Author: Ben Debski

Pebble sinks amid market consolidation

Posted on by Ben Debski

In 2012, everything looked so promising for Pebble. The little company that could was responsible for a Kickstarter campaign that raised over $10m and legitimised crowdfunding as a method of developing a product. Its first smartwatch was years ahead of competitors, and made the promise of a Dick Tracey-style wrist-phone seem plausible. Two more Kickstarter campaigns later, Pebble raked in over $40m of funding in total and amassed a dedicated community of users and developers.

But now the dream is over, with Pebble recently being purchased by Fitbit as the smartwatch market consolidates. As reported by Bloomberg at the time of the deal, the company was purchased for less than $40m; much less than the $70m Intel reportedly offered prior to the launch of the Pebble 2, and a tiny fraction of the $740m offered by Citizen prior to that. Pointedly, Fitbit purchased Pebble’s software and programmer talent, but not its products, leaving the functionality of the company’s smartwatches adrift in a sea of uncertainty. Fitbit issued a statement saying it will support Pebble’s functionality for the next year, but beyond that it seems unlikely.

As more technology utilises cloud systems, an increasing number of devices and services will cease to function when the money for server bills dries up. This lingering uncertainty is bad enough for technology users, but private efforts to keep these systems running exist in a legal grey area.

Clouded vision
For anything that requires an internet connection to function, to the ongoing upkeep of servers is necessary. Cloud services have unlocked a world of possibilities for both businesses and consumers by allowing remote systems to do jobs that would not be possible by a self-contained computer that was, say, small enough to fit on a wrist. While this makes devices more capable, it places a lifespan on them; once the servers go down, devices such as the Pebble will lose some, if not all, of their functionality.

When a company can’t support a product indefinitely, its upkeep often falls into the hands of enthusiasts building their own solutions

This was the reality facing people who purchased a Revolv hub, a smart home system that controlled things like sound systems, lights and burglar alarms. The company was purchased by Alphabet’s subsidiary Nest in 2014, and in 2016 it announced it would be discontinuing Revolv’s services. Anyone who invested in the system suddenly found their $300 hub ‘bricked’ and in need of an alternative way to switch on their lights. The more money you spent buying into the system, the worse you were hit. It’s a situation that could plausibly befall Pebble; at some point maintaining the systems that support out-of-date products will become an unnecessary expense for Fitbit.

Victimless crime
When a company can’t support a product indefinitely, its upkeep often falls into the hands of enthusiasts building their own solutions. Pebble’s particularly enthusiastic community of developers could certainly take up the baton. However, efforts to keep these systems running are in a legal grey area; keeping them working requires access to the code underpinning the devices that, as is made clear in end-user license agreements people rarely read, remains the property of the manufacturer. This code is unlikely to be handed over freely, as it is often the only thing of value left when a technology company dissolves. In the case of Pebble, software was a big part of the deal, so Fitbit would probably be reluctant to give it away.

The right to modify products is one courts have so far been unsupportive of. In February 2016, a federal appeals court in the US ruled patent holders had the power to set conditions of use on their products; modifying a product to keep it running when the servers go down could, by extension, be considered patent infringement.

Pull the plug
Anyone who purchases products from a digital service, such as iTunes or Steam, also runs the risk of their investments disappearing should the company that manages the service shut down. Add in the legal uncertainty surrounding the maintenance of these systems, and a business disaster seems inevitable at some point. While right now it might seem impossible for companies like Amazon, Google or Dropbox to go under, business shifts are inevitable. The individuals and businesses that rely upon their services could lose an incalculably valuable amount of data that is rightfully theirs.

More protections need to be in place for users and companies that indirectly rely upon cloud services. While it is unrealistic to expect these services to continue forever, legal rights are needed for the individuals who are willing to do the work needed to keep the systems running, especially as more products become part of the Internet of Things. It’s that or end up in a never-ending cycle of product redundancy, where a business deal means you can no longer switch your kitchen lights on.

As global politics abandons the climate, business is stepping in

Posted on by Ben Debski

In a global landscape of populist politics and support for the far-right, climate change denial is on the rise. Sceptics have vehemently spouted cynicism over man-made global warming arguments, spurning ‘fanatic alarmists’ whose political consensus focuses on the impending ‘warming apocalypse’.

