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29 Apr 2019, 16:02
| FROM nickrubick: Globalisation, International Teams, and the Triangle of Trouble |
I’m sure you have been on the receiving end of a botched attempt of getting two teams in distant locations to work in harmony. You may have even attempted it yourself. The good news is that as humans we are hardwired to struggle in these situations, so don’t be too hard on yourself… As globalisation has increased the need to integrate international teams has also increased. However, humans do not naturally find cross cultural integration easy, not least when we have to do so via modern communication technology and when located thousands of miles from one another. This article combines a couple of popular theories to explain why we find this so tricky, and offers some advice on how you might be able to overcome such a hurdle.  The Triangle of Trouble… CULTURE: First off, let’s not underestimate how a person’s background affects their social norms. One culture’s polite is another’s rude, and what may be considered friendly in one culture may be considered disrespectful in another. Dutch and Russians are renowned for being direct in their communication, but also appreciate the honesty of direct feedback from others. On the other hand Chinese and Japanese are notoriously unobtrusive with their feedback, but are intuitive enough to be able to read another’s subtle body language to observe their opinions. Where does your social norm fit in with the culture that you are communicating with? If you don’t know then you may be offending them even as you feel you are rolling out the charm offensive.  AWARENESS: This is a simple appreciation that we humans have an incredible propensity to think that anything in which we don’t know the detail is far simpler than it actually is. Once again I’m sure you are all familiar with having to complete a task that is far more complex than those asking for its completion can comprehend. A common example is the introduction of a new software that promises to fix a set of business problems. What usually happens is that the software introduction makes the problems worse; once the software is installed people stop trying to work in such a way to mitigate the old problems, thinking that the software has taken away this need. In reality the software will need to be built carefully into existing processes in order to improve them. Outsourcing and cross culture working is very similar to installing software. If a business is considering outsourcing something or collaborating with a distant team, then it’s likely that the their current state of operations is not satisfactory. But throwing problems over to a third party and expecting them to intuitively know how (or indeed want) to solve your problems is not realistic. When this utopian and low maintenance solution turns out to not be more of a problem than a solution, then who’s fault is it, yours or theirs?  EMPATHY: This is perhaps the biggest barrier to successful integration, and is an effect of cultural divisions and a lack of awareness. We as humans tend to be emotionally switched off to those that are either culturally different to us or geographically distant. When we are talking down the phone to someone who we can barely understand, who seems starkly dissimilar to us and other people we know, and is thousands of miles away, then we tend to diminish their importance and relevance. Naturally we will see our opinions as more insightful than theirs, unfortunately they will be thinking the same thing about us.  …Knowing that you are not alone with your international integration problems is comforting up to a point, but how do you overcome these problems? This is no easy feat, and in extreme cases where team integration is critical it may be safer to keep the work under one roof. This will not always be possible or practical, and where integration is necessary empathy will be key. Creating empathy will require the teams to have an increased awareness of one another, an appreciation of one another’s cultural norms, while also sharing some common ground. In my personal experience this is best (and most time efficiently) solved through face to face contact. Ideally a rotation policy should be implemented; such as relocating team members on an exchange programme. Those team members who are relocated are also best placed to act as a communication bridge between their new team and their familiar team back home. They will know how their original team think and work, and so communication with them will be more effective. Educating each team in cross cultural awareness will also help. Over time the two teams will grow to know one another better, and will eventually become one.  Achieving success is no easy task, and productivity may initially fall before it begins to rise, but this is not surprising when you consider the three elements that are against us. Most importantly, you should realise how difficult this integration process can be, and if you fail to take the issue seriously then you will likely be throwing away valuable time and resources, while also demoralising your team members. |
11 May 2019, 16:02
| FROM nickrubick: A problem shared is a problem solved when utilising the adjacent possible |
Want to solve a problem? Well you had better talk to someone about it!: My insights taken from the book: Where Good Ideas Come From, written by Steven Johnson… I was strongly recommended this book by a successful entrepreneur, and I’m glad I took the time to read it as it has had a profound impact upon how I approach problem solving. It certainly isn’t a self help book, and it might not give you the magic formula needed invent the next big thing, but it does give a good blend of historical and behavioral analysis on what things tend to help cultivate ideas. There are several good summaries of this book online, one of which that I particularly like, written by Phil Gyford, is linked here.  The Adjacent Possible: The idea creation aspect that really struck me, and for me feels like the most useful tool to engineer yourself a solution, is the idea of utilising the adjacent possible. This explains the rationale that inventions and innovation can only happen one step at a time, and on reflection it is very true. Google couldn’t have been created until the internet was created. Facebook’s success depended not only on the internet, but also on the creation of the digital camera, and it really started its rapid rise to prominence with the invention of the smart phone.  For me, making use of the adjacent possible is exploring the use of current new innovative ideas in alternative domains to what they were created for. An example given in the book is the use of old car tyres to create soles for sandals. This concept can be used for applications in all walks of life. For instance, Deliveroo is a very successful start up that has disrupted the fast food industry, could this delivery service model be used for other purposes? Some ideas that spring to mind are delivery of parcels and special delivery mail from logistics companies. Riders could collect from the delivery depot, and deliver on demand when you are at home, within 30 minutes. Will people pay the extra delivery fee to have their parcels delivered out of hours (something many logistics companies can’t do)? Not everyone will, but depending upon the urgency of a parcel, I’m pretty sure some people will.  Keeping on this train of thought, M&S are in the process of entering into a Joint Venture with Ocado. A deal that will be very intriguing to see how it plays out. Ocado are fantastic at delivering people’s weekly shopping, and they are looking at offering a ‘delivery within the hour’ service. However, no matter how brilliant new service, it will once again be focused on weekly shopping. Shopping that involves pre-planning from looking at the full week ahead. M&S over the last couple of years have had a focused drive to open many convenience sized stores, and these stores very much focus on very fine quality, pre-prepared meals. Meals that are cooked at home with the little time or fuss, made from fresh ingredients, that everyone trusts. Could M&S successfully collaborate with Deliveroo, offering a ‘heat at home’ food delivery service? I wouldn’t bet against it.. The adjacent possible is like shuffling cards, until eventually you get two cards that pair up to offer an innovative idea that hasn’t yet been implemented. Simple!  A problem shared is a problem solved: The other key insight the book gave me was the environment in which most ideas are created, and most problems are solved. A profound discovery was made in the early 20th Century when a stop-motion study was performed in a research laboratory. The discovery was; that most ideas did not come from Eureka moments by individuals, but when one researcher spent time discussing their problems with another. Their fresh perspective often resulted in fruitful discussions and even more fruitful idea creations. The effect of collaboration is all the more visible when you look at the history of innovation. In shear quantities, there have been many more key inventions to come from organisations that are not driven by financial incentives. Why is this? Surely inventors will be more keen to see their ideas realised if it will result in life changing financial fortunes? Of course it will, but where there are financial incentives, there are often patents, intellectual property, and closely guarded secrets. This process is not wrong, inventors need to be able to gain from their ideas and hard work. But it does show that collaboration is (far) more effective in creating ideas than financial incentives for individuals.  This was a bit of a revelation for me, previously if I had a problem that I was working on, I had a tendency to hatch down and go into individual problem solving mode. What I should be doing more of is talking to as many people about my problem as possible. This will give me new perspectives, and might introduce me to people who have similar problems (or even better; solutions). This new mantra has led to the creation of a new blog category: ‘innovative problems‘, in which I will share a perspective upon my own and other peoples’ problems. As the reader, you may be able to empathise with these problems from an adjacent domain. Even better, they may inspire a brand new solution to a problem that you were previously unaware of. My first post of this type was created a few weeks ago: Digital transformation in the aerospace industry… Really?? and has resulted in several follow on discussions with people of how this concept can be developed. Without this post, these discussions would never have happened.  So in summary, shuffle the cards of possibility, and share your findings with all and sundry. Who knows, there might be an Einstein or Newton inside you somewhere… |
05 Jun 2019, 03:02
| FROM nickrubick: How to create positive environmental impact through consumer demand.. |
