Autumn 2007

ReviewConsultingThe magazine of Capgemini Consulting in the UK

China could be consuming as much as a third of the worlds total luxury goods by 2015

The future of luxury, Glynn Davis 06

Most of the people I spend my time with are deadNiall Ferguson 03

Young people do not see it as their duty to votePaul Baines 16Consulting Review Autumn 2007 01

Contents : Editors note

In this issue:03 What happens next?Niall Ferguson wrote and presented a six-part history of the British Empire for Channel 4. His latest book, The War of the World, is a global history of the Second World War.

04 The highs and lows of working in LondonIoannis Kaplanis is a PhD candidate at the Department of Geography, London School of Economics. He summarises his research on labour markets and employment polarisation.

05 The power of networkingKiran Arora gives a snapshot of her work at the Qualifications and Curriculum Authority while Adrian Sheppard discusses his work with Shell.

06-07 The million dollar questionEditors note: Tom Blacksell, chief executive officer, Capgemini Consulting UKGlynn Davies is a business journalist writing for a wide variety of publications including the Financial Times, Grocer, Retail Week and Restaurant Magazine. He describes the future of the retail and leisure sector in 2027.

New eco-systemThis issue of Consulting Review explores the usual range of topics including a focus on the linked subjects of transformation and collaboration. At a corporate level, Jean-Baptiste Rouge says that it is generally limiting to transform within the traditional boarders of an enterprise. With the growing inter-connections within corporate eco-systems, Rouge argues that transformation becomes an issue involving you, your suppliers, their suppliers, your customers and their customers. According to Larry Tampkins on page 10, this transformational process will be expedited by the next generation of Web 2.0 technologies that can effortlessly create collaborative relationships with customers and suppliers. From a wider perspective, Jerome Buvat points to the fact that it is the younger generation that has been the first to embrace this shift in interaction. These digital natives are in the first wave of those adopting Web 2.0 technologies, sharing opinions through blogs, instant messaging and similar modes of communication. However, Paul Baines argues that 18-24 year olds are increasingly disenfranchised by wider social and political processes, presenting a risk that Generation Z mostly inter-connects with its own members. Government and companies must find ways to engage and encourage participation from CR this crucial community.

08 Hearts, minds and transformationJean-Baptiste Roug discusses his findings from a research and development program he has been leading on business transformation in the global networked economy.

09 Students of strategyGabriel Szulanski is associate professor of strategy at INSEAD. Szulanski writes on the management of knowledge assets and the making of strategy.

10 Collaboration 2.0Laurence Tampkins begun working in contact centres nine years ago with Unisys and now works within the services team for MSST. He writes about the future of collaboration.

11 Close the gapJohn Reed has been responsible for setting up large investment programmes for public transport and examines transportation energy efficiency.

12 First contact with digital nativesJerome Buvat has been head of the Telecom and Strategy Lab team for two years. He looks at how the telecom and media industry is going to evolve over the next few years.

13 Does Brown mean business?Jonathan Guthrie, enterprise editor of the Financial Times, blends humour with serious analysis and comment to take on Gordon Browns partnerships with UK business.

14 Suppliers dilemmaGeorge Yip and Audrey Bink write on how suppliers can recognise and get the most out of global accounts.

15 Where projects come fromFiona Czerniawska specialises in researching and consulting on strategic issues in the consulting industry, and looks at the real reasons why consultancies win projects.

16 Capturing our lost youthAfter being seconded to the Elections Unit at IpsosMORI during the 2005 British General Election, Paul Baines wonders whether we have lost touch with Generation Z.

02 Autumn 2007 Consulting Review

Top of the ladder

Top of the ladder:

What happens next?An award winning Scottish historian specialising in financial and economic history, Niall Ferguson explains why history isnt physics and what would have happened without the British Empirethis idea that we cant learn from it. Admittedly, you can learn badly from history, from bad analogies. Not every dictator is Hitler and you cant reduce everything down to parallels with World War II. So you need to keep to the historical straight and narrow. Would you describe yourself as a team player? Im a solitary, misanthropic individual. Most of the people I spend my time with are dead. However, I owe a large debt to my family, my colleagues, my students and thats why my acknowledgements get bigger. Im a loner by nature but history has to be a collaborative exercise. It can be a dreary and slow process so Im always keen to get graduates to help me, its the best way for historians to learn. What are the challenges facing global companies? History offers guidance, it points to things like the liquidity crisis. The financial services companies who have blown up used mathematical models rather than looking at the past. Companies should not approach the future as if it is a singular, there are many possible histories. Have you had a singular ambition that has driven your career? History is one damn thing after another and sometimes it feels like my career is one damn thing after another. Ive seized opportunities, Ive always been interested in economics and finance about power. There is a linking thread in that my work has always had a financial dimension. Most historians dont have that discipline. I havent achieved what I wanted to. Deciding to become a historian as a young man, I wanted to write a great historical work, one that would endure, one that would be unassailable. There is always this hunger to write the perfect book and the feeling is worse CR now because I have less time.

What are you working on? Im writing two biographies, one on Siegmund Warburg and one on Henry Kissinger. Historians start with documents, you cant write without them, and in both cases the written material is voluminous. The benefit of them being modern is that I can interview people who are still alive, especially with Kissinger. Youve previously written on the rise and fall of the British Empire, how does writing biographies compare? The object of any biography is to gain an understanding of someones thinking, trying to enter their mind. I wrote about the history of the Rothschild family in 1998, but Ive painted with very broad brushes since then. With Kissinger and Warburg I wanted to paint with a finer brush again. Its easier to write about millions of people than one as its psychologically more challenging to understand an individuals motivations than an empires.