Prominent politicians including Donald Trump, Marine Le Pen, Nigel Farage and Geert Wilders are among this new generation of global warming deniers. Despite the overwhelming amount of scientific evidence displacing their assertions, their political persuasions have undermined international efforts to curb carbon emissions and develop clean energy solutions.

It is in this political leadership vacuum that companies have made a move to assume the responsibility for climate change action. A mutual appreciation for the risks posed to business from the consequences of rising global temperatures and adverse weather conditions has brought together strange bedfellows, but also profitable partnerships. With billions of dollars being invested in new technology and research the question remains as to whether this new business-led climate leadership will pave the way forward for the energy industry, or if it is just a temporary solution.

Out in the cold
On 3 October 2016, the EU, as the 63rd joining party, brought into force the Paris Agreement. This was, in theory, a momentous occasion for climate change action, reflecting a new global commitment to reducing carbon emissions. As it stands, China and the US, the world’s two largest carbon-emitting nations, are parties to the agreement. However, without enforcement mechanisms, the obligations on signatories are essentially premised on goodwill. Trump’s anti-climate change intentions therefore seriously put into question the future of this potentially toothless instrument of international compliance.

In light of evidence of climate change as an economic disrupter, companies are taking on responsibility for action themselves

Sadly, Trump is not alone in this destabilisation of international regulatory frameworks. Through an injection of doubt and promotion of protectionist policies, populist global leaders have undermined the work of their predecessors and reshaped the climate change dialogue to focus on economic competition.

Six-term Republican Congressman Bob Inglis described this mentality as “rejectionism”; a total refusal to believe in or concede any fact associated with the opposing side, irrespective of how many experts attest its veracity. He said the US Republican Party is stuck in an anti-globalist cycle whereby it must continue to reject the idea that “we can come together to solve really big challenges”. Therein lies the problem: “Climate change does not respect any borders”, stressed Ban Ki-Moon when talking to The Wall Street Journal. “It affects a whole humanity, it affects our planet Earth.”

Quagmire of denial
Companies are recognising this interdependence of the environment and the world’s population. They see climate change as a costly business vulnerability, with fragile supply chains affected by adverse weather conditions. Unprecedented floods, droughts and storms have resulted in billions of dollars in damage to distribution centres and local economies worldwide. According to the Stern Review on the Economics of Climate change, annual global GDP is predicted to suffer a five percent cut by 2100 if no action is taken to reduce carbon emissions. And so, in light of this evidence of climate change as an economic disrupter, companies are taking on responsibility for action themselves.

New initiatives focused on green technology research and development are consequently experiencing a growth boom. The latest billionaire-led investment platform, Breakthrough Energy, is an initiative backed by business and technology titans including Bill Gates, Richard Branson, Michael Bloomberg, Jeff Bezos, and Jack Ma. Their focus is on ‘investing in a carbonless future’ through pairing basic research needs with people and companies that are willing to fund high risk breakthrough energy companies. These are the companies that will, with this investment funding, be able to provide affordable and reliable energy while limiting the impact of climate change.

RE100 is another newly established collaboration, which involves companies publicly committing to procuring 100 percent of their energy from renewable sources by a specified year. The campaign has a wealth of big-name brands, including Unilever, Tata Motors and Microsoft, openly sharing their business cases through transparent reporting processes. Google, one of its affiliates, has announced that it will reach its 100 percent renewable energy goal in 2017.

In a similar vein, EP100, run by the Climate Group, focuses on companies committing to doubling their energy productivity within 25 years. Their emphasis on energy efficiency and production is supported with research purporting that “doubling energy productivity in the US by 2030 will save $327bn a year in energy costs, add 1.3 million jobs, and reduce CO2 emissions by 33 percent below 2005 levels”.

This injection of capital into new technologies and innovation has had a transformative effect on the energy market. New, diversified competition has meant renewables have eaten into the majority share that fossil fuels have traditionally held, significantly reshaping the commodity-focused market. This, is turn, has created more incentives for developers to continue with innovative technology to further reduce costs and increase the market share for renewables.

However, capital investment and market forces can only go so far. Renewable sources reaching parity with energy demand will require infrastructure development and a supportive policy environment for growth acceleration and maintenance. A sound regulatory framework in line with political will is the key to success in reducing emissions and slowing global warming.

