www.menainfra.com • Q1 2011

BUILDING THE DREAM

INSIDE: ABDUL MAJEED AL FAHIM, DUBAI PEARL • TOM BARRY, ARABTEC • LAURIE VOYER, AL HABTOOR LEIGHTON

KUWAIT HAS GRAND PLANS TO REVITALISE BOTH ITS ECONOMY AND SOCIETY THROUGH NEW CITY CONSTRUCTION. WILL IT SUCCEED?

COVER STORY

Eric Kuhne has a vision: to re-position architecture as a form of diplomacy for the 21st century. And if his goal sounds lofty, that’s nothing compared to the heights he is preparing to scale at Kuwait’s groundbreaking Madinat al Hareer development, home to what is planned to be the world’s tallest building, the Mubarak al Kabir. By Ben Thompson

BUILDING THE DREAM

As you’d expect from one of the world’s most feted architects, the principles of good design were instilled in Eric Kuhne from an early age. His father taught him to do perspective

drawing when he was just seven years old, and architecture and civil engineering were constant topics of dinner table conversation in the family home. “At least once or twice a week, my mother would pull a book off the shelf and say, ‘Let’s explore the archaeology of such-and-such a place’,” he explains with a grin. “Before you knew it, the dining table would be covered with literature and the children’s stories of that culture along with these great map books, and we’d have this fantastic, broad-ranging conversation.”

It was a schooling that taught the young Kuhne much about the importance of architecture in the development of a society – and also gave him an inspirational introduc-tion to other cultures and the magical stories behind them. “My mom used to always say that books are windows to the world that you can hold in your hand, but you don’t truly experience different cultures until you go to those places and that culture holds you in its hand,” he explains. “We were raised with an absolute belief that the best parts of the world were yet to be explored by us, and that we had to get out there and see them.”

It’s a perspective that has had a profound influence on his approach to architecture. “In America you’re raised with blinkers on to think that the American Way is the only way of doing things,” he says. “But the greatest gift I’ve had is that I’ve lived outside of the US for 20 years and been able to see my own country from Australian eyes and Southeast Asian eyes and Korean eyes and Chinese eyes and Kazakh-stan and Russian and Middle Eastern eyes. And while the rest of the world loves the liberties and freedoms that have been hard-fought and won in America, different countries must find their own way to grow and protect those liberties and freedoms within their cultures, within their govern-mental systems, within their own contexts. There is not a single head of state that I’ve worked with (and I’ve worked with over a dozen) that doesn’t want to bring those precious ideals into their own country, but they want to do it on their own terms.”

And for Kuhne at least, this is where architecture comes in: as a showcase of ideas, as a starting point for a conversation, as a form of diplomacy. “What we try to do is design a project – a waterfront, a building, a city – that will showcase how these cultures intersect with global beliefs. All of our work is based around that idea. So architecture is a new diplomacy for us. It’s not a job. It’s not a building. It’s the way you express yourself and teach the world about the beauty of your own civilization.”

In this exclusive interview with MENA Infrastructure Managing Editor Ben Thompson, Kuhne outlines how his philosophy has helped shape one of the region’s most ambitious mega projects – that of Kuwait’s City of Silk development, Madinat al Hareer – and why a smarter, more collaborative approach to funding and development is needed in order to embrace the realities of 21st century project work.

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You have said that money has never been more naïve than it is right now. So let’s start with your view of the current economic climate, and why the concept of ‘smarter’ money is essential to both the recovery and the industry itself.Eric Kuhne: In the past 10 years we witnessed some of the most unenlightened capital distribution ever with regards to project financing. There was no respect for what the market could absorb, no respect for business planning, no understanding of aesthetics being a fundamental part of long-term value, it was all about smoke and mirrors. In fact, the best way to label the past decade is that it’s been the biggest casino operation in the history of the planet. And as a result, we’ve never seen a greater collapse in the history of the property industry than the one we’ve experienced in the past two years – people make reference to the Great Depression, but I think it’s far grander than that because it touches nations all around the world.

What we need is a better approach to the way we think about financing and capital distribution, particularly in our industry. Smart money builds great cities, not archi-tects, and the more enlightened the capital, the grander the city. And as terrible as this crash has been, we’re now finding that the talent is finally getting aligned with the capital, and it’s starting to ask all the right questions. That’s a positive step.

So you feel that in the last decade there’s been a dis-connect between the people who provide the funding and the people with the smartest ideas?EK: Exactly. Boom economies never produce quality. They just produce quantity. We do our best work in bust economies because people have to be precise about what they invest in, how they put their business plan together, whether there’s a market that’ll support that, and how they can sustain the investment; in a boom economy it’s all about how much you can inflate the fake value of some-thing before flipping it and selling it on. Property is meant to endure, it’s not meant to be a commodity or a poker chip. And what we’ve seen is that countries that have used prop-erty as a gambling technique have had the worst economic collapses while communities and nations in which proper-ty was seen as a long-term investment – whether because of tax laws or ministerial policies or good leadership or even cultural sensibilities – have come out relatively unscathed.

Our belief is that you always stick with the basics. Is there a market that will support your ideas? Is there a business plan that you can apply to that market that will improve its long-term wealth creation and sustainability? If there is, then we can wrap great architecture around that.

So is that a foundation stone for your approach to ar-chitecture? Having a firm business model in place as a real-world driver for the architecture?EK: Absolutely. And, by the way, we start designing the moment we start in a community. The first thing we do is we hit the bookstores. Then we go to the schools and we listen to the stories that are being told to children because

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energy, information technology and the environment as the key economies for the Middle East going forward, and decided to organise the new cities around those industries.

This was in 2005. How have global events since that time impacted on the development?EK: Kuwait has been caught by the same economic crush as everyone else, but we’ve learned to be patient in the Middle East. Things go quiet, and then the phone rings, and it’s all action. We’re still exploring some design ideas on the proj-ect, but mostly we’re just working through the planning process and the political process. It’s fair to say that the economy has slowed things down but it hasn’t stopped any-thing. My job is to keep the project alive internationally. I have the highest level of respect for the ministers. To see a group of elected leaders fight to recover from having their nation flattened and their population scattered around the world, and to come back and start to rebuild that nation and build a new entrepreneurial society, is a lesson that the world needs to see. Look at Korea: 50 years ago it was bombed flat, yet today it’s the 11th strongest economy in the world, and that’s the model we’re aspiring to in Kuwait.

To what extent do you look to other cultures, people and work for inspiration?EK: I do it all the time. For example, I was given a copy of Ibn Khaldun’s Prologue by someone in the Emir’s office that has proven invaluable for my work on City of Silk. Ibn Khaldun was one of the greatest thinkers in the history of the world, and in that book he writes about his experience travelling all over the world, from India to Spain and Mo-rocco, which is where he ended up – essentially, the silk and spice routes. And he wrote about what he experienced, and about why honouring the diversity of peoples’ rituals and belief systems is essential. The tolerance of beliefs that don’t agree with your own, plus the concept of agreeing on business principles so you can successfully work with each other – those are fundamental parts of his work that I’ve tried to apply to Madinat al Hareer, sitting as it does at the crossroads of the old silk route and with its aim of being a major commerce hub.

I believe in building of and for our time. And I believe the search for form and symbols that represent our time are as essential as they were when they were building the great cathedrals or the pyramids or the Great Wall of China or anything else – but you have to do the hard work, you’ve got to go digging.

You talked earlier on about the need to have demand as a starting point for any kind of project. I guess for Westerners, it seems hard to imagine the demand for eight brand-new cities in a country is there – especially when our views are coloured by stories of regional oversupply in the property sector. So where is the demand coming from?EK: That’s a really good point. When we started this, which was almost five years ago, Kuwait was doing three things. First of all, it was encouraging citizens that had moved out

in those stories is the genius of that civilisation being passed on to the next generation. So by the time we meet with the client, we’ve got a cultural map of their nation as much as we have a drawing that represents our ideas, and those two go hand-in-hand. It’s the polar opposite of the modernist movement. While modernism wants to erase the identity of nations and civilisations across the planet, we believe we can be inspired by the genius of the past, and we can build something new today that honours that past as well as teaches the world about the history of our own civilisation. Modernism doesn’t do that.

Do you think having an outsider’s perspective – born and raised in the US, now resident in the UK, exten-sively travelled, working in countries all around the world – and bringing that to the projects you work on gives you a unique outlook?EK: I hope it’s not unique; I hope many people share it. But I’m surprised how many times we’re brought in to turn around projects that have gone in the wrong direction. A lot of contemporary leaderships have forsaken their own cultural history; look at the Commonwealth of Indepen-dent States, Central Asia, even China – those are all new governments, new leaderships, that came out of a com-pletely different political ethos to those of the past and who basically said, “we’re gonna erase history and start again”. It’s very hard to counter that. But the past is so important to our understanding of the present; I never dreamed that I’d be speaking as a diplomat and an archaeologist and a sociologist in order to create pretty things, but on the other hand I can’t imagine a better thing to be doing. I love my work. I get to travel and explore these great cultures, and the stories are amazing.

Obviously storytelling is an essential part of the pro-cess for you. Let’s talk a little bit about Madinat al Hareer and the storytelling process that went on there in terms of your conversations with the Emir of Kuwait. How did that meeting even come about? EK: His Excellency Sheikh Al-Sabah – who was prime minister when we started – asked the leadership of the pri-vate sector in Kuwait to build a series of new cities geared around transforming Kuwait into a knowledge economy; one of our clients at the time, Muhammed al Marzouk – we were doing a major retail-leisure destination for him in Kuwait – asked us to get involved. So I wrote a letter to Sheikh Al-Sabah that said, “All these other seven cities are fine, but would you consider an eighth one at the mouth of the Tigris-Euphrates river delta, rather than out in the middle of the desert?” He agreed, and so we were brought in, and in a matter of six weeks we had put together the sketch plan and started meeting with the ministers on a regular basis. They’re one of the brightest collection of minds that I’ve encountered anywhere in the world. And they saw their role as creating an entirely new entrepre-neurial class in order to address the ‘lost generation’ – the society that had been chased away by the invasion in 1990 and not returned. So we identified education, health,

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of the country to come home. They were saying, “We will pay you, we will give you land to build your home, to come back. We want you back so we can restore our culture.” The second thing was Kuwait was undergoing a massive immi-gration of blue-collar workers from countries around the region – Iraq, Iran, Afghanistan, Pakistan, India – and it had no place to put them. And the third thing – and this is what makes Kuwait different from a lot of the other nations in the Middle East – was that it saw itself as an economic catalyst for the development of the entire region rather than just a self-contained economy. So you have restoration of those that have left, you have empowerment of an immi-grant workforce that’s becoming an emerging middle class, and you have ambitions to become a catalyst for surround-ing economies. That’s where the demand is coming from.

Can you tell us more about the vision for Madinat al Hareer as a means of meeting that demand?EK: Well, just the building of City of Silk alone will employ around 100,000 people over that 25-year period, so the actual construction process itself is one way of supporting a population. But what the various government ministers were obsessed with was the idea that once the city is built it would have a self-sustaining economy where those work-ers’ children can then be employed to power the new Ku-waiti economy. And so various economists and experts put together an economic analysis for the City of Silk, without which it would have just been a bunch of pretty pictures. And that showed that Kuwait had the capacity to train the children of the workers to become the new emerging middle class over the course of a generation. I get really excited about this because we’re not just putting up build-ings, we’re putting up businesses; we’re not just building structures, we’re building educational programmes and health programmes and communities and changing the future of an entire culture. Architecture is just the package that wraps around all that. It can inform it, it can inspire it, it can touch hearts and souls, but it has to work and it has to endure.

The world’s much more accessible today, with ease-of-travel and advances in technology making it a much smaller place. How is this informing your work?EK: In an information economy, the velocity of knowledge and the quality of content is spreading faster than anybody could have imagined, and we’re finding now that we’re setting up Facebook pages for each of our projects so that there can be a blog about that project that people can con-tribute to; we’re starting to think about Twitter as a poten-tial communication tool; and we film every project because video is great for experiencing a three-dimensional world properly. So our job is to try to figure out how to get the word out, and we’re just on the verge of setting up what’s going to be called the Civic Arts Forum, where we will post videos and start debates.

There’s just not enough debate in this industry. Ev-eryone thinks they need to keep their great ideas to them-selves, and as a result lifting the general level of debate is

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very hard. In property development, very few people read; they xerox and copy everything, but they don’t read. So we’re just really focused on getting our ideas out there – at least that way you can raise (and more effectively manage) expectations, which is important because getting an en-lightened, professional team in place is essential on these projects.

Who are you working with on City of Silk?EK: Atkins were the engineers. And project management is a really important piece – it wasn’t until our partners at Faithful+Gould actually mapped out the 25-year lifecycle of the project so that the economists could put a cost on infrastructure, calculate income from sales and projected income from work, and we could see how we were going to phase it, that the thing came to life. It was like an EKG. We had a pulse on a patient that was comatose, and all of a sudden, boom! all the indicators came to life.

I guess it highlights the need for all of us to continue to learn from other people, to share, to collaborate – and obviously this is now an increasingly important part of the industry…EK: Absolutely. One of the problems is that the capital guys are generally seen as separate from the creative pro-cess, and so they bring a prejudice of failed projects to the project development side, which is generally restrictive. I feel they should see their responsibility as protecting the creative processes from failing, and if they knew what was being created they would participate in the board meet-ings and raise questions, as opposed to just reading the

reports and putting up obstacles. Greater collaboration is definitely needed.

But financial models are out of date. The intangibles that make a place, a city, a building, a project, a garden or a waterfront great have got to be measured. And that is why financial people are important. This is what they do; work up formulas to measure the intangibles. At one point capital was an intangible until someone figured out how to calculate its return. So was carbon. Now we have to figure out how to measure social grace, or the ability to release human capital in a society. And imagine if we judged buildings by their ability to do that rather than just reduce the carbon footprint, for instance? We have to come up with new economic models to measure our work properly.

I’m proud that design is in the boardroom – but to sit in that room, you have to honour those that you disagree with, and you also have to show that great design can solve what money can’t. That’s the magic. Each discipline – whether it be finance, marketing, engineering, project management, design – can speak a language, and they can solve irrecon-cilable differences; they just need to communicate better. There are many times where I’ve had asset managers and project managers say something will never happen, and I do a little sketch, and all of a sudden everybody gets what they want. And they’re great moments. Design has be part of the solution. It’s great to be part of those groups. And of course I bring stories to every job to get people to re-member what they’re there for: they’re building something that captures the ethos of that civilisation, not just trying to make an investment return. n

CONGRESS OF FAITHS: Atop the central core, an interdenominational hall caps the Mubarak al Kabir. The highest inhabitable floor is 1001 metres above street-level.

CORE FLOORS: Free of all but the highest elevators, the central core occupies the seventh village above 204 floors and has exclusive residential apartments commanding the farthest views from the tower.

CRYSTAL MOSQUE: Islam, the youngest of the Abra-hamic faiths, is represented by the Crystal Mosque atop the sixth village. Oriented towards the Tigris and Euphrates delta, this looks deep into the heart of the birthplace of the monotheistic religions.

TWIN ANTENNAE: Two-metres in diametre, each is large enough to allow for a person to walk out to the end where the environmental, communica-tion and navigation equipment is for the tower.

CRYSTAL CATHEDRAL: On top of the middle blade, at 170 floors, the Christian Cathedral sits looking west towards Rome, Canterbury and Athens. The vaulted interior space is open to all and incorpo-rates stained-glass as part of the sun shade.

CRYSTAL SYNAGOGUE: On the lower blade, topping the 136th floor and symbolising the beginning of the monotheistic faiths, the syna-gogue looks out towards the Arabian Gulf.

EXPRESS ELEVATOR CORE: All the express elevators are in the triangular core and run from the ground to the top of the tower, along with all the primary utility services.

BLADE ZIPPERS: Each blade has a central ‘zipper’ that includes scenic elevators running along the outside of the blades. Sky lounges are provided for everyone’s use looking out over the Middle East and Arabian Gulf.

SKY GARDENS: On the interstitial floors between each of the seven villages are the sky gardens. Four stories tall, the height allows for sun to reach deep into the interior space to support winter garden plants. The sky gardens also serve as village squares.

VILLAGE SQUARES: These are the village centres, complete with retail, leisure, entertainment, educa-tion, health care, emergency services, cultural facili-ties and maintenance centres for the entire tower.

CORE STRUCTURE: The structure is based on three overlapping blades that pinwheel about a triangular core. The blades contain all the space for residents and offices, while the triangular core contains the express elevators that stop seven times – once at each sky garden – in their ascent to the top.

30-STOREY VILLAGES: The tower is made up of seven 30-storey villages stacked atop one another. Each of the three blades of each village contains elevator banks serving the low/medium/high-rise lifts. There are apartments, offices and hotels in each village.

GRAND DESIGNSThe vision for Madinat al Hareer is to create a new city on the Arabian Gulf that will become a centrepiece of the Arabic world: a crossroads of the new Silk Routes, a gateway to Central Asia and a rich centre for the heritage and genius of Arabic culture stretching back over 2000 years. The so-called ‘City of Silk’ is a proposed 250 km2 (62,000-acre) planned urban area in Subiya, Kuwait, an area just opposite Kuwait City that will be divided into four main districts: Educational City, Finance City, Leisure City and Ecological City. Upon construction it is set to include the world’s tallest building Burj Mubarak al Kabir, a natural desert reservation of two square kilometres, a duty-free area located beside a new airport, a large business centre, conference areas, Olympic stadia, athletic areas and areas that concentrate on media, health, education and industry. The city will also include numerous tourist attractions, hotels, spas and public gardens. Planned to be built in individual phases with construction set to be completed within 25 years, the development will cost an estimated US$94 billion.The complex is planned to be linked to Kuwait City by a 23.5-kilometre long bridge that should decrease driving times between Kuwait City and Madinat al Hareer to just 17 minutes rather than the usual one-and-a-half-hour drive around Kuwait Bay. Up to 700,000 people could be housed in the city complex and it is estimated that up to 450,000 new jobs will be created.

ARABIAN DREAMInside the Mubarak Al-Kabir, the tower inspired by 1001 Arabian Nights.