As consumers become ever more environmentally conscientious, giving them access to the data to help make informed spending decisions would force businesses to tackle sustainability. The emergence of block chain and the Internet of Things is making this concept a real possibility. Today there is much concern for our Earth’s environment, and climate change appears high on many peoples’ agendas. The media shows us that high profile protests are increasing, such as those from Extinction Rebellion this year in London, and the rousing words from Greta Thunberg in late 2018.  Sir David Attenborough has also helped increase the world’s awareness of what impact our consumption habits are having upon the planet and nature around us. The Google Trends chart below shows the dramatic increase in searches for the term “Plastic Recycle” immediately after Sir David’s Blue Planet episode showing how single use plastics are hurting our planet. Approximately one year on from the first broadcast of this episode GlobalCitizen.org reported that it has changed the lifestyle of 88% of viewers. Fast forward to Spring 2019, and Attenborough’s hard hitting new documentary episode on the effects of climate change is set to have a similar impact.  Despite all of this attention that the subject is attracting, it dawned on me some time ago that currently there is scant information available to enable environmentally conscious consumers to make informed decisions. What products have high carbon footprints? By making some small changes to consumption habits, how can a person’s carbon footprint be reduced? Food packages have nutrition information on them, why don’t we have something similar for climate impact? While considering these questions, I came across the excellent website and app gikibadges.com which allows you to scan bar codes of supermarket items to find out how they impact the environment and your personal health. I would strongly encourage all readers to download and use this app.  Giki is an exceptional tool and a step in the right direction, however I feel that the business world could do a lot more to help us and them. For me, an optimal solution would combine the world’s obsession of social media, the internet of things and block chain. This solution would give people a user profile that updated their carbon footprint with their spending patterns. These profiles could be kept private, or for advocates who are proud of how they have reduced their footprint, made public. This would create some friendly competition between consumers, which in turn would lead to further carbon footprint reductions.  How would such a tool create revenue? Each user would be a strong climate change protection advocate. For each of these users there would be data available showing all of their spending patterns. The environmentally conscientious business could access this data and propose alternative purchases to users to further reduce their carbon footprint. This creates a virtuous cycle, where environmentally friendly suppliers are selected ahead of others, causing more suppliers to follow suit. It also creates a system whereby those businesses that place sustainability high on their priorities have the chance to be rewarded for it. On the other side of the scale, suppliers who were unwilling to participate would eventually be overlooked by consumers, forcing them to adapt or lose market share.  With block chain now becoming widely used, it will soon be possible to track transactions throughout a product’s entire supply chain, and thus claimed carbon footprint values can be verified. While the Internet of Things will allow us to upload all purchases onto our profiles immediately. Meanwhile there are also some forward thinking businesses that are now providing ‘extra-smart’ electricity meters that show you usage of each individual appliance. It doesn’t take too much imagination to see a world where our carbon footprints are measured and recorded real time, and businesses are able to see where they can help us make improvements. The question I have is: Who will move first to take advantage of this? A supermarket and social media partnership? Amazon perhaps? I will be watching this space.. |
23 Jun 2019, 10:02
| FROM nickrubick: Driving Digital Strategy: The future shape of the supermarket industry |
This entry has been born out of reading the book; Driving Digital Strategy, by Sunil Gupta. It has made me realise just how under-served we are by the supermarket industry. Most of us would agree that we spend much too much time buying groceries, it’s tedious, and with today’s technology, it’s not necessary… First off, some notes on the book itself. I found it quite effective at making me see things from different angles, notably from the eyes of the customer. It touches a lot on ‘marketing myopia’, something everyone should be aware of; the nature of your business is not what you supply (e.g. groceries), it is what customer needs that you solve (e.g feeding a family) It also inspired me to write the previous blog article below. So it really is the book that keeps on giving: Digital transformation in the aerospace industry… Really?? What has also inspired this article is a case study and strategy assignment that our class completed for M&S Simply Food. This got me onto the train of thought described below. Hopefully, from me writing this down, it will actually happen; and grocery shoppers will live happily ever after.  If you consider the average supermarket, and the average grocery shopper, you could be forgiven to think that the consumer has it quite easy. The supermarket advertising slogans would certainly have you believe that this is the case: ‘Every little helps’, ‘Live well for less’, ‘save money, live better’. In truth however, I am yet to meet someone who looks forward to their local shopping trip, or wrestling their shopping all the way home from the supermarket. Of course, there is online shopping, this is a step in the right direction, but not enough.  Most shopping trips, or online shopping sprees, start with an inventory check, then a mental note of the household’s upcoming schedule, followed by some sort of meal planning, before any shopping can start. All of this is unnecessary. It is certainly not beyond today’s technology that a supermarket can offer you a service whereby purchases are recorded in a personalized inventory profile. Then, as you use items for cooking, a quick scan of you phone onto the bar-code could allow you to update your stock levels. If you add to this a facility where you can store your favourite recipes, rather than shopping per item, you can update your shopping list automatically from what you intend to cook. Going another step further, what is stopping recipe books from having bar codes against their recipes, so that you can scan these and add these to your shopping list?  Once we have this level of service, the supermarket chains can really start living up to their promises. A family on a budget? A simple algorithm can take your current home food stocks, and suggest meals that will require the minimum spend in order to make up meals. Alternatively the same algorithm can take your shopping list made from the meals you have selected, and offer savings from suggesting similar but cheaper alternatives. Have children? Special diet needs? Perhaps you are training for a marathon, or need a high protein diet? Once again why can’t you tell your online shopping platform these requirements so that it can offer you improvements to your manual shopping list. Netflix and Amazon have been suggesting films considering our viewing patterns for years, so supermarkets should be able to offer alternative meals similar to those that we regularly cook, but cheaper and / or more healthy.  The above covers the bare necessities, now how about living up to the promise of helping us to ‘live better’? Having a sales channel online is all very well, but considering that food makes up such a big part of our everyday lives, the supermarkets really are missing a trick by not offering us much more than this. For instance, cookery programs are one of the most popular genres on television, following in Amazon’s footsteps, supermarkets could quite easily offer cookery programs that are matched with shopping list options on line. These could be viewed live in the evenings, offering interactive content where viewers can send in pictures and feedback of their experiences while following the celebrity chef. Or they can be streamed at your convenience at a later date. Do you have children? Why not tune in to a special children’s show that encourages children to help you cook the evening meal? Thus getting them used to cooking and embracing a healthy lifestyle.  Alternatively, why not have a quiet night in with your partner where you both get stuck in to a live cookery show? Supermarkets could go even further here, offering live Master Chef style competitions, where customers can apply and compete in live cookery competitions. Us at home can try and emanate their recipes while we watch the shows, and perhaps the competition winners can get a regular slot on one of the cooking channels? Customers could also write in to suggest meals that they would like to see cooked by celebrity chefs.  With Amazon having a JV with Morrison’s and purchasing both Whole Foods and Deliveroo, and Ocado soon to offer delivery times of one hour, it looks like one trend will be to offer grocery shopping at late notice. This will certainly help add a little variety and flexibility to our lives, if we can receive a healthy and quick to cook food option, as an alternative to a sloppy takeaway, then I for one will be happy. However, these delivery facilities should also be utilised to deliver parcels and other online shopping to your door. Online shopping does offer you delivery time flexibility that you can’t get else where, you are often able to fix the delivery to a one hour time slot. If you could get all of your parcels delivered at the same time as your shopping, meaning you avoid the frustrating ‘we couldn’t deliver your parcel because your were out’ note pushed through your letterbox. Wouldn’t this be great?  These are just some of the many improvements that supermarkets can offer to their customers. However, I’m sure you get the idea. As for supermarkets themselves, there must be a first mover advantage for implementing stuff like this. Will it come from Amazon; the customer obsessed behemoth? Or will the incumbents come to their senses and get there first? Only time will tell, but I know who I would place my bets on… |
24 Jul 2019, 06:02
| FROM nickrubick: So are we finally going to live like the Jetson’s?? |