Green today, gone tomorrow
Whether governments will begin to recognise the importance of global cooperation in this regard is yet to be seen. Business boldness in an era of political upheaval has been a welcome necessity, and has greatly developed the low-carbon economy within the energy market, but if any meaningful progress is to be made, the contribution must sit within a supportive policy environment.

Governments need to work on policy and regulatory frameworks that offer incentives to companies to continue along this green trajectory. Given the disproportionate global influence of carbon emitters such as the US and China, political controversy and uncertainty will continue to be an issue. However, the important consideration is that the energy industry, as a global homogeny, is moving forward. As Nina Skorupska, CEO of the Renewable Energy Association, told The Guardian: “Expanding renewable energy is very important, but calling for too much, too soon, when governments have so many other priorities, will not get you very far. The key thing is to keep the momentum going and the industry growing.”

Tackling unconscious bias in feedback and task assignment is the key to gender equality

Posted on by Ben Debski

It is widely acknowledged that gender diversity in the workplace is a positive. For one thing, it paves the way for women to reach their full potential. If that isn’t enough, a growing body of evidence has established a link between more equal gender balance and higher profits, sales and innovation. However, even as gender balance is increasingly touted as a top priority for companies, a disconnect remains between such intentions and tangible outcomes.

Crucially, the issue goes much deeper than just those moments when a promotion or hiring decision is being made. Women in the Workpace 2016 – a recent study by McKinsey & Co – surveyed more than 34,000 employees throughout the US with the aim of finding out what is holding women back. The study claimed women “get less access to the people, input and opportunities that accelerate careers”. It outlined many of the subtle interactions that lie at the heart of gender inequality – factors which carve out the playing field for women, but often go unnoticed.

While 68 percent of men said they had recently received a challenging assignment, only 62 percent of women said the same

Feed the hungry
One issue is there is a disparity in the feedback men and women receive. Such feedback can be critical for employees, as it can help them identify how to improve their performance and advance. According to the study, women are a massive 20 percent less likely than their male counterparts to say their manager often gives them difficult feedback that improves their performance.

Crucially, this is not because women are less likely to ask. In fact, they ask for informal feedback as often as their male counterparts. Perhaps most surprisingly, this difference goes largely unnoticed by those who are issuing the feedback; the study explained “most managers say they rarely hesitate to give difficult feedback to both women and men”. This implies that, to some extent, an unconscious bias exists in the way women are approached when discussing their performance. The study also found some managers actively hold back in giving difficult feedback to women for fear of triggering an emotional response.

Equally different
Moreover, seemingly small inequalities saturate the workplace environment. For example, women are less likely to be given a difficult assignment; while 68 percent of men said they had recently received a challenging assignment, only 62 percent of women said the same. Also, only 67 percent of women felt they were able to participate meaningfully in meetings as compared to 74 percent of men, a finding that comes as little surprise given research showing women are far more likely to be interrupted. A study published by the Journal of Language and Social Psychology in 2014 analysed conversations between men and women, and found over the course of a three-minute conversation, women interrupted men an average of once, while men interrupted women 2.6 times.

These kinds of disparities are often based in deep-rooted behaviours people have little awareness of. Alone they seem insignificant, but taken together they form an important part of the fabric of a woman’s day-to-day workplace experience. While it is imperative companies continue to push for gender balance as an official priority, it is only through a conscious acknowledgement of the issues facing women that real change can be achieved. Companies must be more proactive – a greater focus on communication and training is critical if the underlying issues are to be addressed. These are issues that run deep – they will not simply be fixed through superficial targets and statements of priorities.

 

21st Century Fox reaches for the Sky

Posted on by Ben Debski

On December 16, Rupert Murdoch’s media empire, 21st Century Fox, agreed a $14.6bn merger with Sky TV. The move was widely anticipated following AT&T’s acquisition of Time Warner for $84.5bn in October and the recent fall in the pound relative to the US dollar. Fox offered $13.41 a share as part of a formal offer; valuing Sky at $23bn. The merger will give Fox access to a highly sought after television infrastructure, while also opening the doors for Europe’s top subscription-based television service.