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CONSTRUCTION FOCUS48

The last few years have been tough for construc-tion contractors; even the biggest have been feel-ing the pinch. And in terms of the Middle East, few are bigger than UAE-based Arabtec. Its logo

is plastered on sites and equipment across the region, and over the last few years the firm has worked on some of the biggest and most iconic building developments in the region – including the Burj al Arab and Emirates Palace hotels, the Abu Dhabi National Exhibition Centre and the world’s tallest building, the Burj Khalifa. High-rises, hotels and commercial buildings: you name it, Arabtec has probably worked on it.

But despite its considerable size and substantial pedigree, even Arabtec has not been immune to some of the industry’s most common problems over the last few years – namely non-payment and other contractual breaches. “Resolving construction disputes through me-diation, arbitration or litigation has become a very topical subject over the last few years, especially since the crash at the end of 2008,” admits Thomas Barry, the company’s straight-talking CEO. “The financial crisis has brought about an escalation in these types of challenges. There are many more disputes on the table now between contractors and clients because of breaches of contract as a result of delayed payments, inability to pay, etc. and that is having a negative impact on the whole industry.”

Of course, there were disputes and contractual issues before the onset of the financial crisis. In fact, says Barry, since the construction boom started in the early 2000s there have been a growing number of issues that have

ended up in negotiation, mediation, arbitration or even litigation, largely due to breaches of contract in respect to payment issues. For one thing, the magnitude of the projects themselves is bigger. “There’s a lot more at stake,” he says. “The issues become bigger in terms of value. I remember when we thought a huge project was US$150 million and we were celebrating for a week. Now, US$1.5 billion projects have become commonplace, and any variation in scope or delivery might have a huge impact in terms of value.”

This, combined with the pressure of the downturn, has led to a change in the way both contractors and clients are approaching such problems – which is compounding the issue even further. “It’s just the order of the day now: people are prepared to let disputes go to some form of mediation, adjudication or arbitration rather than just sit around the table and employ some common sense in order to resolve it,” he says. “It’s not like the old days, where disputes would be resolved over a cup of coffee. The two parties would just get together, talk over their differ-ences and be prepared to compromise – and most likely they’d get a solution.”

Indeed, Barry believes that a return to a more amicable way of solving potential problems would go a long way towards reducing some of the headaches the industry cur-rently faces. “Very few construction projects get completed without some issue or contractual disagreement cropping up along the way,” he says. “This can be of a minor nature or it can be of a very serious nature; the point is that many of these issues can be dealt with before they become a dis-

RESOLVING CONSTRUCTION DISPUTESWith the effects of the recession continuing to bite, Arabtec CEO Tom Barry argues that firms need a new approach to dispute resolution: old-school negotiating skills.

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pute. In fact, we should all try and ensure that they’re dealt with before they become a dispute.”

The benefits of direct negotiation are numerous. For one thing, such an approach maintains and improves ex-isting relationships between all the parties involved on a project. For another, it saves significantly on the time and costs involved in alternative methods of dispute resolu-tion such as conciliation, arbitration or litigation.

“Arbitration is a very costly and lengthy process,” says Barry. “It can involve you having to appoint a trained specialist. You’ll probably need local lawyers and maybe your own in-house counsel as well. Your staff will have to be involved in preparing documentation and then they’ll have to appear at the hearing as witnesses and be inter-rogated, which can be pretty stressful. Then, of course, there’s the cost of the arbitrators themselves. It’s no fun and definitely to be avoided where possible.”

Litigation is even worse, and as such it is no wonder that conciliation – which involves bringing the two opposing sides together to reach a compromise in an attempt to avoid taking the case to trial – is the fastest growing form of alternative dispute resolution. “I don’t believe clients or contractors ever want to have to resort to arbitration or litigation,” says Barry. “In such cases, the lawyers are the only winners. I strongly recommend that we try and go back to the old way of doing things and sort any issues out over a cup of coffee or through direct negotiation.”

Even better still is the concept of ironing out all potential areas for concern before work is even started. “Prior to 2008 we started to see a tendency for some cli-

ents to engage the contractor at an early stage, and it’s something that we in Arabtec certainly advocate,” says Barry. “Unfortunately, when the financial crisis hit that seemed to go out the window. We would certainly favour meeting with clients at the pre-construction stage so that we can talk together and agree upon issues relating to contract clauses, evaluate the engineering process and the programme of work. In my opinion, it would eliminate a lot of disputes and complications further down the road if that happened more often.”

Ultimately, Barry believes a more collaborative ap-proach from the start – one that continues throughout the lifespan of the project – represents the future. “I think if we can get back to those win-win type of relationships then the clients will see the benefit of that because they’ll get a far smoother, better quality, better delivered project and it’ll be a happier bunch of people all the way through,” he says. “A more collaborative approach is definitely the future. It’s just the timing of when we might start to see people returning to that kind of approach that is going to be interesting.”

Barry hopes that along with an improvement in in-dustry relationships, 2011 will also see Arabtec expanding further into the Gulf region. Already, the New Year has brought an award for two projects in the UAE worth a com-bined US$170 million. The company will provide enabling, structural and MEP work as well as fit-out and landscaping for two residential towers in Abu Dhabi as well as staff ac-commodation in Fujairah.

The first tower will consist of three basement levels, a ground floor, five podium floors and 40 residential floors;

“I strongly recommend that we try and go back to the old way of doing things and sort any issues out over a cup of coffee or through direct negotiation.”

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the second tower will have two level basements, a ground floor, five podium floors and 35 floors on top. The total built up area for the two-year project is 90,000 square metres and represents a contract worth US$150 million. The com-pany will also design and build staff accommodation in Ishwais in Fujairah, the eastern-most emirate. The building will be 16 floors high with two podiums and a basement over a built-up area of 14,000 square metres. It will take 16 months to complete and is worth around US$20 million.

And while the UAE remains an important market, Barry explains that the projects represent just the start of an aggressive expansion plan across the Middle East, with Saudi Arabia a key focus, along with Syria and Egypt. “At Arabtec we will continue to focus on Abu Dhabi, as there are still a lot of projects there,” he says. “Some may be a bit slow to come to fruition, and margins will be tight because of competition from other local contractors look-ing for work there. As such our major focus will be Saudi Arabia. They’ll be spending around US$400 billion over the next few years to improve residential areas, hospitals, schools, rail.” In October the company recently secured

a US$1.33 billion contract from Saudi Binladen to build 5000 villas, which includes a residential project in the Eastern Province.

“The Egypt and Syrian markets will also be important for us. There are some big projects in Damascus. In Egypt they tend to carry out some large projects, so those will be big targets for us as well,” he says, adding that he is also upbeat about the market in Qatar. Indeed, Arabtec is bid-ding for around US$8.17 billion of work outside its local markets, and sees relationship building – and amicable dispute resolution early in the contract process – as key to developing that growth further.

“Contractors here are increasingly moving into areas where there is work – in Saudi and Qatar and Syria, in our case even Egypt,” he concludes. “I hope that this tendency towards contract breaches and disputes doesn’t follow the work such that we’re going to be forever embroiled in dis-pute resolutions or arguments as to who’s right and who’s wrong and what our rights are versus those of the client. This will not be good for the industry. I hope in the end that common sense will prevail.” n

Dispute resolution: the alternatives

Negotiation: Here, compromise is the order of the day. Both parties get together across a table to discuss the issues and how best to resolve them to mutual satisfaction. Negotiation can take the form of an informal chat or a more formal discussion where claims and documentation are shared; either way, if the two parties are unwilling to make concessions then an agreement is unlikely to be reached.

Mediation: In mediation, a neutral individual attempts to assist the parties to find a compromise acceptable to both. It’s a popular way of resolving problems amicably. However, although it is relatively inexpensive the mediator has no power to impose a decision; the mediator is only there to identify the issues and to facilitate the parties reaching an agree-ment themselves.

Adjudication: Adjudication is a more serious form of mediation. It involves the two parties agreeing to a third-party adjudicator who is presented with all the claims, documentation and technical submissions for analysis, and who then makes a decision based on

the evidence presented. For adjudication to work, the parties must agree to be bound by the final decision of the adjudicator.

Arbitration: Arbitration involves a hearing but takes place out of court. The two sides select an impartial arbitration panel, usually made up of three people: each side appoints one person, and those two then appoint the third. Both sides present evidence and testimony, and the panel then makes a decision. The arbitrator’s decision is usually final and courts rarely re-examine – although if the decision is contested you may have to take it to court to get it enforced.

Litigation: Litigation happens when a lawsuit is brought before a court of law suitably empowered to hear the case and to make a resolution and judgment on it. Such solutions are seen as a last resort as they are extremely expensive and involve lawyers, court officials, court procedures, witness statements, cross-examination, extensive documentation, expert testimony – and a whole lot of time and effort.

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Right across the world, awareness of the potential risk to health and safety posed by overhead lifting is growing. In the Middle East and North Africa, concern is even more acute, given the importance

of industries heavily reliant on lifting such as construc-tion, mining and the oil and gas sector. Some readers may recall the traffic chaos caused in Dubai back in 2008 when the gantry of a mobile crane working on the metro collapsed across a main road. Tragically, this was just one of a series of crane-related accidents in the region, a number of which have resulted in deaths or serious inju-ries. Indeed, worldwide, overhead lifting remains a major cause of workplace fatalities.

Addressing the challenges posed by overhead lifting is a wide-ranging task. However, the starting point is simply the recognition that it is a specialist discipline that requires specialist skills and experience. The vast majority of ac-cidents can be traced back to human failings – typically including basic errors made by staff who lack the necessary training for the job in question. In part this is often because lifting is a long-established, commonplace activity, and much of the equipment involved – such as slings, lifting attachments and hoists – appears straightforward and easy to use, inspect and maintain. Given the continual pressure to meet deadlines, the temptation for staff to be given re-sponsibility for lifting-related jobs regardless of their skills or experience is obvious.

Fortunately, a growing number of employers in the Middle East and North African region appreciate that safe (and indeed efficient) overhead lifting demands a profes-sional approach. But whilst this realisation is an important first step, translating good intentions into effective action is a major hurdle. For a start, overhead lifting involves a number of distinct disciplines, ranging from planning, su-pervision and operation through to the inspection, main-tenance, test and examination of the equipment involved. Furthermore, in common with many so-called traditional engineering disciplines, recent years have seen a shortfall in staff with skills and experience in this field. As a result, sourcing staff or suppliers with the requisite qualifications can be problematic, to say the least.

This skills gap goes a long way to explaining the dra-matic growth in LEEA membership over recent years, par-ticularly from companies and organisations based outside the UK. The LEEA is perhaps best known for its Diploma examination, the most widely recognised qualification for engineers intending to test and examine overhead lifting equipment. In terms of maintaining the safety and legality of overhead lifting operations, the importance of this quali-fication should not be underestimated; ensuring that equip-ment remains fit for purpose is clearly fundamental to any safe lifting programme. In many countries, health and safety legislation demands periodic thorough examination of over-head lifting equipment by a ‘competent’ person. Certainly this is the case in the UK, where the Lifting Operations and Lifting Equipment Regulations (LOLER) have been in force since 1998. Crucially, in countries where no such lifting-specific regulations exist, many multinational companies have chosen to adopt LOLER as best practice.

Taken by hundreds of students in numerous different countries every year, the Diploma examination is supported by both distance learning courses and practical training ses-sions held either at the LEEA’s purpose-built facilities in the UK or member premises around the world. These are now open to individuals as well as employees of member com-panies. Significantly, the approved codes of practice that ac-company LOLER define competence as a mix of theoretical skills and practical experience. However, there is no formal registration scheme for engineers that meet the criteria. To

Bridging the skills GAP in overhead lifting Geoff Holden, Chief Executive of the Lifting Equipment Engineers Association (LEEA), addresses a key concern for construction workers.

CRANES AND LIFTING

CRANES AND LIFTING 43

help employers identify engineers that are genuinely com-petent, the LEEA now issues a ‘TEAM’ identity card and logbook to those that have passed the Diploma examination.

In terms of ensuring safety, the test, examination and maintenance of lifting equipment is only part of the story. It is equally important that those responsible for planning and supervising lifts and operating equipment are effectively trained. Indeed, most overhead lifting accidents are the result of failings in one or more of these areas. And although in many cases the same individual will be responsible for all these tasks, it is important to recognise that each requires a different set of skills. There is generally no shortage of commercial companies offering courses in these fields, but experience suggests that many lack the rigour necessary to make a real impact on the skills of students and therefore the standard of lifting operations. To help address this par-ticular problem, the LEEA recently launched an accredita-tion scheme for member companies that offer training in the operation and management of lifting equipment. Only companies that meet a rigorous set of independently audited criteria, including the qualifications and experience of the trainers, the standard of training facilities, and the quality of student assessment, are entitled to display the LEEA Au-thorised Training Centre logo.

In all aspects of health and safety, the ‘human factor’ is generally considered paramount. Effective risk assessment, proper planning and appropriate supervision, and the use of appropriately qualified staff are rightly considered vital

across a wide range of workplace activities. Ensuring that work equipment remains fit for purpose is another high priority. For overhead lifting in the Middle East and North Africa, a number of factors further emphasise the impor-tance of these issues. The conditions experienced in the offshore oil and gas industry, for example, are notoriously tough on lifting equipment. Similarly, construction is char-acterised by extremely high lifts, often in close proximity to staff or the public. A particularly acute shortage of staff is another of the challenges that many employers face. How-ever, the growing demand for the training and accreditation provided by the LEEA demonstrates that there is a genuine commitment to filling this skills gap. If this is maintained, and employers insist on using only appropriately qualified staff, then they undoubtedly stand to reap the social and eco-nomic rewards that result from safe and efficient overhead lifting operations. n

For further information, please contact Geoff Holden, Chief Executive of the LEEA, on +44 (0)1480 432801 or mail@leea.co.uk.

About the LEEAEstablished in 1944, the LEEA has over 380 member companies worldwide and campaigns vigorously for higher standards of safety within the lifting industry. In addition to providing members with training and expert technical advice, the association works closely with organisations such as the Health and Safety Executive in the preparation of regulations and British, European and International standards. Member companies include those involved in the design, manufacture, hire, repair, refurbishment, test, examination, verification and use of lifting equipment. Applicants are subject to an initial technical audit before full membership is granted, and then to a continuing programme of assessments. Further details on the activities of the LEEA and a full list of members can be found at: www.leeaint.com

FOOD PROCESSING106

Roger Emery has the good grace not to curl his lip when I tell him I don’t take milk in my tea. In some quarters, that would be akin to telling Victoria Beckham you don’t believe in high heels or zero

body fat. But then Emery has more reason than most to consider

my refusal of milk as something verging on treason. Based in Shropshire, the 41-year-old is the Group Technical Direc-tor of Dairy Crest Group plc, the UK’s leading dairy com-pany responsible for processing and selling fresh milk and branded dairy products to the UK and Europe. It’s a role that entails working with a team of food technologists to unlock the goodness of dairy and product ingredients for a range of application categories.

The milk-less tea gaffe over, Emery settles back to sing the praises of the role he’s held for the past three years.

“Milk is a fantastic raw material and it’s my aim to make sure Dairy Crest gets as much value from each last drop as possible. Our strategy is to drive added value in the supply chain but, as a broadly-based dairy company, we continue to operate in some of the traditional ingredients markets.”

That includes the UK’s competitive milk processing sector, where the statistics that have shunted Dairy Crest to

Cre ting the dairy wave

The UK’s leading dairy processing company reveals how it has survived – and thrived – through the worst recession in recent memory. By Sharon Stephenson

FOOD PROCESSING 107

the front of the queue are certainly impressive: the 23-year-old company processes some 2.2 billion litres of milk a year, and then delivers it to customers via door-to-door milkmen and leading supermarkets such as Sainsbury’s and Mor-risons. Thanks to Dairy Crest, every day more than 1.3 million residential customers have something to pour over their cornflakes and top up their hot beverages with. Not to mention the 20,000 businesses such as cafes and hospitals who rely on milk to help keep the wheels of their organisa-tions turning.

“The sheer volume of milk is what makes it possible for us to supply some of the UK’s biggest retailers with liquid milk,” says Emery. “Dairy is one of the largest food categories in the UK, worth around GBP£10 billion, and I’m proud that Dairy Crest is able to claim a large chunk of this market.” To prove his point, the company’s turnover was GBP£1.6 billion for the period 2009/10.

The economic crisis hasn’t been kind to other parts of the food sector, but Emery says markets for dairy products have remained strong. “According to a survey by Mintel Oxygen, nearly a third of consumers say they avoid pro-cessed foods and are looking for more natural products such as dairy. Milk was the world’s first super food and consum-ers understand and trust the benefits of dairy products in-cluding calcium and protein.”

It hasn’t hurt that Dairy Crest owns one of the UK’s top selling fresh flavoured milk brands, FRijj, or that their complementary manufacturing businesses in the UK and France feature some of the most recognisable brands in the dairy sector such as Country Life and Clover spreads as well

Cre ting the dairy wave

as Cathedral City Cheddar, which is the UK’s best selling Cheddar cheese with a retail value of around GBP£211m last year alone. Sitting under the Dairy Crest brands in Europe are leading spreads brands St Hubert (France) and Vallé in Italy.

The key, is to focus on innovating products to meet con-sumers’ needs, and therefore to increase the value through the supply chain.

“For example, Cathedral City Cheddar has shown year-on-year growth to be the UK’s number one Cheddar brand taking market share from own-label Cheddar. We have achieved this through consistently high quality. A key focus for us has been expanding our range to include healthier products such as low fat variants of our main brands Clover, Country Life and, of course, Cathedral City. Research from Nielsen told us that over three-quarters of people (77 per-cent) want to eat more healthily, but 62 percent don’t believe they are succeeding. We can help by providing core, every-day products which are healthy as well as enjoyable.”

According to research by Kantar, the average British household buys 28kgs of saturated fat a year, which is 40 percent too much, according to government guidelines. The significance of these figures haven’t been lost on Dairy Crest.

“Consumers are becoming more aware of health issues around saturated fat and research shows that almost half of them claim it is their first or second concern when buying food,” according to Emery. “It is something we have concen-trated on when developing our strategy – I’m proud to say that we estimate that all of our initiatives, such as introduc-ing lighter variants of the main brands, have saved consum-ers over 6400 tonnes of saturated fat.”

