In 1993, the US military began what would become the single most expensive individual military procurement project in history. With an expansive and varied fleet of ageing fighter jets, Clinton administration Secretary of Defence Les Aspin suggested the next generation of planes should be standardised to keep costs to a minimum.
Almost 25 years and approximately $400bn later, combat-ready Lockheed Martin F-35 Lightning II jets have only just started being delivered to countries that have been waiting decades on their orders. While the F-35 is impressive, the project has been marred by an out-of-control budget and a never-ending stream of setbacks.
Almost 25 years and approximately $400bn later, combat-ready Lockheed Martin F-35 Lightning II jets have only just started being delivered
Search and destroy
After a lengthy tendering process, in 2001 Lockheed Martin won the contract to build what had been dubbed the ‘Joint Strike Fighter’. The codename came from the requirement that the countries and military branches purchasing the jets should be able to order variants on the same base design to keep costs low.
Lockheed’s prototype became the F-35 Lightning II, and is designed in three main variants. The F-35A is the base model for use by the US Air Force – a modern stealth fighter. The variant for use by the US Marines is the F-35B, and is capable of taking off and landing vertically, replacing the Harrier Jump Jet. The F-35C is the US Navy version, and is able to operate out of an aircraft carrier thanks to its folding wings and shorter runway requirements. All three feature a ‘combat cloud’ system that allows a fleet of F-35s to share and compile tactical information, as well as helmets that let pilots see through the floor of the jet via a series of cameras. The Joint Strike Fighter was expected to result in huge cost savings, with Australia, Canada, Denmark, Italy, the Netherlands, Norway, Turkey and the UK all signing up as customers. Despite best intentions, however, the project proved to be anything but cheap.
Master of none
Being designed to fill such a wide variety of roles, the F-35 became bloated and ineffective. The US Air Force wanted a stealth fighter to slip under enemy radars, similar to jets used by Russia and China. The Marines demanded a jet that included internal weapons and vertical take-off systems. Meeting these requirements made the overall design of the F-35 far more bulky than initially envisioned.
Making matters worse, the US also wanted to keep costs low by building production planes while testing was still underway. As more planes were built, more problems emerged. In 2004 the F-35B was found to be more than 2,000lbs overweight, and in 2012 the US was forced to approve plans for reduced mobility and longer runways to accommodate necessary design changes. By 2013, the cost to retrofit planes already built was estimated at $1.7bn, and in 2014 the entire fleet was grounded after an engine fire. Some reports have even suggested that, while the F-35 features greater stealth capabilities, in a one-on-one dogfight, an ageing F-16 may actually come out on top.
The F-35 seems to be a textbook case of the sunk-cost fallacy: investors believe they can’t cancel a large project no matter how disastrous it may be because everything already spent would be for nothing. It may be President Trump who decides the ultimate fate of the jet, and he has already fired off several angry tweets pledging he will bring down the per-plane cost or cancel the entire project.
The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.
Following these tirades, Lockheed reportedly cut $600m from the next 100 planes to be delivered, though officials claimed this was due to mass production naturally driving down prices. Either way, it may only be a drop in the ocean, with Reuters reporting in 2012 that the lifetime cost of the project is expected to reach $1.45trn.
Shanghai-based pharmaceutical company Hutchison China MediTech (Chi-Med) announced on June 12 that the China Food and Drug Administration had accepted an application to consider its new drug Fruquintinib as a treatment for colorectal cancer.
This brings Chi-Med one step closer to becoming the first company in recent history to bring a drug developed in China to the international market. The announcement triggered a landmark payment of $4.5m to Chi-Med from its US partner Eli Lilly. Fruquintinib is currently under development by both companies, with future clinical trials planned in the US and China.
Eli Lilly’s payment marks the significance of this progress in Chi-Med’s journey to eventually securing approval for Fruquintinib in the notoriously tightly regulated US market.
Fruquintinib is currently under consideration for use primarily as a treatment for advanced colorectal cancer
Fruquintinib is currently under consideration for use primarily as a treatment for advanced colorectal cancer. The drug displayed promising results in a late stage clinical trial of patients in China, which were highlighted at the American Society of Clinical Oncology Meeting in June. Colorectal cancer is the second most common cancer diagnosed in China, with around 380,000 cases declared every year, as well as an estimated 1.5 million new cases diagnosed globally in 2015.
The drug has also demonstrated potential in treating lung and gastric cancer, with further advanced trials planned in China later this year. Studies on patients in the US suffering from each of these cancers are also on track to begin this year.
Fruquintinib is administered orally and works by selectively targeting the protein that enables tumour growth in late stage cancer. In trials so far it has performed well, particularly because of its ease of consumption by patients compared to radiation treatments, as well as lower rates of damage to non-cancerous cells than market rivals.
On June 8, Japanese carmaker Honda announced itself as the latest company to join the race to bring autonomous vehicles to the mainstream market, with plans to develop vehicles capable of navigating cities by 2025. The announcement is further evidence that the future of the car industry is autonomous. Previously, Honda announced it hoped to market a vehicle capable of driving on highways by 2020, but inner-city driving is much more complicated. Since there are ample possibilities for collisions and a typical urban journey involves many more manoeuvres, Honda has set a conservative target.
Honda’s timeline to develop autonomous vehicles capable of both city and highway driving places it slightly behind large commercial rivals like BMW, and far behind the likes of Tesla and Google. The latter two firms are currently working at the forefront of autonomous driving technology.
Automatic driving on highways has the potential for widespread use in the US
Automatic driving on highways has the potential for widespread use in the US, where the inner country import industry relies heavily on trucks ferrying produce across long, straight roads. By numbers, truck driving is one of the most popular professions in the US; there are around three and a half million drivers and almost nine million people employed across the entire industry. Automating these journeys will have negative consequences for employment, but the potential for profit in this field is huge.
However, designing robots that can master driving within cities is essential to maintaining a stake in the commercial consumer market. Most people don’t use their cars to travelling long, straight distances anywhere near as much as they use them to drive to the local shop or work. If Honda wishes to put an automatous car in every driveway, building one that can drive customers around their towns or cities will be essential.
Speaking to Reuters, Honda said it would attempt to bring teams working in R&D, procurement and manufacturing together to try and keep development costs to a minimum while maintaining its strategic goals.
“We’re going to place utmost priority on electrification and advanced safety technologies going forward”, said Honda CEO Takahiro Hachigo.
Hachigo highlighted that, in addition to artificial intelligence, developing new technologies such as robotics and greener energy vehicles would also be a priority.
An initiative to privatise US’ air traffic control operations has been announced by President Donald Trump, with the plan for a non-profit organisation to take the responsibility from the US federal government. The decision may prompt significant changes for businesses keen to utilise drones, particularly for autonomous deliveries.
At a media event, Trump said the US’ current air traffic control system was woefully out of date, and that privatisation would “take American air travel into the future”. While the Federal Aviation Administration (FAA) has recently made efforts to upgrade its network, critics have said the process has taken too far too long, particularly in the shift from radar-based tracking to a GPS system. “Honestly, they didn’t know what the hell they were doing”, Trump said of the FAA.
Trump’s plan would see a private, non-profit corporation operate and manage air traffic control across the entire US. The organisation would be primarily governed by representatives from the US’ major air carriers, though the FAA would retain some oversight.
Privatisation may speed up the process of allowing autonomous drones to operate in US airspace
As reported by NPR, the US air traffic controllers union sees the initiative as generally positive, and may prompt a change for a system it sees as inefficient, while calling for more specific details. A number of the major US carriers, including American Airlines and Southwest Airlines, have also declared their support for the plan.
However, others in the industry have not been as keen. As reported by Bloomberg, groups representing private plane manufacturers have expressed concern smaller airports may be overlooked and see a fall in service. The plan may also struggle to pass Congress, with many Republican lawmakers opposed to the deal.
As noted by Recode, if passed privatisation may speed up the process of allowing autonomous drones to operate in US airspace. Under current regulations established by the FAA, drones can be operated as long as they remain in the pilot’s sight. For fully autonomous systems, like those trialled by Amazon in the UK, new standards need to be established in order to avoid accidents.
A couple of years ago, JPMorgan Chase CEO Jamie Dimon famously remarked that fintech “is out to eat our lunch”. He was referring, of course, to the slew of alternative providers making inroads into the traditional banking business, the first time in a century or more that his industry has been under threat on several fronts at once.
Dimon has been proved right. Since then, these disruptive, digitalised upstarts have shown they not only want the banking industry’s lunch, but its dinner too. In this regard, the industry’s main weakness is in the area of payments, a seemingly mundane but highly lucrative service that is being rapidly commandeered by a vast array of providers. Even more threateningly, these hi-tech revolutionaries are using payments as a springboard into offering an array of other services the established industry has long seen as its prerogative.
The world of digitalised payments has become very broad, extending beyond the simple money transfers with which it began into big-ticket corporate services. UK-based Crossflow Payments, an alternative finance platform, is a good example.
The entire payments market is undergoing a dramatic structural transformation at both corporate and consumer level, fuelled both by customers dissatisfied with the services provided by mainstream banks and by the advent of new technology
In February, Crossflow signed a three-year deal with Maplin Electronics, the UK’s biggest technology retailer, to provide the chain with up to £360m of payables across more than 100 suppliers. Although established as recently as 2015, Crossflow can already fund up to £2.4bn in payables in the supply chain market, which clearly puts it on a bank-like scale.
Like similar payment platforms, Crossflow has jumped into a giant gap in the market that was vacated – or neglected – by established commercial lenders in the wake of the financial crisis. Nimbler and more solution-focused, new kinds of lenders such as Crossflow allow suppliers to firms like Maplin to greatly increase their working capital while also benefiting the retailer, as the enhanced liquidity strengthens its supply chain.