Human’s have been buzzing around in flying cars since before we landed on the moon, in cartoon form at least. However, if the hype is to believed then maybe 60 years after the first Jetsons episode, we in the real world are finally catching up… Although I’m not old enough to have witnessed the first showing of the Jetsons, which aired in September 1962, I do fondly remember their 80’s shows. The life and times of the Jetson family was given to us as a futuristic alternative to the Flintstones, and the notion of flying cars as well as other futuristic inventions left a lasting impression upon me. However, despite the optimism that us pre-millennials carried with us through the 80’s, it didn’t seem to translate into reality. Our wide eyed vision of the future was most likely fueled by our parents witnessing the moon landings when they were a similar age to us, together with the emergence of the computing age; which would seemingly make anything possible. I remember reading children’s books that were telling me by the year 2000 we would no longer be using petroleum fueled cars. I also remember watching Back to the Future II in 1988, which told me that by the time I was 35 I would be whizzing around on a flying hover-board.  You can’t deny that the impact that the likes of Mark Zuckerburg has had on our lives is both significant and unpredicted. But in terms of tangible inventions, when compared to what was being predicted, it’s certainly a case of must try harder. Sure, I love the fact that I can make my face look older than it really is just by using a special app, but how come it still takes me 24 hours to get to Australia? and while I’m at it, how come my journey out of London for a weekend retreat now takes longer than it did for my parents at my age??  Well documented studies have shown that social media isn’t actually that social, and with climate change becoming ever more of an issue, the challenge of physically connecting people seems to be becoming much more difficult than the now solved challenge of virtually connecting people. I mean, if you have a vacuum cleaner manufacturer has decided that they can make better electric vehicles than incumbent vehicle manufacturers, then surely the industry is in need of a shakeup?  Well, finally we might be getting there… following on from Elon Musk’s foray into the electric vehicle market with Tesla, companies are starting to take this one step further and combine electric propulsion with air travel.  This year has seen a marked increase in media exposure for where we hope the next generation of aircraft will take us. The 2019 Paris Airshow displayed several electrical powered concepts, including an offering from both Airbus and Boeing. Roland Berger, an aerospace thought leader, have stated there are now 170 different ‘e’planes globally Roland Berger Study. Of these 170, there are two German based start ups, one who is aiming to serve London with air taxis by 2025 Lilium Jet’s 2025 target, and another who is aiming to go one further and provided automated flying taxis. I challenge you to watch the video clip below and not get excited… Having been instantly blown away by these claims, my imagination was quickly kicked into overdrive with what possibilities and opportunities such developments will bring; from transformational commuting experiences to exciting employment opportunities. However, as the saying goes, once bitten twice shy. With the broken promises of Marty McFly and Doc Brown still fresh in my memory, I thought it only right to investigate further into this fresh and exciting sector. Just how real are these claims? I will be sharing my findings upon this blog, so you will be the first to know. Starting with an interview with a business owner who is developing a manned eVTOL (electrically powered vertical take-off and landing) vehicle, which I will post tomorrow… |
25 Jul 2019, 03:02
| FROM nickrubick: eVTOL, interview: Simon Scott. Founder and Owner of Esprit Aeronautics |
As a first for my blog, see below for my interview with Simon Scott; owner of Esprit Aeronautics espritaero.com a business focused on developing a manned vertical take-off aircraft. Simon has been active within this sector since the 1990’s, long before eVTOL and drones became media trendy. This interview follows on from yesterday’s eVTOL blog entry: So are we finally going to live like the Jetson’s?? Nick: Hello Simon, firstly thank you for agreeing to the interview. Nick: First off, please could you give a little detail upon your background, and how you became interested in the eVTOL sector? Simon: Both my grandparents had served in or supporting the Royal Air Force and my youth was spent either making model aircraft or visiting air shows and museums in Europe. After leaving school at 15 I studied engineering before becoming an assistant metallurgist for a specialist castings company that supplied the aerospace industry. At 19 years of age I joined the military as a guided weapon’s controller before working closely with the Army Air Corp on several operations. On leaving the military in the late 90’s my fascination had not diminished and I started to look at the research being done by Mark D. Moore (currently UBER Engineering Director of Vehicle Systems) when he was at NASA Langley Research Centre and following several email exchanges I started my own research into Personal Air Vehicles which led me towards hybrid propulsion and electric aircraft in the early 2000’s. Nick: So this is not a recent venture for you, this is an area that you have been working upon for many years. You also have significant experience in the creation of drones. Does your ePAV carry a lot of design heritage from Esprit Aero’s drones? What are the key differences? Simon: I’ve always been a believer in building something, not just a nice 3D CAD rendering. It is also better to build and test a real platform in nature as CFD (Computational fluid dynamics – used for aerodynamic analysis) may be a very useful tool but nature is unpredictable in many cases. I’ve also carried out testing at higher elevations, usually starting at 500m ASL unlike many which tend to test at scale and at sea level. You learn a great deal from failure and I have experienced plenty in the early years with drone flight controllers and sensors far less capable than current versions, but I have also seen my designs carry out flights lifting payloads far greater than even some of the well-known drones of today cannot handle. As far as heritage goes, if you can fly a conventional quad copter drone competently today you could fly one of our eVTOL platforms, it is that simple to fly. Finally there are many differences between drones and manned vehicles, most notably, safety is of utmost importance, when carrying a “Live” cargo. Nick: I think most will agree that public awareness of the future eVTOL market has rapidly increased in recent times. This awareness has been amplified due to the concept designs shown at this year’s Paris Airshow, and claims that cities such as London will be serviced by air taxis as early as 2025. Do you think that these 2025 claims are realistic? Simon: I will say I am very sceptical of timelines as I have first-hand experience of just how long it takes to turn ideas and concepts into reality. There are far more barriers to market for eVTOL air taxis in the Urban Air Mobility sector than many openly admit to. Obviously there are some exceptions when it comes to platforms we are already seeing in test videos online but we have yet to see any fly in an urban environment never mind carry a fare paying passenger between two vertiports in a city. Nick: What do you think are the main barriers to achieving this 2025 target? Simon: Obviously legislation requirements, not only for vehicle certification but also flight restrictions, noise levels and flight corridors over populated areas. Social acceptance is key so safety requirements need to be much higher and the costs associated with using such means of transportation needs to be cost effective for passengers. Most people would enjoy saving an hour a day travelling but not if it costs them twice as much as using conventional means, which reduces the potential passenger numbers willing to pay for that time saving.  Nick: So legislation and regulation will be key, unsurprisingly, but you also consider that there is high risk of the short to mid-term business case being unviable. With such significant barriers remaining before city air taxis are accepted for use, and with the recent rapid increase in eVTOL businesses across the world, it looks like at least some of these ventures will not end with success. Considering this, what is Esprit Aero’s planned product and service offering? Simon: We are targeting Rural Air Mobility (RAM) and at first, we are looking at the use of single and dual seat platforms for first responders. Many rural areas are receiving very little support from emergency services due to budget cuts and low staffing numbers. Smaller ePAV solutions are force multipliers and allow a greatly increased response time. Nick: So, you are looking to provide highly mobile transport solutions for emergency services in remote locations where there is a high need. In affect you are proposing to offer a smaller, quieter, more cost-effective and easier (safer) to fly, alternative to a helicopter? If the eVTOL consumer taxi market is delayed, do you see this space being targeted by the eVTOLs taxi companies, while we wait for the certification and regulation hurdles to be overcome? Simon: Most of the air taxi designs could be modified but the focus by the main player’s remains air taxis. Would a local authority pay £4,000,000 GBP for an eVTOL air taxi platform when they could purchase a dual seat ePAV for less than £200,000 GBP? There is also the platform footprint to consider as some of the eVTOL designs being developed are nearly as large as conventional helicopters. Nick: Regarding the seemingly booming eVTOL industry, have you found that this has helped or hindered your business development strategy? Are you finding it easier to find both customers and suppliers now than say two years ago? Simon: We tend to get far more suppliers interested in us now as many read the analysis & market predictions believing it to be a good opportunity for them at an early stage. Customer interest is growing but many are “tyre kickers” and are wisely waiting until they see the real platforms working before committing. Nick: With so many different types of eVTOL being developed, do you think that there will be key areas where parts will become homogeneous? Are there any of these products that you plan to specialise in, or in fact outsource to a specialist supplier, rather than create yourselves? Simon: We have a plan and that has to be flexible as nobody can predict the future so we will keep a keen eye on the industry & market and react accordingly. Nick: What do you see as your key objectives in the mid-term, once you have achieved certification and the ePAV is in use in the UK? Do you plan to develop business overseas? Also, are you planning to develop any additional vehicles to the ePAV in the future? If you were to develop an additional product offering to the ePAV, what differences would it have (eg. What do you see as a strong second market)? Simon: At this stage we are focused on finding the right investment for us and our plans to get our designs into the air safely and legally. Obviously there is international interest and due to our experience with international suppliers and the wider aerospace industry we can visualise dealerships across the globe in the future as well as the international support infrastructure that will be needed. We are aware that certain clients require bespoke solutions that will need to be built “in-house” for security reasons. Nick: So it sounds like you will need at least a small manufacturing facility, with the option of outsourcing high volume orders on build to print licences as and when customer demand deems it necessary. Many thanks for your time Simon, it has been very interesting to speak with you. I think considering the current market, your business development strategy is smart; offering a product with low unit cost that offers clear advantages over existing products (e.g. helicopters), and will also open the market to users who may not have previously considered flying vehicles as a viable option. I look forward to hear about further developments!  For those who are reading this blog, if you would like to learn more about what Simon and Esprit Aeronautics are developing, please check the links below: The business case for Rural vs Urban air mobility: https://www.espritaero.com/ram-rural-air-mobility The ‘barriers’ to Urban air mobility: https://www.espritaero.com/are-evtol-air-taxi-s-the-only-solution |