Cathedral City Lighter has revolutionised the Cheddar category. Before its launch most consumers rejected low-fat alternatives due to lack of taste. Emery says that Cathedral City Lighter offers 30 percent less fat but still delivers on taste and now accounts for 11 percent of total brand sales. “With 30 percent less fat than its standard counterparts, Clover Lighter now accounts for 14 percent of total brand volume, while sister brand Country Life Spreadable Lighter accounts for 13 percent of sales.”

The reduced fat message from Dairy Crest isn’t con-fined to cheese, butters and spreads – Emery is also proud of the fact that the company’s vast liquid milk division is following suit.

“A year or so ago we championed one percent fat milk,” he says, “which quickly achieved a combined volume of over

Research from Nielsen told us

that over three-quarters of people (77 percent) want to eat more healthily, but 62 percent don’t believe they

are succeeding, says Emery

Roger Emery

FOOD PROCESSING108

18 million litres in Sainsbury’s, Morrisons and Waitrose su-permarkets. It’s been so popular, we also sell it through our online doorstep delivery business, milk and more.”

Emery says another key focus has been to fine-tune the ingredients business over the past few years. This has seen the spotlight trained firmly on skimmed milk powder and whey powder, the by-products of Dairy Crest’s main dairy manu-facturing processes.

“Our ingredients operation can be a balancing act and needs careful management of seasonal supply and demand,” Emery says. “We focus mainly on the by-products from our manufacturing processes, such as whey and buttermilk. Last year we had a successful year on the back of rising com-modity markets.”

The underlying strategy, he says, is to drive added value in the supply chain. A major link in this chain was last year’s ac-quisition of Fayrefield Foodtec, a company that specialises in developing innovative raw ingredients for the food industry.

“The business focuses on replacing traditional ingredi-ents with those that can deliver other benefits such as removal of allergens. Fayrefield Foodtech has developed an award-win-ning range of gluten-free baking products and products such as the GelTec egg replacer which can significantly reduce egg usage while offering lower cost fat, cholesterol and a clean label for no loss of functionality.”

The past year has also seen the launch of a gluten-free bread supplied nationwide to Boots, as well as such envelope-pushing products as Equilibrium, a lactose-based product aimed at easing stress.

“Acquiring Fayrefield Foodtech has allowed us to widen the scope of our innovation proposition and add value to our main ingredient stream. It is one of the ways that we have managed to ride out the recession and improve our product offering to consumers.”

Emery has worked in the food industry since graduation and has a background in technical, manufacturing and con-tinuous improvement. Most of this was gained from 16 years at Nestlé where he moved between dairy, canning, fruit juices, frozen foods and chilled deserts.

The future for Dairy Crest, he says, lies in continually driving innovation, which isn’t totally confined to the devel-opment of healthier products. Dairy Crest has also led the way with new packaging ideas: “Cathedral City pioneered re-sealable cheese packaging which keeps cheese fresher for longer without consumers having to resort to silver foil and cling-film. This also has the benefit of keeping the brand in front of consumers every time they take more cheese from the fridge. And, more recently, we produced a revolutionary new milk bag and jug system, of which we are very proud. This gives consumers an alternative to poly bottles and makes recycling easier. Research shows that the milk bag can save 75 percent of packaging, as well as reducing supply chain costs for the company.

“Our company vision states that we aim to meet consum-ers’ needs and go where this takes us. I think that by keeping our eyes on the future, anticipating trends and needs, we live that vision every day. I’m very proud of my team’s part in that achievement.” n

Spread ‘emA key part of the Dairy Crest business is the

Foods Division which manufacturers and sells butters, spreads and cheese in the UK and Europe. More than 80 percent of this division’s sales are brand-ed with a strong focus on marketing and innovation.

In the UK, Dairy Crest’s butters and spreads are manufactured in two factories at Kirkby near Liver-pool, and Crudgington in Shropshire. In France and Italy, the spreads portfolio includes St Hubert, which was acquired in January 2007 from Uniq and is now the number one brand in the French spreads market. Building on last year’s launch of two products targeted at health-conscious consumers, St Hubert Omega 3 Leger in France and Valle + Leggera in Italy, Dairy Crest has recently expanded its offering: St Hubert Bio is the first mainstream organic spread in the French market and has been well received by both retail and consumers. Spreads for the French and Italian markets are manufactured at Ludres in North Eastern France.

FOOD PROCESSING 109

Cheese is one of the most varied and subtle foods in the world. It can taste bland, buttery, innocuous, rich, creamy, pungent, sharp, salty or lightly delicate. In texture it can be hard enough to chip off in flakes or so soft and runny that it needs to be eaten with a spoon.

Some archaeologists have suggested that there is evidence of cheese being made from the milk of cows and goats as far back as 6000 BC, while murals found in Egyptian tombs dating back to 2000 BC show milk being stored in skin bags.

Most authorities consider that cheese was first made in the Middle East. The earliest type was a form of sour milk which came into being when it was discovered that domesticated animals could be milked. Legend has it that cheese was discovered by an unknown Arab nomad who is said to have filled a saddlebag with milk to sustain him on a journey across the desert by horse. After several hours he stopped to quench his thirst, only to find that the milk had sepa-rated into a pale watery liquid and solid white lumps. Because the saddlebag, which was made from the stomach of a young animal, contained a coagulating enzyme known as rennin, the milk had been effectively separated into curds and whey by the combination of the rennin, the hot sun and the galloping motions of the horse. The nomad, unconcerned with technical details, found the whey drinkable and the curds edible.

By AD 300, cheese was being regularly exported to countries along the Mediterranean seaboard. Trade had developed to such an extent that the emperor Diocletian had to fix maximum prices for a range of cheeses including an apple-smoked cheese highly popular with Romans. Yet another cheese was stamped and sold under the brand name of ‘La Luna’, and is said to have been the precur-sor of today’s Parmesan which was first reported as an individual make of cheese in AD 1579.

Roman expertise spread throughout Europe. While the skills were initially employed only by landowners and Roman farmers, there is little doubt that in time they filtered down to the local population. Roman sol-diers who had completed their military service married local women and set up ‘coloniae’ farms in retirement, and may well have passed on cheese making skills.

With the collapse of the Roman Empire around AD 410, cheese making spread slowly via the Mediter-

Spread ‘em

The Big Cheeeranean, Aegean and Adriatic seas to Southern and Central Europe. The river valleys provided easy access and methods adopted for production were adapted to suit the different terrain and climatic conditions. Cheesemakers in remote mountainous areas naturally used the milk of goats and sheep.

In the fertile lowlands of Europe dairy hus-bandry developed at a faster pace and cheese making from cows’ milk became the norm. Hence, the particular development of cheeses such as Edam and Gouda in the Netherlands.

France developed a wider range of cheeses from the rich agricultural areas in the south and west. French cheesemakers preferred soft cheese production which had a comparatively long making season. Hard-pressed cheeses appeared to play a secondary role. To some extent this reflects the Latin culture of the nation, mirroring the cheese types produced in the Mediterranean areas as distinct from the hard-pressed cheese that were developed in the northern regions of Europe for storage and use in the long cold winter months that lay ahead.

Monks were the innovators and developers of the Middle Ages and it is to them we owe many of the classic varieties of cheese marketed today. During the Renaissance period cheese suffered a drop in popularity, being considered unhealthy, but it regained favour by the nineteenth century when, on the heels of the industrial revolution, produc-tion began to move from farm to factory.

INNOVATION 132

Consumer behaviours are changing, especially in the soft drink space. How do you balance the formal goal setting required by the business with the flexible nature and inherent agility required by modern busi-ness practice?Esat Sezer. Our strategy is primarily explained in a sense that we need to be creating enough resources to fund the growth–related initiatives that differentiate us from our competitors. In other words, create resources through the efficiencies and productivity initiatives and fund your growth–related activities that business requires

The approach that we are taking related to the dif-ferentiating capabilities which drives competitiveness for our business. We have tight integration with our business In other words, they put the necessary financial resources to be able to drive those capabilities. They could put those financial resources into something else as opposed to IT, but we work with them very closely to define the value proposition up front and then we allocate the resources accordingly with our business partners. There are some exceptions to that. We also, in the business units of using technologies to drive resources, create resources, and drive productivities.

And those are the initiatives that we look at from the enterprise corporate benefit perspective, and we have some resources that we are allocating by looking at the enterprise benefits because the enterprise corporate ben-efits don’t match the business unit benefits every time. So you’ve got to balance those two carefully, and that’s the

model that we are applying today to our IT investments. Engaging the business with us, defining the value, and

then letting the business allocate those resources where they see the value. In the meantime, we look to enterprise benefits, corporate benefits, and then make the resource al-location decisions parallel together at the same time.

Platform as a service (PaaS) is very much considered the next big thing, and you’re currently assessing in-frastructure as a service. How do you, as a CIO, make the decisions on what to build and what to buy? What are meaningful metrics to you? How are you making those decisions? What are the signposts for success and failure?ES. I think the way that we are looking at this is that our team actually have the expertise and knowledge. We’ve also tested the cloud services within the software as a service with Microsoft. We’re now crawling, walking and running from the learning standpoint. We are seeing the thing that drives all those decisions is the customer. As I mentioned, the wow factors created by the software as a service in the communication/collaboration space that we are working with Microsoft in the cloud has created a kind of an eye opening for us.

We had eliminated certain orthodoxies that existed in our mental model. In the model that we are working, while we are buying the pre-developed capabilities like email software or instant messaging software, you don’t make too much development on it. But on the other hand,

CIO of Coca-Cola Enterprises, Esat Sezer, explains the role of IT in the company’s business transformation programme.

Coca-Cola beverages are

sold in over 200 countries

INNOVATION 133

on our SharePoint team sites and our employee portal space, you do make some development collectively within those platforms. But the amazing thing for me, and I think that’s the exciting part of that, the development cycle that you are talking about, especially when you are in the cloud,and using standard modular capabilities, is extremely shrunken. And that could potentially change the perception.

You’ve got to look scenario by scenario into this; there’s no one-size-fits-all answer to this. One thing that we are now looking into as a platform, as a service, can be to rap-idly develop capabilities and deploy the wow factor that cloud provides with ease of use, adoption and accelerated beta deploy. Would that make sense in the development of some of the functionalities that might be residing in the traditional ways internally within our technology ecosys-tems? We are looking into that very seriously right now.

For you then, what are the meaningful metrics and how do you tie those into genuine business outcomes?ES. To give you an example, if you look into the collabora-tion space, there are several ways that you could actually get value out of better communication and collaboration,

if you will. What I mean by that is if you have a transfor-mation agenda in your business, I would not think any CEO or any sound business person could tell you: “I don’t need a better communication or collaboration capabili-ties if I have a business transformation agenda.”

In fact it’s the opposite. What can I do that will engage my employee base into the change agenda that I have, is the question. You need to look from the business requirements perspective. In our case we have a very sig-nificant transformation agenda in Coca-Cola Enterprises.

It was not much of a debate for us to decide to put more effort into better communication and collaboration capabilities. The question was, how are going to do that? How fast we could get there? Obviously the funding, if the allocation of the resources comes into competition with other things, which in our case it did not really, that could be tricky. But this was a priority because it was enabling capability defined by our executive com-munication council.

All the decision making on the technology invest-ment decisions related with that was driven from a com-munication and collaboration council that we created in our business. Along with our communications and public

INNOVATION 134

relations team we collectively led that effort and then tied that back into our transformation agenda and built it into our annual plan. Some of those corporate benefits and en-terprise benefit initiatives have come from that and then some of them we self-funded by decommissioning those technologies that used to be operating internally.

So we created some resources, but we also added some additional funds to be able to get there. So in short answer to your question, the metrics you’ve got to put in are the value, but value sometimes doesn’t necessarily need to be very quantitative. Sometimes, especially in big change agendas that you are driving, it is very intuitive to see what the value proposition is, but on the other hand, the major-ity of our initiatives are not like that.

We have to have a business case for us to put invest-ment into the IT department. In every initiative we have, we have a value management process that we go through, a very rigorous process, and toll gates that we apply and then assure that the value proposition is going to be deliberate, if you will. The metrics are those differentiated new capabil-ity standpoints, there’s a solid business case that we define and that we manage that through the toll gate process, whether we are materialising it or not.

On some of the corporate benefits, which communica-tion collaboration is a space that we looked at, it was quite honestly a capability building excercise. Rather than a business case requiring activity, it was more required foun-dation, if you will, that we need to be building. So that was the approach the we took in that case.

You’ve previously said that CIOs should take advantage of the buzz around green IT to upgrade their systems and drive cost reductions. Is it really that simple?ES. I don’t know why we need to make this more compli-cated than it is, quite honestly. As a CIO, the experience that I could relate to this is the Sarbanes Oxley rules that have been introduced. I think many smart CIOs took ad-vantage of the buzz around this act to drive some of the simplification efforts that they would like to make in their IT back office, if you will.

Green IT is maybe not quite the same, but has a similar kind of a buzz at the moment. I think we could use that as an opportunity to define, especially for companies like Coca-Cola Enterprises, where corporate responsibility and sustainability is an integral part of the operating frame-work that we have.

We take this very seriously, but on the other hand if you look into the IT space and then drive some of the upgrade processes, like virtualisation and data centre con-solidation that reduces your carbon footprint and energy consumption, it’s not a bad idea. Using green IT as a buzz word to drive the print consolidation, fax consolidation and reduce paper use is not a bad idea. And to use that buzz as a tool to drive some of those efficiency-related activities really makes sense.

Clearly IT is viewed widely as a place in which costs can be reduced, but you have to prove your value oth-

erwise you will be forever cast as the place that sucks costs out, but isn’t adding to the top and bottom lines. How do you balance that drive towards cost reduction with the absolute need for innovation?ES. We have defined IT’s value proposition in Coca-Cola Enterprises in two ways. It’s a balancing act, if you will. One side is to create resources for the purpose of fund-ing the growth-related initiatives, so what that means is you’ve got to be creating enough productivity from your business, meaning if nothing innovative or differenti-ated comes through you’ve got to be better at running what you have year after year.

You have to be creating enough productivity. Doing the same thing again and again you’re going to get better at it, so think from that perspective. You have to find a way to drive the productivity in your maintenance of business, either operational expense or capital, and spend that comes into that and then put that reimburse-ment back into the growth-related initiatives. We have a list of different initiatives to drive to create the resourc-es, such as virtualisation, consolidation, simplification of applications and infrastructure.

Then, of course, you can talk about the outsourc-ing, offshoring, shared services centres. You could talk about the cloud, but that brings to you as an efficiency, cloud computing capabilities. You could talk about the whole green IT thing that basically drives that and also from the standpoint of the vendor management and then really focus into the strategic vendors as opposed to spreading yourself thin into a variety of places. So leverage your volume and investment capacity to drive some of the cost up.

These are all the things that can create resources for you to invest back in on your maintenance or business space to invest back into your growth-related initiatives. Now, the funding of growth related initiatives should be shared within business and IT, which has to drive those productivity initiatives. The funding that’s required by the business should also match that so you could be able to drive the growth-related initiatives.

We also look into innovation. We don’t want to in-novate for the sake of innovation. We would like to put those innovative capabilities if it differentiates us from any of our competitors, so innovation means having dif-ferentiated capabilities to us. Those capabilities would be in revenue growth management, either in the selling and customer services or either in the supply chain, which are the world-class capabilities that Coca-Cola Enterprises is constantly building.

And do you think that this sort of drive for innovation is perhaps a more modern way of understanding that IT requires different skill sets from IT staff?ES. It does. It requires different competencies that you need to build into your IT organisation. You need to be very specific around where you are differentiating and where you are going to be focusing, so that requires a dif-ferent dialogue with your business partners. You have to

There are 3300 beverages in the Coca-Cola

portfolio, CCE distributes 200

of them

CCE recorded

revenues of €14 billion

in 2008

INNOVATION 135

really be engaged with your business to understand where the differentiation is gonna come from. To do that you have to have very business savvy IT people that need to be dia-loguing with business to extract where the differentiation points are, and that requires a lot of different competen-cies, like consolidative skills, that you need to be building within your IT organisation.

Then you need to be looking into emerging technolo-gies and the current strategic technology base that you have and how you are going to find the shortest, fastest and best way to deliver that differentiated capability. It requires architectural expertise, if you will, because every company has their own technology ecosystems that are – especially in the recent evolution of the technologies – pretty complex. So therefore, to understand how you define the differentiation and then develop the capability and deploy it in a fast way in whatever enterprise that you are in, requires a different skill set.

And from the development and deployment perspec-tive it requires some innovative thinking, like the cloud development platform as a service and software as a service and other maybe strategic platforms. How that’s going to get together requires some really good architectural knowledge, if you will, in your IT organisation. But if your IT organisation is occupied with maintenance of business, you can’t build so therefore your focus needs to shift from maintenance of business into differentiated solution devel-opment and with the speed and pace deployment of that.

Absolutely. And how are Coca-Cola Enterprises attracting and retaining those more business savvy IT staff?ES. We are absolutely looking into the skill sets in develop-ment, deployment areas and governance areas today; and we define our core competencies in each of the development, deployment, support and governance areas in IT. We have clearly articulated core competencies for all of those specific areas. We are bringing skill sets from the outside in and re-freshing our talent where it makes sense, but we have also a very focused internal people development programme in place today. And the amount of investment we are making into our people has never been the level that we had at this state, and the return of that is 10-fold.

I am now able to bring those differentiated solutions faster than I used to be able to with the external resources coming in because the internal institutional knowledge mar-ried with those core competencies added on top of those stra-tegic technologies that we have is the winning formula at the moment. Bringing external resources in, who don’t have your institutional knowledge, and keeping your internal IT people focused into the maintenance of business does not provide any growth for them.

All those things are going to be disappearing when you start to focus into your internal organisation shifting from maintenance of business to differentiated solution develop-ment. Every dollar you put, you have a 10-fold return because the external spent is going to be reduced significantly for you especially from the capability development standpoint. n

Atlanta-based Coca-Cola Enterprises

(CCE) is the biggest marketer, producer and distributor of Cola-Cola products in the world,

serving 419 million consumers

CCE boasts 72,000 staff across 430

facilities

SUPPLY CHAIN

Walmart has set itself a goal to cut 20 million tonnes of greenhouse gases by 2015 and green its supply chain.

Walmart, the world’s largest retailer with more than 7800 stores around the world, has set itself a new goal of reducing its en-vironmental footprint by turning its atten-

tion to its supply chain. Walmart is looking to its suppliers to help it achieve a 20 million tonne cut in greenhouse gas emissions from the lifestyle and supply chain of Walmart products by 2015.

