Unemployment and underemployment represent the biggest risk for doing business around the world. That is the view of more than 12,000 business people across 140 economies, according to findings that we publish today in the first edition of a new Regional Risks for Doing Business report.

The second biggest risk is “failure of national governance.” These findings should ring alarm bells. At a time when the world is often distracted by the latest twists and turns of accelerating news cycles, they provide cautionary evidence of weaknesses in the foundations of our political and economic systems.

Source: World Economic Forum

The regional impact of global risks

The World Economic Forum has been analysing risks at the global level since 2006 in its annual Global Risks Report, highlighting the vulnerability of our increasingly networked and interconnected world to volatility and disruption.

But even the most global of risks crystallise locally and are experienced differently. If global risks demand our attention, it is ultimately because they entail harm to the lives and livelihoods of particular people in particular places. These particularities cut across several dimensions, from wealth and nationality to gender and profession. In our new report, we are seeking to shed some light on one of these dimensions: the regional.

Our starting point is the data from our Executive Opinion Survey, which each year gauges sentiment about the business environment in individual economies. As part of the survey, respondents are presented with a list of 30 risks and asked to select up to five that they view as a concern in terms of doing business.

This framing is important—we are capturing perceptions about operational impacts rather than the more holistic risk perspective that we can focus on in the Global Risks Report. This probably explains some of the big differences between the two reports, such as the fact that environmental risks predominate in the Global Risks Report, but rise to prominence only in a small number of countries in Regional Risks for Doing Business.

Cyber-attacks are a growing concern

As the table below indicates, there are marked differences in the profile of the risks highlighted by businesses in different regions. On an aggregate global basis, cyber-attacks jumped in the rankings, from eighth position according to last year’s data to fifth position this year. But it was the number one risk in three of our eight regions.

Unsurprisingly, cyber-attacks tended to be flagged as a concern in the world’s more advanced economies. Of the 19 countries that ranked it number one, 14 were from Europe and North America (the others were India, Indonesia, Japan, Singapore and the United Arab Emirates).

Source: World Economic Forum

Unemployment and underemployment was ranked in first place in just one region, Sub-Saharan Africa, where respondents in 22 of the 34 economies we surveyed cited it as the top risk for doing business. However, it was a top-five risk in every region except North America, and this consistency pushed it to the top of the overall global results.

The underlying significance of the unemployment risk needs to be cautiously interpreted, as it may reflect quite different challenges across countries, such as weak growth, talent shortages or labour-market disruptions caused by automation.

In Sub-Saharan Africa, countries face the profound challenge of creating sufficient jobs to meet the needs of the working-age population that is expected to more than double to 1.6 billion by 2050. Quality of employment matters too – at present 70% of workers in Sub-Saharan Africa are in vulnerable employment, compared to a global average of 46%.

In both South Asia and Latin America, failures of national governance topped the list of business risks according to respondents. The scale of the strains being experienced in much of Latin America is highlighted by the fact that the second-placed risk in that region is “profound social instability.”

This follows a marked deepening of social tensions across much of the region – in particular, successive corruption scandals have reaffirmed electorates’ mistrust of institutions and reinforced political polarisation.

The critical situation in Venezuela is reflected in the risks prioritised by survey respondents there: “unmanageable inflation,” “state collapse or crisis,” “profound social instability,” “food crisis” and “failure of national governance.”

Energy price shocks were perceived as the biggest risk for doing business in Eurasia and in the Middle East and North Africa (MENA). Oil producers have benefited from rising oil prices over the past year. However, vulnerabilities to swings in prices have not disappeared, particularly in countries where government spending is rising, such as Saudi Arabia, which was one of five MENA countries to rank energy prices as the top risk to doing business.

Regional coordination is crucial
One consequence of the geopolitical shifts that are underway is the increasing likelihood that regional developments will have a greater impact on the wider international system.

Nation states acting alone cannot manage, let alone resolve, the global challenges facing the world, but coordination at the global level appears increasingly fraught with geopolitical tensions.

Some of these tensions are less pronounced at the regional level, and we expect regions to play an increasingly active and important role in the world in the years ahead. For this reason, understanding the risks each region faces is essential if we are to better understand the forces shaping the global landscape.