22 Nov 2019, 06:38
| FROM nickrubick: Boeing vs Boeing’s Stakeholders |
The Boeing corporation has had a special place in my heart since I was young, even though I have spent much of my career working for their European rival. As my last assignment on the Sloan programme I was very happy to cover Boeing, delve a little into its current problems, and offer some insight into how it might recover. I enjoyed the research on this topic so much that I decided to share it with you. Unfortunately a lot of it doesn’t make pretty reading, as you might expect.. A brief history of Boeing Boeing came into prominence as a commercial aircraft manufacturer in the mid-1950s when it saw a market opportunity to leverage its expertise and create commercial jet powered airliners. At the time this was considered a bold move; several European manufacturers had already tried and failed, some with catastrophic results. However, perhaps more importantly, key customers were very sceptical. C.R. Smith, CEO of American Airlines stated that “the time was not yet ripe for jets, and that nobody would ever buy a Boeing jet” (Leonard, n.d.). The CEO of United Airlines went one step further and placed an order with the then market leader; Douglas, that was purposely large enough to incentivise them to delay jet engine development in favour of maintaining the production of piston engine airliners. Boeing’s gamble paid off, which resulted in a prolonged period of market domination, effectively monopolising the airline industry and holding a market share of over 90% well into the mid 1980’s (Thomson Reuters, 2012). During this time, Boeing gained an unparalleled reputation for building the best aircraft in the world, which reflected its core focus on engineering excellence (Kay, 2004).  Figure 1: Boeing vs Airbus market share, 1973 to 2010 (Thomson Reuters, 2012) Since the 1980’s, Boeing has seen its market share slowly eaten away by Airbus (Refer to Figure 1 above) and the two organisations now share a market duopoly. In March 2019 Boeing entered perhaps the most difficult period of its celebrated history when the latest version of its 1960’s designed 737 ‘MAX’ aircraft was deemed unsafe to fly. There is a strong argument that Boeing’s current predicament has been brought about from an approach of prolonged radical shareholder primacy. A profoundly accurate warning against this approach was given by fortune magazine some 19 years ago: “doesn’t Condit (Boeing’s then CEO) ever worry that 20 years from now people will be writing about the big bet (the next new aircraft) Boeing failed to make? Does he ever wonder what his legendary forebears, who famously scorned bean-counting, would think of a company whose stock price flashes incessantly on the desktops of its executives and the walls of its leadership centre?” (Useem, 2000). Boeing’s Shareholder Value Despite relinquishing half of its market share to Airbus, between 2003 and 2018 Boeing’s stock price both outperformed its European competitor and significantly outperformed the S&P 500 (Refer to Figure 2 below). As of 7/3/19, Boeing CEO; Dennis Muilenburg, was credited with increasing market cap from $90bn to $243.9bn. Since he became CEO in 2015 shares had gained 210% (Siesluk, 2019). Most of the improvements were attributed to reducing costs (Siesluk, 2019), and minimising costs to maximise profits has been Boeing’s typical approach since the late 1990s (Irving, 2019).  Figure 2: Share price performance of Boeing and Airbus vs the S&P 500 (McBride, 2019) March 10th 2019 Suddenly cracks started to appear, the house of Boeing was not all that it seemed. The product that made up 72% of Boeing’s 2018 aircraft production (Statista, 2019) was ruled as unsafe to fly. The 737 MAX was quickly grounded by airlines all across the world, and current predictions are that it will remain grounded until February 2020 (Finley, 2019). Boeing has set aside $5bn in compensation to cover the costs of these grounded aircraft (Isodore, 2019), which is more than the $2bn-$3bn cost to develop the entire aircraft (Ostrower, 2012). This event caused an immediate 18% drop in Boeing’s share price, and as of Q3 2019 the Boeing group’s top line was down 19% compared to the previous year. Boeing may now be “facing the worst crisis in its 103-year history” (Hemmerdinger et al., 2019). Cause and Effect There is strong evidence that by focusing only on shareholder value Boeing have mastered their own downfall. It is noteworthy that just one year after Boeing’s 1998 announcement that shareholder value is “the principle measure of our success” (Boeing, 1998), Airbus had its first year where it enjoyed more aircraft orders than Boeing (Spiegel, 2019). 20 years have passed since this watershed moment and looking at Boeing’s R&D investment over the last 10 years shows that they still haven’t been willing to invest to counter this now well-established rivalry. Boeing’s R&D spend as a percentage of sales has been less than half of it’s European rival since 2010 (Refer Figure 3 below).  Figure 3: R&D spend as percentage of group revenues for Boeing and Airbus (Statista, 2019) Boeing’s lower R&D spend correlates when comparing the price and performance characteristics of the two organisations’ current single aisle aircraft. Even without the safety concerns surrounding the 737 MAX aircraft, for the same price you can purchase an Airbus A321 that can carry more passengers for a longer distance (Refer Figure 4 below). The 737 is the most popular aircraft in history; but chasing shareholder value has resulted in Boeing having an inferior product to its main rival in its most important market segment. Although being bridled with an inferior product is certainly problematic for Boeing, this is by far their only problem. As the next section illustrates, it is Boeing’s mismanagement of stakeholder relations that now needs fixing perhaps even more so than its aircraft.  Figure 4: Boeing and Airbus’ current single aisle aircraft specifications (Cummins, 2019) 20 Years of Stakeholder Mismanagement There are many aerospace protagonists that attribute the origins of Boeing’s current crisis to an event that occurred over 20 years ago; Boeing’s 1997 acquisition of McDonnell Douglas. The rationale behind the deal was sound; McDonnell Douglas was a specialist in military aircraft, Boeing was the commercial aircraft market leader. Combining the two organisations offered the corporation a capability to shift its operations to match the fluctuations in demand from one sector to the other, which tend to be counter cyclical. Additionally, Boeing had recently been shortlisted by the U.S government (at the expense of McDonnel Douglas) to provide their next generation military aircraft, McDonnel Douglas’ expertise with such products would assist Boeing’s aspirations to win this lucrative contract. Another consideration was the low purchase price; McDonnel Douglas was struggling to remain solvent following the U.S government’s decision to not short list their proposal for their next generation aircraft. However, this is also the biggest point of contention for the commentators of the era. The fact that Boeing; a civil aircraft specialist, had been selected ahead of McDonnel Douglas to potentially supply a military aircraft indicated how just how much McDonnel Douglas had lost its way. This is even more pertinent when considering that the same commentators also attributed McDonnel Douglas’ decline to cost cutting and improving the bottom line at the expense of longevity. Thus, a business renowned for engineering excellence and courageous decision making (Boeing) was married to a business that was risk averse, focussed on operational efficiency and struggling to survive.  Ultimately, this marriage created a business that increasingly mirrored the McDonnel Douglas mantra “to maximize short-term shareholder value—at the expense of what’s good for nearly everyone but the shareholder” (Georgescu, 2019), culminating in the situation as described below from the perspective of Boeing’s relevant non-shareholder stakeholders. Employees “For many decades of Boeing’s history, most employees were immensely proud of where they worked” (Spiegel, 2019). If you consider that every commercial aircraft currently sold by Boeing, except the 787 models, was originally developed during Boeing’s ‘golden era’ of market domination, Boeing is still heavily reliant upon the historic achievements of its workforce during this period. However, this reliance on historic achievements is also what created the flawed 737 MAX aircraft. Perhaps more worryingly, a once celebrated working culture is now replaced by an environment where employees fear for their jobs if they raise concerns (Edmondson, 2019), these conditions are not conducive of innovation and creativity, at a time when Boeing needs it most. The culture clash between Boeing’s traditions and those of McDonnell Douglas likely contributed to this change, as did the protracted conflict between Dennis Muilenburg’s predecessors; and Boeing’s unions (Spiegel, 2019). The Boeing union members “were fighting to save Boeing” (Useem, 2000), while the Boeing leadership moved the HQ out of the Boeing heartland of Seattle to Chicago, and half of the 787 production to North Carolina. North Carolina had no qualified mechanics and engineers in the region, but it also had the lowest union membership in the entire U.S.A (Spiegel, 2019). Boeing used to count on its staff as a key organisational capability that offered it a strategic advantage. Much of Boeing’s brand identity came from the engineers within the organisation. Today Boeing is used as an example of what impact a toxic culture can have on a business (Edmondson, 2019).  