The company’s measures to reduce some of its impact include working toward: 100 percent use of renewable energy; zero waste at its sites and a prototype design for new stores to make them 20 percent more energy efficient.

Speaking at a webcast news conference, CEO Mike Duke gave details of how Walmart plans to make the entire business more environmentally friendly.

The cut in emissions is about one-and-a-half times the company’s projected carbon growth over the next five years and is roughly equivalent to taking 3.8 million cars off the road for a year, he said.

“We’re announcing an aggressive new goal,” said Duke. “There are opportunities throughout the product lifecycle – from the sourcing of raw materials to the manufacturing of a product to its transportation and how customers use it, dispose of it and recycle it. We will be efficient because we can find the reductions anywhere in the world and at the lowest price. We will be a leader in retail because we will be the first to take a look at the supply chain on a global scale.”

Environmental Defence Fund Fred Krupp, President of the Environmental Defence

Fund (EDF), an organisation which has been working closely with Walmart to implement their measures, has praised Walmart’s initiatives. “This is real leadership. Walmart is looking at the whole picture,” says Krupp, ref-erencing the firm’s work to reduce emissions of its fleets and buildings, establish a Sustainability Index and increase

122

SUPPLY CHAIN 123

Walmart’s innovative programme to reduce greenhouse gases has three main components:

SelectionWalmart will focus on the product

categories with the highest embedded carbon. This is defined as the amount of lifecycle greenhouse gas (GHG) emis-sions per unit multiplied by the amount the company sells. To find the embedded carbon, the ASC reviewed the GHG emis-sions associated with all Walmart prod-uct categories. This approach ensures the project team focuses on the catego-ries that have the greatest opportunity for reductions. Reductions can come from any part of a product’s lifecycle.

ActionFor a project to be included as part

of this goal, it must reduce GHGs from a product in either the sourcing of raw materials, manufacturing, transporta-tion, customer use or end-of-life dis-posal. Walmart must demonstrate it had direct influence on the reduction and show how that reduction would not have occurred without Walmart’s participation.

AssessmentSuppliers and Walmart will jointly

account for the reductions. ClearCarbon will perform a quality assurance review of those claims to ensure methodology, completeness and calculations are cor-rect. When the claims meet the quality assurance check, PricewaterhouseCoo-pers will assess under consulting stan-dards whether the defined procedures were followed consistently to quantify the reduction claim.

standards among suppliers in China and around the globe.Duke acknowledged EDF’s counsel and assistance in

developing the new goal, as well as input from the Natural Resources Defence Council and the World Wildlife Fund in the company’s broad environmental programme.

Other help in achieving this impressive supply chain goal is coming from PricewaterhouseCoopers, ClearCar-bon Inc., the Carbon Disclosure Project and the Applied Sustainability Center (ASC) at the University of Arkansas. The organisations will help identify projects, measure and verify reductions and engage with suppliers.

Elizabeth Sturcken, Managing Director of EDF’s Corporate Partnerships programme who leads the team working with Walmart, said the company, its suppliers and the various advisory groups collaborating on supply chain emissions are venturing into “uncharted waters”. They plan to share their framework for some of the key processes. “We’re going to open this up to the world to make sure this is real and accurate,” she says.

With 90 percent of its carbon footprint embedded in its products’ supply chain and lifecycle, the company plans to focus first on the sectors that are likely to yield the greatest amount of emissions reductions as well as the greatest amount of cost savings, says Matt Kistler, Walmart’s Senior Vice President for Sustainability. “Walmart has more than 100,000 global suppliers. With its biggest-bang-for-the-buck strategy, the supply chain reduction effort is expected to involve several hundred suppliers,” says Kistler.

Walmart ran several pilots with suppliers before an-nouncing the goal, he says. Early successes include that of Fox Home Entertainment, whose reductions in DVD packaging have served as a model and resulted in DVD suppliers eliminating 28,000 tonnes of greenhouse gas emissions last year.

Paul Kelly of ASDA, a Walmart subsidiary and the UK’s second-largest grocery chain, noted that it has achieved a seven percent absolute reduction in green-house gas emissions in the past two years. “We’ve taken more than 80,000 tonnes of CO2 equivalent out of Asda’s operations since 2007, despite opening 36 stores and serv-ing an additional 2.5 million customers each week,” says Kelly. “We’re now producing 66 tonnes of CO2 equivalent for every GBP£1 million of our sales, compared with 83 tonnes two years ago.”

In the UK the distance between stores and the dis-tribution centres average only 50 miles so that ASDA can reduce the number of miles trucks travel and save fuel.

ASDA is also working with suppliers to reduce the amount of carbon in the supply chain. In 2007, the gro-cery firm worked closely with a number of its fresh food suppliers to map the embedded carbon in their products, including eggs, milk, potatoes, lamb and chicken. As part of this work they identified hot spots that could be tar-geted to significantly reduce levels of carbon. For example, ASDA is working with 100 dairy farms to calculate their individual carbon footprint and then provide them with a toolkit to help identify and reduce embedded carbon. n

REDESIGNING THE SUPPLY CHAIN

1

2

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PACKAGING 89

Nestlé’s Head of Packaging and Design, Anne Roulin, tells Next Generation Food how the world’s largest consumer goods company is improving its packaging.

In your opinion, how important is sustainable and re-newable packaging? What are you doing in this sector at Nestlé? Can you give some examples of your alter-native and sustainable packaging initiatives?Anne Roulin. Packaging is at the heart of our sustainabil-ity agenda. It helps make best use of resources by prevent-ing waste of the product, it makes business possible by allowing easy distribution of products and provides the consumer with fresh and stable food products.

Packaging is one of the four priority areas that we have identified in the Nestlé Policy on Environmental Sustainability. There are many ways to reduce the impact of packaging on the environment: promoting the estab-lishment of comprehensive recovery systems for used packaging; using recycled content wherever it makes sense; source reduction; and material selection – the opti-mal material for the specific application.

What are we doing? Nestlé uses all of the above strat-egies, with the choice depending on a variety of factors such as geography, available recovery infrastructure and protection requirements of the product. Our policy is to reduce the environmental impact of our packaging. We have been systematically reducing the weight of our pack-aging and since 1991 have saved over 444 million kg. That said, there are limitations in how far you can go. Beyond a certain point such an approach will create adverse ef-fects in terms of product spoilage and losses, which far outweigh savings achieved on packaging.

We also promote recovery and recycling, using re-cycled materials where we can and where the safety and quality of our products are not impaired. We choose materials with an inherently lower impact on the envi-ronment (such as materials from sustainably managed renewable resources). In considering the impact of packaging on the environment it is important not to just take one indicator (e.g. carbon footprint), but to include other parameters like water usage, non-renewable energy usage, solid waste etc.

Whatever measure is taken it should be seen as a means to an end and not as an end in itself. The end is to deliver benefits to consumers in the most envi-ronmentally efficient way. In order to address this in a systematic manner we need tools to guide “concrete” actions. The appropriate tool for this is lifecycle assess-ment (LCA). This area is in rapid evolution, and Nestlé is already using lifecycle assessment-based eco-design tools to systematically address environmental impacts in the packaging design phase.

PACKAGING 90

tool but we were the only company who took this further and developed it for worldwide use. We have compared the PIQET data with full lifecycle assessments done by independent companies to ensure that the PIQET tool gives valid results.

We are now rolling out the new products with pack-aging developed by PIQET.

The PIQET approach is part of a programme of source reduction that we started in 1991. In 2008 we made a saving of 58 million kg of packaging material and in 2009 we saved 59 million kg of packaging mate-rial. Nestlé Waters has been a big part of this over the last two years (reductions in PET in water bottles) but there are additional savings across all the businesses and geographies.

What are the main challenges facing the packaging industry? How are you tackling these challenges? AR. We can’t speak on behalf of the packaging industry. However, for the food industry product protection is an extremely important issue and it is critical to ensure that the barrier properties are appropriate. In terms of material choice there is no good or bad material; it all depends on the specific application.

For example, to design packaging for our popu-larly priced products we need to use packaging materials that are suited to the different trade channels, as well as taking into account cost and convenience. This in-cludes downsizing to make the product affordable (for shopkeepers/traders as well as consumers), and small enough for distribution using motorbikes or selling vending carts etc, while also providing the necessary product protection, and minimising the impact on the environment.

How has the global economic recession affected the industry? What impact has it had on Nestlé specifi-cally? AR. We can’t speak on behalf of our industry but the global economic recession has not meant any cuts in our packaging budget at Nestlé. We continue to invest in packaging, which is important for the future of the business.

The trend of eating at home, which is more relevant in times of economic hardship, provides additional impetus for new packaging developments – especially for improving the convenience and product experience e.g. for our Lean Cuisine range we have developed a new proprietary microwave tray that generates grill marks, and results in a Panini sandwich that is crispy on the outside and soft on the inside.

Where do you see the future of innovative packaging solutions for Nestlé? What are your plans over the next 12-24 months and beyond? AR. Developments are on-going in many areas. These include packaging materials from renewable resources, digital printing and interactive packaging. n

What packaging have you introduced recently at Nestlé that you are particularly proud of? AR. There are so many. In the US for example, we have optimised the packaging for Hot Cocoa. We have reduced our new Hot Cocoa carton by six percent in depth, which allowed for a 14 percent reduction in case length. This packaging change has a substantial impact on reducing greenhouse gas emissions, as well as in saving trees.

In Switzerland we won the WorldStar Award for promotional modular display unit made from corru-gated board (Display TRIANGOLD). This competition attracted over 230 entries from 35 countries around the world.

In Hungary we received two special awards from the Ministry of Agriculture and Rural Development for our Christmas Kit Kat tree and Smarties Advent calendar in 2009.

In addition we are proud of developing systems that help us to develop the best packaging solution. These are the Packaging Impact Quick Evaluation Tool (PIQET) that helps us, right at the start of a project, to evaluate the impact of a packaging material on the environment. This tool looks at a range of environmental impact fac-tors, and not just on one indicator (such a CO2).

And our Globe SAP IT system enables us to analyse our worldwide purchasing of packaging materials, and to focus our efforts on key applications that have the most benefit for the environment.

Can you explain about Nestlé’s PIQET and how this is helping optimise choices of materials and packaging design in regards to sustainability?AR. The PIQETprovides a quicker and simpler way (versus full lifecycle assessment) to analyse packaging solutions for a particular application. It allows you to make a balanced comparison of different packaging material solutions for the impact on the environment (e.g. impact on CO2 footprint, water use, land use, air pollution, energy use, solid waste).

We generate spider plots to make comparisons be-tween different material, so that we can see what the dif-ferent trade-offs are. There is no intrinsically “good” or “bad” material – you have to have the right material for the right application. PIQET results can be surprising, some people might expect paper to be better than plastic laminates, but we have found that this is not necessarily the case. For example, for our large pet food contain-ers, we now use woven polypropylene sacks instead of paper. The paper sacks were prone to splitting during transportation, causing wastage and a negative effect on the environment. On balance the impact on the environ-ment is improved by switching to woven polypropylene. This reduction in damage brings cost savings to Nestlé and to our customers.

It took a significant amount of time and effort to get this tool developed. In the beginning there was an industry consortium in Australia that co-developed the

PACKAGING 91

Nestlé Waters North America (NWNA) continues to invest in improving its environmental performance, with the objective of having the industry’s lightest environmental footprint per unit of product. One priority is the

bottle itself, and the company has made progress in reducing the bottle’s environmental footprint by introducing innovative, lighter-weight packaging. The carbon embedded in the purchased PET resin for the bottle accounted for

55 percent of NWNA’s greenhouse gas emissions, so in the 15 years to 2007, NWNA reduced the amount of PET plastic in its bottles by 40 percent.

The EcoShape bottle, launched in 2007, achieved a further 14 percent reduction in plastic used, and weighs only 12.5 grams on average. It remains

the lightest branded half-litre bottle on the US market. We estimate that it will save more than 88 million kg of resin and help avoid more than 356

000 tonnes of CO2 equivalent emissions from its launch to the end of 2009. The company plans to reduce plastic in its half-litre bottles by an additional

15 percent by 2010. In addition, since 1994, NWNA has manufactured 98 percent of its PET packaging in its plants, saving the energy required to ship

160,000 truckloads of empty bottles to its sites.

This investment in packaging technology is backed up by a commitment to recycling. The returnable bottles for its US Direct-to-Home & Office business get used 35 times. When their useful life is up, the majority are recycled into

products such as lawn furniture, synthetic lumber and outdoor sheds. In terms of public recycling, the US only has about a 25 percent plastic recycle

rate and about half of Americans have access to kerbside recycling. A lot is about education and changing habits. NWNA is advancing the goal of a

minimum 60 percent recycling rate for PET beverage bottles by 2018 through partnerships, coalition-building, consumer education, improved kerbside

recycling programmes and policy initiatives.

Source: www.nestle.com

Packaging innovation

www.usfst.com • Q4 2010

BANK OF MOM AND DADWILL SOCIAL LENDING PUT AN ENDTO THIS NATIONAL INSTITUTION?

RISK AND SECURITYADVICE ON MANAGING RISK AND SECURING YOUR IT PERIMETER

IDEAS ARE EVERYWHEREHOW SOCIAL COLLABORATION CAN TAP INTO YOUR COMPANY’S INNER WISDOM

HOW TO: PUBLIC SPEAKING132

Making a speech in public is something most of us have to face at some point during our career. Although for some the experience may be daunting, it is a

valuable and important career tool. Michael Ronayne, director of the UK’s College of Public Speaking, ex-plains that often, if your content is good, it is how you deliver it that can make all the difference.

Statistics show that glossophobia – mankind’s fear of public speaking – is right up there with the fear of death or snakes. So where does this fear come from? Michael Ronayne believes that the phobia is most likely formed during our childhood. “We grow up with phrases like, ‘stop showing off; stop drawing attention to yourself; be quiet; sit in the corner; don’t cause any trouble’. And we hear that message so often we learn to believe that being quiet is good, while drawing atten-tion to yourself is bad.” As a result, when someone asks you to speak in public, it is essentially telling you to do the opposite of what you have been conditioned to do.

With advice from Ronayne, who as six times’ UK National Public Speaking finalist and two times’ winner qualifies to comment, FST US has compiled a ‘How To’ guide to public speaking.

HOW TO:

BE A BETTER PUBLIC SPEAKERPublic Speaking: The two little words that can fill even the most experienced industry leader with

dread. But why are we so afraid of speaking in front of people, and what can we do to combat the nerves? Lorna Davies spoke to public speaking expert Michael Ronayne for his top tips and

discovered that the best speakers are very often the shy ones.

1BE PREPAREDBut not too much. Making sure you have exactly what you need and have learnt your material helps to ease nerves, but don’t

follow the ostensibly easier option of reading from text: If you can’t learn it, take a few note cards or

hints to help the words flow.

2KEEP IT SIMPLE

“You will forgive a speaker anything: bad diction, squeaky voice, poor eye contact; but you will not forgive poor structure,” says Ronayne. “So the key thing

is to have a very clear, simple structure.” You should not over

complicate – your speech should be more soap opera than crime drama. He added: “With a soap opera like Days of our Lives, you can disappear out of the country

for two years, come back, and you pick up what’s going on in a minute and a half. Whereas, with something like CSI, if you go out of the room or the phone rings for a moment, there’s no point in seeing the rest of the

series, because you’ve missed an important clue.”

3BREATHE

It may seem obvious, but when people are tense, their breathing can become shallow

and tight, making their words hard to follow. Ronayne explains that relaxing can be tricky.

“From a purely physical point of view, if you’re about to speak then obviously relaxing is easier said then done. But deep breathing

consciously can really help.” When your breath becomes shallow it can also affect the pitch of your voice, and it is harder for people to listen

to a higher pitched voice so try to use your deeper register when speaking. A useful tip is to greet the audience, to warm up your voice,

and then count to three before beginning.

4DON’T APOLOGIZE

It is understandable to think that the audience is against you, but it is impor-tant to remember that they want you to

succeed, they want you to be interesting, stimulating, informative and entertaining

so they can gain information. A natural nervous reaction is to apologize for nerves

or a problem: more often than not the audience won’t notice, so don’t worry.

5THE THREE Cs

Clarity, Concision and Confidence: Three words that are vital to remember when both putting together and performing

a speech. “Most business people are busy; they don’t want to be working

out and scratching their heads all the time. They want it delivered to them

clearly,” says Ronayne. So if you’ve got the three Cs, you’re 90 percent there.

After studying English Literature at York University, England, Michael

Ronayne quickly became used to the limelight, spending four years at the

Franz Liszt music academy in Germany. He is described as having ‘natural

ability for public speaking, enabling his success in sales and coaching’. Heis also an author of many public

speaking articles.

MICHAEL RONANE

HOW TO: PUBLIC SPEAKING 133

6PRACTICE

MAKES PERFECT

“Good speakers practice,” says Ronayne. “And that mustn’t be

underestimated.” There is often a misconception that some people

can and some can’t, but, adds Ronayne, “Speaking is something natural. We all do it. We’ve been doing it since we were around a year old,” and that is what you

need to remember.

7TALK TO A

FRIENDThe key is to take the focus off you; so projecting it on to the audience will help. Ronayne

suggests asking yourself questions. “People worry about themselves. You have to firstly take the eyes off yourself and

think about your audience. How can you help them? What are you saying that is going to be of use to them? And maybe imagine

you’re talking to a friend.”

8BARE NECESSITIES

An age-old public speaking tip is to imagine the audience in their underwear. While this may be a slightly unorthodox method, visualizing the audience beforehand can enhance

your presenting style. “Imagine how it is going to be,” says Ronayne. “Picture what ity should sound like. Picture the applause; hear the applause you’re going to get. Talk to yourself; tell yourself it’s going to go well. Tell yourself that what you’ve got to say is worth listening to.

Tell yourself that the audience is going to be engaged by what you’re saying, and you’re about 95 percent of the way there already.”

A good tip is to greet the audience as they arrive: speaking to people you have met is much less daunting than presenting to a group of strangers.

9FROM THE HEART

Obviously more experienced, naturally overt business leaders will be more comfortable with speaking in public.