What intrigues you about history? Im interested in things that didnt happen, the counter factual. We need to understand what didnt happen in order to understand what did. What if Hitler had been run over, would World War II have happened? If you say that the British Empire was a good thing because we stopped Nazi Germany and the Japanese, then you must look at the counter to see what would have happened if the Empire hadnt been there. History is a story but nobody at the time knows whats going to happen next. Would you describe yourself as populist historian? History isnt physics, it should be understood by any moderately educated individual. I take pride in the fact that my ideas can be understood both in The Journal Of Economic History and the LA Times. War of the World was a rigorous book, but I didnt water down the content for it to be communicated to a mass audience in the TV show. There is an ignorance of history, I never really understood

Consulting Review Autumn 2007 03

Public at large

Public at large:

The highs and lows of working in LondonLondon has the best paid jobs in the country, but it also has a fast growing number of the least well paid. Ioannis Kaplanis from the London School of Economics explains how he came to this conclusion in The Geography of Employment Polarisation in Britain which has been published by Institute for Public Policy ResearchIn the last quarter of 2006, employment in the UK reached a record high of over 29 million. But it is important to consider the quality of the new jobs that have been created, as well as their number. Although the average quality of jobs in the UK has increased overall, recent evidence suggests that polarisation of employment has emerged in Britain in recent decades there has been a growth in the number of high-paid and low-paid jobs relative to middle-ranking occupations. Several US studies on this topic have found substantial evidence for increased employment polarisation in the US between the mid-1970s and the 1990s. Goos and Manning in 2003 found evidence of increased employment polarisation in Britain in the period 1975 to 1999 across different occupations and industries. Using regression techniques they identify a Ushaped relationship between employment growth and job quality (measured by pay): that is, greater employment growth in high-paid and low-paid jobs accompanied by relative shrinkage in employment in middle-paid jobs. How can job polarisation be explained? Autor et al (2003) argue that technology can substitute for human labour in routine tasks but not in non-routine tasks. Non-routine tasks are found predominantly in high-skill and low-skill, rather than medium-skill, occupations. Building on this, Goos and Manning argue that the nonroutine tasks that cannot be substituted by technology are found increasingly in high paid cognitive jobs in areas such as financial services and the creative industries but also in low-paid manual jobs such as cleaning. Other disciplines, such as urban sociology and geography, have offered explanations that rely more on spatial factors. Notably, Sassen (1991) has suggested that the changing nature of the global economy leads to the formation of world cities whose economies are boosted by the growth of the financial services and new economy sectors. Although these world cities are characterised by great dynamism and increased prosperity, at the same time social and economic polarisation emerges because, in Sassens words: High income residential and commercial gentrification is labour intensive and raises the demand for maintenance, cleaning, delivery and other types of low wage workers. My initial results show that many of the lowest-paid occupations experienced substantial growth in the share of all employees they employed between 1991 and 2001 for example sales assistants (up 47% relative to total employment growth) and bar staff (up 32%). At the same time, many of the highest-paid occupations have also

experienced an increase in their share of employment for example marketing and sales managers (up 54%) and financial institutions managers (up 73%). Looking at the amount of employment polarisation into high-paid and low-paid jobs, there is a pattern of rising shares for the highpaid and low-paid jobs and falling shares for the middle jobs. This pattern is strongest in London. Further analysis of the differences between London and the rest of Britain according to different worker characteristics produces two additional findings. First, for women, there was strong employment polarisation between 1991 and 2001 in London, but no statistically significant increase in polarisation outside London. Second, the growth in low-paid parttime jobs that occurred in the national economy between 1991 and 2001 does not explain the increase in employment polarisation over this time. Employment polarisation is overwhelmingly driven by changes in the composition of full-time job occupations. Overall, employment opportunities in the lowest paid jobs, mainly associated with consumption and leisurerelated services offered at the local level to affluent workers, are growing faster in London than in the rest of Britain. The London labour market seems to have operated very differently during the 1970s and 1980s than during the 1990s. This is an important area for future research and plausible explanations such as increased international CR migration to London in the 1990s.

04 Autumn 2007 Consulting Review

At the sharp end

At the sharp end:

The power of networkingKiran Arora from Capgeminis Strategic Advisory Services has been working on the Diploma programme that will affect thousands of English school children, while Adrian Sheppard from Capgeminis IT Advisory Services has been helping Shell IT reinvigorate its IT function. Seemingly different, both projects required network building and stakeholder managementmultiple organisations that are involved in Diplomas, including awarding bodies and employers. Capgemini has implemented a new governance structure for the programme, facilitated the joint design of a Diploma development approach that met the needs of each organisation, and managed the delivery of the programme across the organisations. Two years on from the White Paper and Diplomas have come a long way. New qualifications for the first five Diploma sectors have been written and the newly formed school and college consortia are now preparing to start teaching them in September 2008. This is a reform that will impact everyone in England and Capgemini has CR played a key role in its success. Working primarily out of Shells head office in the Hague, Capgemini supported the company on its journey. This followed on from Capgeminis previous success in delivering a global project delivery framework for Shell. The new delivery model scope covers every aspect of IT within Shell, from strategic activities such as portfolio management, supplier relationship management and innovation, through to operational activities such as application and infrastructure support. Capgeminis approach involved three key elements: 1. The creation of a network of key executives and operational specialists within Shell who worked together collaboratively to establish a framework for driving process, tools and capability improvement year on year. 2. A common delivery and process model underpinned with maturity assessments and benchmarking for each IT domain. 3. Identifying a stair-step path to deliver year on year performance improvement linking this to strategic controls and KPIs. Having established the model, Capgemini jointly shaped the overall portfolio of work to create an integrated set of strategic improvement plans for the IT function from 2008 through to 2010. The roadmap created a new re-aligned set of programmes, each contributing to three key pillars of the functional improvement programme: the what (delivering to the business), the how (IT efficiency and effectiveness) and the who (sourcing, capability, and improved working together). Within the Shell environment the Capgemini team has developed a very strong network of colleagues, their expertise has been recognised by staff across the IT function and their opinions and advice are often sought, CR said the client sponsor Keith Herndon.