Tech reformation
The entire payments market is undergoing a dramatic structural transformation at both corporate and consumer level, fuelled both by customers dissatisfied with the services provided by mainstream banks and by the advent of new technology that enables the payments industry to marry with consumers’ needs in highly original ways. What’s more, 2017 promises to be a watershed year for the industry.
As Maurice Cleaves, CEO of trade association Payments UK, said in January: “I have worked in the payments industry for more than 30 years, and it seems to me that we will look back on 2016 and 2017 as the time when the foundations were laid that changed for good the way we pay. We are on the verge of a whole range of new services that will benefit many different types of customers.”
It’s little wonder that banks feel threatened. A few short years ago nearly all payments went through high street institutions, whereas today, in the UK alone, there are more than 2,500 providers of payment services. And most of them are offering products and services that run rings around the banking industry in terms of convenience and cost.
Developments in Europe and the UK may set the pace for the rest of the world. As Cleaves pointed out, other countries have tended to follow the UK’s lead in chip and pin technology, contactless payments, and other innovations.
Atlantic progress
North America isn’t far behind though. In the retail arena, for instance, the US is moving rapidly to tokenisation as a security measure, card-not-present transactions, point-to-point encryption, and mobile and contactless payments, all of which make transactions faster, safer and more convenient.
Roughly a third of US merchants are equipped to accept chip cards
As Randy Vanderhoof, Director of the US Payments Forum, wrote in the European Payments Council newsletter in early March, the speed of payments adoption is accelerating: “From what our chip-enabled merchants are telling us, chip-on-chip transactions are increasing at a very solid rate, and our larger enabled merchants are seeing most of their transactions come in as chip transactions.” Already, roughly a third of US merchants are equipped to accept chip cards, and about three quarters of consumers carry at least one chip card in their wallets.
The infrastructure on which this revolution depends is racing to catch up with the payment preferences of consumers. Vanderhoof regrets a shortage of access points such as in-store point-of-sale terminals at mid-size merchants, ATMs, and automated fuel dispensers. “These would help speed up the migration to chip-based transactions and reduce in-store counterfeit card fraud, which is the largest source of fraud in the US, particularly at petrol pumps”, he noted.
Developing regions
In the meantime, there’s no more transforming example of the power of technology harnessed with payments than M-Pesa, the mobile payments system launched in Kenya and Tanzania by Vodafone in 2007. Both countries lacked – and still do – anything like a nationwide banking network. But, funded by a UK grant, the introduction of M-Pesa allows users to easily deposit, withdraw, transfer and pay for goods and services using mobile devices, and from the most remote of locations. What’s more, circumventing the banking system, customers can deposit and withdraw funds from a steadily widening network of retail outlets and other approved sources. All this happened without any bricks-and-mortar banks.
In a once cash-based society, M-Pesa has greatly reduced robberies and other forms of financial theft. That’s why, in other banking-starved countries, M-Pesa is winning a huge following for its simplicity and convenience. It’s spread beyond Africa to India, Afghanistan and even eastern Europe.
Cashless future
Although Europe and North America are at the forefront of the revolution, other regions aren’t exactly dragging their feet. In the Asia-Pacific region, Singapore is aiming to be a cashless society within the next 10 years. If so, it won’t be far behind Australia, which has set a similar target.
This isn’t a pipe dream either. As Visa pointed out in a report in March: “Consumers in Singapore are already spoilt with a wealth of cashless payment options.” These range from credit and debit cards, mobile wallet platforms launched just last year, and online shopping products such as Visa Checkout, which allow consumers to make transactions with a single sign-on.
Singapore also deploys token services, which allow payments to be processed without exposing account details. These work by replacing sensitive account information such as the 16-digit card number with a unique digital identifier called a token. With all these options available to them, it’s not surprising Singaporeans are the regional leaders in the usage of electronic payments.
Even in tech-minded Singapore, roughly a third of companies report it takes up to three days to access received funds
Bite back
However, as the Visa report also revealed, corporate payments in the region lag behind those in North America and Europe: “They are still heavily reliant on cash and cheques.” The result? The clearance system moves at a snail’s pace compared with the Northern Hemisphere. It takes an average of 14.2 hours for a company in the Asia-Pacific region to prepare each payment run internally. Banks then take an average 10.9 hours to process it. Even in tech-minded Singapore, which prides itself on being a smart city, roughly a third of companies report it takes up to three days to access received funds. And they have to wait an average of 50 days following invoice submission before payments turn up. As Visa concluded, the solution they need is “higher levels of automation for payments”.
It’s here that banks are fighting back. In Singapore, for instance, Citi recently launched an electronic payment system for major clients. Citi’s RenePay is a cloud-based, fully automated, B2B e-procurement platform that promises to be a boon for corporate cash flows. Indeed, across the region, companies say they would be prepared to pay an extra 20 percent to get their hands on cash sooner, such is the value of liquidity.
Wherever they are based, however, banks are disadvantaged compared with their more agile rivals. Stuck with slower and more expensive legacy systems, they are handicapped in terms of speed and convenience because of the astounding advances made in digital technology. An alternative payments provider, for example, can process on a simple desktop device the volume of payments that would normally be done by a small bank. And, as payments expert Paul van der Valk of the Payments Advisory Group explained on corporate treasury site GTNews: “It’s now possible to handle all the payments processing of a second-tier bank on a server that fits under your desk.”
Blocky future
Looming on the horizon is another dramatic development in payments: the system of transacting payments based on blockchain. Also known as distributed ledger technology, it promises to greatly simplify transactions, as well as reducing risk as payments work their way through multiple sites, locations and institutions. All participants in a blockchain-enabled network have their own identical copy of the ledger, and would immediately pick up within seconds any undue changes, for instance if it were hacked.
Of course, banks can use blockchain – and the industry is taking a close interest in it – but they would have to compete on price and convenience. And that’s where they’re at a disadvantage already. The bird may have already flown.
The EU’s new payments services directive, known as PSD2, will spark the creation of entirely new types of payment companies and services
In the meantime, a new kind of bank could be emerging. In the Netherlands, Bunq, which calls itself ‘the bank of the free’, is a payments-dedicated institution with a mission. “Your money should be easy to use and share”, the founders promised. “Instead of accepting the banking system as it is, we decided to change it.” So saying, Bunq won’t use clients’ money for ‘risky investments’ or sell their personal information, both of which the established industry has done as a matter of routine. This is a long way from the pre-2008 world of inflated bonuses and salaries, not to mention 30 percent fees for processing payments.
In Europe, the revolution is gathering pace. Payments experts predict the EU’s new payments services directive, known as PSD2, will spark the creation of entirely new types of payment companies and services. Simultaneously, the Bank of England is developing a real-time gross settlement system that will enable consumers of all types to use trusted third parties to make much more individualised payments, thus circumventing the legacy banking industry.
Veterans of the payments industry have compared the situation to the launch of the mobile phone 20 years ago, when not even the most far-sighted observers predicted it would become the all-purpose tool that it is today.
As the revolution rolls on, the payments industry will drag even the most conservative consumers into the 21st century. It’s even working to accommodate those diehards who still insist on using cash and cheques – around 500 million cheques are still processed in the UK every year. On the horizon is cheque-imaging technology that will clear paper-based transactions much faster and, in addition, provide new ways of paying cheques into accounts. Even the staunchest Luddites couldn’t complain about that.
Hello Kitty is not a cat. The world’s most famous kitten is, in fact, a little girl from London. She has a twin sister called Mimmy, her hobbies include baking and playing tennis, and she even has her own pet cat called Charmmy Kitty.
Kitty White, known to the world as Hello Kitty, is a global phenomenon, an iconic brand, a subject of devotion and obsession, and the centrepiece of one of the most successful marketing models of the past century. But she’s not a cat.
Since the creation of Hello Kitty, Sanrio, the company behind its success, has soared to incredible heights, carving out a presence in over 70 countries with a character that is adored by children and adults alike. Today, the brand is worth over $7bn, and features on more than 50,000 products worldwide. The appeal of Hello Kitty knows no limits, spanning continents, cultures, ages and genders, with its fanbase growing rapidly with each passing year. Indeed, the brand is the perfect illustration of how simplicity and versatility can weave magic, and how a careful balance of consistency and keeping abreast of cultural changes is perhaps the only way to ensure longevity.
Kawaii culture
Hello Kitty was created in 1974 by Yuko Shimizu, an employee of consumer goods company Sanrio, who was tasked with designing six new characters for the company. By March the following year, a small vinyl purse – the first piece of merchandise to carry the now-iconic Hello Kitty visage – was sold. The character was an instant hit, as Sanrio had cleverly played into a nascent trend in 70s Japan.
“It was the rise of girl culture, if you will”, said Christine Yano, Professor of Anthropology at the University of Hawaii, and the author of the only academic book on the subject: Pink Globalisation: Hello Kitty’s Trek Across the Pacific. “Sanrio tried out this notion of cute add-ons to things. For example, if you had simple beach sandals and you put a strawberry or a flower on them, all of a sudden it has added value, and the value in this case was decorative cuteness”.
Sanrio’s founder and CEO had a global vision in mind: with Hello Kitty, he hoped to create Japan’s answer to Mickey Mouse
Soon, these embellishments took on a life of their own, growing into cute characters in their own right. As most other animals already had representatives that were popular in Japan (Snoopy the dog, Mickey the mouse, and so on) Sanrio settled upon a cat. “And that took off, so Hello Kitty was born amid this rise in girl consumer culture in mid-70s Japan.”