First launching Sky TV in 1989, Rupert Murdoch still retains 31.9 percent of the European pay TV service. The company – which is now run by Rupert’s son, James Murdoch – boasts a customer base in excess of 20 million and operates across five countries in Europe, generating approximately $1.9bn before tax in each of the last five years. Meanwhile, 21st Century Fox is the world’s fourth largest media company. Fox, which split from world news counterpart, News Corp, in 2013, will look to consolidate the acquisition of the remaining 61 percent of Sky by early 2017.

[Fox will] benefit from Sky’s highly coveted technology infrastructure, which includes… the Sky Go streaming platform

Fox will be keen to benefit from Sky’s highly coveted technology infrastructure, which includes direct-to-customer offerings such as the Sky Go streaming platform. Additionally, the merger will give Fox access to Sky’s ‘powerful distribution platform in Europe’.

However, the merger’s come under scrutiny from minority shareholders and politicians. In a bid to conclude the deal free of any conflict of interest, Sky put together a committee of independent directors – excluding James Murdoch. The company said Barclays, Morgan Stanley and PJT Partners acted as advisories to the elected directors.

The UK Parliament has also voiced concern over the subsequent diversification of media ownership resulting from the deal. Many expect the deal to be referred to the country’s telecommunications regulator, Ofcom, to determine whether the merger would ultimately result in a disproportionate media influence. However, the government has yet to comment.

Given Fox doesn’t own any British media assets beside the existing minority in Sky, it is reasonable to expect the US-based media group will contest the issue, citing its split from News Corp as evidence the merger won’t effect diversity in media ownership.

Talking to The Wall Street Journal about the expected regulatory investigation, James Murdoch seemed unconcerned: “We believe this passes regulatory muster… no meaningful concessions will need to be made.”

Nevertheless, this transatlantic acquisition will be felt heavily in the television industry, in which scale and leverage remain the cornerstones of negotiations, and big companies are increasingly looking to get bigger. The merger has no doubt consolidated Murdoch’s media empire, and placed him in good stead to remain on top for the foreseeable future.

As the GDPR deadline looms, regulators warn businesses to implement changes

Posted on by Ben Debski

The UK Information Commissioner’s Office and privacy law specialists have warned CEOs not to ignore the looming deadline for implementation of the European General Data Protection Regulation (GDPR). Companies have only 15 months left to prepare before the GDPR becomes applicable on May 25, 2018. As Eduardo Ustaran, European head of privacy and cybersecurity at law firm Hogan Lovells, told Bloomberg, “because the GDPR is completely new, very few people know how to interpret it, let alone comply with it”.

The new rules, which entered into force on May 24, 2016, have set a high bar for personal data protection across the globe. Hogan Lovells and advisory service KPMG, among others, have issued advice and guidance to companies on investing in readiness plans. Should companies choose not to heed this preparatory advice before the application deadline in 2018, companies risk new non-compliance fines of up to four percent of their global turnover or €20m, whichever is greater.

The GDPR’s predecessor, the Data Protection Directive, was created in the pre-Facebook era to regulate personal data within the EU. The internet boom has meant an increase of data flowing across borders and a lack of harmonisation between member states in regulation. These new regulations have been designed to address this fragmentation and simplify the regulatory environment for business.

New rules include reporting of data breaches within 72 hours, and the extension of the right to be forgotten beyond simple web searches. This means citizens should be able to ask social networking sites to delete their profiles entirely.

The internet boom has meant an increase of data flowing across borders and a lack of harmonisation between member states in regulation

Some companies will also require the designation of a data protection officer, and legal departments will have to reconsider contractual agreements with third parties that involve processing of personal data. Online advertisers will also face stricter rules on how they use browser history data to target web users.

The new financial penalties will be applicable for a variety of violations concerning consent, privacy rights and orders from privacy regulators. Importantly, they will be applicable to all companies, located in the EU or not, provided they possess data on European citizens.

Though the EU has advocated that “a single law will also do away with costly administrative burdens, leading to savings for businesses of around €2.3bn a year”, the increased obligations on companies to track data flows and comply with the new rules will not come cheaply. With the deadline looming, companies will have to face the decision to either fork out the cash and get in shape, or risk the wrath of the regulators.

Amazon Go’s ‘just walk out’ principle redefines the physical shopping experience

Posted on by Ben Debski

Retail giant Amazon has unveiled what it sees as the future of brick-and-mortar shopping. Amazon Go is a new shop that enables shoppers to ‘just walk out’. The shop, which has opened for beta testing in Seattle, sells fresh food and groceries, as well as ready-to-go breakfast, lunch and dinner options.