Passing the DiplomaIn 2005 the Government was faced with a difficult situation. Nearly 50% of learners achieved less than five A*-C grades in their GCSEs; participation in post-16 education was lower than desired; and employers and universities were making noises about young people not having the life skills required to succeed. In response to this the government published the 14-19 Education and Skills White Paper. This outlined the largest reform of 14-19 year-old education for a generation, the cornerstone of which was the new Diploma. Diplomas are a brand new suite of qualifications that learners will be able to choose as an alternative to GCSEs and A levels or Apprenticeships. Unlike GCSEs and A levels, employers have had a key role in defining what learners will learn and what skills they will develop. Diplomas are also large qualifications that need to be delivered across a number of schools and colleges. School and college consortia are being formed to tackle issues about who will teach which bit of the Diploma and how to timetable a qualification that is being delivered across so many locations. Capgemini has been supporting both the Department for Children, Schools and Families (DCSF) and the Qualifications and Curriculum Authority (QCA) over the last 18 months. The key challenge for the programme has been enabling joint working across the

Shell delivery and performanceShell has been on a journey to create a new delivery model and achieve top quartile performance with its IT function. It needed the IT function to deliver business performance and growth, continue operational improvement, and realise the opportunities created by new technologies and new sourcing models. In addition, there was the challenge of coordinating change across a global set of businesses and domains, sometimes with very different views of the shape of the new IT delivery model.

Consulting Review Autumn 2007 05

Satellite navigation

Satellite navigation:

The million dollar questionWill the Wests conspicuous consumers still be hogging the lions share of fine wines and lavish yachts in 20 years time? Writer for the Financial Times, Grocer and Retail Week, Glynn Davis considers whether the luxury pound will have travelled EastAnybody peering in through the window of Le Bernardin restaurant in New York on October 26 this year would have seen an auction of a seriously luxurious selection of fine wines taking place with the lots predicted to bring in a total of $20m. When considering where the luxury pound might have gone by 2027 it is hard to imagine that fine wine will have lost any of its lustre as a luxury product and will be as sought after in 20 years time as it is now. But what might change is the location, with the auction moving from Le Bernardin to one of the ultra-glitzy hotels being constructed in Dubai or Shanghai. The one trend that we will undoubtedly see over this 20-year timeframe is the massive growth in demand for luxury products from the developing economies in the East. According to Goldman Sachs, China could be consuming as much as a third of the worlds total luxury goods by 2015, surpassing the demand from the worlds current top luxury brands consumer Japan. This startling figure is based on demand from the twenty-something and thirty-something consumers in China, with this growing band of aspirational middle-class consumers regarded as a key target market for luxury brands in the future. This situation is somewhat different from that in Russia where there are a small number of very high net worth individuals but a distinct lack of a wealthy mid-tier that have sufficient wealth to consume luxury goods. But where these two regions are similar is in

06 Autumn 2007 Consulting Review

their rich elites desire for ostentation. Their conspicuous consumption looks set to continue with ever-larger cars and private planes being purchased. There is a need in such countries to signal just how wealthy you are, which is why India has become one of the fastest growing markets for luxurious cars. Boats are also a sure-fire sign of wealth and sales are expected to grow in the East, but for now sales are constrained by a lack of marinas. However, once the infrastructures are in place then growth will undoubtedly take-off for the desirable vessels crafted by well-known manufacturers such as Italy-based The Ferretti Group. Although global demand has been established for US and European luxury brands, in China around 80% of luxury foods are sourced from overseas markets. This is likely to change by 2027 as domestic brands will have built up a reputation for quality and generated traction. The trend for localised product could seriously affect the luxury industry since it has historically been a very global affair. Making matters worse in the developed world, and especially the US, could be the gathering backlash against globalisation. The West is coming to terms with the green issue and sustainability, which will undoubtedly affect the market for luxury goods. There is the growing paradox of wanting to consume while being a decent citizen. This has led to the rise of philanthropy among the richest individuals in the US who, having accumulated all that they could possibly need, have taken to giving it all away. One thing the rich wont be giving away is their private jets, despite their effect on the environment. Whether it is a holiday or a business trip, jets get them there quicker. And saving time is one of the worlds greatest luxuries for time-pressured rich individuals. Expect to see the rise of home visits for a greater cross-section of affluent people, with jewellery, haute couture clothing and bespoke suits sold in the comfort of peoples residences. The increasingly high value placed on time could see ever greater amounts of money expended on what could be lifes greatest luxury the ability to live forever, or for at least an additional 10 or 20 years on top of

The increasingly high value placed on time could see ever greater amounts of money spent on lifes greatest luxury the ability to life forever

natural life expectancy. Much is already being spent on anti-ageing creams and potions at exorbitant prices, so expect to see the rich spending big time on new technologies that can add years to their lives. In the West, this increased time would enable the wealthy to enjoy more experiences those precious, once or maybe twice in a lifetime holidays that will command a greater premium than expensive jewellery or flashy sports cars. Travel will therefore probably rise ever higher up the wanted list and a greater number of very intimate boutique hotels located around the globe, tailored to specific guest needs and desires, will emerge. We are also likely to see the continued rise of eating out but the booking of tables will become a thing of the past as it will be possible to buy a table for the evening at the best restaurants. Because of its characteristics, wine will continue to be a desired object but increasingly it will actually be drunk rather than stuck in a cellar. Where wine will also score highly in its desirability as a luxury object in the future is the finite quantity of the finest vintages. This is exactly why art will continue to be desirable in 2027. For unique works, which are revered around the world, there will always be a bevy of potential buyers. However, the