The girl culture movement quickly became intertwined with the concept of kawaii, or cuteness, in Japanese popular culture. “Throughout the 80s and 90s, Hello Kitty was very kawaii, and played a huge part of the growth of kawaii in Japan”, noted Martina Longueira, Senior Marketing Manager at Sanrio. “Hello Kitty was really able to resonate with the concept of cuteness and femininity”.
The rise of cutesy culture mirrored the changing political and socioeconomic mood in Japan at the time, as the country underwent a profound shift from political idealism to mass-market consumerism. Sanrio’s ever-growing range of Hello Kitty-emblazoned fanshi guzzu (fancy goods) played perfectly into Japan’s newfound consumerism and emerging national identity, with masculinity and sobriety giving way to femininity and playfulness.
Cat for a mouse
From the very outset, Shintaro Tsuji, Sanrio’s founder and CEO, had a global vision in mind: with Hello Kitty, he hoped to create Japan’s answer to Mickey Mouse. “This was a Japanese version of an anthropomorphised animal figure”, Yano said. “And, in fact, the founder’s ambitions were that this cat might overtake the American mouse.” Reflecting these early ambitions was Sanrio’s swift move to the US, just two years after Hello Kitty was created. “That foray into the American market by way of Asian-American conclave stores was instantly successful among Asian-Americans.”
From the 80s onwards, Hello Kitty’s appeal began to defy ethnicity, with the character firmly in the universal consciousness by the 90s, particularly as celebrities began to associate with the brand. By appearing alongside the likes of Mariah Carey and Cameron Diaz, Sanrio and Hello Kitty were able to make “inroads into the American popular culture consciousness”, Yano noted. “It went from an Asian-American niche market to a much broader market, so that by the 90s Hello Kitty was fairly widespread and distributed to department stores.”
Hello Kitty’s popularity continued to mushroom across the globe, with merchandise proliferating at a stunning rate. In Taiwan, for example, there is now a Hello Kitty-themed maternity clinic and a Hello Kitty aeroplane – the latter thanks to national carrier EVA Air. Hello Kitty cafés and restaurants in London, California, Hong Kong and Singapore have queues around the block, while two theme parks in Japan and one in Shanghai pull in hundreds of millions in revenue each year. From the practical (rice cookers and waffle makers) to the expensive (diamond encrusted jewellery and laptops), to the unlicensed and bizarre (assault rifles and vibrators), it seems there is nothing you can’t buy without the expressionless feline staring back at you.
Nothing there
While Hello Kitty’s popularity can be put down to the rise of kawaii and broader cultural shifts, ensuring her compatibility with these trends was the masterstroke of her creation. Take a closer look at Kitty White and you’ll be struck by how simple and clean the motif is. As Yano put it: “The design has a brilliant abstraction.” This simplicity gives Hello Kitty incredible versatility as a logo; it can be moulded to fit any product.
Perhaps more importantly, the simplicity also speaks to the consumer; for them, the character is a mirror. “She can represent what you are feeling, or what you want her to share with you”, Longueira explained. “So, if someone is feeling sad, they’ll be able to look at Hello Kitty and believe that she’s empathising. If they are feeling happy, then Hello Kitty is there to share in happiness with them. There’s a simplicity to Hello Kitty that is a big part of why she remains so popular, and visually is so memorable and striking for the superfans or for the millions that are aware of her.”
While Hello Kitty’s popularity can be put down to the rise of kawaii and broader cultural shifts, ensuring her compatibility with these trends was the masterstroke of her creation
Not having a mouth is also an important element of the design and broad appeal. “She doesn’t have a mouth because she speaks from the heart and because it means that we don’t attribute a specific language or a specific localised set of values to her”, said Longueira. In Hello Kitty, Sanrio has a blank slate that can be adapted to any culture, market or product. “There is a huge range of products and marketing out there by Sanrio – it’s phenomenally diverse. I think Sanrio has always been very creative about how we can make Hello Kitty come to life and how she will be most relevant in different parts of the world.”
“People have talked about Hello Kitty blankness: the ability to have such a blank slate that you can project anything onto her”, Yano agreed. “This is different to other characters like Mickey Mouse, which are already so filled with content, making it more difficult to project your feelings. Hello Kitty is, in some ways, contentless, which offers great flexibility in terms of who this is supposed to be, what it is supposed to represent, and especially what it might mean to me: the consumer. In a sense, there are many, many Hello Kittys out there, each a kind of mirror enabled by its simplicity and abstraction.”
The Hello Kitty Stratocaster is just one of many odd merchandising tie-ins
Big kids
What is particularly striking about the appeal of Hello Kitty is that, despite starting out as a children’s character, the brand has become incredibly popular among adults as well. Indeed, Hello Kitty inspires a certain level of mega-fandom that has seen many individuals procure vast collections, covering themselves and their homes in Hello Kitty merchandise.
Longueira suggested some of this infatuation among adults could be attributed to Hello Kitty’s longevity. “For children that saw Hello Kitty in the 70s, 80s and 90s, those girls, and some boys, are now adults. A 42-year-old woman will have known Hello Kitty her entire life. When you love something as a child, you will continue to love it, or have really positive feelings towards it, when you become an adult, and then you’ll probably share it with your own children as well.”
Yano argued a cultural shift in terms of what is socially acceptable among adults has also played a role: “I think Hello Kitty has come at a very interesting juncture, when we think cute girly things are OK. It’s a very fertile time for its market demographic, which as you know is now way beyond children.”
Sanrio’s company slogan is “small gift, big smile”, and this mentality underlies the appeal of Hello Kitty. “It’s about generosity, giving gifts in a small or big way, and making someone smile”, said Longueira. “The main tenet of the character and her whole story is around friendship and generosity; there is a purity and innocence to her that resonates with people of all ages, wherever they are from. And the idea that she was created in order to share with others and give a gift is crucial.”
Test of time
What makes Sanrio’s success all the more impressive is the fact Hello Kitty has never been cast aside as a passing fad – the usual fate of illustrated characters. This may partly be due to the fact Hello Kitty’s popularity was not sparked by a TV show or film, for which a decline in popularity would naturally follow a post-release peak. “There isn’t a rotating series of pushes in that sense to make Hello Kitty fit a mould”, explained Longueira. “She’s kind of who she is because Sanrio believes she should be, so there isn’t a need to offer a new message around Hello Kitty in each market or every year, and because she has existed for so long, her identity is clear.”
When you love something as a child, you will continue to love it, or have really positive feelings towards it, when you become an adult, and then you’ll probably share it with your own children as well
Again, Hello Kitty’s blankness comes into play here, as it has afforded Sanrio incredible flexibility: the character defies fads and always stays cool. “She’s almost 45, and we’ve seen so much in terms of trends, cultural change and shifts in attitudes, and Hello Kitty has been there throughout”, said Longueira. “Due to both the company’s creative direction and the fact that Sanrio is present basically everywhere in the world, you can see where trends are beginning or where they lead to. This allows you to be ahead of the curve and also understand that maybe that curve will come full circle, which happens quite a lot.”
Hello Kitty’s ubiquity and status as a cultural icon has made her an obvious target for commercial partnerships. Indeed, more and more western companies are scrambling to team up with Sanrio and plaster their products with Hello Kitty branding. In 2006, iconic US guitar maker Fender released a Hello Kitty Stratocaster, with the likes of Guns N’ Roses guitarist Slash pictured playing the new pink guitar. In 2009, make-up giant Mac introduced a limited edition Hello Kitty range. “To me, Mac Hello Kitty embodies the ultimate beauty icon”, said Jennifer Balbier, Mac’s Senior Vice President of Product Development, at the time. The following year, carmaker Smart jumped on the bandwagon, introducing a variety of full and partial body wraps, allowing drivers to show the world their love for Kitty White.
When asked about this growing trend, Longueira explained there is more at play than simply partnering with a popular brand. “I think western companies and people in general look to Japan for a certain kind of design and cultural influence”, she said. “Japanese design is often associated with high quality; there’s a clean and pure element to it, and I think, in a really fascinating way, Hello Kitty represents that notion of Japanese culture and design that western companies can engage with.”
World domination
So, what remains for Kitty White? Well, while the main character is ubiquitous, her supporting cast remain largely in the shadows, but Sanrio now has plans to spread the brand even further by elevating the profile of the other characters in the company’s toy chest. “Hello Kitty has so many other figures around her that we’re really keen to expand, in order to reinforce the story of Kitty and her friends”, said Longueira. “There’s also a continuation of communicating Hello Kitty’s kindness and generosity. Sanrio works with charities and philanthropic partners; doing more in this area and working with more partners in more regions is a big part of reinforcing that central part of the Hello Kitty story.”
And that’s not all. While the male demographic in Japan has already been secured, Sanrio wants to replicate the feat globally. Hello Kitty has largely been perceived as a female brand, but the positive rise of the concept of gender neutrality is feeding the idea that anyone can be a Hello Kitty fan. Sanrio is attempting to capture the zeitgeist, just as it did when the character was launched. “I think the idea that we shouldn’t be pigeonholed to female or male boundaries is growing apace”, noted Longueira. “Hello Kitty has a lot of male fans and I think more men are confident in saying so. Ultimately, friendship and generosity are values that are important to all humans, regardless of gender or sexuality.”
While the male demographic in Japan has already been secured, Sanrio wants to replicate the feat globally.
Hello Kitty started out as part of the rise of kawaii culture, but has since demonstrated a remarkable ability to stay ahead of the curve. Over four decades, the brand has survived changes in fashion, society, technology and politics, remaining ever constant and largely unchanged. For this feat alone, Hello Kitty must be regarded as truly phenomenal. The character has become an integral part of people’s lives, triggering a sense of nostalgia and innocence that speaks to people of all ages, races and genders.