The shop is a manifestation of hybrid technology, using a combination of location services, integrated payments, image recognition, multiple sensor technology, AI and machine learning. Essentially, shoppers use the associated free smartphone app to sign in to the store via a sensor at the door. Then, as they shop and pick items off the shelves, video surveillance and infrared sensors track and log their purchases. Once they have collected everything they require, customers simply leave, without the need for a cashier. The company analyses their virtual shopping cart and bills their Amazon account, sending the customer a receipt for their purchases.

For shoppers, the new technology has introduced greater simplicity to the shopping experience – no more queues, no more payment hassles. For the retailer, shoplifting is essentially eliminated.

For all its positive attributes, however, Amazon’s creation raises potential privacy concerns. By tracking all of your shopping behaviours, Amazon has key insight data into product placement and customer interaction. With this information the company is in a position to be able to develop its services to enable individualised customer experiences. Amazon can track patterns of consumer behaviour by tracking the direction taken to peruse the store, and can track the order of products picked up through advanced facial recognition software. This information can then be used to tailor the products on offer, pricing strategies and product placement throughout the store, but may worry privacy advocates.

For the retailer, shoplifting is essentially eliminated

However, it is not a novel concept for a company to be focused on the subconscious processes behind retail-based decision making. Companies such as Deloitte have been involved in research into consumer behaviour and the effect of the proliferation of digital technology in retail for years. Similarly, AI systems have long been used in casinos to spot banned gamblers and cheaters.

As Wayne Gretkzy once said: “The secret to success in hockey is not being where he puck is; it is being where the puck is going to be.” Amazon has modelled its business in line with this mentality and, so far, it has paid off. With a focus on investment and innovation, Amazon has refrained from pigeonholing itself in the market, and instead branded itself as a revolutionary explorer in the tech age. From an online bookseller in 1998, Amazon Go epitomises the phenomenal growth of the pioneering company.

“What if we could create a shopping experience with no lines and no checkout?”, asked Amazon in a statement published on its website, “Could we push the boundaries of computer vision and machine learning to create a store where customers could simply take what they want and go?” The answer has been a confident ‘yes’. Amazon employees can already shop at the first store, which will be open to the public early next year.

Lego CEO steps down as Danish firm rearranges the bricks

Posted on by Ben Debski

By the end of 2016, the building block legends at Lego will have new a new leader. Current CEO Jorgen Vig Knudstorp will be stepping down in favour of COO Bali Padd.

Knudstorp was appointed CEO in 2004, after the company founder’s grandson Kjeld Kirk Kristiansen handed over the reins following 25 years in charge. His appointment was the first non-family position, which marked a major turnaround at the company and sparked a decade of innovation and success. A former McKinsey & Co consultant, Knudstorp pulled Lego out of a downward spiral with the introduction of research teams and a financial governance makeover. His efforts bolstered commendable success at the company, boosting revenue five-fold by 2015.

Lego has demonstrated its persistent strength, overtaking major competitors such as Hasbro and Mattel

In addressing the move, Knudstorp shared his excitement for the future of the company: “I really look forward to this new challenge together with Thomas. I have enjoyed being the CEO of this great company, because I have a lifelong passion for the Lego idea. The role and the job have changed very much over these years, and this is the natural next step, as I am a firm believer in the value of active family ownership.”

The perennially faddish toy industry is one of the hardest to break into and remain on top in. Lego has demonstrated its persistent strength, overtaking major competitors such as Hasbro and Mattel, to earn a stellar reputation as the world’s most profitable toy manufacturer. Last year, the privately listed company reported a net profit of €1.23bn.

The Kristiansen family have traditionally held majority ownership in the company. This is the extended family of founder Ole Kirk Kristiansen, who began making wooden toys back in 1932. The first iconic bricks that created the snap together personality of the brand were created in 1949 in the small town that Lego still calls home: Billund, Denmark.

The company has been clear that the move will be in line with their family values and will maintain Kristiansen-family ownership. Knudstorp will be moving horizontally within the company to head up the new division, Lego Brand Group. He will work alongside Thomas Kirk Kristiansen to facilitate and oversee the governance of all Lego brand-related activities.