value of some contemporary art will be increasingly brought into question because 20 years from now some of it will be in a state of disrepair. Think of Tracey Emins bed becoming ever more dishevelled and Damian Hirsts formaldehyde pieces leaking. For slightly less wealthy individuals, luxury brands will increasingly focus on producing limited editions of their products. These create a demand from consumers because of their desire to be among an elite group that own a rare-ish item. The desire for exclusiveness will drive personalisation in the world of luxury with concierge services gaining a greater foothold. Might we even be on the brink of the return of the butler and increased demand for personal chefs on a fractional ownership basis, similar to private jets, where a certain amount of their time can be pre-booked? And so much of the future of luxury will have one foot firmly placed in the past. Does this suggest a lack of innovation in the industry? Well probably yes, but thats because luxury brands have historically been built up over many generations and have had little need to change radically. However, with the East now growing so quickly, the luxury industry will have to adapt rapidly to these new markets and innovation might come more to the fore. But whether this means we will find miniature implanted watches replacing traditional Patek Philippe timepieces on the wrists of the rich in 2027 is the million CR dollar question.

Consulting Review Autumn 2007 07

Capability case study

Capability case study:

Hearts, minds and transformationJean-Baptiste Rouge, a vice president with Capgemini France, is leading the TC 21 research and development programme on business transformation. He discusses why conquering new markets and double digit growth require a vision of the future often lacking in the boardroomIn 2006, Capgemini Consulting conducted a survey with 125 European CEOs on the topic of business transformation with two key findings. First, transformation is becoming a corporate way of life, CEOs expect to launch two or three significant transformation initiatives each year over the next three years. Second, business strategy is easy, setting the direction is not the issue but implementation is. Sixty percent of CEOs consider that transformation initiatives fall way short of expectations and do not deliver the expected benefits. Indeed, the ability to access new markets, move from product to service, change the rules of the ecosystem, re-deploy capabilities, globalise, trim, outsource, off-shore and thrive in the Web 2.0 economy is what will drive the success of global corporations well past the end of this decade. While some of the more mature organisations often operating in hitech sectors have made transformation and changed their normal way of working, this is not the case for most of the others. They are faced today with a double challenge: conducting the transformation programs that are necessary to adapt to the global economy and inducing the behaviours and capabilities that will make transformation part of their organisations DNA. Recognising this challenge, Capgemini Consulting launched a research program in 2007 to re-think the fundamentals of business transformation and consolidate its experience into actionable frameworks, tools and methodologies. Backed up by 40 years experience of managing large transformation programmes across the world and through the analysis of a number of significant client cases, Capgemini transformation experts transformed their own approach to transformation on the basis of three essential observations. Observation number one is that if considerable energy and top management attention is put into defining the business strategy that triggers the need for companies with massive synergy saving commitments. In the global networked economy, transforming solely for productivity gains has become pointless. Competitiveness works hand in hand with growth, and if you dont go for those new hyper-growth segments someone else will, eventually challenging you on your traditional markets. Transformation is therefore about growth, conquest, leverage of new business or technology opportunities. This is all fine as it stands, but the greater challenge is in how to energise your company and resources around a positive, growth oriented objective. When its about survival, your people will be behind you, when its about conquest you need a highly inspiring vision to win the hearts and minds of managers and employees. Announcing a transformation initiative built on the desire to take a company into double digit growth wont do the trick. Engaging hearts and minds for conquest requires a highly inspiring corporate vision that will create fundamental sense for all. Understanding the underlying dynamics that have made the success of organisations such as the Red Cross or Wikipedia, which have managed to channel the time and energy of millions for free, gives a flavour of how these inspiring visions should be crafted. Observation number three is that it is generally pointless to transform within the traditional borders of an enterprise. With the growing integration and inter-connection of the eco-system in which you operate, transformation becomes an issue for you, your suppliers, their suppliers, your customers and their customers. Meaningful success will come from engaging and orchestrating your ecosystem into an ambitious transformation partnership. This may sound like a bet, but is in fact just sound business understanding of how the economy is transforming. Collaboration to create value through the eco-system is the CR name of the game.

transformation, the essential step of turning the business strategy into a transformation strategy is often overlooked. Eager to move towards action and delivery of results, a programme manager is assigned and the transformation is kicked off, yet the drivers and alternatives to implement fundamental shifts have not been thought through. The coalition of essential stakeholders is not aligned and engaged over critical issues issues such as how to balance growth and competitiveness objectives, how to engage hearts and minds, what the capability challenges are to make change sustainable, where to start from, what the right sequence and interventions are to manage the journey. Failing to address these essential questions prior to engaging the organisation is the number one reason for disappointment. Observation number two has more to do with the dynamics of transformation. For the past decade, most business transformation projects were either about reducing costs and increasing competitiveness or merging

08 Autumn 2007 Consulting Review

Boardroom radar : Vital statistics

Boardroom radar:

Students of strategyThe complexities of engineering change are well mapped out, but how should you go about creating a transformation strategy in the first place? INSEAD professor of strategy Gabriel Szulanski explainsMeg Whitman, chief executive of eBay, said in interview: Companies used to have strategy meetings twice a year, now we have them twice a week. The fact is that the metabolism of enterprise is changing dramatically. Whitman points to an overwhelming need for transformational strategy. Business people are increasingly bombarded with complex and often conflicting information, meaning that companies have begun to focus on a systematic process of creating strategy, as well as the content. Furthermore, as the cycle of strategy making has become so fast-paced, and involves more managers and specialists throughout the organisation, a process or framework for strategy making is now a crucial pre-cursor to boardroom discussions. An understanding of the process of strategy-making allows executives to retain better control of their organisations in a world of increasing geographic, technical and social complexity. In the Capgemini sponsored INSEAD elective The Making of Strategy we work with a framework called TFAS (Triggering, Framing, Alternative Generation and Selection), that directs attention to four major activities of the strategy process. 1. It identifies internal and external changes that trigger the organisation to revise its path. Examples of such events include industry consolidation, enterprise wide IT overhaul, changing customers, or regulation/deregulation. 2. It explores how the organisation frames its own problem in light of these changes. For example, how will the company use its superior technology to drive profitability? How does the company grow at 15% a year as it promised the shareholders? 3. It directs attention to the ways in which the company generates alternatives by having members participate in a freethinking process that generates choices for answering the questions framed. 4. It focuses on the selection process to ensure that the organisation chooses the very best option. Using the TFAS framework, a number of Capgemini consultants and INSEAD student teams actively work together with clients to explore how the client companies face and respond to real life issues. The student teams then create case studies based on their findings, receiving feedback from consultants in a range of forums including a unique interactive web based intranet. Client companies receive their reports and give feedback to the students, and the new cases become a part of a growing ongoing database of more than 100 cases. The database of cases has allowed us to better understand management inclusion, the efficiency of the strategy process and the types of triggering companies recognise or initiate. Two of those cases, the Taj Group and HSBC, were so rigorous that they have become fully accredited for use by business schools worldwide. The work Capgemini does with INSEAD has been a win-win situation. Participating companies find the interaction with the students and Capgemini stimulating, the students get to ask carefully crafted questions directly to senior management teams, and INSEAD is able to offer its students access to CR the coalface of managerial reality. The Capgemini and INSEAD team includes Capgemini vice president Andre-Benoit de Jaegere and David Warne of Capgemini France, INSEADs Gabriel Szulanski and Professor Susan Lynch, research associate Jenifer Raver and project coordinator May Koh.

Vital statistics:

The price is right

Comparison of pay growth with the consumer price index

Average earnings including bonuses rose by 3.5% in the year to July 2007

Source: www.statistics.gov.uk

Consulting Review Autumn 2007 09

25 143 2 198 7

3.277053973

4 2 13 6 62 5 120 9407

08

9 9

43 93

9

Technology insight : Management text

Technology insight:

Collaboration 2.0Promises of Web 2.0 technologies delivering a collaborative eco-system sound all too familiar. Laurence Tampkins, a consultant from Marketing, Sales & Service Transformation, explains why its different this timeCollaboration is true differentiator in a highly competitive marketplace. These days, customers are not looking for an organisation to simply offer advice about their problems, they want a collaborative partner to play a part in overcoming them. One of the most important facets of this collaboration is the transfer of knowledge on to the customer, allowing them to prepare for the time when that engagement ends. While this is not a new idea, what has changed recently is the manner in which we can achieve collaboration and knowledge sharing. An increasingly common use of collaborative technologies is to allow project teams across the world to work together without actually being physically located in the same place. This often takes the form of virtual meetings, discussion groups and document repositories. However, the tools that allow us to do this have been around for a while, so where are the advances? There is shift in the interaction paradigm towards Web 2.0, but it is not about technology per se. Rather it is about using customers to determine what their next product line will include. At Capgemini, we sometimes struggle when trying to decide the exact make-up of a team to go out and win, or deliver a critical piece of business, but why not let the customer decide? We already hold detailed descriptions of our staffs capabilities and we know who is available. Wouldnt it be interesting to consider the impact on a project of allowing the customer to determine who will offer the most value to their organisation and let them pick the project team? It would offer us enormous insight into what our customers want in a team, we would quickly see the skills and experience mix that is most valued by our customers and be able to focus on staff development accordingly. Collaboration 2.0 moves us far closer to our customers. The innovative nature of this emerging technology will ensure that organisations taking a more collaborative approach to their interactions with their staff, customers and suppliers will continue to push CR the boundaries.

existing technologies in a different way to achieve a new ethos of shared internal content that is available more readily to those outside the organisation. The goal of Web 2.0 is to achieve true collaboration, allowing customers to participate in making decisions that relate to your business. So can Web 2.0 translate into collaboration 2.0? It already is. Take the example of Cadburys which is bringing back Wispa bars following massive consumer pressure on its website, or Lego and HP who now allow

Management text:

Fooled by randomnessFooled by Randomness advances the view that most of what we believe to be intelligence and perspicacity is in fact blind luckEveryone wants to succeed in life. But what causes some of us to be more successful than others? Is it really down to skill and strategy, or something altogether more unpredictable? Fooled by Randomness by Nassim Nicholas Taleb aims to change the way you think about business and the world. Taleb sets forth the idea that modern humans are often unaware of the very existence of randomness. They tend to explain random outcomes as non-random. According to Taleb, it is all about luck: more precisely, how we perceive luck in our personal and professional experiences. Nowhere is this more obvious than in the markets, he says. When we hear an entrepreneur has vision or a trader is talented, but all too often their performance is down to chance rather than skill. Taleb uses probability theory, basic statistics and psychological research on biases to shows how professionals in finance, the media and even academia CR repeatedly fail to use these basic tools.