Sanrio’s success can be attributed in large part to the brilliance of Hello Kitty’s design, but in equal measure to the simplicity of the company’s global strategy. In Hello Kitty, Sanrio has created a mirror that reflects both individuals and societal trends – in many ways it’s the perfect commercial logo. As Kitty White adapts, her core message remains the same. This balance of consistency and evolution is incredibly fine; in managing it Sanrio has carved out a niche position that’s very tough to emulate. As the brand continues to flourish worldwide, it’s safe to say we won’t be saying Goodbye Kitty anytime soon.
It has been a tempestuous 12 months for the world’s biggest smartphone manufacturer. In September 2016, over $14bn was wiped from Samsung’s market value following a botched global recall of its erratically explosive Galaxy Note 7 handset. With shares tumbling, Samsung scrambled to recover its brand image, discontinuing the malfunctioning device and accepting the ensuing heavy losses. Despite the company’s best intentions, however, these damage limitation efforts proved futile.
By December, the conglomerate had become embroiled in the sensational political corruption scandal gripping South Korea. As special prosecutors alleged collusion between Samsung and the highest levels of the Korean Government, the company’s heir apparent, Lee Jae-yong, was formally indicted on charges of perjury, embezzlement and bribery. With the de facto leader now awaiting trial behind bars, 2017 is shaping up to be an equally testing year for the electronics behemoth.
With its ever-expanding network of subsidiary and affiliate companies, Samsung has established itself as a leading global brand
The scope of the scandal may well be unmatched in Korean political history, but the country is not unfamiliar with such extensive business-government collaboration. Close relationships between conglomerates and the state have been an enduring feature of the South Korean economy since the 60s, when a revisionist government embraced big business as a vehicle for industrialisation. While government connections have allowed Samsung to thrive over the past half-century, they may also prove to be the company’s undoing.
Republic of Samsung
Today, South Korea is one of the most developed, high-income countries in the world. Thanks to its booming hi-tech and heavy industries, the country stands as the world’s 11th largest economy, boasting a well-educated and skilled workforce. However, South Korea hasn’t always enjoyed such prosperity.
“In the post-Korean War period, South Korea was desperately poor”, said Mark Clifford, Executive Director of the Asian Business Council and author of the book Troubled Tiger, which chronicles the modern history of the Korean economy. “It was even poorer than many counterpart African countries at the time. Indeed, it was so poor that people generally thought the Philippines and Burma (as it was then known) would have far better economic prospects than South Korea.”
These dire economic straits began to change in 1961, when Park Chung-hee – the father of recently impeached President Park Geun-hye – seized power in a military coup. The new authoritarian leader had a clear vision for Korea, aiming to modernise the country and turn it from an essentially agrarian economy to an industrial, export-led state. In order to realise this vision, the Park Sr regime started funnelling money into the businesses it trusted to carry out its plan, forging close personal relationships with the families running the companies. After years of receiving state-sponsored credit and assistance, these burgeoning family businesses began to expand into sprawling conglomerates known as ‘chaebol’ in Korean.
Close relationships between conglomerates and the state have been an enduring feature of the South Korean economy since the 60s
Fortunately for founder Lee Byung-chul, Samsung was one of the companies chosen to carry out Park Sr’s development strategy. Starting life as a modest trading company in Daegu, an injection of government capital saw Samsung emerge as a budding economic power in the 60s. By the end of the decade, Lee had launched Samsung Electronics, which would later grow to be the crown jewel of his vast business empire. The next few decades were characterised by intense diversification, with the company entering new markets such as retail, insurance and heavy industries. By the time the Asian financial crisis hit Korea in 1997, Samsung had secured its position as an economic heavyweight. As its weaker rivals crumbled under the pressure of the crash, Samsung emerged not » only unharmed, but with its market dominance strengthened and consolidated.
In the post-crash years, Samsung has gone from strength to strength. With its ever-expanding network of subsidiary and affiliate companies, the chaebol has established itself as a leading global brand, even knocking Apple off the top spot as the world’s largest smartphone maker in 2011. In its domestic market, Samsung’s ubiquity simply cannot be overstated. In Seoul, babies can be born in a Samsung medical centre, grow up to attend a Samsung-owned university, and even live in a Samsung housing complex. Just one in 10 Korean smartphone users has an iPhone, with the vast majority opting for the national brand.
“In Korea, people often talk about the Republic of Samsung”, said Owen Miller, Professor of Korean History at the University of London’s School of Oriental and African Studies. “South Korea’s economic success is ultimately very closely tied to a few specific chaebol, with Samsung and Hyundai the most vital.”
Incredibly, Samsung’s revenue alone represents 20 percent of the nation’s entire GDP, and the company’s products account for 20 percent of South Korean exports. And yet, while the sprawling conglomerate may be the nation’s greatest economic success story, it is also no stranger to controversy.
Crony capitalism
By now, long-standing ties between corporations and the Korean political elite are no secret. Government support may have enabled the nation’s chaebol to thrive in the post-Korean War period, but it has also raised suspicions as to the form of those relationships. As such, a cloud of corruption has lingered over Seoul politics for the past half-century.
By the time the Asian financial crisis hit Korea in 1997, Samsung had secured its position as an economic heavyweight.
“Unfortunately, corruption scandals have been a feature of Korean politics since its democratisation”, said Miller. “Every elected president has had some kind of corruption scandal, usually involving influence peddling and slush funds.”
The scandal currently enveloping impeached President Park Geun-hee is thus the latest in a long list of political wrongdoings. While Park’s impeachment makes her the first democratically elected Korean leader to be forced from office, her predecessors have all faced similar accusations of corruption and cronyism. Before leaving office in 2013, Park’s predecessor Lee Myung-bak was forced to publically apologise over a bribery scandal involving his brother, who was ultimately jailed for two years.
“I can barely hold my head up for embarrassment and sorrow”, Lee Myung-bak lamented, after his brother was found guilty of accepting $500,000 from two businessmen seeking political influence. Lee’s predecessor, Roh Moo-hyun, also found himself embroiled in a multimillion-dollar corruption scandal, ultimately taking his own life in May 2009 as prosecutors progressed with their investigation. Roh allegedly received over $6m in bribes over the course of his presidency, but the corruption case against him was formally closed after his death. In the wake of such high-profile scandals, a 2015 OECD report showed a staggering 70 percent of South Koreans distrusted their government, while less than 30 percent had faith in the nation’s judicial system.
Now, Park stands accused of allowing a friend and aide, Choi Soon-sil, to extort tens of millions of dollars from the nation’s top chaebol. Over 19 conglomerates have been investigated in relation to the scheme, with Samsung emerging as the largest donor to two foundations linked to Choi. Samsung Electronics Vice Chairman Lee Jae-yong is accused of providing up to KRW 43bn ($36m) to Choi in exchange for political support for his succession plans – an allegation he denies.
Lee has been looking to consolidate his control over the sprawling conglomerate since his father – Samsung Group Chairman Lee Kun-hee – was hospitalised with a heart attack in 2014, acting as the de facto head of the company in place of the ailing Lee Sr. In order to ensure a smooth leadership transition, Lee is said to have required state approval for a controversial 2015 merger of two major Samsung units, which Choi allegedly helped to facilitate in return for substantial donations to her numerous overseas foundations.
Corruption cycle
With Lee’s formal indictment, the Samsung heir is following in his father’s footsteps in more ways than one. In 2008, Korean police raided Lee Sr’s home and office, following a tip he was using slush fund reserves to bribe politicians. Despite Lee Sr denying any wrongdoing, he was forced to stand down from Samsung, and was indicted and found guilty of tax evasion and embezzlement. Prosecutors sought a seven-year prison sentence, but the courts sentenced the Samsung patriarch to just three years of suspended jail time and imposed a meagre KRW 110bn ($98m) fine.
With Lee’s formal indictment, the Samsung heir is following in his father’s footsteps in more ways than one
A few months later, Lee Sr was formally pardoned by President Lee Myung-bak, who wanted the Samsung leader to remain on the nation’s International Olympic Committee. According to a government spokesman, Lee Sr’s pardon was simply “in the national interest”. Amid public outcry, the ousted leader returned to Samsung in 2010. Shortly before this return, a 474-page exposé hit shelves in Korea, alleging Lee Sr had stolen up to KRW 10trn ($10bn) from Samsung subsidiaries since moving into the top job.
Penned by the company’s former chief legal counsel, the controversial book divided opinion in Korea. While the author’s earlier allegations had prompted the 2008 investigation, his most serious claims were rejected by prosecutors, who described him as ‘unreliable’, according to the Financial Times. The book was a bestseller in South Korea, though Samsung strongly denied the allegations it contained.
“We’ve had a number of cases like this in the past”, said Clifford. “These cases seem very dramatic at the time, and there are often high-profile trials and even convictions. Every once in a while someone goes to jail, but, more often than not, the sentences are suspended.”
It is too soon to speculate what verdict will be delivered in the case of Lee Jae-yong. As it stands, the Samsung heir faces up to 20 years in prison, potentially scuppering succession plans at the conglomerate. For his part, Lee has denied the donations were made in exchange for political favours. Samsung said it would “do [its] best to ensure that the truth is revealed in future court proceedings”.
Prior to the election in South Korea, anti-chaebol protests were rife
Explosion zone
Samsung is now entering one of the most critical periods in its 79-year history. In August, the smartphone giant unveiled the Galaxy Note 7, a state-of-the-art phablet tipped to rival Apple’s iPhone 7 Plus. With positive reviews pouring in from tech critics, demand for the device was high, breaking pre-order records in South Korea.