Regional Risks for Doing Business 2018 is available here.

Edited by Tomas Lin


Original content can be found at the website of World Economic Forum.

♦ These are the top risks for doing business around the world

This article is reproduced under the permission of World Economic Forum (WEF) and terms of Creative Commons Attribution-NonCommercial-NoDerivs 4.0 Unported License (“CCPL”). It presents the opinion or perspective of the original author / organization, which does not represent the standpoint of CommonWealth magazine.

Hon Hai Precision Industry Co. chairman Terry Gou attended an event at the American Institute in Taiwan (AIT) early on the morning of April 16 to mark the fortieth anniversary of the Taiwan Relations Act.

Before heading inside, in response to persistent questioning by members of the media about whether he has decided to run for president, Gou let it slip that he might participate in the Kuomintang (KMT) party’s presidential primary.

Spreading rapidly over online media and television news, word of Gou’s response stunned all of Taiwan, as people wondered if the rumors of Taiwan’s richest man perhaps becoming president were true.

Speaking to CommonWealth, an unnamed source familiar with the inner workings at Hon Hai revealed that Terry Gou first toyed with running for the presidency after such atypical politicians as U.S. president Donald Trump and Kaohsiung mayor Han Kuo-yu defied expectations to win their respective races.

“Terry Gou is a very proud man,” relates the source. This explains why Gou remained mum about his intentions at first, being careful to first set the stage for a run behind the scenes, starting with Facebook and LINE fan pages in January and March, respectively, as a platform for airing his views on national issues and take the pulse of the potential reception. A team was even established inside Hon Hai to conduct public opinion polls and test the waters for a prospective run.

Once again surrounded by media during a break during the meeting on the sixteenth, Gou began speaking at length, addressing issues “at the presidential level.” As the atmosphere began to resemble a campaign speech, a reporter suddenly asked, “Chairman Gou, could you really let go of Hon Hai?”

Photo by Chien-Ying Chiu

“That’s a great question,” he answered seriously before proceeding to share an anecdote he had never spoken about before, about the late Formosa Plastics Chairman Wang Yung-ching, the “god of management”.

Learning to Let Go Allows Staff to Learn and Grow

“I once spoke with Chairman Wang,” he said. “You might not know this, but Wang had retreated to the second line by then.” In 2006, two years before his death, Wang Yung-ching retreated to the second line with his brother, Wang Yung-tsai, handing over decision-making authority over the Formosa Plastics Group to a seven-member policy team.

Gou believes that he planted the seed with advice he gave Wang, relating that the Qianlong Emperor’s 60-year reign was a key contributor to the decline of the Qing dynasty. Therefore, one should hand responsibility over to younger people.

Changing course, he spoke about the executives at his own company, saying, “I trained them and have worked with them for 40 years. I need to learn how to let go so they can learn and grow.”

Judging from Gou’s public pronouncements, a potential presidential run is still in the long-term consideration stage. However, “letting go” and “stepping back to the second line” appear to be inevitable.

According to the Public Official Property Reporting Act, publicly listed and over-the-counter stocks held by a presidential candidate (including spouse and minor children) must be placed in a trust and reported within three months of the inauguration date. Should Gou’s 1.33 million shares of Hon Hai stock all be entered into a trust, he would not risk losing his eligibility as CEO of Hon Hai Precision.

That said, general popular sentiment could become an issue if the nation’s top official were also at the helm of a large corporation. Should Gou decide to declare his candidacy, he would surely have to distance himself from Hon Hai to a certain degree.

Chinese online retailer Alibaba has been keeping track of what consumers are talking about, what they are searching for, and most importantly, the products they are unable to find.

Analyzing data from more than 600 million monthly active users, Alibaba has identified gaps in the market and alerted retail companies eager to create products to fill them.

It has helped Mars create a new chocolate bar, given Unilever information to develop a range of pollution-beating cosmetics, and also advises companies on how best to market their new products.

As one of the world’s largest e-commerce companies, Alibaba is favourably positioned to discover the wants, needs and aspirations of customers.