But as Ronayne explains, they are not always the best speakers. “Often the greatest communicators are actually

often very shy. They don’t particularly enjoy being up there, so they’re going to be as clear and as concise and get it over with as quickly as possible – these speakers are effective in an economical way.” It is also important to be as sincere as possible, he adds. “Often the best speakers are either from

a political point of view, in a context within history, or they are just normal, ordinary people who are coming across as regular people who speak genuinely from the heart, and who can communicate directly with other people.”

10JUST DO IT

It may sound simple, but a lot of the initial fear is actu-

ally getting up and doing it. “The fear of public speaking

is, as with most phobias, irrational. For many people, just getting up and getting

through it is actually the first big step. Once up there, they realise actually it’s not that

bad,” explains Ronayne.

Famously great orators like Barack Obama and Tony Blair seem to have got all

these things right. Britain’s new coalition deputy Prime Minister Nick Clegg’s confi-

dent speaking is arguably one of the reasons he has come so prominently to the fore in recent months. Ronayne explains that there may well be some businesspeople out

there as good as the more well known speakers, but he

reserved some respect for the Deputy Prime Minister,

stating: “Nick Clegg, I would say, is a wonderful technical speaker. It is very difficult for politicians these days because there is such analysis, and so the key thing to being a good

speaker is to be a natural.”

AND FINALLY...It is important to remember that even the most seasoned

public speakers make mistakes; it is their ability to learn from them that sets them apart. n

FINANCIAL SECURITY86

What are the unique challenges that you, as CISO for an organization such as Experian, face on a regular basis?Stephen Scharf. Our business is very dynamic and fosters innovation and new product development in a constant effort to increase value to our clients. As such we focus a considerable amount of time on vetting new products and services to ensure they have the proper security controls in place. By partnering with our internal project management department we ensure that security reviews are performed throughout the project lifecycle. As one of the world’s larg-est data repositories this is a continuous effort.

Experian’s data is extremely sensitive, so what pro-grams do you have in place to effectively manage the risk on this data?SS. We have a robust data classification program that ensures data is properly identified and tagged. Through the use of globally adopted information security poli-cies we are able to clearly define the required controls for each dataset and ensure they are used with the proper protections in place. As with many organizations we do not have ‘a one size fits all’ approach to security. Proper data classification and segmentation helps to ensure that security controls increase appropriately around sensitive information.

Is your current level of risk exposure increasing or decreasing?SS. The threat landscape is constantly evolving, which creates a constant stream of new risks to address. On

average our risk profile remains fairly constant but the styles of attacks ebb and flow over time. The security in-dustry as a whole is seeing a general transition of attacks moving away from individuals trying to make a name for themselves and now focusing more on crimes for profit. The level of organization in some attacks is increasing as the motive morphs from destruction to profit.

As CISO in any business, there’s a real danger of only seeing symptoms and not causes. What types of pro-cesses and strategies do you have in place to prevent that from happening?SS. In information security the symptom blindness tends to occur when efforts are only focused on technical con-trols and IT related processes. In order to ensure greater awareness of the larger issues, a successful CISO needs to partner with the business they support and truly un-derstand the goals of that organization. By having a more rounded understanding of the business drivers combined with the IT components that deliver those drivers, a CISO is much better positioned to understand root cause and will be quicker to react to possible issues.

What kinds of security lessons has Experian taken on during your tenure?SS. I have the privilege of being the first Global CISO for Experian. Before my position was created we operated information security successfully via a regional approach and did not always cross benefit from the best practices that were developing in each region. In the last two years we have put significant time and energy into indentifying

CREDITABLE CONTROLStephen Scharf, Global Chief Information Security Officer at Experian, speaks to FST US about the various strategies he implements to combat the security challenges Experian faces on a daily basis.

1 in 8 adults fell victim to online ID fraud

in 2009

FINANCIAL SECURITY 87

and elevating the best practices in each of our regions to develop a single global security program. Some of these improvements have been focused on our training and awareness campaigns as well as standardizing our assess-ment methodologies.

When rolling out any sort of new information sys-tems, where do the greatest challenges lie for you? Are they human, technical, operational…SS. The human element is always the greatest challenge since it is the most dynamic. IT systems are fairly binary. If you build systems the correct way they tend to operate in consistently the same way. This is not the case when dealing with human activities. This is why having proper training and awareness campaigns are critical for any organization. At Experian we treat training and aware-ness as two distinct items. Information security training is structured and is mandated for all employees. The goal of training is to make sure our employees understand their obligations and the appropriate way to conduct Experian business. Awareness campaigns are more about broadening our security culture and continually appris-ing our staff of new and emerging threats. These can focus on more subtle security issues like social engineering or the risks of social networking. The great thing about Experian is that a strong part of our culture is based on security of the data entrusted to us.

Has the proliferation of next-gen mobile devices exposed your perimeter to greater threats and inse-curities? How do you combat against this increasingly

fast-paced consumerization of technology?SS. The demand for mobile devices has definitely gone up and the value that these devices bring to the workforce is significant. We support these types of improvements by conducting full evaluations of new products, services, and/or devices before they are allowed to operate in our envi-ronments. Because the type of device and desired use case can vary, we do not have a blanket policy that allows or dis-allows their use. Instead we work with the requesting busi-ness to fully understand the scope of the device they wish to use and then partner with them in developing a safe and secure rollout strategy. Sometimes the cost to adequately protect a device is greater than the value that device may bring to the business. In these cases the decision is made to not use the device in our environment.

Where do your main priorities lie for 2011 and what additional security challenges do you foresee in the immediate future?SS. Our priorities continue to focus on the protection of our applications, systems, and data. Our 2011 activities will complement the existing programs we have already embedded while at the same time evaluating new tech-nical solutions. Future challenges that face the secu-rity industry as a whole include the rapid expansion of social networking and the increased focused on distrib-uted (cloud) computing. The mantras of security tend to remain constant: segmentation, separation of duties, and least privileged. While these are all relevant in addressing the future threats, the way in which they are leveraged will need to change. n

“The human element is always the greatest challenge since it is the most dynamic. IT systems are fairly binary. If you build systems the correct way they tend to operate in consistently the same way. This is not the case when dealing with human activities”

BUSINESS PROCESS MANAGEMENT114

Recovery can come in many guises. It could be a helping hand thrust out from a milling crowd. It might arrive in the shape of friendly nursing staff at a hospital, or in the form of a refreshing

sip of water delivered to an exhausted marathon runner. The first step on the road to recovery is always the hard-est, but also the most fulfilling and rewarding. There are few better feelings than the knowledge that a corner has been turned, an obstacle has been overcome and the road ahead lies clear and uncluttered of hurdles.

In the financial world, the word ‘recovery’ has taken on almost mirage-like proportions. After such a damag-ing fall and lengthy period of rest, reflection and reassess-ment, the financial sector has recently begun thinking about recovery – how to achieve it, how to instigate it and how to manage it to ensure there is no relapse. And like everything that makes the world of finance so energized and diverse, recovery is being achieved through a multi-tude of various strategies, programs and projects.

At The Capital Group of Companies – a leading investment management firm boasting assets totalling more than $1 trillion under their management – there is a company-wide sense that the recovery has already hap-pened.

“We kind of went past the recovery period in late 2009, and since then we have been thinking, on both the business side and the internal IT side, about how to deliver new capabilities, how to reach out and serve our custom-ers better,” says Steve Taw, The Capital Group’s head of

MANAGING MOMENTUMIf your IT department can become more agile and business-aligned, the recovery process post-recession will be smoother and quicker than you ever foresaw, argues Steve Taw of The Capital Group.

technology business. “We’re thinking long-term strategic investments. So not short term, but tactical, which will include a major rewrite of our investment systems and other similar projects.”

The ability to realign the group’s strategic outlook is a result of the relatively small size of the company, a nimbleness that enables agility in operation. “The Capital Group is a private company of 8000 or so associates,” says Taw. “But the relationship between the business and IT is the strongest I have ever seen. So the CIO is not just the CIO: she [Julie St. John] is part of the management com-mittee of the company. She is involved in business discus-sions, not just technology discussions, and this permeates all the way down.”

Business program managementSuch partnerships have allowed The Capital Group to

deliver highly focused business and IT objectives to drag

“The relationship between the business and IT is the strongest I have ever seen”

BUSINESS PROCESS MANAGEMENT 115

the company through to recovery, with Taw instrumental in overseeing the group’s program management and IT transformation initiatives.

“My role as head of technology business is chiefly centred around running IT like a business. This includes things like strategic planning, budgeting, vendor man-agement, speed sourcing and major program manage-ment,” says Taw. “We provide the program and project management services and functions through my office.”

As part of the group’s recovery performance, Taw has implemented eight major IT initiatives that have been designed to centralize the IT infrastructure and de-liver better processing performance and tighter database analytics. “We are two years into a three year plan on IT transformation, which include delayed foundational ca-pabilities that we felt were still missing components in IT to make us more effective, increase our delivery capabili-ties and rationalize the environment.”

Increasing delivery capability is a perennial challenge for financial IT departments nationwide. If a financial institution can extract and tease out useful data and information that can be acted upon in a usable way, half the battle is won. “On the technology front, we are trying to leverage our information to better revamp and re-strengthen our distribution network because we are not a direct retail sales organization. All of our sales come through financial advisors and brokers like Merrill Lynch and Charles Schwab,” says Taw. “So there are a lot of CRM initiatives that we are implementing to leverage both the web and customer data more effectively to get out to the distribution network. This is an external challenge.”

These initiatives are made possible thanks to a combi-nation of acute technical know-how and widespread busi-ness support. Such a structural setup has ensured that Taw, his CIO and his team are walking lock-step together, which has resulted in better focus. “The actual leaders of the lines of business are all involved in the governance committees for the IT initiatives we are working on,” says Taw. “They are setting the strategic vision and they are ap-proving the initiatives themselves, sponsoring them and being continuously involved.”

With the management spending so much time with the IT department, there are fewer surprises to deal with; a situation that ensures 100 percent focus is delivered to the client.

“The Capital Group has always been a very collabora-tive environment,” admits Taw. “It is a private company that has been around for more than 80 years, and one of its core strengths is collaboration. Working alongside the CIO for example, we have really beefed up the IT governance structure and processes, and have worked to-gether to centralize our IT units. Latterly, we have really strengthened the partnership involvement with the busi-ness at a strategic level. There were always discussions at the tactical and execution levels, and now there are more strategic long-term discussions with the business, which allows for better business process management both in-ternally and externally.”

Having moved beyond expense cutting, The Capital Group’s road to recovery looks stable and secure. Added focus on new capabilities and longer-term investments has come about thanks to a shared vision and alignment between the business and the IT department, and Taw has the luxury of being able to plan for a number of multi-year business initiatives.

“Many of the programs I am working on are multi-year,” concludes Taw. “So in 2011 we hope to be fully executing on about three major multi-year business initiatives on a number of new fronts. But it is not just The Capital Group that is in this position. From the dis-cussions I have been having at a high level, a lot of other companies are facing the same challenges as ourselves, namely dealing with major new initiatives post financial collapse. A lot of firms are focusing on new capabilities and long-term investments. They are in the same boat as us, and that can only be good news for the industry.” n

The Capital Group began life in 1931 in Los Angeles

DATA MANAGEMENT

For financial institutions, the massive growth in red-tape regulations and data volumes over the past few years has been a double-edged sword. This strin-gent, crowded landscape has caused endless head-

aches, presented numerous challenges and has demanded greater organization and management of sensitive data. To combat such a double-edged threat, an equally bipar-tite approach to technology and considered strategy has become necessary.

As Executive Vice President and Chief Technology Officer at FINRA (the Financial Industry Regulation Au-thority), Martin Colburn is faced with such regulatory pressures every day. FINRA protects America’s investors by ensuring that the securities industry operates fairly and honestly, and Colburn admits that managing, analyzing and mapping such huge volumes of sensitive and valuable data proves to be a continuous and time-consuming pro-cedure.

“Our largest challenge is data ingestion, and how we use that to regulate our markets,” says Colburn. “Surveil-lance is the best way to look at the patterns within the markets that we regulate. So we have several markets that we regulate by contract, and we will be bringing in a sig-nificant amount of data and then replaying these markets and looking cross-market for any issues within the market regulatory interest.”

To achieve this, FINRA employs an integrated soft-ware system that processes and analyzes the data that comes into the organization in order to present it in a ra-tional and usable manner. “We use a set of data processing engines and analytics to help us ingest significant amounts of data in a processing window,” says Colburn. “The chal-lenge is to process the data and then make it available for the business to actually survey the markets.”

Such tools allow Colburn and his team to bring in dif-ferent sets of data from different exchanges and then nor-malize that data with an extraction load process. “Once we have that rationalization we can then make it available

to the users. We employ two different technologies to do this. One is an Intel grid based on IBM’s essential product, and the second is data warehouse appliance technology. We are using predominantly Netezza and Greenplum and we actually process that data, make it available and then write surveillance patterns, which are the analytics of issues that are happening with the market that might be of regulatory interest.”

Analyze to rationalizeData value differs from organization to organization.

For an authority such as FINRA, the value of its masses of data is only truly realized once it has been managed, ana-lyzed and processed toward a usable outcome. “There are many companies that are kind of transaction based, where they take a number of transactions and then develop a profit,” says Colburn. “FINRA is just the opposite. We are a regulatory organization that sits between the SEC and member firms to regulate the securities industry. We reg-ister and re-register all the broker dealers in the industry.”

FINRA’s position as a regulator of both the markets and members has meant the adoption of a very holistic approach to business, regulation and data management. “The bulk of our business is taking in both structured and unstructured data, and looking at any anomalies that we may find from an industry perspective,” says Colburn. “This could be an examination or audit of firms, or a surveillance of the market, and we then make decisions with the data that we have, which is the analytical side of what we do. On the operational side we look at reliability, availability and serviceability of our software platforms, and on the cost side of the equation we look at how much it costs us to actually operate, run and maintain the envi-ronment.”

Being cost-effective is a perpetual ambition for every organization. For FINRA, better data management en-ables quicker and more accurate data analysis, so an IT en-vironment that is equipped to deal with every dimension

Getting your docs in a row

Accurate data analysis and efficient document management can be achieved through the utilization of sound technology, careful surveillance and a clear thought process, explains FINRA’s Martin Colburn to FST US.

IT professionals spend 15% of their

time analyzing info, but 50% looking

for it.

DATA MANAGEMENT

of complexity is extremely valuable. To that end, Colburn explains how he oversees the specification and building process of the applications FINRA uses in order to achieve its business objectives.

“We take a very iterative approach to the way we build applications,” he says. “Some companies will actually set up requirements as a kind of contract between a business and technology. This can hinder your approach because a developer can interpret a requirement incorrectly and build it improperly. So what we find is that if we are doing sprints or iterations in a one-to-two and two-to-three week timeframe as we are building the product we can put it back in the user’s hands so they can see the product as it is being constructed. They can then give us feedback so we can make corrections before completion. This limits defects and allows us to control our costs in the way we actually build and deploy technology.”

Such an approach has allowed FINRA to reduce its daily operating costs to figures way below industry norms. “We measure what we call the development drop-down – how much it is costing us to operate and run at the end of the day – and find that best of class companies are typi-cally 33 to 34 cents on the dollar. We run at around 10 to 20 cents on the dollar. We see it as key to treat technology as a business and be able to look at our numbers and compare them favorably throughout the industry,” says Colburn.

Portfolio managementWhile FINRA’s priorities and challenges are rela-

tively unique to them as an organization, the techniques and strategies Colburn employs are universally beneficial and positive for all CTOs and CIOs working within the financial industry. And as the role of a typical CTO and CIO evolves and diversifies, it will become even more imperative for c-level executives from across the indus-try to learn from and converse with one another. There are a number of challenges that are industry-wide, so an understanding that one’s own role is going to have to shift

and change in response to business demands is something that can no longer be ignored.

“The way I look at it is I’m as much a portfolio man-ager as somebody running a portfolio up in the business,” says Colburn. “I have a number of technology assets as well as applications and systems, and all of those are really kind of a portfolio, and I have a buy/hold sales strategy for that.”

Juggling this particular space in the company is as much about technical know-how as it is about careful planning and a wider awareness of the business. Knowing when to invest in a new technology, when to retire legacy systems and when to be homogeneous or heterogeneous is an important part of Colburn’s role.

“One of the biggest challenges you find with a lot of technology organizations is IT sprawl,” says Colburn. “It is important to always have a pretty good view on everything you have within a certain category, and knowing how it becomes homogeneous is kind of important. So for me it really is a portfolio management strategy line up on your business priorities. We have what we call a shared toolkit section where we build the technology off of shared busi-ness applications that many of the businesses will use, and then we have shared services that we actually vend out to businesses that maybe use their service oriented architec-ture in a different fashion.”

Applying such an approach to an organization’s most relevant business processes will produce measurable results and be an enabler for better data management. “We employ a document management system that we have vended out to all areas of the organization,” concludes Colburn. “Some of that is embedded into applications. Some of that is actu-ally a direct service to that document management system. Some of it is almost kind of what we call a headless applica-tion where it may be part of the way we create a repository of these documents. We take this approach in everything we do, and it’s an approach that has proved to be a very economic way to conduct business.” n

“We see it as key to treat technology as a business and

be able to look at our numbers and compare them favorably

throughout the industry”

“I have a number of technology assets as well as applications and systems, and all of those are really kind of a portfolio, and I have a buy/hold sales strategy for that”

CLOUD COMPUTING

HAS

HYPE HURTOR HELPED

THE CLOUD?

Overblown, overexcited, exaggerated and extreme: hype phrases that rarely infiltrate the financial service technology’s carefully crafted perimeter of suspicion and risk aversion. IT experts work-

ing within this field shy away from mind-blowing adjectives and extreme superlatives. They are naturally risk-averse, careful and considered individuals who cringe at the merest hint of hyperbole. But at the same time, they are inquisitive, intelligent, and under increasing pressure to perform, to do more with less and to further support the business goals of their organizations.

Hence, when a new industry trend comes along that promises all this and more, they take notice, but are wary of the ‘and more’ part. Cloud computing has been the number one source of hype hoopla throughout the industry for the past couple of years. Introduced as the solution to all CIOs’ concerns, the cloud landscape was meant to transform the ICT industry. It was going to improve systems, cut costs and

make data more efficient, easier to store and access, and easier to scale. But here we are, on the cusp of 2011 and still the fa-miliar concerns persist: ‘Is it secure?’ ‘How does it work?’ ‘Will it work for my business?’ ‘Does it actually add any value to my key business metrics?’