Upon its launch, however, reports quickly began to circulate about devices catching fire. Videos began to flood the internet, showing brand new Galaxy Note 7 phones exploding and melting in users’ hands. In the US alone, Samsung received over 90 reports of batteries overheating, resulting in 26 cases of burns. As panic over the explosive smartphone escalated, the US Federal Aviation Administration banned the Note 7 from being taken aboard any flight, even when switched off.
In an effort to contain the escalating fallout, Samsung announced a global recall of the device in early September, and permanently ceased production on October 11. As the company rushed to limit the damage to its multibillion-dollar brand, the costly recall began to burn a large hole in the company’s profits. Samsung had expected to sell some 19 million phones during the Note 7’s product cycle, but the model’s sudden discontinuation put this ambitious target immediately out of reach. According to Credit Suisse analysts, the subsequent loss of revenue and ensuing recall could cost Samsung at least $17bn.
Still grappling with this blow to its balance sheet, the firm’s spate of misfortune continued in November, when it was forced to recall over 2.8 million washing machines over further reports of explosions. The malfunctioning machines saw users suffer various injuries, including a broken jaw, a damaged shoulder, and other blunt-force injuries, with Samsung ultimately receiving over 730 reports of exploding models.
Shaken by these costly recalls, Samsung’s latest launch became something of a make-or-break moment for the conglomerate. In April this year, Samsung released its new flagship handset – the Galaxy S8 – to both high expectations and tough scrutiny. While the device will undoubtedly be placed under the microscope over the coming months, its release has reinforced Samsung’s control over the Android market, ushering in a new era for the company following the Note 7 fiasco.
With the Galaxy S8 launch, however, Samsung is looking to repair the damage to its reputation more than to its finances. Remarkably, the company has emerged relatively unscathed financially from its various product failures, with share prices rising steadily over the past 12 months. Despite the Note 7 debacle, Samsung Electronics profits actually rose by 50 percent in the last three months of 2016. In January, the firm recorded its largest leap in profits in three years.
“From a business perspective, it’s clear that Samsung is in no way, shape or form at risk of going under”, said Kyle Ferrier, Director of Academic Affairs and Research at the Korea Economic Institute. “It has diverse holdings across Korea, with hundreds of affiliate companies spread across the nation. It also has outsized cash reserve holdings, which can always tide the company over.”
Indeed, with over $69bn in cash reserves, Samsung boasts a vast financial safety net. But, if the company seems set to survive the scandal, the same cannot be said for its government ties.
Rising dawn
On December 3, 1.9 million Koreans took to Seoul’s streets in a demonstration against the presidency. For these impassioned protestors, Park’s alleged corruption represented a failure of democracy, reigniting the contentious debate over government-business collaboration.
Remarkably, Samsung has emerged relatively unscathed financially from its various product failures in 2016
“There has been a constant back and forth between the state and the chaebol since at least the 90s”, said Miller. “There have been repeated, popular trends towards trying to control the chaebol, such as trying to break them up or reduce their power. However, these attempts have not been successful, and the chaebol seem to have consistently come back stronger than ever.”
What’s more, during her presidential campaign, Park positioned herself as something of a chaebol sceptic, promising to push ahead with economic democratisation and pledging support for SMEs. In the wake of Park’s stunning fall from grace, chaebol reform has once more entered the national conversation. With many chaebol moving operations overseas, public distrust of the nation’s conglomerates has reached what is perhaps an all-time high.
Now, with a new reformist leader in place, chaebol reform sits at the top of the political agenda. Throughout the short electoral campaign, presidential candidates from across the board pledged to overhaul South Korea’s corporate culture as a matter of priority – but only time will tell if this goal can be realised.
In addition to promising conglomerate reform, newly-elected President Moon Jae-in has honed in on Samsung, delivering a blistering attack on the group. “Samsung must undergo soul-searching on its anti-market practices and the illicit favour it has gained through its close ties with politicians”, Moon told reporters on his campaign trail. “This illicit practice should be put to an end.”
For its part, according to the Financial Times: “Samsung has promised to review measures to simplify its corporate structure, and outlined plans to hire a new independent board member and form a new governance committee.”
Chaebol reform has long been promised, yet remains elusive. With Park’s unprecedented impeachment, however, the tectonic plates of South Korean politics might just be beginning to shift. Calls for chaebol reform are reaching fever pitch but, for most Koreans, actions will speak louder than words.
In May 2016, owners of the Revolv smart home system woke up to an unpleasant surprise. Two years after being purchased by Nest, a subsidiary of Alphabet, the company announced its $300 smart home hub would stop working. The Revolv hub connected a number of smart appliances and gadgets, such as lights, thermostats and burglar alarms, to a central base. Smart home systems function better the more that is connected, and early adopters were encouraged to substantially buy into the system. According to a post on the Revolv website at the time of the shutdown, Nest no longer had the resources available to keep the system running.
For owners of a Revolv hub, their choice was to either purchase a new Nest system or ditch their smart home gadgets entirely. The number of Revolv users was likely quite small (hence the decision to shut it down) but for the people who did use it, the situation stung. Suddenly, completely out of their control, their homes would effectively stop working, with the only alternative being the purchase of another expensive device.
While the average person probably lacks the know-how to open up and repair a smartphone, the locking down of devices has also impacted the independent repair industry
While the case of Revolv could be seen as a damning indictment of smart homes and connected appliances in general, its shutdown also raises a more philosophical question: did anyone who purchased a Revolv smart home hub ever actually own it? Despite paying $300 for the device, it could be permanently shut down by the company with little to no warning. Even if someone did have the expertise to keep the system running, the tools needed to repair it are unavailable to anyone outside the company that built it. Looking at the details, it seems a lot more like rental than actual ownership.
With many more devices being built in this way, efforts to re-establish the concept of ownership and return more competition to both the private and public repair sectors are currently underway. Though a slow process, the right to repair is gradually building momentum all over the world.
Small beginnings
When something breaks, its owner would typically expect to have the choice to either replace it, or repair it if possible. That may be through the original manufacturer, but it may also be through a third-party repairperson or even on their own, should the owner have the requisite skill.
However, with many modern gadgets and devices, repair is no easy task. Many manufacturers are now using proprietary tools or refusing to sell replacement components, instead requiring individuals to return products to the original manufacturer. Accessing the inside of the most recent iPhone, for example, requires a proprietary screwdriver that the company does not sell.
While the average person probably lacks the know-how to open up and repair a smartphone, the locking down of devices has also impacted the independent repair industry. With the parts and tools needed to repair a device only available to the original manufacturer, many independent repairers are finding a growing number of devices impossible to fix. In response to this, organised groups have begun fighting to ensure access to the parts and tools they need. One such group is the Repair Association in the US.
Gay Gordon-Byrne, Executive Director of the Repair Association, said the group, which is a coalition of independent repair trade associations, was formed in 2013 after finding they couldn’t repair the devices they had been fixing for years. “We thought we’d all been living in isolation, then we started finding out that we were all suffering the same problems, but within what used to be different industries.”
While the average person probably lacks the know-how to open up and repair a smartphone, the locking down of devices has also impacted the independent repair industry
Gordon-Byrne said many technology companies, including Apple and Oracle, started making independent repair far more difficult at around the same time. And, while the issue began in consumer electronics, other industries have also been affected. Repairers working in agriculture, medical devices and industrial equipment also began discovering they were no longer able to repair the devices they once could.
“We thought: ‘Holy cow, our businesses are dead if we don’t get this fixed’, and we looked at the future and found the future looks terrible”, Gordon-Byrne explained. “Because if anybody else copies these policies, we’re dead.”
Hard lock
The path to independent repair has been blocked in a number of different ways. Aside from making physical tools unavailable, through such methods as creating proprietary screws and screwdrivers, companies have also begun obstructing the digital tools needed to assess what is wrong with a device. When a modern digital device fails, it usually presents an error code to the user.
“You need to have a diagnostic tool to figure out what that code is, like ‘E8’ for example”, Gordon-Byrne said. “What does that mean? If you can’t get the list of codes, you don’t know what’s even wrong, and you don’t know where to start. You need to know, usually from a service manual, what the testing procedure is.”
Software itself also poses challenges. If a repair requires the replacement of a storage device, for example, a copy of the software powering the device is needed. Unfortunately, manufacturers have made the process of copying this data difficult.
“You’ve got to be able to get the firmware so you can download it, because even though under US copyright law it’s legal to backup and restore all of your copyrighted software for purposes of repair, there are a lot of products that ship with no backup and restore capability”, Gordon-Byrne said.
For less common, more specialised or more obscure devices, there is neither the time nor the business case for third parties to figure out how they work
There is also the question of parts. Many manufactures are locking away their part libraries to ensure that, even if a device could be repaired, the parts needed would not be widely available.
Through these locks, companies say they are able to offer better service to customers, as well as protecting trade secrets. Additionally, the practice locks consumers into a product ecosystem that is difficult and costly to escape. Gordon-Byrne noted Apple’s business model of cyclical repairs and device replacement is the perfect example of this.
“If you get involved in that product line, you’re really going to have almost no options other than to continue to replace that product whenever Apple wants you to. When a manufacturer decides they want you to buy a new model, they can obsolete the old one almost instantly by not providing any means to repair it.”
That said, with the number of independent iPhone repair stores around, one could be forgiven for thinking the repair industry has no problems. Despite being one of the best examples of a system that is a challenge to repair, the sheer popularity of the device has encouraged independent repairers to develop their own manuals, share information and create a market for third-party parts.
“Despite Apple not wanting to allow people to repair its stuff, there’s a goodly amount of repair that gets done”, Gordon-Byrne explained. “But there’s a level of repair that can’t be done without Apple’s cooperation.”