10 Autumn 2007 Consulting Review

Sector at large

Sector at large:

Close the gapWith increasing oil prices and environmental pressures, John Reed from Capgeminis Transformation & Change team explains why the pressure is on for the UK rail industry to reduce its energy consumptionLondon Underground uses 3% of the capitals total energy consumption to move three million people every day. By most standards, thats a lot of energy. But perperson rail is very efficient: better than any other mechanised mode of transport by some margin. So youd be entitled to think that the rail industry spends little time worrying about how to use even less energy. Wrong. Like all businesses, its under growing pressure to use less energy, and one day green taxes may really drive the environmental message home. The European rail industry isnt planning on losing its efficiency lead any time soon. The reality of corporate social responsibility (CSR) now demands that organisations measure their sustainable success through a triple bottom line. A balancing of economic, social and environmental performance is now accepted as business as usual for many companies. At the economic level, energy is just another cost that needs to be minimised. The price of oil has risen by 124% in real terms in the last 10 years, so ways of using energy more efficiently are creeping up the agenda for many organisations. And whatever happens with oil prices in the future, regulatory and competitive pressures will demand ever more efficient use of energy to ensure costs are minimised. So it shouldnt come as a surprise that UK rail operators, like their counterparts across Europe, are working hard to reduce energy consumption. The solutions are effective and in many cases proven, such as training drivers in eco-driving techniques, reducing vehicle weight and installing regenerative braking to return energy to the grid while the train brakes. The third international railway energy efficiency conference took place this autumn, where many of the latest energy efficiency solutions were showcased. Its clear that the industry knows what it has to do, but working out how to implement the transformation is only starting now in many countries. The industry has an increasingly clear view of the rational dimension of the transformation required: the processes, the competencies and people and specification of the technology.

But transformation programmes are not guaranteed to succeed by rational argument alone. The complex emotional and political dimensions must also be considered . For example, the transformation will create both winners and losers financially. The political challenge will be how to get everybody in the industry on board before they know whether theyll win or lose, for the greater good of the industry in the long term. For the industry to make a step change improvement in its energy efficiency, and gain the subsequent financial rewards, it needs to understand all three business dimensions sooner rather CR than later.

Consulting Review Autumn 2007 11

(c) Transport for London 2005

Whatever happens with oil prices, regulatory pressures will demand more energy efficiency

Strategic research : Management text

Strategic research:

First contact with digital nativesJerome Buvat, global head of the telco media (C4) strategy lab, looks at how the younger generation is radically reshaping the telecom and media landscapeWe live in a world of hyper-choice, where media and communication is extremely diverse encompassing services such as texting, instant messaging, interactive web content, gaming and video-on-demand. This world of choice has been welcomed by users who communicate and consume media more than ever before. In France, time spent by an individual on voice and text communication has almost doubled to four and a half hours from 2000 to 2006, with text communication such as email and instant messaging overtaking voice due to its cheaper and non-intrusive nature. Text communication now comprises around 53% of total communication time compared to only around 25% in 2000. Media consumption has also reached an all time high of 56 hours perperson, per-week in the UK. To understand where these changes will lead us, it is important to understand the behaviour and attitudes of 15-24 year olds, the first digital natives who grew up surrounded by devices and therefore display especially pronounced new behavioural patterns. The behaviour of this generation is characterised by four key themes that summarise the new media and communication equation. Control: Youth want to access content whenever they choose. Nearly 38% of UK youth watch TV-content on PCs. Impatience: Youth display impatience as they utilise their time efficiently through multitasking and pulling relevant or strippeddown content through search engines. Community interactions: Youth are also engaged in community interactions, wherein they share opinions through blogs, emails, instant messaging and websites. Originality: They seek self-expression avenues to showcase their creativity and originality. New consumer behaviour is reshaping the traditional, static and pre-packaged media and communications space. Operators need to redesign their customer relationships by leveraging consumer involvement and insights at every stage of a products lifecycle, creating new sources of value to gain consumer attention.

People, especially the youth, want more involvement in what they consume and how they consume it. The changing behaviour towards media and communication currently exhibited by young people will become mainstream as they mature and their digital habits bridge the generation gap. Operators therefore need to learn and incorporate consumer insights to offer innovative services if CR they want to benefit in the long run.

Management text:

Get smashedIn Get Smashed, Sam Delaney takes the reader on an exhilarating journey through the British advertising industry as it was transformed into the creative sector we know todayBetween the 1960s and the 1980s some of the most influential men in the country spent most of the day in the pub and got paid more than the prime minister. They were responsible for transforming a lifeless advertising industry into something exciting and extravagant. They came up with the idea of selling lifestyles. They changed what we ate, how we dressed and who we voted for and celebrated with fast cars, private jets and champagne. Get Smashed is a story of ambition, obsession and excess and how the advertisements that began by reflecting British culture came to define it. Its a fascinating and extraordinary tale of a vibrant and exciting time, tinged with more than a little mania and extreme passions, detailing the rapid rise of British advertising creativity to global CR dominance.

12 Autumn 2007 Consulting Review

Boardroom radar

Boardroom radar:

Does Brown mean business?The business community respected Gordon Brown as chancellor. Guest columnist and enterprise editor from the Financial Times Jonathan Guthrie wonders how he will build upon this respect as Prime MinisterWhen Alistair Darling announced his plan to abolish tax breaks on the disposal of business assets in the Pre-Budget report, there was confusion within the business community about what exactly had just happened. This had been a popular measure introduced by Gordon Brown that had wholehearted support across business. By cutting capital gains tax to 10% after two years it encouraged patience in investors. And it stimulated serial entrepreneurship. Yet the government plans to sweep taper relief away in favour of a flat rate tax of 18%. Lacking any element of indexation, the levy will create an incentive for business owners to take short-term gains. Almost everyone is against it: entrepreneurs, venture capitalists and AIM investors. The only professionals sanguine about the reform are the private equity firms against which the change is targeted. A troubling aspect of the proposal, which was unveiled in the October pre-budget report, is that better fixes were available. For instance, extending the qualifying period for full relief to five years would have excluded many private equity transactions. But Labours engagement with business since 1997 has always been a prickly subject. The creation of a nil rate tax band for small companies by Gordon Brown while he was chancellor triggered a slew of incorporations by the self-employed. The chancellor was forced to execute a U-turn in instalments. This March, Brown unveiled a business friendly budget that raised corporation tax for small companies while decreasing it for big ones. Business bodies, again, were perplexed. Browns 10-year stint as chancellor has inspired respect in business people. They have, for the most part, been comfortable with the accession of this known quantity to the premiership particularly after he recruited prominent business figures as ministers and advisers. However, their approbation has been based largely on two pieces of non-intervention and one piece of good luck. Brown freed the Bank of England to set interest rates and kept sterling