In an industry as fast-paced and technically savvy as financial services, are the cloud’s stuttering adoption rates a cause for concern? Or does the fact that – even in an industry as famously safety-conscious, decisive and unadventurous as this – cloud computing is still being deliberated over again and again hint at something positive for the technology? Is there a future for cloud computing in the financial services industry, or has the hype put a dampener on the cloud’s buzz?

It’s an interesting topic for which there are few easy answers. However, here are five steps the cloud computing industry could undertake in order to gain the trust and sup-port of the technology executives working within the finance industry.

Cloud computing still generates plenty of interest, but that interest remains stuck in an ever-revolving debate of doubt and concern. So if the cloud landscape is to ever fully mature, what more should cloud providers be doing to convince the industry of its worth? FST US investigates.

STEP

CLOUD COMPUTING

2Sort out security

Cloud security remains the number one concern. Clearly, the subject of security has been the biggest bar-rier to cloud adoption in the financial sector. Figures from the Eighth Annual Global Information Security Survey conducted by PriceWaterhouseCoopers and CSO Online show that 62 percent of the 12,847 global businesses they surveyed still have ‘little to no confidence’ in their ability to secure assets they put in the cloud.

“It is clear that a number of CIOs and IT executives within the financial industry are pushing back against the cloud,” says Malcolm Eylott, Senior Vice President and Global Head of Operations and Technology at TD Bank Financial Group. “The issue of general security is a concern for everybody, and until that is cleared up there will always be this necessary discussion.”

Len Johnson, Senior Vice President and IT infra-structure Manager at RBS North America, agrees. “The biggest concern we have with the cloud right now is se-curity. In a private cloud environment I think security is pretty good, but it is the public cloud sphere where we still face issues,” says Johnson. “Losing data is always a major concern, but losing data across the cloud landscape means losing it in somebody else’s environment, which is completely unthinkable for people working in the finan-cial sector.”

STEP

Define what the cloud is

There is still a great deal of misunderstanding around the cloud. Figuring out what cloud computing actually is has been a continuous challenge for everyone working in the IT sector. Actually working out how to then leverage the cloud to one’s own end has proved even more troublesome, and it is this confusion and misunderstanding that is hindering the cloud’s wider adoption in the financial technology industry.

“Unlike a natural cloud, the cloud computing land-scape hasn’t floated away,” says Hong Loh, Chief Architect at Legg Mason. “It has been around for two or three years and it is still stuck in limbo. So it is kind of like an unnatural phenomenon. What does the industry want with it? It has remained a buzzword because of this misunderstanding, and this conflict between the demand for the cloud and the confusion about its value.”

Eylott agrees that the way the cloud has been portrayed has deepened both the debate and the confusion around its true value to the financial industry. “Approaching the cloud through third parties can appear to be very, very risky,” says Eylott. “Adopting something like a public, outsourced cloud is not really that different to data center optimization or server optimization – something that most firms have been doing for years. The only difference being you have got somebody else managing your data for you, but you are no longer in control of the data centers and servers.”

Differentiate the cloud from other technologies

The cloud has to compete with virtualization software and strategies. Cloud computing can be inclusive of virtualization, but they can also be implemented and extrapolated as two dif-ferent processes. Both help to deliver optimized resources, scal-ability and on-demand utilization, but virtualization can be maintained and managed completely within a company’s own enterprise firewall. Does such competition hinder the cloud’s growth?

“At RBS, we have just completed a very aggressive section on virtualization,” says Johnson. “I have a target to virtualize 60 percent of the servers at 60 percent of our workstations. This pro-gram is driven by cost and recoverability issues. We have gone down the virtualization route rather than the cloud-computing route because of the ability to move a virtual machine from one environment to another, to replicate it quickly. So if you had a failure on one system you can easily move it over to another, replicate it and be moving again.”

“Is cloud computing about sharing service and utilities and hardware and software?” asks Loh. “If it is, then true virtualiza-tion technology enables that; it makes hardware sharing easier. Is this what the industry wants?”

Provide a more managed service space

Cloud as a utility could represent the future of the industry. Whether used as an analogy or as the reality, if the cloud computing landscape could re-engineer for itself a place in the utility field of businesses, then its future adoption rates could increase. The analogy goes that homes and business do not have their own electricity generators and instead rely on an external provider for electricity. This provider responds to their demands for service and scales accordingly. Swap ‘electricity’ for ‘hosted services’ and you have cloud computing.

“The vendors of cloud computing tech-nology are looking to provide a utility-type service, almost like your power and your telephone service that you can easily buy without thinking too hard,” says Loh. “This is what the vendors want, but is this necessarily what the customer needs? Electricity works this way because it is a dumb thing. You plug it in and it works. Phone services work in a similar manner. But to expect everybody to shift their ap-plication to a cloud is unrealistic because the first step to sharing is being able to give up your data center and move it into a core location.

“However,” continues Loh, “if you can move your info into a managed service space where things like email, instant messaging and collab-orative software can be hosted, then this type of value-added service is where the cloud computing landscape can really thrive.”

STEP

Be patient

Cloud concerns will disappear, but it will take time. As security issues are overcome and the true value of what cloud computing can bring to the industry is realized, the majority of the concerns that surround this technology will fade from view. Cloud computing is still a relatively new phenomenon, and one that has warranted plenty of thought and consideration throughout the industry in just a short period of time. As IT experts begin to gain a better understanding of how to leverage this technology, the cloud computing landscape will become increasingly demystified.

“Grid computing is a classic example of how cloud comput-ing can be leveraged for us,” explains Johnson. “It can slide into the cloud and you can then pull all the processor capabilities you want out of it. You could basically meter it up and down, as you need it. As we become more comfortable with this model, I think all of our fears and concerns will disappear. It is just like when PCs first hit the streets. Nobody thought they were going to amount to anything, but now we have got to the point where they are second nature for everyone. Technology always finds a way to mature if the interest is there, and that is what I think is going to happen with the cloud.” n

CLOUD COMPUTING

STEP

STEP

FST US SUMMIT

Angling through the grid-like network of wide streets and boulevards that characterize down-town San Francisco, Market Street is one of the city’s most important thoroughfares. Connect-

ing the winding Embarcadero to the east with the hippy heartland of Haight-Ashbury in the west, the street is lined with the biggest, the brightest and the best that San Fran-cisco has to offer.

FST US SUMMIT FOUR SEASONS HOTEL SAN FRANCISCO OCTOBER 12-14 2010The latest FST US Summit was held at the luxurious Four Seasons Hotel in the heart of downtown San Francisco in October 2010. Enjoyable and insightful, this two-and-a-half-day event once again served as an invaluable networking platform for the industry’s C-level executives and solution providers.

Hong LohChief Architect Legg Mason“The workshops provided a great mixture of subject-matter expertise and interested delegates, and this helped to create a different angle to the discussions.”

Len JohnsonSVP and Data Center Architect RBS North America“It’s invaluable to be able to network with people who have similar issues in your field and then sit down with them over dinner or breakfast and work them out, because these are issues that I cannot share with anybody else within my own organization as there’s nobody else at that level.”

Brian ModoffSnr Telecommunications Technology AnalystDeutsche Bank“The summit’s been good; it’s always interesting to hear what other peers are talking about, what their issues are etc. So it’s been very insightful.”

Jeff BroadheadCISOLegg Mason“This was my third attendance at the FST US Summit and, like always, I got a lot of value out of it: the workshops have been good, and some of the discussions have been particularly rewarding for me.”

TESTIMONIALS

FST US SUMMIT 131

Standing tall and striking along here is the wonderful Four Seasons Hotel, one of the city’s finest establishments and the luxurious venue for October’s FST US Summit. For two-and-a-half-days, the elegant meeting rooms, foyers and terrace buzzed with the sound of intelligent and excit-ed chatter, beeping Blackberrys and intermittent applause as some of America’s most highly respected financial IT executives gathered together to discuss the industry’s most pertinent and pressing issues.

With unseasonally hot fall weather outside, the cool interiors served as the ideal arena for industry figureheads to connect with their peers as ideas were discussed, topics were debated and issues were raised.

Heading into its seventh year, the biannual FST US Summit is the ideal platform for senior level executives to engage in clear, focused dialogue with fellow industry lead-ers, examine their own management strategies and build and nurture rapports and relationships with individuals they might not otherwise meet.

Summit Highlights

FST20 MeetingOpening the summit, the FST20 Meeting was a closed-

door gathering of the 20 leading industry CIOs, CTOs and CISOs in attendance. Moderated by David Potterton of IDC Financial Insights, this professional forum discussed the changing role of financial services in 2010, and set the agenda for the forthcoming two days of workshops and keynotes.

Gala dinner & opening keynote addressThe official welcome for everybody invited to the

summit, the fantastic food and atmosphere was only bet-tered by the tangible sense of anticipation at the forth-coming 48-hours of high-level industry discussion and decision making.

Keynote workshop 1: A clearing in the cloudsModerated by IDC Financial Insights, this hottest of

hot topics was laid bare before a captivated audience. Ani-mated debate quickly followed, it soon becoming apparent that many industry leaders were excited by the prospect of cloud computing but still harbored reservations around security and scalability. Other issues raised included the forthcoming trends for 2011, best practice for implement-ing the cloud in the field, and how to manage capacity-on-demand.

Refocusing the customer relationshipAudience participation characterized this lively work-

shop, with the themes discussed mining a rich vein of opin-ion amongst those in attendance. The discussion centered on digital marketing possibilities and how cross-channel fulfilment will allow banks to better reach their customers. Indeed, this workshop was to set the tone for much of the rest of the summit – the issue of customer interaction and engagement became a common theme throughout.

The mobile channel in 2010 and beyondSeen as a key battleground for financial services in-

stitutions throughout the country, the issue of the mobile space generated plenty of insightful comments, sparking an interesting discussion on where this technology was taking the banking world. iPads, iPhones, Blackberrys and netbooks featured heavily, and one topic that gar-nered consensus was that of mobile payments and how this industry still has a lot of maturation ahead of it.

Keynote workshop 2: Security choices in an emerging IT environment

The issue of security is always a lively one, and this workshop was no exception. Again moderated by IDC, the keynote explored how social media, the cloud, virtu-alization technologies and new industry regulations are impacting upon security perimeters. While all agreed that internal and external threats will always be an ever-present concern, opinion was split on the various levels of security needed in order to protect the perimeter.

Financial services path to the cloud and beyond

Tapping into the enthusiasm so evident in all the attendant delegates, this interesting workshop outlined how cloud concerns can be addressed. This sparked a number of interesting points raised by the audience, piv-otal of which was the issue of dealing with cloud bursts – preparing and planning for external bursts in capacity demand. Many interesting viewpoints were put forward, indicating that this is an issue with plenty of gas left in the tank.

Data, data everywhere: dealing with the challenges of data integration and information silos

Data management was an underlying topic through-out the summit, with this workshop in particular shining a light on the numerous challenges CIOs face in success-fully managing their warehouses in the face of environ-mental, cost and regulatory pressures.

Private tour of Alcatraz followed by dinner cruise

At the end of the first day of workshops, meetings and keynotes, all attendees were invited to let their hair down in style with a guided private tour of Alcatraz fol-lowed by a wonderful three-course dinner while cruising around San Francisco Bay. As the sun was setting behind the Golden Gate Bridge, the boat pulled into Alcatraz and was welcomed by the knowledgeable and engaging tour guides. With the island closed off exclusively for this visit, delegates were treated to an eerie insight into what life was like in the world’s most notorious prison. With a hunger suitably worked up, the party returned to their private cruiser and enjoyed fine food and wine against the backdrop of twinkling city lights that make San Francisco one of America’s most beautiful cities. n

2011

The next FST US Summit will take

place at

The Fairmont Turnberry Isle Resort & Club

in Miami

between April 5th to 7th,

2011.

For more information, please visit

www.fstsummitus.com

IT SECURITY

CHECK YOUR BALANCE

IT SECURITY 71

Modern banking can be a wonderfully swift, efficient and – for some – even a pleasurable experience. The evolution in banking tech-nology that has swept through the nation’s

banking institutions in recent years has felt like a breath of fresh air. Since the turn of the millennium, each year has yielded a surfeit of dazzling advances in the way we bank, providing each and every one of us with greater conve-nience and greater control over our finances.

As consumers, we have been inundated with the temp-tations of quicker, slicker, sleeker and better means of con-nectivity, greatly altering the way we communicate with one another, the way we shop, the way we travel and, in-creasingly, the way we bank. From the early days of check-ing one’s balance online rather than making the trek to your local branch for a statement, to today’s finger-jabbing, screen-swiping relationship we have with our smartphones and their ability to conduct almost any type of banking transaction on the go, we have learnt to adapt to the chang-ing interfaces our banks provide us with. Technology has led, and we have dutifully followed.

If life were anything like the smug, self-congratulatory and wealthy world that Apple portrays in its aspirational advertisements, this would all be well and good. An entire population connected, highly educated, financially com-fortable and brimming with goodwill and a packed social calendar would not only be great for Apple’s profits, but would also do away with the banking industry’s need to protect their increasingly exposed customers. But it’s not, and the threats to account holders’ security is increasing with every email sent, every Twitter tweeted, every app downloaded and every iPad perched proudly on laps from San Francisco coffee houses to Boston bars.

Although banking technology has changed so unrec-ognizably in such a short space of time, our often-lax at-titudes to our own security has not. Great strides have been made in making it easier for us to conduct our financial activities wherever and whenever we please, but largely, the banking population has not been educated on the need to adapt to this exciting new world. Today, the main threat to banks comes not from some raincoat-wearing beardy guy thrusting a concealed banana through his pocket at the teller counter (indeed, FBI statistics show that there were just 5500 physical bank robberies in the USA in 2009, an 18 percent decrease on 2008, with the number of federal court indictments for bank robbery charges at a 10-year low), but from online fraudsters looking to hack, phish and deceive as often as they can. Banking institutions are well aware of the threats they face to their security perimeter on a daily basis, and the current economic environment has only exacerbated the situation. There is a balancing act to be

achieved by banks striving to offer increased connectivity and convenience but also a secure perimeter; a perimeter that is more easily punctured now that account holders are more mobile.

Enhanced security software can only do so much, says David Potterton, Vice President of Global Research at IDC Financial Insights, who believes that banks should engage more closely with their customers in an attempt not just to educate them about the types of threats out there, but also encourage them to alert their banks to any unusual activity on their accounts. “The problem for many financial institu-tions is figuring out how to allow their customers access to their accounts with a minimum of effort, while ensur-ing that proper security procedures are followed. To some degree, financial institutions depend on their customers to help them achieve this balance, and rightly so.”

Customer collaborationAlthough better-connected account holders have an

ostensibly greater awareness of their finances, not every-body monitors their account’s transactions as closely as they should. In fact, improved connectivity can sometimes foster a more relaxed approach to one’s own financial scrutiny, while those who eschew newer banking methods in favour of traditional practices can be hacked, targeted and cleaned out before they even know it. “Banks should be asking their customers to monitor more closely their statements, and become more aware of their transactions so that they can notify their bank of any fraudulent activ-ity,” says Potterton.

Potterton sees this collaboration between customer and bank as the natural evolution of a relationship that has been through some rocky patches in recent years. The current economic climate, caused by the actions of the financial industry, has led to increased fraudulent activ-ity online as credit avenues have been squeezed, jobs have been lost and money has become increasingly scarce. But people still need banks; they still want their accounts and some have come to love and rely on the level of connectivity they currently enjoy. “This is where there really needs to be a combination of effort by both the banking institutions and their customers in order to strike a balance that suits both parties,” says Potterton. “But in all honesty, I think that this balancing act is going to have to err more on the side of security in the future. Customers are going to have to make that sacrifice of convenience for tighter security at some point.”

Tipping this delicate balance in the favor of greater security could prove challenging for the banking industry. At face value, saying that you are going to improve the se-curity of your customers’ accounts is likely to be met with

CHECK YOUR BALANCE

The banking industry must balance its need to offer better convenience with the importance of tight security, and banks should not be worried to enlist their customers to help, David Potterton tells FST US.

IT SECURITY 73

widespread support, but some banks are rightly concerned that by inhibiting their account holders’ freedom and con-venience, they might be trampling all over the fragile green shoots of trust that have only just begun to re-emerge this side of the credit crunch. “It’s potentially tricky,” admits Potterton, “but I think that most people will understand that tighter security is part and parcel of the current envi-ronment. They should understand that every person must be aware of their own account activity and not be fully reliant on their financial institutions to simply guide them through. So it comes back to that idea of collaboration, and it doesn’t have to be painful for the customer – simple forced changes in passwords and multi-factor authentica-tion procedures are painless trade-offs. But ultimately, customer convenience is going to have to suffer.”

Financial institutions’ reluctance to engage with their customers on issues of security care may be borne out of a reticence to not only admit potential weakness, but also be faced with charges of admitting to walking before they can run. Why, some may argue, have banks bent over back-wards to offer such flexibility and convenience from a ser-vice perspective if their back-end security processes have been unable to keep up with the pace of their user-friendly interfaces? “I think most customers know what’s going on. They know how it works. The issue in the USA has always been around convenience, convenience, convenience,” says Potterton. “And now we are at a stage where it is increas-ingly up to the financial institutions to do a better job of educating their customers about why things like tokens and single-use passwords are important.”

But convenience counts for little if fraud remains an ever-present, and very real, threat. “To some degree,” continues Potterton, “the banking industry almost doesn’t want to bring up security as a big issue because they don’t want people to become unduly concerned about the battles they are fighting behind the scenes. However, they do have a duty to make their customers aware of what is going on, what the potential threats are, to make not just their ac-counts safer, but also their own lives a lot easier. A customer who understands why they have to follow stricter security measures is not going to think ‘why are they making my life more difficult?’ They will understand.”

Catch-22Not all customers are born equal. For every hyper-

connected early adopter, dripping with the latest technol-ogy and forever on the move, there is your more traditional bank customer who waits patiently for their monthly state-ment through the post, visits their local branch to make deposits and, if they are feeling adventurous, might pick up the phone to make a one-off transaction. The banking world is well aware that these opposite ends of the service spectrum are both incumbent and permanent – some people will always want a local branch, that human touch and actual safety deposit boxes as much as some people will forever be hankering after the next great technologi-cal hope for the banking industry. Balancing service and security between these two stools will continue to present

the financial world with its biggest challenge as the 21st century plods onwards.