However, not all devices are as popular as the iPhone. For the less common, more specialised or more obscure devices, there is neither the time nor the business case for third parties to figure out how they work. Gordon-Byrne picked a Pioneer power supply as a random example. “This thing is 10 years old, I seriously doubt anybody could fix it. Not because parts are going to be rare, but because nobody is going to have the diagrams, nobody is going to have the schematics, and it’s going to take too long to figure them out.”
The challenges aren’t limited to the US; the situation in Europe is similar. Jan Hoogstrate from the Free ICT Europe Foundation said his organisation is facing the same hurdles. As well as working to overcome the challenges in accessing systems and parts, the organisation is also trying to make sure customers know they have the option to repair independently, and that they recognise the environmental benefits of repairing over replacing. “A fair playing field is the target. Manufacturers are not the enemy – we need their products”, Hoogstrate explained.
With the recent surge in smart devices, the prevalence of computers is only becoming more widespread. As more devices now include electronics in some form or another, software is appearing in entirely new industries. With the promise everything in our future will be connected via the Internet of Things, an ever greater number of everyday objects are going to become difficult or impossible to repair.
John Deere tried to make a link between the right to repair and music piracy, such was the manufacturer’s aversion to giving customers free rein
Tractor phone
To curb these efforts, the Repair Association has backed a number of state-level bills in the US to enshrine the right to repair in law. The changes would ensure independent repairers and private individuals would have the right to access service manuals, diagnostic tools and the necessary parts, if available. While the legislation would function only at state level, it could be enough to prompt a change at national level; manufacturers would struggle to implement a policy in one state and not the rest.
The legislation is following a template already established within the auto industry. The automotive right to repair had been brewing for over a decade when a law was passed in Massachusetts in 2012. From the early 2000s, cars had increasingly featured more complex electric components and computers. These systems started out in high-end luxury and performance cars before trickling down to become standard features. Notably, they required interaction with software to diagnose and repair problems. While changing a tyre remained much the same, working out the exact reason a dashboard alert was on required software. As manufacturers only supplied the necessary diagnostic equipment to approved garages, an independent business could only repair the simplest problems.
The legislation ended up being a tremendous success: after being passed in Massachusetts with 86 percent voter support, a national policy soon followed. Rather than contend with the potential for 50 different state bills, the Alliance of Automobile Manufacturers, the Association of Global Automakers, the Automotive Aftermarket Industry Association and the Coalition for Automotive Repair Equality announced the development of a national memorandum of understanding. All cars badged 2018 and onwards will use a standard and non-proprietary connector, allowing mechanics to access a car’s service information, while manufacturers are required to sell repair tools for a reasonable price. Exempt will be any information that is considered proprietary or a trade secret.
While drafted from the same mould, a comparable standard for software-embedded equipment and electronic items is still in its earliest stages. In March this year, the bill was presented in Nebraska for public hearing. Headlines were dominated by tractor manufacturers Case IH and John Deere, which attended the hearing with their representatives, arguing the bill would create safety risks by providing a way for criminals to breach the security of their tractors, and would also expose their intellectual property to unlicensed use. Despite the press focus on agricultural equipment, the bill covered gadgets in general with representatives from Apple and industry bodies also arguing against it. In support were lobbyists and members of the Repair Association.
Go to IKEA, and you get every tool you need to put the thing together. Why does Apple not provide a screwdriver if they want to use a proprietary screw?
The formation of the Nebraskan Government is unique: due to the limited time senators have at their disposal, each can only select a single bill as having priority. Without priority, a bill will not be voted on. Approximately 90 minutes before the public hearing began, a shuffling of priorities resulted in the right to repair bill losing out.
Gordon-Byrne admitted the last minute decision was extremely disappointing. “A lot of lobbyists there came in from out of town and I’m sure they weren’t unhappy because they were paid, but the volunteers who came in and took time away from their businesses to come testify were really upset, and justifiably so.”
Gordon-Byrne couldn’t explain why the bill was dropped at the last minute: “That’s the one piece I can’t really speak to, because it had to have been something going on internally within the dynamics of the legislature. I can’t put my finger on any blame. It was always up in the air, and it made me nervous all year.”
While a setback, it is nowhere near the end for the legislation. The bill will be refiled in Nebraska with the hope of gaining priority, and similar bills are in various stages of development in a number of other US states.
Software scheme
Even if these bills pass, the question of ownership might remain a thorny issue. Companies’ efforts to protect their intellectual property rights have slowly merged with hardware ownership, creating greater challenges. In the US, hardware manufacturers frequently cite the Digital Millennium Copyright Act (DMCA) as the reason for limiting access to the software in their devices. The DMCA was initially intended to protect content creators from having their work shared freely online, with movies, music and games the main media in mind.
Hardware manufacturers, however, have harnessed the legislation and now use it to justify placing a number of locks on the software that controls their devices, rendering it completely inaccessible to anyone but the manufacturer, arguing that, if these locks were removed, their software could be stolen. Gordon-Byrne said changes to copyright law are handled at a federal level, and making alterations to those laws would be a long and slow process.
Another worrying trend is the increasing number of end-user licence agreements that include references to hardware. Although software may be covered by these restrictions, attaching it to the sale of hardware should be separate. In some cases, agreements even state the software or hardware can’t be resold.
Gordon-Byrne said this deteriorates the definition of ownership to the point where it is questionable whether it exists at all. “If there’s a licence it really should be a fully separate agreement: it should have a price, it should have terms and conditions, and it should be wholly separate from the hardware. But, if you put it in the hardware contract, you’ve now turned the hardware into a licence, and therefore you don’t really own it.”
Boxing clever
At the end of the day, Gordon-Byrne noted, if efforts to support independent repairers aren’t made, the definition of ownership will continue to be eroded to the point of nothingness. “The less and less people become accustomed to being able to fix their stuff, the more ingrained it’s going to become into their thought process that that’s OK.”
To see what ownership should be like, Gordon-Byrne said you only need to look at Swedish furniture. “Go to IKEA, and you get every tool you need to put the thing together. Why does Apple not provide a screwdriver if they want to use a proprietary screw? We can’t make them provide a screwdriver, but we can make them sell one. It’s that kind of stuff. We’ve always been able to repair our stuff even when it had a computer in it – even when it was a computer. And then, all of a sudden, companies said we don’t feel like letting anybody touch our stuff. And they start treating products as though they still own them. And they don’t own them; they sold them.”
While the process of establishing a right to repair will continue for many years as negotiations play out, in the immediate future online communities will continue to pull apart devices and come up with their own solutions. But, to make sure this can continue, changes in the law need to be made. With the public popularity similar bills have enjoyed in the past, manufacturers may face an uphill struggle if they want to continue to make devices more difficult to repair.
In March, Tokyo 2020 President Yoshiro Mori announced Olympic baseball would be played at the Azuma Baseball Stadium in Fukushima. Roughly 70km south-east of the stadium is the Fukushima Daiichi Nuclear Power Plant, where in 2011 a major earthquake and subsequent tsunami resulted in the meltdown of three of the plant’s reactor cores.
While efforts to secure the reactors are ongoing, the reconstruction of the communities that once surrounded the plant has become increasingly important. While radiation carries the stigma of an invisible, intangible poison that seeps into all it touches, the risks it poses to both people and produce in the region are largely overstated. Politics and public opinion have shaped decisions that are contrary to what may be the best scientific solution, limiting recovery efforts.
The public’s fear of the effects of radiation, whether founded or not, can shape responses to a crisis
Fukushima in context
The accident at Fukushima was rated seven – the highest possible – on the International Nuclear Event Scale, making it a ‘major accident’. The only other incident to receive such a high rating was the Chernobyl disaster in 1986. In the immediate aftermath of Fukushima, over 100,000 people were evacuated from their homes.
In the time since the event, plenty of work has been done to secure the site, but much more is still needed. Francis Livens, Professor of Radiochemistry at the University of Manchester, said at this point the site could be considered “stable”.
“A lot of the easy mess has been cleaned up, they know what radioactivity is where, and they’re reasonably confident that things are structurally sound enough on a reasonable timescale”, Livens explained. “There’s no obvious thing that’s going to go horribly wrong, horribly quickly. On the other hand, its not OK to say ‘we sorted it, we can walk away’, because they clearly have a lot of fuel debris within the reactors. They’ve got contamination around the place, so it’s many, many years off being sorted.”
The most recent challenge to have emerged at the site is assessing the condition of the nuclear materials within the reactor and ensuring they are secure. The reactor is by far the most radioactive location and remains supremely dangerous. To assess the situation, Tokyo Electric Power Company has been sending in remote-controlled robots, although their success has so far been limited: at least seven robots have broken down while exploring the reactor, suffering problems including getting stuck on the terrain, or having their cameras destroyed by a level of radiation capable of killing a person instantly.
In contrast to the Chernobyl accident, the fuel has more or less remained where it should be. Chernobyl saw the upper shield blown completely off the reactor, dispersing radioactive material into the surrounding area. Livens said the the safety features of the Fukushima plant could be compared to those of a modern car; while it may be crumpled and destroyed at the end of a high-speed crash, if the occupants are safe, it has done its job. “The fuel is, by and large, still in the reactor. So, they have done their most basic safety job. And that’s a good thing; if the fuel had been released in quantity then the accident would have been far worse.”
The philosophical questions of radiation
Deciding what to do with radioactive material is a philosophical question as much as a scientific one. The public’s fear of the effects of radiation, whether founded or not, can shape responses to a crisis in a way that may not actually make the best use of resources.