In addition to its major online shopping platforms – alibaba.com, Taobao and Tmall – Alibaba Group Holding has many other assets including online payment platform Alipay, China’s biggest digital advertising business, and its own hybrid version of YouTube and Netflix (Youku).

At Tmall Innovation Center – the company’s market research department – analysts have access to a wealth of data on consumer behaviour and preferences, making it one of the biggest focus groups in the world.

Duan Ling, director of brand marketing and head of the centre, told Bloomberg: “We can see where there are blank spaces and unmet needs in the market.”

Big data is providing companies with new tools to monitor and analyse consumer behaviour, which is changing the way products are conceived and manufactured.

Know Your Customer

Technology continues to transform the manufacturing sector as the Fourth Industrial Revolution gains pace. The internet of things (IoT) connects devices, services and user information like never before, allowing companies to collect vast amounts of market information.

According to the World Economic Forum white paper Technology and Innovation for the Future of Production: Accelerating Value Creation, 70% of captured production data isn’t used.

Artificial intelligence (AI) enables companies to make sense of the overwhelming amounts of data harvested, which then helps them better understand their customers and make more informed business decisions.

As the chart shows, IoT investment is increasing rapidly. The IoT and AI can help streamline processes from the shop floor to customer delivery, boosting efficiency, improving quality standards and predicting production or maintenance problems before they happen.

IoT technology allows manufacturers to carry their quality control processes into the homes of customers. Products with sensors embedded in them can provide real-time data on how, when and where a product is being used, throughout its lifespan.

Armed with valuable information on a product’s performance, manufacturers can design and build improved products that meet customers’ needs.

However, this also raises privacy concerns about how data is used and who controls it. Manufacturers that handle data carefully should emerge with a competitive advantage by earning customers’ trust, but may still be at risk of security breaches from criminals targeting personal information and payment details.

Edited by Tomas Lin

Some of the most prestigious brands and most sought-after employers have long reserved themselves for those who have graduated from university with a degree. But the times they are a-changin’, as Bob Dylan once sang.

The shift in recruitment practices is taking place across a range of different sectors, with technology and accounting firms amongst those who have recently decided that a university degree is no longer a requirement.

The reason many employers are adopting a less rigid stance when choosing their ideal candidates relates to a combination of recruitment and talent management challenges.

July 2018 marked the 94th consecutive quarter of job creation in the USA, with 219,000 jobs added – significantly above ahead analysts’ expectations of 185,000. In the UK, the second quarter of the year saw unemployment rates hit a 43 year low of 4%. China is also enjoying low unemployment. A rate of 3.83% (June 2018) is the lowest it’s been since 2002. Meanwhile, many developed economies are experiencing the effects of declining birth rates, leading to reduced numbers of people coming on to the job market.

In addition, employers are increasingly waking up to the importance of diversity and inclusion (D&I). Google is one of the most visible brands taking its D&I responsibilities seriously. In its most recent diversity report, it details its aims, strategy and progress to date: “… despite significant effort, and some pockets of success, we need to do more to achieve our desired diversity and inclusion outcomes,” the report says.

As a result, we are witnessing employers having to rethink their recruitment and retention strategies. This involves working harder to support minority communities within their employee base, as well as attracting new employees from a wider talent pool.

An Emphasis on Experience

For many years, Google was famed for requiring all employees to have a university degree. That is no longer the case. Peruse the job ads over at Google and you will see phrases like “bachelor’s degree or equivalent practical experience” listed in the role requirements for sales managers and software engineers alike.

It’s a significant change of outlook, and Google is not alone.

Publishing giant Penguin Random House dropped its degree requirement in 2016, and in 2015 the global accountancy firm EY announced it would no longer evaluate potential employees on their degree or other academic qualifications; Deloitte has done much the same, as has PwC. “The world of business is changing, and there are now many professional opportunities available to you straight out of school,” according to the PwC website for school and college leavers.