“Banks’ client bases range from the incredibly sophis-ticated to those who might never even bank online,” says Potterton. “Then there are those in the gray area who might not be the most technically sophisticated, but they will bank online. This group are more likely to be at risk from phishers and scammers because they are less likely to have installed the latest anti-virus software on their computer; they are less likely to know what they are doing and more prone to scams and simple errors.”

Statistics from the UK bear this out. Since 2008, online fraud in the banking industry there has increased by almost a third, with more than 100,000 victims of ID fraud reported in 2009, and 24,000 instances of account takeover. The majority of these victims fell prey to simple email phishing and social engineering scams: a worrying indicator that thousands of account holders are still quite naïve when it comes to simply conducting the most menial of online activities. “I have had many conversations with financial institutions that are struggling to get the message across to their clients that they must take some responsi-bility for their actions; that banks cannot be depended on solely. But many banks realise that they have to walk their clients through this process. They have to give them the software and keep it updated for them, really just to make sure that they are not exposing themselves or the institu-tion to threats and unwanted risk,” says Potterton.

But it is the tech-savvy customers who are steer-ing the financial industry towards its catch-22 situation. Banks that rein in their services in too much of a draco-nian manner run the risk of losing a fair chunk of custom. Equally, banks that allow unchecked connectivity on all manner of platforms are faced with potentially exposing their customers to a greater range of threats, fraudsters and malware practices, thus running the risk of losing custom, too.

“It really is a catch-22 situation,” explains Potterton. “Banks are trying to expand their access points and it’s all going mobile, so handheld devices are really going to become the way that people interact. These devices could then become the testing ground for security procedures, so you could soon start seeing more limited access on balance checking, perhaps with second or third-level authentica-tion required, or perhaps the reintroduction of tokens, or even something as drastic as an additional chip in these devices, things like that. There are so many different ways that this could play out.”

Cultural or structural?Admitting to a weakness is not the same as identify-

ing potential weak points and working hard to eradicate them. Potterton is of the opinion that banks’ predilection for collective macho posturing can often work against their efforts to collaborate with their customers. It would be far easier, he believes, if banks admitted that they could better balance their service if they received im-proved feedback and help from their clients. “Who’s going

IT SECURITY 74

to admit to what, right? For the most part, the major-ity of banks know where their weak points are, but what sometimes works against them, particularly for the larger financial institutions, is the fact that they are extremely siloed.”

A large siloed bank will struggle with cross-channel communication; a structural defect that can have a nega-tive impact on the security of its customers. “It becomes very difficult to investigate fraud and security issues if a bank’s cross-channel capabilities are impeded,” reveals Potterton. “It becomes really difficult for a bank to iden-tify the patterns that are held and then be able to work cross channel to pinpoint where there might be fraudu-lent activities. So you might have someone fraudulently filling out a credit card application while at the same time opening a bank account while at the same time maybe ap-plying for a mortgage. And this is where it gets difficult, which is why I think real-time monitoring across chan-nels is the key to successfully combating fraud. While I think that people understand this, the capabilities that banks have to combat that in real-time are still at the early stages of development.”

To expect even the most un-siloed bank to be able to combat and repel every security attempt it faces is, be-lieves Potterton, optimistic. “I would like to think that we will get to a state of complete privacy, but I sit in on some session at banking tech conferences and you hear the sta-

tistics and you think to yourself: ‘oh my god, I’m going to close all my online accounts and go back to walking into a branch. I’m going to get rid of my computer and every-thing,’ because it can really scare your socks off.”

Potterton also believes that the increasingly sophis-ticated band of cyber criminals will not only be able to keep pace with security software development, but might even stay one step ahead. “I think we can get to a level of security that is reasonable but, in all honesty, I think that the threats, the malware, the bots and all the other nasty things out there are just going to continue to be one step ahead. Because it’s the old adage – banks are where the money is, so scammers will forever be finding creative ways of coming in through the back door, or finding other way to get at the money.”

Reactive in recessionThe recent economic turmoil experienced by mil-

lions in the western world has damaged many people’s previously unshakeable trust in large financial institu-tions. The banking industry has had to work doubly hard in order to recover that trust and acceptance, but crafty and unscrupulous cyber criminals looking to exploit the financial woes of millions in order to make a fast buck are hindering it in its objectives. “Such an economic environ-ment is fertile breeding ground for people to justify going after things in an illegal way,” admits Potterton.

Faced with such perpetual threats, financial insti-tutions are being encouraged to shift their attitudes to-wards security from reactive to proactive; by aggressively implementing strategies that protect their perimeter before, and not after, the hackers, phishers and fraudsters identify a weak spot. “We did some research on this,” con-cludes Potterton. “The banks actually asked us to go out to see what would people’s attitudes be if banks were more proactive with providing software tokens out to the end devices. What we found was, as you might suspect, people were in favor of that, but there were others who were not. So I think again that it is the banks that would love to do it, although there is an element of support and risk that goes with that. Some people just will not feel ready for it. That is, until they get hit themselves, and then they are more likely to want to get on board.”

The last two years have been tremendously trying for the financial institutions. The banking industry has taken a number of hits on many fronts, from being forced to close their doors, to bailouts and a sharp decline in con-sumer trust. “They are just getting to the point where they are seriously able to begin rebuilding that trust,” says Pot-terton. “They are really thinking about ways to communi-cate their efforts at increasing security without damaging the relationships they have with their clients. Some banks will take the risk of acting upon their security concerns without consulting or engaging with their customers, and that’s fine. But I think for banks to effectively rebuild trust and build a stronger security perimeter, they have got to engage with their clients if they wish to achieve that.” n

THE SAFEST

WAYS TO

BANKTrust them or not, banks are still the safest place for your money, and while electronic banking increases your chances of becoming a victim of fraud, nearly all financial institutions have put in place a layer of security designed to protect the customer.

Most banks now have zero-liability policies for debit cards, designed to limit the direct risk to users in much the same way a credit card does.

Figures from Javelin Strategy show that the average cost of fraud to victims using debit cards has fallen from $739 in 2007 to just $243 in 2009. With credit cards, those figures are $696 and $314 respectively, which highlights just how much the situation has been improved for debit card users.

If using your card online to make purchases, be aware of the site’s url – protected web sites should show ‘https’ to denote SSL encryption, rather than the non-encrypted ‘http’ prefix.

Setting up email or text alerts to signal when a purchase on your card has been made is a good way to keep track of your purchases, and a swift way of identifying fraud.

PREDICTIVE ANALYTICS

A FEARLESS FUTURE?

Can the rise of predictive analytics in banking and insurance help remove financial risk and better shape customer interaction, or is the software limited in its ability to really see into the future and guard against risk? Ian Clover reports.

PREDICTIVE ANALYTICS 91

Various industries have been reaping the benefits created by the rise in predictive analytics and predictive modeling over the past few years. Police forces, hospitals, energy companies and

marketing firms have all utilized predictive analytical tools to help them to better manage their respective fields, and now the financial sector is getting in on the act too.

Whether you work in risk management, customer profiling or insurance, predictive analytics could prove invaluable. The result of good predictive modeling is fan-tastically simple; it’s the processes required to achieve these results that make up the tricky part. Thankfully, there are some innovative software packages out on the market that do all the complex work for you, but every company that employs these tools still needs to know how to effectively utilize predictive software for their own ends.

Before your company dives headlong in, it is useful to know what predictive analytics is.

The predictive modeling software has been developed to analyze vast pools of data to achieve results. It uses predictive algorithms to effectively locate any underlying patterns in the data that is fed into the program. These pat-terns, trends and relationships are not so immediately evi-dent to the naked eye, but predictive analytics software can take this fine and minute detail about usage, behaviors and consumption patterns to create a model that recognizes which customers and clients might be most receptive to a certain product launch, or who might be better served by a change in their account detail. Effectively, this is business intelligence with bells on.

Creating a picture for the end-user to work with, predictive analytics does away with complex investiga-tive procedure, effectively condensing vast threads of data into easily manageable chunks of information that have great value for the user. “We use predictive analytics in a number of places,” says Bill Martin, senior vice president in marketing analytics at Farmers Insurance. “It is used everywhere from pricing to modeling, to looking at how to handle different customers from different sources of busi-ness and even, to some extent, to try to figure out how to respond to different claim situations.”

In the world of insurance, raw data holds only so much value. In bringing together centralized information and patterns from a whole mass of clients, and then presenting this information in a usable and useful fashion, predictive analytics pinpoints areas of the business where certain de-cisions will have certain effects. While the results are never

100 percent accurate or quantifiable, Farmers has been able to extract enormous benefit from its investment in predic-tive modeling software.

“We gather data in lots of touchpoints with our cus-tomers, whether they are visiting us online to run through a quote or they are calling with a claim, and even when we are conducting outbound marketing activities that involve using outside sources for data that help us contact potential customers,” says Martin. “We bring that data together in several systems, and there are several different databases that serve a variety of purposes – some are helping our agents service their policyholders; some are helping us market to customers, and some are helping us to undertake these types of analytics. So there are quite a few databases that are being used, oftentimes in addition to creating the databases we have to bring together too, and the predictive tools are used on top of that.”

Extracting the dataFeed beef into a mincer and the immediate result is

minced beef. It takes additional seasoning, shaping and cooking before you have yourself a burger. In predictive analytics, the raw data is ‘minced’ through the software program, but the resultant data still requires additional shaping and interpretation before it becomes palatable for a company to fully ingest.

“At Farmers, there are two ways that we interpret and work with the data,” says Martin. “In some cases we’ve got predictive analytics that are very much part of the process, and that includes something as simple as time, our adjust-ers, the range of settlements for similar types of injuries and conditions, and details on their background too. To

“When using predictive analytics, we see an increase in sales rate when we know which products to present and how to present them, and we see an increase in the accuracy of our claim payments”

PREDICTIVE ANALYTICS 93

put it into an example, we can accurately decide, when a customer calls us directly, whether or not they would be more or less likely to be interested in other products we have besides the ones they want to discuss. This informa-tion is delivered to us based upon our previous contact with them and other data we hold on them.”

The other method Farmers employs in order to fully capitalize on its investment in predictive modeling is to utilize the software in a more analytical sense. “Aside from its operational value, there is great analytical value too,” says Martin. “We could be doing research that says ‘alright, so in the pattern of customers who respond to one type of advertising, what web services or what type of media gives us most access to those customers? And what types of cre-ative messages are most likely to get them to respond?’ So there is both a research approach and a kind of in-process, or live approach with the predictive models that we use.”

Once this information has been gleaned, the benefits soon become apparent. It is every company’s dream to know what their customers are thinking and to then be able to second-guess their whims in order to present them with the right product at the right time. Predictive analyt-ics produce highly technical results that can then be quan-tified into tangible, financial growth.

“We see an increase in customer satisfaction when we are more likely to know what the customer wants,” says Martin. “We see an increase in sales rate when we know which products to present them and how to present them, and we see an increase in the accuracy of our claim pay-ments, in that we don’t miss by paying too much or too little when we spend more time using the models there.”

Predicting business growthAt the coalface, predictive analytics have helped

Farmers to better service the needs of its clients, but it is from a business perspective where the tools have really proved their worth. “The pricing area of our business has been the lead driver behind our adoption of predictive modeling tools and data analytics,” says Martin. “The laggard is customer serving routing, of both prospective and current customers. We are just learning how to use predictive modeling more heavily in the service arena, and I think when we can anticipate better what it is that the customer needs then we will reach a point where ser-vice interaction isn’t even necessary – we will be able to provide without prompting from the customer.”

One area where Martin believes predictive analyt-ics is going to struggle to make an impact in the coming years is in risk. “I think that modeling for risk and emerg-ing risks is an area where predictive analytics is going to have to take a step back from. The financial crisis in particular was proof that this method of modeling is inef-fective at predicting rare events or events that are, at the time, unique or unprecedented. So in terms of emerging risk I think we will come to rely more on blue-sky type brainstorming and modeling of potential scenarios. This is a little bit different from predictive modeling, which is based purely on prior patterns.” n

Out on the formerly mean streets of Memphis, Tennessee, violent crime rates have fallen by 30 percent since the city’s police force first started using IBM’s predictive analytics tools.

Nicknamed ‘Blue CRUSH’ (CRUSH stands for Criminal Reduction Utilizing Statistical History), this predictive analytics tool works out where crimes are likely to occur, and empowers the city’s police force to interject. So far, so Minority Report, but read on and it all becomes clear…

Much of policing decisions are made on the basis of an officer’s experience, previous knowledge and, to a large extent, hunches. “Some of these gut feelings may be valid, some not,” says Colin Shear-er, worldwide industry solutions specialist for SBSS, an IBM company. “With the assistance of the Memphis police force, we were able to develop a system based around evidence-based decision making, allied with asking the questions: ‘What do the hard facts and the data tell us?’

“So the Blue CRUSH system uses human knowledge on how crimi-nals operate to try to give police officers and commanders assistance with their operational decisions. So with their raw data they would ordinarily base their decisions on, our systems are able to give them quantifiable probabilities based on what has happened in the past, taking into account all sorts of factors, such as particular parts of town; the existing police presence there; the weather and temperature; the time of day; whether there is a rock concert on in that part of the city; whether it is pay day, and so on. All the while the Blue CRUSH system is looking at this data and working out the probability of a crime oc-curring.

“With this data, the system can advise shift commanders to help them with rostering, telling them where and when to deploy their of-ficers. And then when an incident occurs, the system can rerun these models and update the city’s risk profile.” The predictive analytics tool actively collates the knowledge, data and historical information that police forces have built up over decades of crime fighting, and use this data to form recommendations, probabilities and predictions, which is one step up from character profiling, and just a few steps down from the world of sci-fi.

PREDICTIVE ANALYTICS IN ACTION

SOCIAL COLLABORATION66

You wouldn’t know it, but bank compliance pro-fessionals are very social people. We spend a lot of time getting to know the people and systems that make a bank run smoothly, so we can better

understand bank operations as they relate to the laws and statutes that regulate our industry. As we observe what our institution does on a daily basis, we also look for opportu-nities to ensure we comply with the law, while maximizing customer satisfaction and shareholder value. Often this requires us to conduct research, and develop innovative approaches to achieve that delicate balance between com-pliance, risk and profitability.

As part of the research process, it’s a good idea to seek out people in similar circumstances, but where do you find large groups of compliance professionals and experts to discuss the regulatory challenges facing the banking in-dustry and to benefit from their experience? Conferences? Seminars? Although they are definitely examples of large gatherings of like-minded and experienced professionals, there is rarely an opportunity to really sit down with a large group and discuss issues and best practices during breaks and meals. A better solution is social collaboration through the Internet.

Facebook and MySpace are great examples of social collaboration in a non-business setting, and there are sev-eral examples of similar networks to exchange experience and ideas about issues and challenges in the business world. A few I use regularly are Bankers Online, LinkedIn and the Association of Anti-Money Laundering Specialists. Each offers a unique opportunity to discuss banking compliance challenges and create an environment conducive to inno-vation and creative solutions to those challenges.

Bankers Online is a website made by bankers for bank-ers. In addition to the volumes of reference and research material relating to banking laws and regulations, it has a great message board and forum used to discuss a wide range of banking topics such as operations, technology, government relations/compliance and lending, to name a few. You can post messages and respond to others, help-

ing each gain new perspectives and approaches to the regulatory challenges we face every day. There are also recognized experts that will help steer you in the right direction along the way.

Although LinkedIn is generally considered a profes-sional networking website, I’ve found the ‘Groups’ feature to be particularly helpful. They are general industry specif-ic, and often you can find narrow groups relating to niche areas of the financial services industry, like anti-money laundering, or audit, or compliance management. These groups will sometimes post questions or polls to its mem-bers about issues important to the group. It’s another great opportunity to connect with other banking professionals to debate issues of the day.

The Association of Anti-Money Laundering Special-ists is a more specific type of professional network. Most of the participants are certified members with specific anti-money laundering and risk management experience. It has a similar group-focused format as LinkedIn, but the topics usually cover banking risks like terrorist financing, customer verification, and anti-money laundering issues. But again, it’s a great place to collaborate with banking professionals with a focus on the operational, compliance, reputational and liquidity risks associated with those that use banks to further criminal or terrorist activity.

As the burden of increased government regulation and expanded oversight puts pressure on the banking industry to change and overhaul its practices, the ability for compli-ance professionals to collaborate with other banking and compliance professionals throughout the United States and the world will become even more critical. Whether it’s to gather and form cohesive strategies to guide the legislature in producing effective banking regulations, or to discuss creative and cost-effective solutions to comply with those government regulations, leveraging the power of the inter-net and the professional networks and resources available will significantly improve your ability to recognize issues and react to the changing landscape of the financial ser-vices industry. n

Social collaboration in banking complianceUtilizing social collaboration tools and techniques can work wonders for your business, so long as you send out the right message on the right platform, says Brian Ware of First National Community Bank.

Brian L. Ware, Esq. CAMS, is First Senior Vice President, Compliance Division Manager at First National Community Bank. He earned his Juris Doctorate from Widener University School of Law and graduated from The University of Delaware with a bachelor’s degree in Political Science. He is a licensed attorney in the Commonwealth of Pennsylvania and a Certified Anti-Money Laundering Specialist (CAMS), specializing in Banking/Corporate Regulatory Law and Government Relations.

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UNIFIED COMMUNICATIONS

INTERACTION

A unified set of communication tools can

enable a bank to reach and surpass its customer

service objectives, and they are easier to use and

implement than you might think, as FST US discovered.

UNIFIED COMMUNICATIONS 127

Short of handing out free money, complimentary head massages and interest-free, no-questions-asked loans, there is not much a bank can do to make its customers completely happy. They can be

made content, accepting, and even occasionally pleasantly surprised by the level of service they receive, but in terms of pure and unadulterated happiness, banks sadly inhabit a bracket that will forever be filed under ‘mistrust’ in an individual’s mental compartmentalization of things ‘good’ and ‘bad’.

This situation is testing enough, but banks also have to employ a team of staff that is ready and willing to face this flak on a daily basis yet remain steadfastly calm, positive and helpful throughout; a task made all the more difficult in light of the global economic crisis that has shaken the banking world like an ornithophobic let loose in a parrot store. The fragile road to recovery is littered with pitfalls and potholes, but the financial world must start some-where, and restoring confidence with the wider banking population is most definitely one of the first steps.