Major cities seek to ban diesel cars by 2025

Posted on by Ben Debski

At the C40 Mayors Summit – a biennial meeting that concluded on December 2 – the respective leaders of Paris, Madrid, Athens and Mexico pledged to ban diesel cars and trucks before the end of the decade. The pledge marks a sea change in the regulatory approach to the fuel, which was once championed for its relatively low CO2 emissions. Regulations that favoured diesel supported its rise as a dominant feature in the global automotive industry, but research into the health implications of certain dangerous pollutants have led to a radical rethink of these policies.

The pollutant has been linked to breathing difficulties and… has led to an estimated 70,000 premature European deaths each year

Diesel engines produce 15 percent less CO2 than their petrol alternatives, and, as a result, were lobbied as part of a push to drive down CO2 emissions. The EU, for example, pressured governments to keep the diesel price below that of petrol. However, there is a tradeoff between CO2 emissions and a number of health implications that were previously underappreciated.

Diesel engines produce four times the nitrogen (NO2) emissions of their petrol counterparts. The pollutant has been linked to breathing difficulties and, according to a study by the European Environment Agency, has led to an estimated 70,000 premature European deaths each year. Further to this, diesel engines are far greater emitters of particulates: tiny particles that are known to have dire effects on health.

“Our city is implementing a bold plan – we will progressively ban the most polluting vehicles from the roads, helping Paris citizens with concrete accompanying measures”, said the mayor of Paris, Anne Hidalgo, as reported by the BBC. “Our ambition is clear and we have started to roll it out: we want to ban diesel from our city, following the model of Tokyo, which has already done the same.”

The impact of air quality on health cannot be ignored by regulators, and it is likely that the pledge made in Mexico will be followed by further regulatory changes. Vehicle manufacturers will have to pay close attention as the markets change course, with many expecting an extra push towards greener alternatives in the near future. As well as the move against diesel, the city chiefs promised to “commit to doing everything in their power to incentivise the use of electric, hydrogen and hybrid vehicles”, providing a clear signal to the direction of future policy.

Philip Morris launches innovative new cigarette alternative

Posted on by Ben Debski

On November 30, Philip Morris International (PMI) announced its radical new approach to the tobacco industry: the end of conventional cigarettes. Speaking on UK radio, CEO Andre Calantzopoulos addressed the phasing out of PMI’s traditional product in favour of the new iQOS smokeless cigarette.

The iQOS differs from normal cigarettes in function; instead of burning tobacco, it heats it just enough to create a smokeless vapour that still imparts the flavour of the tobacco. The company claims that this is far safer, with 90 to 95 percent fewer harmful chemical by-products like benzene and tar.

PMI has put a lot on the line for this drastic shift, investing $650m over the last three years, with the current expenditure expected to pass $200m a year. The product launched in Japan and Italy in 2014, and will make its UK debut in London on December 1.

The iQOS’s biggest rival, the e-cigarette, vaporises nicotine that is suspended in liquid. PMI made the bold decision not to buy into this technology back in 2000, claiming the price was too high, and instead instructed hundreds of scientists to work on creating an alternative product that retains something of the authentic cigarette experience. Of course, heating substances enough to produce vapour without burning is not a new idea – such devices have existed in the cannabis community for many years. PMI’s innovation is in marketing the technology to tobacco smokers as a halfway-house between chemical vaping and traditional smoking.

The iQOS, if successful, will be entering a huge, lucrative market. Six trillion cigarettes are sold globally each year, and it is the company’s hope to attract a share of those users. By replicating the act of smoking while supposedly more than halving the lethality, PMI is hoping to convert smokers to their innovative technology. The company has also been outspoken in seeking to eventually phase out the production of cigarettes altogether.

The iQOS differs from normal cigarettes in function; instead of burning tobacco, it heats it just enough to create a smokeless vapour that still imparts the flavour of the tobacco

However, not everyone is ready to change their opinion on the controversial company. Among others, writer John Porter expressed his dismay on PMI’s Twitter page: “Philip Morris explaining their safer cigarettes [is] like a serial killer offering to use sharper knives as a courtesy to victims.” Others have vociferously condemned the BBC for giving the company what they feel amounts to an advertising platform.