Competition There is an argument that the commercial aircraft sector is large enough that both Boeing and Airbus could happily operate alongside one another without hostilities, collaboration could in fact benefit both companies. However, when Airbus emerged Boeing instead opted to go to war with them, using pricing, complaints to the WTO and public shows of one upmanship to fight their battles (Spiegel, 2019). What Boeing failed to do however was invest heavily in its R&D so that its products were superior to its bitter rival’s. The result is an ultra-competitive environment where Boeing are relying upon power to coerce stakeholders, rather than product quality, in order to secure their market share. This approach has backfired recently. Boeing attempted to prevent Bombardier from selling its new aircraft into the U.S market, seeking 300% import trade tariffs to be imposed against them for alleged dumping. This ended up pushing Bombardier into the arms of Airbus. Bombardier was likely to sell 300 of its new Aircraft, but now Airbus plans to sell 6,000 (The Economist, 2019). This action has also had a negative impact upon some key customer and government relationships, as covered below.  Customers Considering Boeing’s original brave move into the jet airliner market, it is somewhat ironic that at least part of the reason for persisting with upgrading the venerable 737 rather than producing a new aircraft was from the insistence of its customers. Keeping with the 737 was preferred by customers as it negates pilot training costs. However, it was similar short-termist pandering to customers that got Boeing’s main competitor into trouble in the 1950’s and enabled Boeing to seize a near monopoly. History seems to be repeating itself, but this time to Boeing’s detriment. A combination of Boeing’s 737 safety issues plus its actions against Bombardier means that it is now facing loss of sales from many key customers, as concerns for both Boeing’s products and behaviour have provoked worldwide negative reactions. This has contributed to Boeing receiving orders for only 170 aircraft in 2019 compared to 603 aircraft ordered from Airbus (Katz, 2019).  Governments Boeing has publicly aligned itself with the Donald Trump administration, backing Trump’s ‘America first’ rhetoric, while also having him unveil their 787 Dreamliner. Not surprising when considering that Boeing has received $14bn in subsidies from the government over the last 20 years (Helmy, 2018), however being so publicly aligned to protectionist policies is also harmful for a company that relies on exports for 66% of its sales volume (Statista, 2019). The U.S vs China trade war, combined with the Chinese airline Lion Air 737 MAX crash in 2018 have placed a serious dent into new orders for Boeing in a market that accounted for 25% of its sales volume in 2018 (Statista, 2019). Conversely Chinese Airlines alone currently accounts for 50% of Airbus’ aircraft orders in 2019 (Adams, 2019). Additionally, Boeing has alienated the Canadian and British governments through its treatment of Bombardier, both of whom have vested interests in the company. This has resulted in Canada cancelling a $5bn order with Boeing for military aircraft, choosing instead to purchase older alternatives from the Australian government (Pugliese, 2018). Comments given in the same press conference from the Canadian prime minister; “We won’t do business with a company that’s busy trying to sue us and put our aerospace workers out of business” and the UK’s defence secretary: This is not the behaviour we expect from Boeing, and it could indeed jeopardize our future relationship with them”(Aleem, 2017) shows their united dissatisfaction with Boeing. Regulatory As the 737 MAX saga continues to unravel, there are numerous reports that Boeing’s management were aware of the potential safety issues but failed to notify the Federal Aircraft Administration (FAA) as they were so desperate to get the upgraded aircraft onto the market. The integrity of the FAA is now being questioned along with that of Boeing. Regardless of blame, the FAA will be very keen to prevent any similar issues in the future, and thus it is unlikely Boeing will enjoy the freedom and trust that they have previously enjoyed (Reynolds, 2019).  Stakeholder management Just as Boeing’s focus on shareholder value is starting to show serious flaws, the U.S’ business roundtable; an organisation that represents the leaders of the U.S’ largest businesses, has made a statement of intent to move away from shareholder primacy (Business Roundtable, 2019). This is a very different sentiment to the statement that it released in 1997: “The principle objective of a business enterprise is to generate economic returns to its owners.” (Crilly, 2019). Boeing is well advised to follow suit, moving away from radical shareholder primacy approach and towards a stakeholder capitalism approach. Using the criteria shown in the stakeholder assessment model in Figure 5 below it is possible to assess the importance of each stakeholder, helping with prioritisation. A proposal for Boeing’s priorities and approach with regards to their stakeholders is given below.  Figure 5: Stakeholder attributes (Crilly, 2019) Priority 1. Regulators. Power: High. Legitimacy: High. Urgency: High Boeing’s number one priority is to restore trust in the certification authorities, without their co-operation they stand to lose 72% of their aircraft sales. This can only be done by being voluntarily transparent, which will require a measure of psychological safety provided to Boeing’s staff.  Priority 2. Suppliers. Power: High. Legitimacy: High. Urgency: High Although Boeing are part of a duopoly in the aircraft market, aircraft production is limited by the availability of key components, such as engines and high-performance materials. This is a critical time for Boeing as they have had to lower their 737 production to 26% below forecasts (Youn and Kaji, 2019). If Boeing’s suppliers opt to re-channel deliveries to Airbus, then this will offer the European firm the opportunity to increase its production volume and thus market share. It is in the suppliers’ long-term interests that neither Boeing or Airbus gain enough market share to get monopolistic control of the market. Boeing need to use this to gain support from its suppliers during its current tough times. Priority 3. Employees. Power: High. Legitimacy: High. Urgency: Medium Boeing’s fall from innovation leader due to questionable integrity and product quality mirrors the worsening relationship between its leaders and employees. Aerospace engineers the world over still aspire to work in the U.S. (ECORYS, 2009). Boeing should take advantage of this, becoming an empowering place to work, and regaining the internal brand identity that previously brought success.  Priority 4. Competitors. Power: High. Legitimacy: High. Urgency: Medium Airbus and Boeing would benefit from more collaboration rather than higher competition, and Boeing should be strong advocates of this, not least considering the imminent market entry of the Chinese and others. A good example to follow is the German automobile industry; participants have collaborated with one another to improve their capabilities, becoming stronger both together and in their own right. Priority 5. Governments. Power: High. Legitimacy: High. Urgency: Low A balance needs to be set by ensuring the U.S government is engaged enough to provide Boeing the support it needs, but without alienating foreign governments, and thus jeopardising exports. Boeing’s defence division may depend increasingly more upon exports for revenue, as the U.S government is moving away from the Boeing F-18 aircraft, replacing many with Lockheed Martin’s F-35.  Priority 6 Customers. Power: Medium. Legitimacy: High. Urgency: Low In a market of low elasticity of supply and high demand, customers have little choice but to purchase from Boeing unless they choose to wait several years for an Airbus aircraft (Pfeifer and Spero, 2019). With this considered, Boeing need to recapture their visionary spirit with which they once transformed the aircraft industry, rather than cater to customers short term requirements. History has shown that airlines will ultimately pick superior performance and efficiency over short term convenience.  Priority 7 Shareholders. Power: High. Legitimacy: High. Urgency: High Shareholder value is likely to be high on the Boeing management’s agenda, and it is also likely that the board are having to answer some very difficult questions asked of them. However, as the four largest shareholders sit upon the Boeing board (Maveric, 2019), they should use their influence to gain confidence from other shareholders, offering assurences that their long term interests are aligned. The key will be convincing investors that short-term pain may be needed for long term gains, but never in Boeing’s history has there been a stronger case for change. It is up to the board to sell how important rebuilding Boeing’s brand image and cultivating strong bonds with the other stakeholders will be for their recovery. Conclusion Boeing is facing many challenges. There is strong evidence that attributes these challenges to their change in philosophy over 20 years ago; away from excellent products, and more towards cutting costs and providing shareholder value. This philosophy change can in part be justified; Boeing have seen intensified competition in the years since, due to becoming one half of a fiercely contested duopoly. However, there is a difference between saving costs through operational excellence and gaining profits and enterprise value for shareholders at the expense of all else. To recover from this crisis, Boeing will need to convince more than just the financial analysts that they are making meaningful changes. Once again, they will need to change their philosophy, this time to one that considers all stakeholders. Such changes will not be easy, and will not be quick, due to the time lag in product lifecycles it could once again be 20 years before these changes fully take effect.  References Adams, C., 2019. AIRBUS INKS MULTIBILLION DOLLAR ORDER WITH CHINA [WWW Document]. Independent. URL https://www.independent.co.uk/travel/news-and-advice/airbus-aircraft-boeing-china-chinese-airlines-737-max-a8840096.html (accessed 11.6.19). Aleem, Z., 2017. The US just picked a nasty trade fight with Canada — and it’s likely to backfire [WWW Document]. Vox. URL https://www.vox.com/world/2017/9/27/16373156/boeing-tariff-bombardier-canada (accessed 10.30.19). Boeing, 1998. Boeing Adopts Measures for Attaining Increased Shareholder Value [WWW Document]. Boeing. 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Boeing 737 MAX Expected To Fly Again In Europe By Feb 2020 [WWW Document]. Simple Flying. URL https://simpleflying.com/boeing-737-max-expected-to-fly-again-in-europe-by-feb-2020/#:~:text=Boeings%20grounded%20737%20MAX%20is,the%20air%20by%20February%202020. (accessed 11.5.19). Georgescu, P., 2019. Boeing and Business Governance [WWW Document]. Forbes. URL https://www.forbes.com/sites/petergeorgescu/2019/04/17/boeing-and-business-governance/#3e17f2977d98 (accessed 11.6.19). Helmy, S., 2018. Airbus Bites Boeing By Advancing On Alabama A220 Assembly Line [WWW Document]. Simple Flying. URL https://simpleflying.com/airbus-bites-boeing-by-advancing-on-alabama-a220-assembly-line/ (accessed 10.29.19). Hemmerdinger, J., Wolfsteller, P., Reim, G., 2019. Why Boeing faces its worst crisis in its 103 year history [WWW Document]. Flight Global. URL https://www.flightglobal.com/news/articles/analysis-why-boeing-faces-worst-crisis-in-its-his-461748/ (accessed 11.5.19). Irving, C., 2019. How Boeing’s Bean-Counters Courted the 737 MAX Disaster [WWW Document]. The Daily Beast. URL https://www.thedailybeast.com/how-boeing-bean-counters-courted-the-737-max-disaster (accessed 11.6.19). Isodore, C., 2019. 