Browns 10-year stint as chancellor has inspired respect in business people

out of the euro. And he presided over the Treasury at a time when the UK was able to exploit healthy growth in the world economy. Browns long wait for the keys to Number 10 ended as a reckless downgrading of risk in debt markets created the conditions for a credit crisis. The UK economy now shows signs of slowing, with house prices slipping and business growth sluggish. Given his strong ties with the nations purse strings, the Prime Minister will of course be blamed for tougher conditions on his watch. Brown has been under the spotlight since shadow chancellor George Osborne promised to cut inheritance tax and property stamp duty at the Conservative Party conference. The Prime Ministers retreat from an early election was swiftly followed by accusations that Darling was plagiarising Tory tax policies in the pre-budget report. While their have been vast improvements in public services, there is a perception that higher taxes under Labour have damaged competitiveness and left personal incomes stagnating. Tax cuts are no longer taboo as a means of winning popularity. The most intriguing question is how far Osborne and David Cameron will go now the tax genie is out of the bottle. The Tory mantra is that it will make no unfounded tax cuts. Yet the temptation must be very strong to offer steep reductions and keep Labour on the defensive. It would play well with many Britons, business owners included. These are interesting times CR for Gordon Brown.

Consulting Review Autumn 2007 13

View point

View point:

Suppliers dilemmaDesigning programs to serve global accounts has been a painful and often unprofitable art. However, according to Capgeminis vice president of Research & Innovation, George Yip, and marketing manager at the University of Delft Audrey Bink, you can turn it into a science that benefits both you and your customerJust mention the term global account management to executives at suppliers of multinational companies and, more often than not, they will groan. Treating a customers operations worldwide as one integrated account, with coherent terms for pricing, product specifications, and service, global account management programs have proliferated in the past decade. However, only about a third of the hundreds of suppliers that have adopted global account management are happy they did so. A study of 165 major suppliers, plus consulting work and journal articles on individual companies experiences, reveals that the pioneers who introduced their programs in the late 1980s through the mid-1990s constitute the vast majority of this satisfied bunch. However, it took them 10 years of trial and error, on average, to get to the point where their gains (a bigger share of the customers business and a richer sales mix) outweighed their pains (lower prices and a higher cost to serve). Much of the pain associated with global account management arises from confusion about when and how suppliers should offer it to customers. Yes thats right, on occasion you can and should say no. Global account management is the natural extension of national account management. Its initial adopters were primarily technology giants such as Hewlett-Packard, IBM, and Xerox, whose customers were demanding that IT products and services provided to all of their locations be compatible and supported to the same standard. Not surprisingly, multinational customers have been and continue to be the driving force behind the spread of global account management. When purchasing is centralised and far flung, units can no longer negotiate their own deals, prices become much more transparent. In addition, by consolidating orders a buyer can demand bigger volume discounts as well as manage product specifications and service more effectively. This often means a substantial loss in pricing power for suppliers and thats not the only negative. All too often a customers national operations resist abiding by a global contract that requires them to give all their business to a single supplier and, instead, try to continue to pick their own suppliers and dictate their own terms. Even worse, the new organisation and processes required to serve global accounts can easily cause costs to soar, especially if customers demand customisation. Suppliers hope, of course, that these negatives will be outweighed by the promised positives: a bigger share of existing business and, in many cases, strategic-partner status that will lead to new, higher-value-added business. The problem is that an account may take a long time to become lucrative, if it ever does. If a company understands how to answer three fundamental questions, however, it can reach the promised land: 1. Is global account management appropriate at all? You can determine if global account management is appropriate for a company by using four criteria: whether its products or services need global coordination, whether its multinational customers want global account management, whether its multinational customers are important, and whether it can gain competitive advantages from global account management. 2. Which customers is it appropriate for? When it comes to global accounts, more is not always better and theres no ideal number. Managers should focus on identifying those accounts that will accrue significant value in terms of growth potential, increased share of the customers

business, margin improvement, and opportunities to learn about each others businesses. 3. What form should it take? There are three basic forms of global account management, each of which strike a different balance between global integration and local autonomy. Coordination global account management works when the global account management unit is weak and the national sales organisations retain a great deal of power. Control global account management is the most common form, dividing responsibility for global customers between the global account management group and the national operations, but giving the upper hand to the former. With separate global account management, which is the rarest kind, a supplier creates a separate business unit with total responsibility for global accounts. Contrary to the prevailing view, global account management can be good for suppliers. Within a few years of their introduction, these programs can improve customer satisfaction by 20% or more and raise both profits and revenues by 15% or more. Mature programs those at least five years old can generate increases twice as large or more. Just ask the right questions. CR This article summarises George S Yip and Audrey Bink, Managing Global Accounts, Harvard Business Review, September 2007

14 Autumn 2007 Consulting Review

MCA outlook : Vital statistics

MCA outlook:

Where projects come fromYou may understand why a client needed some consultancy, but do you really know why they chose you? Fiona Czerniawska, director of the think tank at the Management Consultancies Association, finds outThe MCA has carried out a variety of surveys in recent years aimed at understanding why clients hire consultants. However, we still havent understood much about the underlying causes of demand. Where do new projects and initiatives in organisations come from? What determines why some ideas get implemented when others dont? Is there anything consulting firms can do to stimulate demand? With these questions in mind, we carried out a survey in conjunction with Management Today of 100 senior managers in large organisations. We discovered that perhaps one in 20 potential consulting projects actually become consulting projects. If we can reduce this rate of attrition, then well increase the total size of the consulting market. The acorns from which consulting projects grow may be very small indeed a niggling issue, a conversation with a colleague, an opportunity to be seized. Only very rarely do projects come from consultants peddling grandiose new schemes. This isnt surprising if we look at what attracts a clients attention. The single most important factor is practical relevance to an immediate issue they face in their organisations. How do ideas evolve into projects? Clients with the germ of an idea tend to do two things: consult their colleagues or search around (usually on the internet) for evidence to show that this is something worth thinking about. What they dont do at this stage is act. Fewer than half of the ideas people originally have make it through this stage. There may be a good reason for this as 26% of people said it was because they realised the idea was unlikely to deliver the anticipated benefits and 12% of people said it was because the project wasnt relevant. However, 27% of projects are abandoned because organisations dont have the skills to do them, 14% because people are too busy on other things and 12% because senior people arent committed to the idea. Consulting firms can counter this in a variety of ways. Clients appear to be generally positive about the thought leadership produced by consulting firms. Almost half of those surveyed said they found some of the ideas interesting and helpful. However, clients are only interested in material that is practical and directly relevant to the issues they face. Asked what would make them more likely to use consultants on a project, around 80% of respondents wanted feedback from their peers about the work done by a consulting firm elsewhere in their organisation and to see case studies of past projects. For consulting firms the message from this is clear: clients are much more likely to make a project a consulting project if they can see examples of

Vital statistics:

Building boomBetween 2001 and 2006, the proportion of newly built homes with two bedrooms rose from 25% to 45%

Source: www.statistics.gov.uk

Consulting Review Autumn 2007 15

25 143 2 198 7

77053

08

9 9973

other similar, successful projects. The key point here is transparency. Clients want to know what consulting firms think and do, and where theyve been successful, but CR they want this information on their terms.

3.293

4 2 13 6 62 5 120 9407

43

9

Business school view : Talk to us

Business school view:

Recapturing our lost youthGeneration Z has disengaged from the political process. Paul Baines, senior lecturer in marketing at Cranfield University, considers why we lost their voteThere is something wrong with the political process and the marketing activity that is now routinely associated with it. At the heart of the problem is the decline in voting, particularly among young people, who do not feel that it is their duty to vote, although paradoxically they regard it as important to vote. Since this group represents the electorate of the future, problems with poor turnout now could represent huge problems in the future, as our society ages. Only 37% of young people aged 18-24 years old, the so-called Generation Z in marketing speak, turned out in the 2005 British General Election. This is a figure that has fallen marginally since 2001 (39%) but substantially since 1992, when it was 63% according to MORI aggregate turnout estimates. Young people were also less likely than other groups to take up postal voting, according to a report on turnout in the 2005 election from the Electoral Commission. So if its important to vote, why isnt Generation Z doing it and what role does marketing play in solving the problem? It seems that young people, but not only young people, are increasingly disengaged in politics. Not disinterested, but disengaged. In other words, they do not feel part of, and represented by the current political process. But try and keep them away from an antiglobalisation website, an anti-war petition, and a campus Coca-Cola consumer boycott. It is a surprise that young voters are so disengaged from the process when most members of the House of Commons are over 40 years old? Of course, they are less likely to visit their local MP in their constituency surgeries to muse over things political. The government seems surprisingly lax about the problem. While the independent Power Inquiry suggested greater political involvement from the electorate through lowering the age of voting to 16 years old and by making it mandatory to debate issues with associated petitions of more than 400,000 people, the House of Commons has instead this year developed a direct mail campaign targeting young voters. None of these approaches is likely to reap any benefit in turnout in the longer term. Extending the voting age would simply generate even lower proportionate participation, and petitions over 400,000 would need the support of newspapers and special interest groups to mobilise interest in the first place, probably about issues of concern to newspaper editors. Direct mail has little impact on any voter group, never mind youth, with fewer than one in ten people regarding it as having an influence of the way they vote according to a 2005 MORI poll. The idea that the House of Commons can drive up interest in politics with Generation Z through direct mail is a truly efficient waste of public money. To its credit, the agency commissioned to develop the campaign did design its Voting Times campaign around some of the issues of importance to the youth market, such as the environment, terrorism, and the economy, although education and employment were the predominant issues for this group during the 2005 election. Surprisingly, party election broadcasts and the television debate, hosted by David

Dimbleby, were regarded as having greater influence on the way young people voted, as they were for other groups, no doubt linked to the greater propensity of this group to watching, and receiving their information from, television. Any idea that this election was one fought in cyberspace is very wide of the mark indeed. Only 2% of the electorate were influenced by this medium, although this was disproportionately much higher for Generation Z, at 9%, and probably represents the youth political platform of the future. In order to increase youth participation in voting, the House needs to think more cleverly, do its homework, on what communication channels this group actually uses and develop a rationale for why young people should quite literally come to the political party. Overwhelmingly, the only way we will properly recapture our lost youth is by giving them a stake in the political process, and that means developing political policies and agendas that consider the impact politics has upon young people. Using marketing in this way to develop the political message, rather than simply to sell existing approaches through slightly redesigned media is the way forward. Politicians take note, direct mail and marketing fluff will not solve the youth turnout problem but redesigning your policies CR just might.

Talk to us: To provide feedback on this issue of Consulting Review or suggest ideas for futureissues contact the editorial team at: csreview.feedback.uk@capgemini.co.ukThe Consulting Review publishing team is Andrew Sims (publisher), Andrew Metcalfe (designer), Luke Turton (contributing editor), Rebecca Shepherd and Claire Boxer (publishing assistants)2007 Capgemini All rights reserved. Reproduction in whole or in part without written permission is strictly prohibited. Articles are published without responsibility on the part of the publisher or authors for loss occasioned to any person acting or refraining from action as the result of any view expressed herein.

16 Autumn 2007 Consulting Review