PMI has dominated headlines for years, battling health industry professionals and anti-smoking groups. Most recently, it lost its case against the Australian Government’s aggressive cigarette packaging campaign. Unusually, however, some health campaigners have admitted that the move to PMI’s new technology could have a positive effect on public health worldwide. They are among a great number of interested parties waiting on scientific evidence of the product’s effects to come to the fore. For now, the emboldened company will press on as the world waits to see if there really is no smoke without fire.

Improved relations see US-Cuban tourism and hospitality blossom

Posted on by Ben Debski

Conciliatory efforts have helped the Obama administration make impressive headway in improving relations between Cuba and the US, including internet access and direct phone lines in the former, and the reintroduction of cigar imports for the latter. A further historic moment took place on November 28, when a commercial American Airlines flight landed at Cuba’s José Martí International Airport for the first time in over half a century.

For the tourism industry, this was a much-celebrated achievement, as trade restrictions have long prevented Cuban businesses from generating much revenue from US companies. Along with the wider push to increase commercial flights to the island, US firm Starwood Hotels & Resorts has agreed a management contract with a Cuban hotel, while Reuters confirmed that Carnival Corp has begun cruises to the island.

US President-elect Donald Trump tweeted a crushing blow to relations between the two states

American Airlines trumped other US carriers in 2015, operating over 1,200 charter flights to Cuba. In discussing the opening of commercial flights to the country John Kavulich, President of the US-Cuba Trade and Economic Council, stated: “The Department of Transportation has authorised 1.2 million seats for trips to Cuba…per year, below the 3.4 million [that] airlines requested, but representing significant revenue.”

Unfortunately, just days after the passing of iconic Cuban leader Fidel Castro, US President-elect Donald Trump tweeted a crushing blow to relations between the two states:

Trump’s rhetoric has many US companies concerned, with the fear that a re-freezing of relations would cost them hundreds of millions of dollars. Though the concerns are trade-focused, restricting travel would be salt in the wound for the island’s booming tourism industry. Described by Lonely Planet as “timeworn but magnificent, dilapidated but dignified…a country of indefinable magic”, to stall the country’s potential to further its promising tourism industry would be to set back an economy that is already lagging far behind.

It’s not all grey skies on the horizon though. Despite all the concessions with Cuba having been made by executive order – meaning Trump can reverse them at will – Josh Earnest, the White House Press Secretary, reassuringly stated in The New York Times that “unrolling all of that is much more complicated than just the stroke of a pen…it’s just not as simple as one tweet might make it seem”. Nonetheless, the 500,000 private-sector businesspeople that The New York Times has estimated entered the workforce since the loosening of restrictions by the Obama Administration will all have their fingers crossed, particularly those in the hospitality and transportation industries.

China invests $3bn in Malaysian port

Posted on by Ben Debski

Malaysia’s Kuala Linggi International Port (KLIP) has set its sights on attracting a share of Singapore’s booming oil trade – which currently accounts for a third of global oil demand. A $3bn dollar investment from private investors will help transform the port, which is situated 200km away from Singapore on the Malaccan Straits. The port aims to be completed within a decade and will be fit to handle some the world’s biggest ‘supertankers’.

Port operator T.A.G. Marine and developer Linggi Base are undertaking the project, with Chinese investors footing the bill – with expected costs in the region of $2.8bn.

Construction was launched in Mallaca in November, making use of 620 acres of land reclaimed by the Malaysian state. The completed port will offer storage, repair and refuelling services for the world’s largest oil tankers and will have the capacity to store 1.5 million cubic metres of oil.

The congestion in Singapore has led to a number of unwanted delays and cost pressures, opening the door for KLIP

KLIP hopes to attract the majority of its business from Singapore, which currently provides passage to $600bn of oil annually. This vast amount of traffic has overwhelmed Singapore’s ports in recent years, causing congestion. Singapore currently handles over 100,000 vessel calls a year, while KLIP handle only a few thousand. By increasing its capacity, KLIP could benefit from the pent up demand in the region.

KLIP has some strategic advantages that could catch the attention of potential clients. Perhaps most notably, KLIP is able to focus on ‘ship to ship transfer’ – the process of passing cargo between ships directly – a facility that is currently banned from ports in Singapore. Additionally, the congestion in Singapore has led to a number of unwanted delays and cost pressures, opening the door for KLIP to position itself as a more efficient alternative.

Ng Xinwei, Chief Executive of trading company Agritrade, said: “Through our clients who are oil majors and oil traders, we see a competitive edge in locating our floaters (storage facilities) in KLIP resulting from lower costs and less congestion.”