737 Max grounding will cost American and Southwest Airlines more than $1 billion [WWW Document]. CNN. URL https://edition.cnn.com/2019/10/24/business/american-airlines-southwest-boeing-737-max-costs/index.html#:~:text=New%20York%20(CNN%20Business)%20The,through%20the%20end%20of%20September. (accessed 11.5.19). Katz, B., 2019. Airbus Pulls Far Ahead of Boeing in New Jet Orders, Deliveries [WWW Document]. Wall Street Journal. URL https://www.wsj.com/articles/airbus-pulls-far-ahead-of-boeing-in-new-jet-orders-deliveries-11572369091 (accessed 11.6.19). Kay, J., 2004. Obliquity. Leonard, J., n.d. Overwhelmed by Success: What Killed Douglas Aircraft. Haas School of Business. Maveric, J.B., 2019. The Top 4 Boeing Shareholders [WWW Document]. Investopedia. URL https://www.investopedia.com/articles/insights/052116/top-3-boeing-shareholders-ba.asp (accessed 11.6.19). McBride, S., 2019. How We’ll “Get Rich Slowly” from the China Trade War [WWW Document]. Risk Hedge. URL https://www.riskhedge.com/post/how-well-get-rich-slowly-china-trade-war (accessed 11.4.19). Ostrower, J., 2012. Boeing Disputes 737 MAX Cost Estimates [WWW Document]. FlightGlobal. URL https://www.flightglobal.com/news/articles/boeing-disputes-737-max-development-cost-report-367504/ (accessed 11.5.19). Pfeifer, S., Spero, J., 2019. Airbus cannot build fast enough to replace Boeing’s 737 Max [WWW Document]. Financial Times. URL https://www.ft.com/content/a495bc06-49a6-11e9-bbc9-6917dce3dc62 (accessed 11.6.19). Pugliese, D., 2018. First used Australian fighter jets now flying in RCAF colours with more to come [WWW Document]. National Post. URL https://nationalpost.com/news/canada/first-used-australian-fighter-jets-now-flying-in-canadian-colours-plans-underway-to-extend-jet-fleet-to-2032 (accessed 10.30.19). Reynolds, M., 2019. Boeing had too much sway vetting its own planes, FAA was warned [WWW Document]. Bloomberg. URL https://www.latimes.com/business/la-fi-boeing-faa-warnings-20190317-story.html16/11/19 Siesluk, K., 2019. We Examine Boeing CEO Dennis Muilenburg’s Strategy For Improving Profitability [WWW Document]. Simple Flying. URL https://simpleflying.com/we-examine-boeing-ceo-dennis-muilenburgs-strategy-for-improving-profitability/ (accessed 10.29.19). Spiegel, 2019. Boeing’s Crashes Expose Systemic Failings [WWW Document]. Spiegel. URL https://www.spiegel.de/international/business/737-max-boeing-s-crashes-expose-systemic-failings-a-1282869-2.html (accessed 11.6.19). Statista, 2019. Airbus and Boeing Dossier (Dossier No. did-9503-1). Statista. The Economist, 2019. Why Airbus’s tie-up with Bombardier is so damaging for Boeing [WWW Document]. The Economist. URL https://www.economist.com/business/2017/10/19/why-airbuss-tie-up-with-bombardier-is-so-damaging-for-boeing (accessed 11.6.19). Thomson Reuters, 2012. Airbus market share pitted against Boeing [WWW Document]. Thomson Reuters. URL https://blogs.thomsonreuters.com/answerson/airbus-market-share-comparison-boeing/ (accessed 10.30.19). Useem, J., 2000. Boeing VS. Boeing America’s export champion is going head-to-head with a company even tougher than Airbus: itself. Fortune. Youn, S., Kaji, M., 2019. Boeing may halt 737 MAX production if planes stay grounded through 2019 [WWW Document]. ABC News. URL https://abcnews.go.com/Business/boeing-halt-737-max-production-planes-stay-grounded/story?id=64536463#:~:targetText=Boeing%20may%20halt%20737%20MAX%20production%20if%20planes%20stay%20grounded%20through%202019,-By&targetText=Aerospace%20company%20Boeing%20has%20not,CEO%20Dennis%20Muilenburg%20said%20Wednesday. (accessed 11.7.19). |
01 Dec 2019, 10:00
| FROM MBA Data Guru: MBA Waitlist Acceptance Rate Analysis (with Class of 2019 data) |
MBA Waitlist Acceptance Rate Analysis (with Class of 2019 data) One of the most frustrating parts of the MBA application process is waiting to hear back from the schools. First, applicants have to wait to hear if you will be interviewed. Next, an applicant must wait to hear if they have been admitted. Some unlucky souls will have to wait a third time on the waitlist, sometimes for up to 8 months if they are a round 1 applicant. I created this updated MBA waitlist acceptance rate analysis to provide some transparency to those who are on the waitlist. Unlike the rather stable overall admission rate, the MBA waitlist acceptance rate fluctuates substantially. Some years it is very high for a school and other years it can be zero. The acceptance yield of the school in a given year drives the waitlist acceptance rate. In addition to providing the average acceptance rate from 2012 to 2017, I also included the lowest year and highest year during that period. Some of the smaller schools have a lot less data available, so the acceptance rates below are less reliable. MBA Waitlist Acceptance Rate and Range Rank School Low Average High 1 Harvard University (HBS) 0% 6% 14% 1 University of Pennsylvania (Wharton) 0% 5% 6% 3 University of Chicago (Booth) 3% 17% 35% 4 Stanford University (GSB) 0% 18% 50% 4 Northwestern University (Kellogg) 0% 5% 10% 4 Massachusetts Institute of Technology (Sloan) 2% 9% 17% 7 University of California—Berkeley (Haas) 0% 7% 15% 8 Dartmouth College (Tuck) 0% 6% 15% 9 Columbia University (CBS) 5% 13% 24% 9 Yale University (YSOM) 0% 9% 21% 11 University of Michigan—Ann Arbor (Ross) 6% 14% 20% 12 New York University (Stern) 0% 5% 13% 12 Duke University (Fuqua) 2% 5% 11% 14 University of Virginia (Darden) 0% 17% 27% 15 University of California—Los Angeles (Anderson) 5% 17% 33% 16 Cornell University (Johnson) 0% 10% 19% 17 University of Texas—Austin (McCombs) 4% 7% 20% 18 University of North Carolina—Chapel Hill (Kenan-Flagler) 6% 26% 55% 19 Carnegie Mellon University (Tepper) 0% 9% 22% 20 Emory University (Goizueta) 0% 8% 33% 21 Georgetown University (McDonough) 0% 8% 13% 21 Indiana University (Kelley) 0% 13% 18% 21 Washington University in St. Louis (Olin) 11% 26% 50% 24 University of Southern California (Marshall) 0% 20% 50% 25 Arizona State University (Carey) 0% 12% 20% 25 Vanderbilt University (Owen) 0% 19% 50% I suspected that some schools would have a higher preference for waitlisted applicants with higher GMATs. I found that schools treated applicants very differently based on GMAT. Some schools have a preference for very high GMATs, while others have a preference average GMATs (for top MBAs). Strangely, some schools have no preference for GMAT while others appear to have a preference for lower GMATs. The data is a little thin, so take this with a grain of salt. Waitlist acceptance rate for schools with preference for very higher GMATs School < 700 700 – 730 740+ Harvard University (HBS) 0% 0% 13% Stanford University (GSB) 0% 0% 13% University of Pennsylvania (Wharton) 0% 0% 5% Columbia University (CBS) 0% 0% 16% Waitlist acceptance rate for schools that have a preference for higher GMATs School < 700 700 – 730 740+ Northwestern University (Kellogg) 6% 2% 11% Dartmouth College (Tuck) 0% 8% 6% Duke University (Fuqua) 0% 6% 4% University of Virginia (Darden) 20% 17% 27% Georgetown University (McDonough) 0% 14% 20% Waitlist acceptance rate for schools that have a preference for average GMATs School < 700 700 – 730 740+ University of California—Berkeley (Haas) 0% 6% 3% Yale University (YSOM) 0% 17% 4% University of Michigan—Ann Arbor (Ross) 10% 18% 11% Waitlist acceptance rate for schools that have preference for lower GMATs School < 700 700 – 730 740+ University of California—Los Angeles (Anderson) 27% 19% 6% University of Texas—Austin (McCombs) 8% 9% 6% Carnegie Mellon University (Tepper) 9% 9% 3% Waitlist acceptance rate for schools that have no preference for GMAT School < 700 700 – 730 740+ University of Chicago (Booth) 18% 15% 19% Massachusetts Institute of Technology (Sloan) 14% 14% 8% New York University (Stern) 8% 6% 7% Cornell University (Johnson) 11% 11% 12% University of North Carolina—Chapel Hill (Kenan-Flagler) 33% 21% 29% Some schools had data that was too thin to analyze. Those schools are Carey, Emory, Kelley, Olin, Owen, and USC. MBA Data Guru - Business school admissions data and analysis |
01 Dec 2019, 10:00
| FROM MBA Data Guru: MBA Acceptance Rate by Undergraduate Major |
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MBA Acceptance Rate by Undergraduate Major Many applicants may wonder if their undergraduate major impacts their chance of getting into business school. Admissions data suggests that your college major can significantly impact your probability of getting into business school. The general trend seems to be that majors that are more dominated by women have a higher acceptance rate while industries that dominated by men had lower acceptance rates. This could be because my data does not have gender as a variable, so I could not account for it. Many people believe that women’s acceptance rate is higher than it is for men with similar credentials, but I have not found any data that proves it. Another explanation is that the female dominated majors are generally underrepresented in business school application pools, so when schools aim to diversify the class, the acceptance rates are higher for those majors. Given that there so many different college majors, there is not enough data to analyze major by school, so instead I analyzed the major acceptance rate by school tier. I grouped the top 10, 11 – 16 and 17 – 25. Ranking Tier Acceptance Rate GMAT GPA Top 10 20% 728 3.53 11 – 16 35% 716 3.42 17 – 25 45% 705 3.42 As you can see, the tier has a strong effect on the acceptance rate. GMAT and GPA also correlate strongly with ranking. Below you can see what majors have a higher acceptance rate than we would expect and which have lower acceptance rates, given the GMAT and GPA. Top 10 MBA Acceptance Rate by Major In the top 10, education majors have the highest acceptance rate for top 10 MBA programs despite having substantially lower GMAT of 711 compared to the average of 728. Law majors have lower GMAT and GPA, but nearly 50% higher acceptance rate than average. Liberal arts and humanities majors have a noticeably higher acceptance rate despite lower GMAT and similar GPA. Other Majors with high acceptance rates also have higher than average GMAT, which could explain the acceptance rate. In the top 10, operations majors have substantially higher GMAT and GPA, but only a 16% acceptance rate compared to the average of 20% acceptance rate. Engineering students have similar to average scores, but only 15% acceptance rates. Computer science, marketing and health/medical majors have very low acceptance rates, that may be at least partially explained by low scores. Major Acceptance Rate GMAT GPA Education 33% 711 3.71 Law 29% 723 3.37 Liberal Arts and Humanities 24% 724 