One such commitment from the authorities was for no contaminated groundwater to be allowed to flow off-site. To meet this commitment, a large number of above-ground water tanks were built to store water on site, and the creation of an ‘ice wall’ – pillars of frozen earth – is underway to stop more groundwater flowing in.
Ambitious and expensive, these defences have questionable benefits. While removing the water from the reactors is necessary, the radiation level it reaches is quite low. Diluting it and releasing it into the Pacific Ocean is an efficient and safe solution, but local fishermen are concerned paranoia of irradiated fish would dissuade anyone from buying their catch.
“You’ve then got to manage everything, and eventually you’ve got to find a way of treating [the water] because of this commitment that’s been given”, Livens said. “That’s a huge amount of energy, effort and resources devoted to something that probably won’t make a blind bit of difference to the overall outcome.”
The greatest health impact from the region is not necessarily from radiation itself, but the fear of radiation
Indeed, rather than radiation, there may be another invisible threat to people living in the region. Professor Geraldine Thomas, Chair in Molecular Pathology at Imperial College London, has visited the Fukushima site a number of times, and said the greatest health impact from the region is not necessarily from radiation itself, but the fear of radiation.
“You’ve got people living in fear that all the awful things people talk about are going to happen to them. This will only increase: fear of cancer and all the rest of it. And, actually, the psychological damage you do to the population is much greater than the actual physical consequences of being exposed to radiation.”
According to Thomas, the effects of radiation on those living near Chernobyl – a far worse accident than Fukushima – were limited: research recorded a marked increase in thyroid cancer in children (already a rare condition) due to iodine making its way into the milk supply. In Japan, the situation is different: the Japanese drink a lot less milk, and people in the area were quickly informed to stay inside or evacuate, massively limiting exposure. Thomas said these precautions will have adequately protected the population. What may be doing more damage are the levels of stress, uncertainty, and economic fallout that have followed the public perception that the site is irrevocably tainted.
Understanding nuclear radiation
Since the Cold War and Chernobyl, any mention of nuclear weapons or power has caused a shudder of fear, and governments tend to respond with a counterproductive degree of caution. Background radiation is literally everywhere, although usually not in doses that will cause specific harm.
“All of us will happily take a paracetamol for a headache”, Thomas explained. “If you take a whole box of paracetamol, you will kill yourself very effectively and there is often no way we can save you from that. We don’t realise we’re all exposed to radiation all the time, and actually
it isn’t doing us any harm.”
The background levels of radiation in the Fukushima area, with the exception of the reactor itself, are now at a level comparable to many other places in the world. As a point of comparison, Thomas pointed to the wild boar that now roam the evacuated areas: “If the boar are doing so well, what’s the problem with humans in there?”
While a long way from the reactor, and more a token gesture than anything, the 2020 Olympics in Japan may alter the average person’s perception that the region is dangerous to even visit. While the surveying and cleaning of the reactor itself will continue for many years, normality must be restored to the region sooner rather than later, for everyone’s sake.
In order to remain competitive in the 21st century, companies must continue to innovate, generating new products, streamlining the production process, improving delivery, and refining the customer interface. Investment in R&D is key. It is no coincidence many of the companies appearing on Strategy&’s 10 Most Innovative Companies list also feature in the Top 20 R&D Spenders list. Certainly, even companies synonymous with innovation – Apple, Alphabet and Amazon, for example – can only maintain their status through substantial investment. In 2015-16, Apple invested $8.1bn in R&D, while Alphabet and Amazon both spent in excess of $12bn.
However, spending is not a prerequisite for innovation. Despite playing host to some of the world’s largest spenders – notably Roche ($10bn), Novartis ($9.5bn) and Johnson & Johnson ($9bn) – the health sector fails to place on the technology-dominated innovation list. The same can be said for the automotive industry, which occupies a number of the top spending spots, but can only lay claim to one of the world’s most innovative companies: Tesla.
Despite ranking fourth on Stategy&’s list of most innovative companies, Tesla spent just $700m on R&D in 2015-16; a fraction of the figures posted by the 20 largest R&D spenders
Utilising R&D spending
Despite ranking fourth on Stategy&’s list of most innovative companies, Tesla spent just $700m on R&D in 2015-16; a fraction of the figures posted by the 20 largest R&D spenders. With the world’s largest corporate investors racking up a combined R&D bill in excess of $680bn, there is no question innovation costs. But, as Elon Musk’s outfit has illustrated, the correlation between investment and innovation is not quite as simple as one might assume. There’s no shortage of literature mapping the relationship between R&D investment and economic growth on a national scale, but we should not assume the same holds true at a corporate level. Indeed, industry commentators have repeatedly asserted there is no significant parallel between the amount a firm invests and its subsequent financial performance. That said, a failure to invest does tend to have a negative effect; the bottom 10 percent of firms in terms of R&D investment lag behind their competitors in a number of financial metrics.
Of course, the level of R&D intensity (investment measured against sales) varies across different industries, with some, such as healthcare, requiring far higher levels of investment. One thing that does remain certain, however, is that investment into R&D in no panacea for poor performance. Barry Jaruzelski, John Loehr and Richard Holman of the Financial Times left no room for doubt in their analysis: “We have tested this issue over 10,000 different ways and the answer remains the same.” It seems it is not the size of the R&D investment that counts, but rather how it is utilised. Leading innovator and apparent big spender Apple reinvests just three percent of its revenue in development. Meanwhile, Google and Microsoft also have relatively conservative strategies, investing 10.4 percent and 12 percent respectively. Yet these companies remain at the top of the innovation rankings.
Companies must develop innovations that are not necessarily the most advanced or the best available, but which meet the specific needs of the market. Strategy&’s report highlighted firms investing over 25 percent of their R&D budget in software enjoyed stronger revenues than those investing less in the area. Equally, it predicted the percentage of R&D budgets allocated to product offerings would fall from 46 percent to 37 percent by 2020. How innovation delivers value
We need to note, however, that there is no one-size-fits-all approach to innovation. The most important thing, according to Harvard Business School professor Gary Pisano, is to have a coherent innovation strategy that closely aligns with the overall strategy of the business. To allow the best ideas to flourish, there must be structures in place to dictate how a company identifies, develops and allocates funding to the ideas that resonate with its overall goals.
This ultimately provides scope for the trade-off decisions that allow innovations to move forward, shaping systems that can be moulded or improved over time according to each company’s needs. Crucially, this will also help to resolve interdepartmental tensions, namely between those focused on developing new ideas and those responsible for maintaining or developing relationships with clients in the short term.
Pisano divides innovation into quadrants: routine, disruptive, radical and architectural
In order to shape a strategy, a company must understand how its innovation will deliver value to the customer, and, when successful, how it will retain the majority share of this value against its competitors. In this vein, Pisano believes technical innovation is not always the best way to achieve a competitive advantage, suggesting firms can often find greater prosperity in business model innovation. Indeed, many of the companies considered to be among the most innovative – Netflix, Uber and Amazon, for example – have benefitted from this model.
Pisano maps this assertion by dividing innovation into quadrants: routine, disruptive, radical and architectural. While routine innovation leverages both an existing business model and existing technical competencies, a disruptive model provides a new business model for existing technical competencies. Alternatively, radical innovation uses the existing business model to promote new technical competencies, while an architectural model of innovation is completely original.
With a strategy identifying whether a company is primarily looking to innovate technically or strategically – or both, or indeed neither – each proposed idea can be placed on this matrix. Despite sounding the least impressive, Pisano stresses routine innovations are not to be sneered at, with the annual rush for the latest model of the iPhone an example of how routine innovation can consistently drive revenue. But blindly investing in R&D provides no guarantee of revenue-generating innovation. Successful innovation strategies must be a little more nuanced. Unconscious bias in the selection process
Even with a coherent strategy and structure in place, firms must ensure they identify the best ideas. In a paper published in 2016, Professor Paola Criscuolo of the Imperial College Business School identified an unconscious bias commonly found within R&D selection panels. The study found panels would often err towards R&D proposals with an intermediate level of ‘novelty’: ideas or concepts considered to be new to the firm itself.
Criscuolo stated: “Companies shouldn’t invest their whole R&D budget in radical new projects, but if they don’t invest enough in products with a high level of novelty, they run the risk of losing their competitive advantage in [the] marketplace. ‘Next’ projects are the ones that have [the] highest impact in terms of generating new clients and of deepening the expertise of those who work on them.”
Criscuolo suggested this unconscious bias can lead to difficult conversations; after all, there is little point investing in ideas so radical they will never conceivably be implemented. This, once again, highlights the necessity of a coherent strategy. Furthermore, research found personal endorsements from within the company were often highly influential in funding decisions, particularly among panels lacking expertise. Ideas presented by applicants with a track record of receiving funding also stood a far better chance of being selected. Interestingly, members of the panel were more sceptical of novelty ideas pitched by colleagues they worked closely with – perhaps in order to avoid charges of nepotism or to distance themselves from high-risk projects.
What can firms do, then, to ensure unconscious bias doesn’t have a negative effect on the R&D process?
What can firms do, then, to ensure unconscious bias doesn’t have a negative effect on the process? According to Criscuolo, the answer is simple: “Letting managers know that they could unconsciously select certain types of projects can be very powerful.” Criscuolo found that being made aware of unconscious biases can often have a profound effect on decision makers. Meanwhile, building a panel of experts from a number of different disciplines ensured the plausibility and potential of each idea was properly assessed. Criscuolo provided another clear recommendation: “Companies should consider having meetings when a certain threshold of ideas has been reached. There is sometimes an obsession with doing things quarterly, meaning selectors end up with 150 projects to look at and are not able to give them the proper amount of attention.”