China’s cybersecurity law threatens business

Posted on by Ben Debski

China has the world’s largest market for digital shopping, mobile payments, and internet-enabled financial services. Close to 400 million people in China conduct the majority of their payments using their smartphones. China’s overall information technology market is valued at well above $300bn, and it is estimated that more than 700 million Chinese have access to the internet. Therefore, any law impacting the online space – cybersecurity included – is sure to make ripples in the way China does business.

That’s why its new cybersecurity law – due to take effect in June of next year – is particularly alarming. It is part of an ongoing government programme to reinforce China’s cybersecurity, and, arguably, looks to target non-Chinese hackers. The introduction of the law comes during a period of continued tension between the US and China – with both accusing the other of hacking in recent years. This tension extends beyond just cybersecurity, however, spreading to trade, the economy, and, of course the US election – which inevitably had great implications on how business would be conducted between the two nations. The law appears to be counterproductive in several ways.

These pieces of information could easily be passed on to Chinese companies… providing them with a distinct competitive advantage

As the law sets forward, important network equipment and software will have to receive government certifications. This means that specific pieces of intellectual property or technical features will have to be divulged. These pieces of information could easily be passed on to Chinese companies by the regulators behind cybersecurity – providing them with a distinct competitive advantage over their foreign counterparts. It shouldn’t be forgotten that government interference in China is far more prevalent than in western nations. And the tremendous power held by the state allows it to play a more critical role in economic plans.

The businesses most at risk will be those with special hardware and systems for network management, but the programme could even include data from, and for, ATMs. New generation ATMs have a much higher level of connectivity, utilising mobile integration and face recognition. This makes them more vulnerable to hacking, and means confidential devices and information will have to be used for protection. Under this new law, ATMs could act as a new source of information for the government.

This law is also counterproductive because companies gathering data in so-called ‘critical areas’ will have to store that data inside China. At this stage, the definition of ‘critical’ is worryingly broad. Complying with this requirement will force international firms to make expensive investments in order to build duplicate facilities within China. This is in total contradiction to the free flow of data, which is expected to swell in 2020 after the introduction of 5G.

International companies will have to weigh this risk against the benefits of doing business in China. China has long had a reputation for ‘copying’ without getting insider access, and this law will only ease the process by which businesses review foreign competition. For international companies there is no easy way forward as the choice is black or white. Either foreign companies will comply – knowing that China has a way to peek into data that was previously private – or they will chose to stand by their principles of privacy and risk being excluded from the Chinese market. Despite the challenging dilemma, companies are likely to comply, giving in to China’s demands. The Chinese market is too large and too ripe for future growth, especially when compared to more stagnant outlooks in Europe and the US.

While cybersecurity is important, this law will ultimately restrict movement in a free market

In addition to creating barriers for international business in China, this kind of legislation stifles innovation. It could well be considered to be part of what has become known as ‘indigenous innovation’ in China. This process favours Chinese firms by establishing non-tariff barriers – such as specific standards or regulations on products – in order to limit non-Chinese firm’s access to China’s dynamic marketplace. The overall impact would be wide-ranging, extending from consumer electronics to products used to produce renewable energy – including windmills and solar panels.

Innovation is a complex process, and in order to flourish requires society to be as open as possible, allowing a vibrant exchange of ideas between various people. While cybersecurity is important, this law will ultimately restrict movement in a free market. Entrepreneurs in China aren’t often bothered by their government’s management of the internet – often referred to as the ‘great firewall’ – but this new law emphasises the nation’s tightening grip on its wider uses. Furthermore, far from favouring China’s champions in this industry – such as Huawei, Lenovo, or Tencent – this law will act to handicap them in the long-term. Maybe the hope is that these companies will fight to alter the law and mitigate the negative implications for China’s internet landscape.

US companies have already begun to lobby strongly against the law, as well as China’s management of the internet in general. But despite the efforts of any company – Chinese or otherwise – the cybersecurity law is just a piece in a larger, ongoing political puzzle that companies will have to deal with. Trump’s stance on trade is equally, if not more, alarming for business. In the end, agility will be key for companies to succeed in this tense political environment.

Professor Georges Haour is a Professor of Technology and Innovation Management at IMD Business School