3.53 Social Services 24% 735 3.61 Political Science 24% 734 3.55 Economics 23% 729 3.51 Communication 20% 727 3.58 Accounting 20% 728 3.62 Finance 19% 726 3.59 Business 18% 723 3.56 Science and Math 17% 733 3.48 Arts 16% 729 3.52 Operations 16% 737 3.56 Engineering 15% 728 3.49 Computer Science 12% 722 3.52 Marketing 9% 718 3.36 Health or Medical 7% 708 3.58 Ranked 11 – 16 MBA Acceptance Rate by Major In the middle tier of rank 11 to 16, communication majors have an absurdly high acceptance rate with similar GMAT and noticeably higher GPA. Liberal arts majors had very high acceptance rates despite the lower than average GMAT. Political science majors had a high acceptance rate of 40% even though their GMAT and GPA are well below average. Operations majors have a lower acceptance rate, but it is explained by a fairly low GMAT. Arts majors have a low acceptance rate despite having higher GMAT and GPA than average. Engineering majors have the highest average GMAT for middle tier schools, but one of the lowest acceptance rates. Health/medical majors have a low acceptance rate, but it is explained by very low GMAT of 688. Marketing, computer science and law majors had some of the lowest acceptance rates, but they also had lower than average stats. Major Acceptance Rate GMAT GPA Communication 61% 717 3.61 Liberal Arts and Humanities 45% 711 3.45 Economics 45% 717 3.36 Finance 43% 716 3.49 Science and Math 42% 718 3.35 Political Science 40% 706 3.37 Accounting 38% 716 3.49 Business 35% 706 3.46 Operations 31% 701 3.4 Arts 27% 720 3.46 Engineering 26% 721 3.4 Health or Medical 25% 688 3.52 Marketing 23% 712 3.34 Computer Science 23% 713 3.43 Law 17% 709 3.07 Ranked 17 – 25 MBA Acceptance Rate by Major For rank 17 to 26 schools, communication majors had an extremely high acceptance rate even though they had an average GMAT and an only slightly higher GPA. Economics, political science, liberal arts, marketing, business, law and operations majors all had very high acceptance rates yet lower than average stats. Health/medical and education majors’ acceptance rates are lower than average, but explained by very low GMAT score. Engineering and arts majors have above average stats, but lower acceptance rates. Major Acceptance Rate GMAT GPA Communication 78% 706 3.51 Economics 67% 698 3.32 Political Science 65% 691 3.36 Liberal Arts and Humanities 57% 697 3.43 Marketing 56% 699 3.35 Business 56% 693 3.46 Law 54% 697 3.31 Operations 54% 688 3.3 Accounting 52% 703 3.43 Finance 52% 704 3.46 Other 48% 698 3.41 Science and Math 45% 702 3.33 Health or Medical 40% 663 3.49 Engineering 35% 713 3.42 Arts 35% 722 3.45 Computer Science 31% 704 3.49 Education 13% 663 3.59 MBA Data Guru - Business school admissions data and analysis |
22 Nov 2020, 13:01
| FROM nickrubick: Boeing: Would a fundamental change in its business model combat its spring-time blues? |
You can forgive anyone associated with Boeing Company for not liking the month of March. March 2019: The fastest selling aircraft in Boeing’s history is judged to be unsafe to fly by global regulators. The product that accounted for over 70% of unit sales (Gates, 2019) becomes unusable until critical design flaws can be corrected and certified. Estimated time to get the aircraft back in the air? 12 months. Actual time to get the aircraft back in the air? Closer to 24… and still counting. Boeing is facing “the worst crisis in its 103 year history” (Hemmerdinger et al., 2019).  March 2020: The global airline industry is shaken quite literally to the ground as the entire planet goes into lockdown. Airlines everywhere were suddenly hit with an existential crisis. As of today, Wikipedia lists 28 airlines that have filed for bankruptcy due to the impact of COVID-19, these include global household names such as LATAM and Virgin Australia. Although as of November 2020, there is hope of a vaccine that will lift us out of this crisis, there is still no guarantee when this will truly end. The chart below shows the impact the lockdown has had on global air traffic. Not a pretty sight.  Fortunately, there is a way that Boeing could use this situation to its advantage and rise from the ashes of desolation. Unfortunately, it would involve drastic change and a complete reinvention of its business model. Am I mad? Well I’ll let you be the judge of that once you’ve read this article… I last wrote about Boeing pretty much a year ago today. At that point I concluded that the source of their problems was a 20 year focus on short term share-price gains to the detriment of everything else. My personal opinion at the time was that Boeing needed a complete reversal in their approach to stakeholder management in order to get them out of their downward spiral. If you haven’t already, I urge you start this story from the beginning.  One year on and situation at Boeing has become ever more complicated. To give full context, I will pick up where I left off last November… In fairness to the then (and now ex) CEO Dennis Muilenburg, he did exactly what he was instructed to do; get maximum return for shareholders. The share price chart below shows that the share-price held up particularly well throughout 2019. It was higher at the end of 2019, before news of Dennis’ departure was released, than it was 12 months earlier. This is an incredible achievement considering the troubles and bad press that Boeing encountered during this period.  Over this period Dennis did a seemingly sterling job of papering over the cracks to maintain the share price, and it wasn’t really until the March 2020 market wide sell off that it really took a tumble. Reading between the lines however, the writing was on the wall before then. Take for instance share trading volume; a few years ago, typical daily trading volume was around 4.5 million shares, as of January 2020 this had increased to around 32 million shares (Sherman, 2020). This indicates that long term loyal shareholders had significantly decreased and were starting to be replaced my more opportunistic traders. Additionally, in 2019 the estimated cost of grounding the 737 Max was put at $5bn (Isodore, 2019), this is now calculated to be around $20bn (Whiteman, 2020). What’s more, throughout Muilenberg’s rein the share-price had been propped by share buy backs to the tune of $34.6bn. These two factors combined to burden Boeing with $38.9bn of debt as of end Q1 2020 (Sherman, 2020), that is before we even consider the impact of the COVID lockdowns.  So that brings us onto 2020… When I first considered what impact 2020 would have on Boeing, I thought it could actually be positive. Let’s face it, when part of a competitive global duopoly, the most important thing is to ensure you maintain market share. Lose market share and suddenly your rival has a market monopoly. Anyone who has ever played that game and landed on a hotel laden Boardwalk, or Mayfair, knows that is not good. Looking at cumulative aircraft deliveries from beginning of 2019, and forecast through to the end of 2020, this is certainly the case. Market share in terms of unit deliveries has Airbus with 1,341 and 70%, and with Boeing supplying 578 units and 30%. Prior to 2019, Boeing out delivered Airbus every year since 2012, so the grounding of the max has had a clear negative impact. However, prior to COVID lockdowns Airbus was forecasting cumulative deliveries of 1,761, which would have given them a market share of over 75%, leaving Boeing with a measly >25% (Oestergaard, 2020).  What I didn’t consider however was quite how much the market has shrunk, and unfortunately for Boeing it looks like it is taking the brunt of this drop in demand. The next two charts below using data from (Oestergaard, 2020) show a clear pattern. On a year by year basis, customer order accumulation is as you might expect. Boeing’s orders have started to shrink from 2019, as the 737 MAX was grounded. This seems to have had a more negative impact upon order accumulation that the COVID lockdowns; the fall in net orders during 2020 shows a shallower gradient.  Airbus has also seen a fall in net orders during 2020, again as you might expect. What is eye opening however is the number of cancellations. Interestingly, cancellations for Airbus orders have fallen in 2020, showing a clear gap emerging between the number of Airbus orders cancelled when compared to that of Boeing orders. Does this show that customers are preferring to ditch their future Boeing aircraft when making a choice between the two? Looking at the cumulative effect of these trends, again, the trend is clear. Airbus’ order book is growing, despite significant cancellations. Also growing is the gap between the size of Airbus and Boeing’s order books. Boeing’s is shrinking quite rapidly.  These trends have interesting operational and strategic implications for both companies that relate to their intricate supply chains. I will explore these in a moment. Firstly however, I would like to note that embedded somewhere within the data shown in the above charts, is the fact that Airbus is now full steam ahead with A220 production. This is after Boeing forced Bombardier to gift the aircraft to Airbus on the cheap. Also note-worthy is that Airbus has announced that the A220 is the only aircraft that will not see a reduced production and delivery rate over the next few years.  Boeing planned to counter this threat by purchasing Embraer, who have a similar product offering to the A220. However, this deal fell through shortly after the start first global lockdown in Q2 2020. It is believed that the impact of COVID dropped the value of Embraer by 75%, and Boeing no longer wished to pay the agreed price. Embraer are certainly not happy: “We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the master transaction agreement, because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems.” (). An official statement was subsequently released by Embraer stating it intends to “pursue all remedies against Boeing for the damages incurred by Embraer as a result of Boeing’s wrongful termination and violation of the MTA” (Embraer, 2020). Once an ally, Embraer now joins the ranks of other institutions that have reasons to be uncheerful with Boeing’s behaviour. Indeed, Boeing may indeed have new management, but it’s astounding record of not winning friends and influencing people looks like it has continued. As they might say in the Airbus’ HQ “Plus ca change”.  Back to today; there is a shrinking total market, but Airbus’s order book is still expanding. Meanwhile, Boeing’s order book is significantly shrinking. As of end September 2020, Airbus’ total order book stood at 7,441 jets, with an estimated backlog of 8.6 years. Boeing’s total order book stood at 5,146 jets, with an estimated backlog of 6.4 years (Oestergaard, 2020). These figures in isolation hardly seem reason to panic. But, consider also that the value of unsold aircraft currently held as inventory by Boeing, is valued at almost $40bn, which is around 50% of its Market cap . This combined with the trend of sales cancellations means Boeing very much does need to do something, and pretty-quickly. It is not until you consider the wider landscape that you can see the extent of Boeing’s challenges and threats. Boeing desperately needs to sell the 450 aircraft it has stored up in aircraft hangers (and on its balance-sheet). However, perhaps even more importantly it needs support its supply chain with buoyant demand. It is no secret that the entire aerospace sector is having a very tough time.  