Another sought-after brand that no longer stipulates the need for a degree in its job ads is Apple. From retail to engineering, the company that recently saw its market capitalisation hit the $1 trillion mark, now puts the emphasis on experience rather than university attendance. Again, Apple is placing significant emphasis on the D&I efforts it is making. “The people here at Apple don’t just create products – they create the kind of wonder that’s revolutionized entire industries. It’s the diversity of those people and their ideas that inspires the innovation that runs through everything we do,” it writes on its website.

With so much emphasis on the importance of a diverse workforce, it is important that employers look beyond their usual hunting grounds, and attract recruits who have a range of backgrounds and mindsets, reflecting the make-up of the population at large.

For those entering the job market, there may never have been a better time to trade on individual strengths and seek out the best opportunities.

Edited by Shawn Chou

Thirteen years ago, W. Chan Kim and Renée Mauborgne swept the world with a new vision for corporate strategy in the book “Blue Ocean Strategy.” Last year, they presented a set of strategic tools in their new book “Blue Ocean Shift: Beyond Competing: Proven Steps to Inspire Confidence and Seize New Growth” to help companies apply the strategy in a changing world.

Chaney Ho, an executive director with industrial automation specialist Advantech Co., and Joseph Huang, president of E.Sun Financial Holding Co., are both fans of the authors and the concept.

Ho says that when the blue ocean strategy was first introduced, he put it into practice by analyzing and revising his company’s strategy.

Ho was looking to compete with China-based EVOC Intelligent Technology, which was founded by a former Advantech employee in China and has received financial support from China’s government. Carefully applying the blue ocean strategic map, he analyzed the differences between Advantech and EVOC and decided to eliminate the company’s advertising budget, allocating the resources instead to strengthen the stability of Advantech’s products and relationships with its big clients. (Read: Advantech Launches Counter Attack from Europe)

Huang said he was particularly impressed by the authors’ emphasis on the need for a humanistic process, or “humanness,” in executing a blue ocean shift.

After speaking with Ho and Huang, CommonWealth Magazine asked Kim and Mauborgne some of the questions that popped up as the two executives applied the strategy to their businesses. Here are excerpts of the conversation.

CommonWealth Magazine: It has been more than 10 years since “Blue Ocean Strategy” was published. Do you think “Blue Ocean Strategy” is still a comprehensive tool for companies nowadays? More than 10 years later, have you revised the theory? If so, why?

W. Chan Kim & Renée Mauborgne: What has happened in the past decade is consistent with our observations about the pattern of value innovation and new market creation. Tech companies have brought significant changes to the financial industry with profound implications for consumers and the society at large.

Yet underlying the creation of a new market and new demand was still value innovation rather than technological innovation or disruption.

Those successful FinTech companies have used new technologies to address the pain points of users caused by traditional financial services and in turn create breakthroughs in value for consumers. Their innovations, therefore, were firmly anchored in value. We should also remember that there were companies that eventually failed despite the bleeding-edge technologies they possessed because they did not offer innovative value to consumers.

This is an important point for traditional financial institutions to appreciate, as once they see new technologies as enabling tools to help them achieve value innovation, they can take an active part in shaping the future outlook of the industry rather than being disrupted by these technologies.

Renée Mauborgne and W. Chan Kim (Source: Blue Ocean Shift Team)

On a more general level, new developments in the past decade have made our theory more relevant than ever before. For most organizations, it is more imperative than before to pursue blue ocean shift. The market today is much more crowded than 10 years ago due to increased participation of global players from emerging economies and the emergence of tools for global communications, transactions and advertising that generally make it faster and easier to become a global player.

The rise of emerging economies and the huge market demand they represent also call on organizations to come up with offerings that are both high-value and affordable to these markets characterized by relatively low per-capita income on the one hand, and increasingly sophisticated consumer tastes on the other.

Moreover, the rising influence and use of social media have shifted the power and credibility of voice from organizations to individuals, making it increasingly impossible for organizations to over-market their me-too offerings.

There has hardly been a time in history when achieving innovative value at lower cost became a pressing need in so many industries, sectors, countries and regions.

CW: According to the book, a blue ocean and red ocean are clearly different concepts. However, companies sometimes feel confused over whether they are situated in a blue or red ocean. Are there signs or indicators you can recommend to help companies identify their situation?