Another way to counter this issue is through collaboration. Companies will often seek the consultation of external experts when expanding their business into unchartered territories, but due to the sensitive nature of R&D, the process can become complicated. This is not to say it cannot be successful, however. Criscuolo cited GlaxoSmithKline’s continued use of external experts as a great example of collaboration providing substantial financial benefits. Again, it seems shrewd selection is an essential element of successful R&D.
Consider R&D collaborations
Companies must, therefore, be careful when considering with whom to collaborate. Professor Annique Un, an international business and strategy expert at Northeastern University, found that, when it comes to process innovation, firms had greater success collaborating upstream than downstream. Un believed working with partners further up the knowledge chain, namely universities and suppliers, was far more beneficial than working with those further down – consumers and competitors, for example.
“The reason is that the main objective of process innovation is to improve efficiency. Upstream partners know more about the internal processes of the firm than downstream partners. They know more about… processes such as the flow and quality of its input, [or] where and how to make the changes in the company to reduce costs and improve quality.”
However, Un stressed this particular observation is specific to process innovation. In more general terms, Un believed partners with a contextual difference – consumers and universities, for example – offer greater benefits to companies seeking to innovate. This is because they often provide an alternative knowledge base to the company in question.
There are, we can safely conclude, a great number of factors to consider when investing in R&D – only some of which have been touched upon here. But one thing is for certain: building and executing a leading R&D strategy (one that takes into account the size and market position of the company, stipulates the type of innovation it hopes to achieve and articulates how ideas are selected) should be the fundamental practice of any company hoping to compete in the modern marketplace.
“When the wind of change blows, some people build walls, others build windmills”, so runs an old Chinese proverb, but the phrase could just as easily have been conjured up to illustrate China’s present strategic position. While President Donald Trump’s leadership is pushing the US away from renewables, China is radically stepping up its pace of change, and is increasingly looking overseas for further investment opportunities in the sector.
At the beginning of the year, China’s National Energy Commission announced $363bn would be channelled into renewable power generation by 2020. Beijing also stepped up its targets from those made in 2014, now aiming for ever-more ambitious goals in terms of wind and solar capacity by 2020.
However, even before these announcements were made, China was the unrivalled global leader in terms of the size of its investments in renewables, which dwarfed those of the US 2.5 times over in 2015. Assuming these trends continue, China could have an electric power system that is beyond 50 percent green within the next decade.
As the world’s biggest polluter, a serious burden lies on China to reduce its carbon footprint
Going green
Professor John Mathews, co-author of China’s Renewable Energy Revolution, underscored the impact of China’s approach on the global energy industry: “China is having enormous – and largely unrecognised – influence in shaping world energy choices. As it ramps up its production of renewables and expands the global market, so it reduces costs – creating business opportunities in Africa, south Asia and south-east Asia for countries to get themselves off the grind of fossil fuels and onto a new, clean trajectory that has enormous economic [and] environmental benefits.”
Greenpeace put some of this into perspective, estimating that, for every hour of 2015, enough solar panels to cover the surface area of an entire football pitch were installed in China. Looking ahead, the International Energy Agency has predicted China will account for over a third of global expansion in wind, solar and hydro energy between 2015 and 2021.
As the world’s biggest polluter, a serious burden lies on China to reduce its carbon footprint. However, the country’s renewables drive is underscored by more than just a heavy conscience: the strategy is deeply intertwined with the health of its manufacturing sector and concerns for its energy security, as well as the immediate need to cut through the cloud of smog that engulfs many of its cities.
Secure future
According to Mathews, China faces a “bleak future” if it fails to break its dependence on fossil fuel imports, which have continuously increased over recent decades. He argued the key driver of China’s rapid uptake of renewables was the improved energy security they bring: “As it happens, it is an extremely convenient truth that the strategy of enhancing energy security via renewables also lowers carbon emissions as a fortunate side effect.”
Indeed, the case for bolstering energy security in China is strong. As oil imports continue to grow, China’s established oil fields are running dry. Despite extensive exploration, few new discoveries have been made and production by China’s own energy fields has peaked. On top of this many key oil-producing countries are plagued by instability; some of China’s key suppliers are Iraq, Nigeria, Iran, Russia and Venezuela, where political entanglements are unpredictable to say the least. Mathews characterised this situation as the existence of “geopolitical limits” to future expansion.
“If China continues to scour the world for fossil fuels and resources, it will run up against limits in the form of civil wars, revolutions and terrorism – as has already happened in Niger and in South Sudan”, Mathews said. As a result, renewables should be approached as an important opportunity for energy security. “A renewables strategy under domestic control, combined with urban mining for resources, is a feasible strategy for getting around such geopolitical limits.”
Breathe easy
In part, the accelerated speed of renewables investment can be linked to China’s immediate environmental concerns. Air quality is an increasingly pressing issue, having sent the country’s capital into crisis late last year. Indeed, an ordinary day in Beijing is said to be as bad for your health as smoking 40 cigarettes.
If China continues to scour the world for fossil fuels and resources, it will run up against limits in the form of civil wars, revolutions and terrorism
According to Simon Nicholas of the Institute for Energy Economics and Financial Analysis: “Recent comments from the Chinese premier that ‘we will make our skies blue again’ are revealing. Air pollution is a major issue in Chinese cities that the government must be seen to be able to control.”
While the country remains heavily dependent on coal, some progress has been made: the amount of coal burnt for energy reached its peak in 2014, but the reduction has not been near drastic enough to clear the skies of China’s cities. “China’s battle with air pollution has being going on for years now, and is a major factor in the nation’s refocusing on more renewables and away from coal”, said Nicholas.
Opportunity knocks
The Chinese approach is casting the renewables sector in a new light by demonstrating a commitment to the industry can be an economic opportunity. In this sense, the divergence between China and the US is stark: while President Trump paints environmental commitments as a drain on productivity, in China, investment in renewables is closely intertwined with its broader development strategy. “Energy targets are viewed in the US as ‘market interference’, whereas China has no such hang-ups, and views state involvement in the economy as a necessary and desirable feature of a catch-up strategy”, said Mathews.
The details of China’s most recent five-year plan demonstrated a profound shift in its economic strategy towards the incorporation of huge investments in renewable energy. The approach is a push towards the creation of a more modernised economy: one that can provide increasingly skilled employment for the Chinese workforce. Ramping up the production of renewables will also be a step towards achieving the long-standing Chinese goal of moving up the value chain in manufacturing. Crucially, by carving out a large portion of global market share early on, Chinese firms can consolidate their lead in a fast-growing export market. China’s firms already have a significant presence in promising future markets, including those for batteries, solar panels and wind turbines, and are poised to become ever more dominant.
“While the US under Trump is looking to the past and fossil fuels, China is looking to new industries based on renewables generation, energy storage, smart grid distribution systems, and new ventures such as fuel cells”, said Mathews. “In each case, China is strategically sourcing and adapting technology, and ensuring it is available to Chinese firms, as well as building export industries and providing for intellectual property rights recognition.”
In the present landscape, there is a strong focus on President Trump’s failure to cede to overwhelming scientific judgement regarding the existence of climate change. The Chinese approach, on the other hand, seems to indicate belief may no longer be the main issue. Instead, there are far more wide-ranging benefits at stake, and China is carefully positioned to maximise them. The US leadership would do well to take note.
President Donald Trump has confirmed the US is withdrawing from the Paris Agreement on climate change, defying pleas from the international community to reconsider his stance on global warming. The move serves as further indication of Trump’s dedication to his ‘America First’ campaign, with the President promising the withdrawal will “protect America and its citizens” from job cuts and “vastly diminished economic production”.
The announcement effectively confirms the world’s second largest greenhouse gas emitter will be stepping back from global efforts to address climate change and keep global temperatures from rising above an additional 1.5C. As of now, the US, Syria and Nicaragua are the only three nations in the world to oppose the global pact on climate change.
The historic move has prompted widespread international commendation, including from Trump’s predecessor, Barack Obama
Speaking in the White House Rose Garden, Trump said he would begin negotiations to craft a new, fairer deal for US workers and businesses. “We will start to negotiate, and we will see if we can make a deal that’s fair. And if we can, that’s great. And if we can’t, that’s fine”, the President told correspondents.
However, the prospect of renegotiation was promptly vetoed by several countries, mere hours after the President’s announcement. In a joint statement, the leaders of Italy, France and Germany expressed their regret at Trump’s decision, but confirmed the treaty could not be renegotiated.
The historic move has prompted widespread international commendation, including from Trump’s predecessor, Barack Obama. In a rare statement, the 44th President said the US was joining “a small handful of nations that reject the future”. Similarly, French President Emmanuel Macron criticised Trump’s move in a televised address, saying: “We all share the same responsibility to make our planet great again.”
There has also been an overwhelmingly negative reaction to the announcement from US industry leaders, with entrepreneur Elon Musk and Disney’s Robert Iger both resigning from the President’s Business Advisory Council in protest at the decision.
Despite announcing his intentions to withdraw from the agreement, President Trump did not disclose a timescale for doing so during his Rose Garden speech. According to expert calculations, the exit process is likely to take years, meaning it may not come into effect until after the next US presidential election in 2020. However, Trump has already begun to step back from the international fight against climate change by withdrawing US payments to the UN Green Climate Fund, which helps developing countries fight the effects of global warming.
While the US is reducing its role in tackling climate change, China – the world’s biggest polluter – is emerging as a champion for fighting global warming. China’s premier, Li Keqiang, is due to meet EU leaders in Brussels this week, and is expected to reiterate China’s previous commitments to combatting carbon emissions. With the US stepping back from international efforts, China and the EU look set to fill the vacuum.