If Boeing reverts to its ‘look after the shareholders first and foremost’ policy, then its obvious choice would be to focus on reducing inventory, and this will come at the expense of maintaining demand throughout its supply chain. This would be folly, as there is a real danger that it will force these suppliers that Boeing relies on in normal times, into the arms of Airbus. In ‘normal’ times, aircraft production is limited by the productivity of an organisation’s supply chain perhaps even more so than it’s in house productivity. Airbus currently has an ever-increasing backlog of orders. It doesn’t take an aircraft propulsion engineer to work out that this could result a once in a lifetime opportunity for Airbus to secure long-term agreements with businesses that up until reently supplied Boeing. This in turn could limit future production of Boeing aircraft, and thus its market share, for years to come.  So, Boeing’s challenge then is; how does it maintain demand throughout its supply chain while also shifting 450 aircraft from its store cupboards? This is where I feel Boeing could use the current sector wide distress to its advantage. Consider Boeing’s customers; the airline operators. Each and every one of these businesses is going through an existential crisis. As per any business turnaround, they need to strengthen their balance sheets while increasing sales improving operating margins. Further to this, according to Boeing, there are currently 4,000 aircraft that are at least 20 years old in commercial service today (). Boeing’s new aircraft can offer very juicy efficiency savings over these old ones still in use. Shiny new aircraft will also bring more customers to the airlines.  My question is this; can Boeing change their business model, and offer these airlines brand new aircraft, on a service lease contract rather than through a purchase contract? Can Boeing agree to terms whereby they share the profits from an airline’s increased revenue and savings? Contracts that are based upon meeting reliability and efficiency targets? This should also greatly improve customer confidence levels; Boeing would be putting their money where their mouth is. It should also allow Boeing to clear it’s inventory whilest maintaining production. It will likely mean that Airbus will be forced to follow, but by the time that happens, Boeing should have caught up. This business model has been adopted by airline engine manufacturers for more than 50 years, ever since Rolls Royce introduced ‘Power by the Hour’, way back in 1962, General Electric is another example. Is it time for Aircraft manufacturers; to follow suit?  Perhaps the biggest barrier to adopt this change would be the shareholders, almost certainly there will be teething problems moving to such a business model, not to mention a significant drop in revenue over the short term. However, perhaps it is also time for Boeing to put someone else before their shareholders – in this instance it would be their customers, their suppliers, and not least themselves. |
02 Jan 2021, 10:01
| FROM nickrubick: Earth2.io: A future parallel universe, or a crazy Ponzi scheme? |
 2019 will go down in history as the year that gave its younger sibling (2020) a virus that spread like wildfire. In a similar fashion, something originating from 2020 looks like it may rapidly spread into 2021. Although this time it’s digital, and this time it originates from Australia. This 2020 creation is known as Earth2.io. My estimations are that it has so far attracted 80,000 speculators since its launch in mid November. Current trends indicate that the population size of this group will double within the next few days. We all know that if that rate is maintained it will become a very significant number, very quickly. Thus, I predict that although this may be the first time you have heard of Earth2, it will unlikely be your last.  My heart wants Earth2 to turn into the platform that the developers claim it will be. However, my head says it’s a money grabbing Ponzi scheme that anyone would be crazy to get involved in. Generally in life, I’ve found that it’s my heart that tends to get me into trouble, and it is my head that I have to use to get me back out of it (My fantastically lovable fiancé is the exception to this rule). So with that rationale applied, I probably should have my answer already. So; what the hell is Earth2.io? The development team claim it will become a second Earth, the geographical terrain the same as our real Earth. This second Earth will be accessed from the same geographical point on the real Earth. For example, if you are standing under the Eiffel Tower and you enter Earth2, you will find yourself at the same geographical spot, but in a different digital world. This digital world will be “open source” created and designed by users of the Earth2 app, and can then be enjoyed by all other users.  Meanwhile; the Earth2 team has divided the earth into 10 metre X 10 metre squares and is selling them off to anyone willing to buy them. Early adopters have been lucky enough to buy famous landmarks such as London’s Tower bridge, New York’s Empire State, and Rio’s Sugarloaf Mountain. All for just a few quid. As more and more land is purchased, the remaining squares become more expensive, in the USA a 10 x 10 square has increased in price from $0.10 to over $20. Also, the earlier purchasers receive a small amount of income from the newer purchasers as ‘income tax’. This is the Ponzi element; if you get in early enough you can make profit from later adopters.  There is also a secondary market, people on chat forums have claimed to have made significant profit from re-selling sought after squares. For instance, one user has sold Arrowhead, home of the Kansas City Chiefs, for the tidy sum of $7,000. So where does all this go? It sounds like a modern-day version of monopoly, except it requires real life cash. For this digital land to maintain these speculative valuations, they will need to realise real life commercial benefits. This is not impossible, but, it is a very big ask.  It is at this point that I will allow my imagination to take over, below are three potential scenarios that could stem from this initiative: Scenario #1: You enter a fast food restaurant. You order your food and take a seat. While you are waiting for your order you go into the Earth2 app on your smart phone. Upon entering, you find an experience that has some fun interactive content, plus also details of some gigs planned in physical near-by venues, one of these gigs is offering cut price tickets. You see a preview of the band due to play and decide to buy a ticket and attend the gig; just a spare of the moment thing as you happened to be in the area.  Scenario #2: You visit a Museum. Upon entry, you enter the Earth2 app from your phone. You enter a world that offers a vivid and creative experience that is along the theme of the museum. Digital artwork is situated in an architecturally designed grand chamber. This artwork can be purchased to place into areas of the Earth2 app you yourself own. Some of this artwork is strictly limited edition and is created by celebrity digital artists. Scenario #3: With several friends you visit your local digital racetrack. This consists of a small physical building that connects to Earth2, and the surrounding land in Earth2 is a racetrack. Within the physical building there are racing car simulation pods that connect to Earth2, and you can race your friends around the track from within these pods. A licensing agreement between Earth2 and a famous gaming company means that the cars used are the same ones as those found on the latest PlayStation game.  All these scenarios are fantastic, but are they realistic? For instance, what can Earth2 offer for Scenario #3 that can’t be better provided simply by a VR café running stand-alone computer games? A computer game can cost just $40 and can give access to hundreds of circuits all around the world. Surely this is a much better option for the retailer than buying the land surrounding their real-world premises, and then committing resources to create their own racetrack. The Earth2 option suddenly becomes a much more expensive option that offers a substandard product. The same can be said for the Museum in Scenario #2. The museum doesn’t need to rely on Earth2, it can simply create its own VR experience that is not bound by any space restrictions. In the future there will be plenty of businesses that will provide 3D digital content to clients. Will Earth2 be better and more cost effective than these options? If it means the museum must purchase the digital land that it is physically situated on in Earth1, also rely on the engine provided by Earth2, and also fit this digital environment within the confines of the limited space offered by Earth2, then probably not.  For Earth2 to be a success, it will need to survive and then thrive in an extremely competitive and fast-moving industry. Can it really take on the existing computer game giants and win? Not only creating better content, but also content that is bound by the physical geometries of our actual real life Earth? The above reservations are even before you start to consider the get rich quick Ponzi scheme. Let’s just assume that this isn’t a scam, and the agressive format was created in order to: 1. Generate cashflow that will be reinvested into the development of the platform. 2. Offer aggressive incentives leading to rapid wide scale adoption.  Will venture capitalists and potential investors see this model as sustainable, and thus back it with additional funds? External funds will certainly be needed; even with the aggressive cash flow creation model it has adopted, self funding will not be able to acheive such an adventurous and ambitious project. Especially not when considering most of the current land buyers are expecting to get rich quick – and will be looking to retieve funds ASAP. I really want to believe that this will work out, when I think about the possibilities, it takes me into a fantasy world of possibilities. However, when I come back to Earth1, AKA the real world, it really isn’t realistically possible.  Additionally, this venture kicks up two big red flags: 1. If something seems too good to be true, it almost certainly is. 2. If you are compelled to buy into something as it is “now or never”, almost always the best option is “never”. However, with all that said and done, I have found myself buying some of the land for sale. I really don’t know what I was thinking. Was it greed? The will for fantasy? Plain stupidity? All three I guess. Plus if I’m honest with mysef, after almost a year of lockdown, the idea of an alternative reality seems pretty seductive. |
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