Kim & Mauborgne: When you are in the red ocean, normally you will find yourself trapped in cutthroat competition. Profit margins are declining, downward pressure on price is mounting, and products are getting commoditized in your industry.

In order to evaluate accurately and systematically whether your offerings are in the red ocean, the first blue ocean tool you want to use is the Strategy Canvas – a one-page visual analytical that depicts the way an organization configures its offering to buyers in relation to those of its competitors.

The horizontal axis of the strategy canvas specifies the key factors the industry competes on and invests in; the vertical axis captures the offering level buyers receive or experience for each of an industry’s key competing factors. This tool allows you to draw and compare the strategic profiles of your offering and those of your competitors in a picture; see and understand where you and your competitors are currently investing; the product, service and delivery factors the industry is competing on; and what customers receive from existing competitive offerings.

This exercise pushes you to take a step back from the detail you are typically enmeshed in and clearly see your industry’s defining contours. When the strategic profiles of industry players are converging, the industry is turning into a red ocean of bloody competition. If you are in such a situation, it is time to think about a blue ocean shift.

A second tool you want to use here is the Pioneer-Migrator-Settler (PMS) Map. Pioneers are businesses or offerings that represent value innovations. A value innovator stands apart from the competition by offering a leap in value. Settlers are “me-too’s” that offer value imitation. Migrators represent a value improvement over the competition and may even be best in class but they do not offer innovative value.

While the as-is strategy canvas enables you to evaluate where a particular offering of yours stands in the industry, the PMS Map allows you to plot all your existing offerings on the map and assess the strength of your organization’s portfolio of offerings. When you do the exercise, if you have many “me-too” settlers in your portfolio, making a blue ocean shift is imperative for your company in order to create new momentum for profitable growth in the future. Conversely, if you have quite a few pioneers in the portfolio, they are your blue oceans and the sources of your company’s profitable growth. (Read: Taiwanese Food Makers Choosing Blue Ocean over Red Ocean)

CW: The financial industry tends to be highly regulated. Financial institutions often identify new business opportunities but cannot take advantage of them because of regulations. What can they do when they face such situations?

Kim & Mauborgne: A fundamental principle of the blue ocean approach is to look across existing boundaries of competitions. Indeed regulations in the financial industry are especially heavy. But outside the traditional industry, financial innovations have been happening. The new FinTech sector is rapidly taking shape. Retail companies are offering banking services based on their large consumer networks. These, of course, are themselves the results of reconstruction across market boundaries.

Chaney Ho, Co-founder, Executive Director & Acting General Manager, Adventech Europe (Source: CW)

(Read: 2 Pieces of Paper = 1 Smooth Succession)

Top-down Approach Inefficient

But here we need to consider the total amount of time needed for a strategic transformation, which includes not only the formulation of strategy but also its execution. Without going through the proper process and ensuring buy-in and support at different levels of the organization, execution can take a much longer time. Hence, the total amount of time needed for the shift under the hierarchical approach is likely to take much longer.

Second, while the blue ocean shift process can be initiated at any level of the organization, for Asian companies, more than for their Western counterparts, top management’s engagement in and support for the initiative from the very start is likely to make a shift move more efficient as this will set the tone and build the momentum in the entire organization.

CW: We have found Taiwanese companies usually create internal competition between different units or divisions rather than to build a blue ocean team when they attempt transformations. What are the pros and cons of doing that?

Kim & Mauborgne: Creating inner competition between different units or divisions can be a good and effective way to improve operational efficiency under a given strategy. But the competitive divides also tend to create silos or even cause a degree of tension between units/divisions. Hence, the inner competition approach often is not suitable for driving innovative blue ocean projects. (Read: Can Taiwan Set Course for the ‘Blue Ocean’?)

The typical challenge a company may encounter in using these tools is that out of a sense of urgency for making the needed blue ocean shift, the management might feel that going through all these steps and processes can be time-consuming and therefore would rather give top-down orders and ask its people to dive into the technical process of conceiving and making a blue ocean shift.

