created? What is the role of these Cluster structures in the development of innovation and business?

Arne Vatnøy, Norwegian Offshore Wind: The idea behind Norwegian Offshore Wind is that we are industry driven. All the working groups are led be a representative from our member companies. The steering committee is also put together to represent the diversity in this industry. Their role is to help create the strategy for the cluster and make sure that it is the opinions of the industry that drive our work forward.

Marek Grzybowski: Floating Wind Days 2023 will be held in Haugesund on May 24-25th. What is the mission and main purpose and role of this event? Who will the speakers be?  

Arne Vatnøy, Norwegian Offshore Wind: With the position that Norway has as pioneers withing the floating offshore wind industry, it is natural that we are the host country of the global flagship event for floating wind. We have more than hundred speakers, see the full list and program at www.floatingwinddays.com. This year´s festival is opened by the Prime Minister of Norway.

Marek Grzybowski: Thank you for your answers