However, without addressing upfront the basic human truths that reside within each of us, attempts to drive organizations to become more creative and innovative are likely to fail. Indeed, humanness builds psychological understanding into the strategic process and strengthens our confidence to act by eliciting our emotional engagement. It relaxes us and inspires us to tap into our curiosity and creativity, which is critical for reshaping and reimagining industry boundaries.

You need to construct a team where you gather representatives from all the functions and organizational levels that will play a key role in bringing a new offering to market. That would usually include someone from HR, IT, marketing, finance, manufacturing, R&D, and sales, as well as someone on the front lines, like a call center staff member or someone who works on the store floor. Instead of encouraging competition between units/divisions, therefore, at this point you need to build collective wisdom and united efforts across them. (Read: The Secret of the World’s Most Competitive Nation)

Once the strategy for making a blue ocean shift is created and execution is well underway, the method of inner competition can be relevant as it will drive different units to move more efficiently towards the newly agreed strategic goal.

“Slasher” has become a popular new term. It describes people making good use of their multiple strengths in their careers. Could the blue ocean strategy be implemented by individuals? Have you seen any such cases?

Kim & Mauborgne: Yes, the blue ocean method can certainly be applied to value innovating personal development.

To value innovate your career, for example, the first question you need to ask yourself is: is my career really stalling? The ‘as-is’ strategy canvas can give you the answer. Plotting your career profile against your peers is useful as it shows the extent to which you stand apart (or don’t stand apart) in the job market. If your strategic profile doesn’t stand apart from that of your peers, you’re a me-too.

To make a blue ocean shift, you need to consider what factors of competition you can eliminate, reduce, raise and create that will help you to stand apart. You can do this by filling in the Eliminate-Reduce-Raise-Create (ERRC) Grid. These four actions allow you to break away from the competition by reconstructing factors across conventional boundaries of competition.

Finally, draw your ‘to-be’ strategy canvas. This is the strategy canvas that depicts the ideal state you want to reach. This will show you in one simple visual how to stand apart from the competition and make a blue ocean shift in your career.

At the personal level, making a blue ocean shift is about setting your own rules rather than benchmarking the competition and being just another me-too.

A telling example is that of Mina Boström Nakicenovic, a former swim champion, who, after a 27-year break and with limited time to train, won gold and silver medals in the Swedish National Masters Championship. To achieve these results, Mina had consciously applied the blue ocean tools to analyzing what the competition was focusing on and what unique strength and technique she should work on in order to stand apart.

Mina found that good swimmers tended to focus on the short-distance and freestyle categories in the competition. Using the four actions framework of blue ocean shift, she eliminated these categories for herself and focused on the 200-meter backstroke. And instead of training intensively and for long hours to get back into the best possible shape, given the limited amount of time she had, she focused on the turning technique, which was critical to increasing speed in backstroke swimming. Her achievement testified to the success of this strategy.

Translated by Luke Sabatier
Edited by Tomas Lin

Image: Statista

It doesn’t matter where you are in the world, chances are that if you have a job, you feel like you work too hard. But a new survey has revealed dramatic differences in the number of hours worked in different cities.

Mumbai tops the chart with a whacking annual average of 3,315 hours. At the other end of the scale is Rome, where the average worker clocks up only 1,581 hours per year – well under half the figure for their Mumbaikar counterparts.

The UBS study found that the five hardest-working cities are all in emerging economies, with residents of Hanoi, Mexico City, New Delhi and Bogota all putting in similar hours.

Many Western cities featured towards the middle of the ranking, with the average New Yorker working 2,045 hours and the average Londoner 2,002.

Europe dominated the bottom of the table with Paris, Copenhagen, Moscow and Helsinki all working an average of 1,750 hours, or fewer, per year.

Take a Break

The survey also revealed huge differences in the amount of holiday entitlement in different parts of the world.

The hard-working Mumbai population were among those with the least time off, at only 10.4 days of vacation per year.

Image: UBS/Statista

Workers in Los Angeles had even less, at 10.1 days, and in Lagos, holidays averaged just 6.1 days per year.

Those who prefer a more leisurely break should head to Riyadh, which averaged 37 days per year, or Russia. Workers in Moscow and St Petersburg get 33.3 and 32.3 days annual holiday respectively.

Edited by: Shawn Chou