But where, and how, to start? Customers no longer blindly trust their bank, but they still, by and large, need to use them. Hence, a bank would be well advised to adopt and utilise the latest technology in order to recover that most basic form of customer satisfaction – great service. George Walker, SVP and CIO of First Community Bank, was quick to recognize that his customers wanted, first and foremost, clear, accurate and swift service from their bank, and identified a unified communications software platform that would enable the bank to deliver and surpass its customers’ demands, while also equipping its staff with the tools necessary to hit these previously unscaled heights.

“We are a community bank, so one of the things we do well is what I like to call relationship banking,” begins Walker. “We know our customers and they know us, so to be able to provide our banking staff with the tools that enable them to receive customer communications no matter where they are is ideal. These communication streams are delivered in an extremely simple way, because the last thing our staff want to do is learn how to sign on to five different systems and be required to remember a bunch of passwords and logins. For them, it is a one-stop shop for service and communications.”

IN ACTION This one-stop shop is reflected in the level of customer

service the bank is now able to offer since it adopted a uni-fied communications software platform.

To the uninitiated, unified communications is a plat-form that integrates all of the systems that a banker might already be using (such as email, telephone, video call etc.) and enables these systems to work together in a real time fashion. So staff at the bank can connect seamlessly to their customers regardless of their location. As long as they are in possession of one of the integrated platforms for end use, staff are connected and able to communicate. In addition, a unified communications platform will come with an interactive directory, which enables staff to access it and locate a fellow member of staff, engage in a voice call, a video call, a text messaging session or even a discussion on a social media-type platform, thus drastically increasing the channels of communication a banker has with not only the customer, but also with fellow members of staff.

“Aside from our staff being able to communicate with our customers better,” enthuses Walker, “one of the other things that we have worked on is enabling more real-time communications with those who bank online or conduct mobile banking. One of the things that we found is, for some of our higher-risk customers, instant alerts to our team about customer transactions have really made their job much easier. For example, if somebody has sent in a big wire transfer and it is outside of their normal pattern of transactions, in the old days you had to call around to try to get hold of them, but now we send them instant alerts and they call us right back.”

This is just one example of how unified communica-tions is able to reconnect the customer with the bank, and slowly erode the walls of distrust that were erected during the credit crunch of 2008. Since incorporating unified communications into First Community Bank, Walker has seen a reduction in business latency and less reliance on the dependency and availability of a certain device or medium.

“Our staff are now much more mobile,” says Walker. “Almost all of our bankers now have Smartphones and with them they can be anywhere, at any time, and are able to conduct almost any form of banking. They have access to almost everything that they have access to when they are in the office.”

Reports by computerworld.com

attribute the growing adoption rates of

unified communications solutions to better return

on investment – what was once an IT luxury is

now viewed as a technical necessity.

Instant MessengerPC to PC

Internet Roaming

Phone to Phone

Voice Mail / Missed Call

PC to Phone

Phoneto PC

SMS in/outand notification

Fax to PC

Call Forwarding

IP Voice Conferencing

OC Global NetworkOC User

CPE

ly, and many are even given the option of immediate call back. If a caller to the bank leaves a voicemail, the bank’s response is also much faster and more accurate than ever before. “This is perhaps one of the most obvious benefits to our customers,” says Walker. “When an account holder calls the bank and leaves a voicemail, we can get back to them much quicker than before, because that voicemail doesn’t get lost, our bankers no longer forget their voice-mail password. This all equates to a much greater service for our customers.”

A complete unified communications system will in-corporate the ability for users to automate the processes behind setting up things like conference calls, video and web conferences, and pretty much all other types of communication in a much quicker, easier and controlled manner. Such technology enables staff members to main-

UNIFIED COMMUNICATIONS128

A personal serviceBut it is not just the ability of the bank’s staff to work

from home or remote locations that yields the greatest benefit for the customer; it is the fact that First Commu-nity Bank can make good on its promise to deliver a more personal service, empowered by the unified communica-tions tools they now have in place. “One of our key business models is that we provide a better service than the larger banks do,” explains Walker. “One of the reasons that we are able to do this is because we have such a unified set of com-munication tools, and they allow us to analyze our contact center in order to optimize staffing levels. So if waiting time is too long, we can identify and respond. In the past, the only way we could have known this is if a customer complained.”

The contact center at First Community Bank has now been transformed. Callers are dealt with much more swift-

How unified communications works

With growth comes choice: there is very little

consistency in the types of unified communications solutions being chosen,

with each company throughout the world

opting for something that works for them.

UNIFIED COMMUNICATIONS 129

and their email and everything else much easier, so I think our unified set of communications have allowed everyone to be more productive than they were before.”

The future of banking will naturally feel its way along a number of evolutionary paths. Mobile banking is still pushing the boundaries of possibilities. Social media platforms are making their first, tentative forays into the financial world. Collaboration tools and unified commu-nications are part of this natural process of evolution, so it is up to the banks themselves to decide which methods are going to work best for their own needs. “For us, I think it has just been a natural evolution of service,” concludes Walker. “I can remember when we just had voicemail, then it became email that was driving service. They were two completely separate things and now, I really believe that the access to customer communication and the ability for staff to collaborate in an increasingly efficient way will be huge for the banking world. As banking becomes more and more electronic, I believe that banks of all sizes are going to need these kinds of tools and technologies, otherwise they are not going to be able to keep up.”

Banking is indeed more electronic than ever before, and it is in this context that banks have to begin to think and operate. Customers are becoming more and more tech-savvy, so maintaining customer connections is, os-tensibly, easier than ever. However, expectations of service have increased in line with technology, and customers now expect service quickly, accurately, and whenever they want it. If a bank can adopt unified communications capabil-ity, it can not only augment and improve its service to its customers, but it can also make the job of the bankers and tellers a great deal easier. n

tain and enhance customer connections, quickly identify problems and issues, respond to them, and collaborate in real-time with fellow staff members in order to ensure that all tasks are resolved in a satisfactorily fashion.

“We have some pretty cool technology here that not only serves the customer but also helps to attract and retain people to the bank,” says Walker. “They find that when they come to work for the bank we are able to provide them with the tools they need in order to be successful and good at what they do. They are able to service our customers in the best manner possible, and this ensures that they want to keep on working here.”

Second natureThere would be little point incorporating a complete

unified communications system into a bank’s technol-ogy architecture if the software itself proved too difficult to master. For George Walker, the tools’ ease of use and intuitiveness were one of the main drivers behind his de-cision to adopt the software for the bank. “They were all very simple to learn. There was very little training involved. It would have defeated the purpose completely if the staff found the software hard to master, so there are very few barriers to adoption.”

From a cost perspective, unified communications tools are obviously not free to implement, but Walker argues that cost savings are relative to the actual real time savings a bank can make in terms of efficiency, productivity, staff retention and customer satisfaction. “As far as cost savings go, I’m not sure if there have been a lot of hard-dollar sav-ings. I think there have been a lot of timesavings though, for sure. Our staff have been able to access their messages

Unified communications is the inte-gration of real-time communication services – such as telephony, video conferencing, instant messaging, pres-ence information, speech recognition and call control – with non real-time communication services, such as unified messaging, which is integrated voice-mail, e-mail, SMS and fax. Unified com-munications is not a single product but rather a set of products that provides a consistent unified user interface and experience across a multitude of devices and platforms.

Unified communications allows an individual to send a message via one medium and then receive the same communication on another medium. An example is receiving a voicemail mes-sage and being able to access it through e-mail or via a smartphone. If the sender is online according to the presence in-formation and currently accepts calls, the response can be sent immediately through text chat or video call. Other-wise, it can be sent as a non real-time message that can be accessed through a variety of media platforms.

“Our unified communication tools allow us to analyze our contact center in order to optimize staffing levels. So if waiting time is too long, we can identify and respond. In the past, the only way we could have known this is if a customer complained”

One of the main drivers behind the growing adoption rates of unified communications in banking is to reduce communication response time, or perceived speed. Unified communications differs from unified messaging in that it allows individu-als to check and retrieve an e-mail or voicemail from any communication device at anytime, and it expands beyond voicemail services to data communications and video services.

What is unified communications?

THE CIO ROLE

OR

Reducing cost, growing the business, keeping the lights on and improving customer retention – all tasks your average CIO must undertake. But with tighter regulation and greater need for business intelligence, has the CIO’s role evolved into a different beast altogether? Ian Clover reports.

The modern CIO: a job made easier or more difficult by technol-ogy? Certainly, the pressures a CIO is under have evolved unrec-ognizably in the past decade, but has the recent consumerization of technology made it easier for them to justify the work they do

to the business, or does the fact that everybody is a little bit tech-savvy these days make the CIO’s job harder?

Such issues are at the forefront for most CIOs, particularly those working within the financial services industry. The very notion of cus-tomer service has been transformed following the widespread adoption of smartphones and the all-pervading reach of the Internet. Couple this with the damaging financial crisis and the resultant regulations cast by the government, and CIOs find themselves caught in the middle, juggling business objectives, adherence to new regulations, tighter budgets and the constant challenge to meet the needs of an ever-more mobile, always-on consumer.

But although the daily duties and pressures may be different, has much else changed? Hasn’t it always been the case that a CIO was charged with enabling and empowering, to ensuring the business could perform to its best ability in the most efficient and cost-effective manner? The pace of change has increased noticeably, but has the direction and end destination remained the same?

“I think it’s always been the case that the CIO has to have a business hat on and has to be seen as a partner to the business,” says Malcolm Eylott, Senior Vice President and Global Head of Operations and Technol-ogy at TD Securities. “The CIO cannot get into a master/servant relation-ship. People sometimes talk about businesses being clients of technology. They are not clients. If they were, they would take their business elsewhere on occasion, but they are not. The CIO has to have a true partnership with the business.”

It is hardly revelatory to note that the CIO of a business must work with their fellow executives towards one common goal, but industry talk in recent years has almost hinted at an irreversible shift in this relation-ship. ‘Keeping the lights on’ has clashed with ‘doing more with less’ as business needs have contradicted the true capabilities of a number of CIOs who have been restricted by the true economic reality.

“With the market downturn over the past few years, businesses have been holding back on their initiatives because the economics just haven’t been there,” asserts Eylott. “The investment dollars were not made avail-able, so there was all that demand being bottlenecked and pent up.”

Eylott believes that we are now on the cusp of the recovery, and the CIO’s role will once more become easier to define as soon as fluid liquid-ity returns to the sector. “Markets are now starting to pick up, firms are starting to invest again and you’ve got this deluge of work that’s been bottlenecked ready to pour forth.”

Regulatory pressuresReturning confidence and fatter funds come with a caveat. TARP

regulations may have bailed out many of the larger financial institutions, but it did so with a number of provisos. Equally, Obama’s more recent Dodd-Frank reform has levied even greater control and regulation on the banking industry, leading to greater transparency and accountability in the sector. This is great news for the consumer and ostensibly great news for the industry, but it means greater scrutiny throughout.

“The market’s pickup is coming at the same time that the regulators are coming at us saying: ‘By the way, the stuff that went on over the past two or three years we weren’t really happy with, so you better smarten up your act, tidy things up, get a handle on access control, data security and data governments,’” says Eylott. “Then in addition to this, many dealers’

risk models are going to need to be revamped, because with the previous models, nobody was able to predict what happened.”

Regulatory pressures are one thing; business pressure is something else entirely, and the modern CIO is feeling the squeeze from both sides. “While the regulators are saying you’ve got to do this and this, the busi-ness is also saying: ‘It’s about time we did this and this’,” explains Eylott. “So it’s all coming together at once, and the CIO is caught in the middle, trying to balance satisfying regulators, satisfying the business partners and also managing a budget.” No wonder there is this sense that the role of the CIO has diversified in recent years.

Consumer pressureThe recent economic turmoil was unprecedented in living memory,

and its outcome is set to have a debilitating effect on the financial indus-try’s ability to self-regulate in the near future. Despite this, a CIO should be able and dextrous enough to navigate a path through the regulations in order to reach a satisfying outcome for the business. Likewise, addi-tional business pressures are par for the course for a CIO – learning to work outside of one’s comfort zone in order to assist the business needs should soon become second nature for all progressive CIOs.

However, there is one pressure that CIOs in the financial sector have never felt so keenly, and that is the pressure coming directly from the consumer. The increasing ‘consumerization’ of technology has brought the customer closer than ever to the business, and the pressures and chal-lenges this new world order brings have never been faced, on a wide scale at least, by those working within finance IT.

“People in general are becoming more savvy around technology and what it can do for them,” says Eylott. “Customers now have a much better idea of what their expectations from technology are, and I think that many businesses have caught on to this idea. So partly due to frustra-tion around delivery and execution, some businesses have hired more technology-savvy individuals to deliver the right initiatives to maximize their technology investments. This will be one of the biggest changes for IT departments in the near term – the business is now going to be almost as interested in what technology can do for them as the technologists are.”

There’s more, too. With more stringent regulatory pressure and a greater urgency to deliver sharper service to a savvier consumer base, many businesses are adopting business intelligence (BI) strategies to help manage and analyze their key performance indicators.

“Financial institutions want better information metrics and data around their products,” says Eylott. “The regulators are saying: ‘If you’re not measuring it you’re not managing it.’ And they’re quite right, and more and more CIOs find themselves setting up BI demos for the regulators.”

With good BI being a world away from bad BI, it is important for CIOs to carefully consider their BI strategy if they wish to extract data that is useful to the business. “There are many people that don’t under-stand the power of BI or a good management information system (MIS),” says Eylott. “In the right hands, this information can identify business projects that are misfiring or exposing you to unnecessary risk. It can also identify opportunities to automate processes, cutting out errors and saving valuable time and money.”

Those ‘right hands’ are increasingly falling within the domain of the CIO, turning the juggling act they are already performing into an even more elaborate merry dance for the business. The role of the CIO has most definitely evolved in recent years, but better tools and technologies, a greater business interest in IT and tighter regulations should be viewed as enablers of, rather than barriers to, good CIO practice. n

THE CIO ROLE 2

Service with a smile

CORE STRENGTHThe agony and the ecstasy of changing core banking systems

How a new breed of bank is bringing back old fashion customer service – using next generation technology

www.fsteurope.com • Q4 2010

STUMBLING TOWARDS THE FINISH LINEWill the Single Euro Payments Area ever get its act together?

ANALYST VIEWPOINT70

As a system, core banking is undoubtedly the single most important element in the bank’s IT environment. While core banking systems have been in place for around 30 or 40 years, the tech-

nology evolution hasn’t changed much since this time and the systems are pretty much what they were when they were first implemented. These systems continue to work well, however core systems invariably come back into discussion

because they are costly to maintain and improve upon. On average a bank will spend between 40 to 70 percent of its IT budget on core system maintenance each and every year, which leaves very little for the bank itself to innovate or to respond to the increasing regulatory burden.

IDC’s 2009 EMEA Core Banking Deal Part 1 report makes a number of predictions for the future of the core banking market by looking at the market trends for the

The heart of the bank

Core banking has a critical place in financial services as the heart of the bank. IDC’s Rachel Hunt outlines the role of core banking in relation to customer service.

ANALYST VIEWPOINT 71

previous year. Rachel Hunt, EMEA Research Director for IDC, explains that what was quite interesting from the report’s point of view is that while 2009 was a difficult year for many IT vendors, the number of deals was fairly level with regards to the previous year.

One of the key reasons for this has been the number of mergers and acquisitions within the banking system, which has meant that many organisations have been required to replace or redesign their core systems. “If we look at the banking sector in general,” says Hunt, “service-orientated architecture is gaining in maturity, and the vendors are fol-lowing suit and offering solutions, which are much more componentised and can scale up much quicker.

“The analogy is that when you’re replacing a core system it’s like doing heart surgery whilst running a mara-thon; it’s very risky for banks to do rip and replace. It’s a complex and usually very long project,” she adds. What banks are currently looking for instead are the much small-er projects, which are a lot less resource and dollar hungry. Hunt says the report has thrown up the organisations that are focusing on their pain points and then rolling them out so they replace or transform their whole core system at the end of the project.

Another interesting trend, says Hunt, is that new banks – in both the Middle East and Western Europe – are inputting brand new systems, leading to a lot of product innovation in the sector. “The majority of deals are being driven from emerging areas like the Middle East and Africa, but Metro Bank and Tesco Bank are also building brand new core systems.”

So what is driving this change in core banking sys-tems? Hunt believes that it is down to the customer. She sees that customer requirements have changed in a power shift that favours the customer as the decision maker. “In the olden days, you went to see your bank account manager and he told you about the products available and how to

access them. Today, you go to the bank and tell them how you want to do your banking,” explains Hunt. “Increasing-ly that pressure is difficult for banks to deal with because the customer wants more and more channels. Plus they want a personalised banking experience, they want to be able to see their data, they want to be able to personalise it.”

Flexibility is certainly a key challenge for the future of the banking industry. Indeed, one element of introducing new channels or new products is that those products need to be introduced in a very flexible manner, particularly in the retail banking side. Dealing with the mass market, which increasingly wants a personalised approach, doesn’t really go hand in hand.

“Banks are having to deal with a competitive envi-ronment where keeping profitable customers is becoming more and more difficult, where the differentiator is not going to be the product pricing,” explains Hunt. “It’s all about the level of satisfaction and the quality of service that’s given.” She goes on to explain that the FSA did a survey recently that found 95 percent of consumers choose their banks based on the quality of the service rather than on the pricing.

Pricing will remain important. “Very dissatisfied customers are changing their banks. The rate is currently around eight percent across Europe, but that’s on the rise. Basically the customer is less and less loyal and similarly in a corporate banking world, the level of sophistication that corporates and treasurers want is much more granular, they want more control and more self-service. All these things are of course limited by your core system and how flexible it is and how cheap it is for you to introduce new products or services.”

Even the quality of the service being offered goes back to the back-office core system. If it takes two weeks to ap-prove a loan origination over the internet, you will not be looking at a very happy customer – if customers go on the internet, they don’t want to have to wait two weeks for a de-cision. All these sorts of competitive issues are linked back to some of the restrictions caused by the legacy systems.

Indeed, Hunt believes that looking at the future of the banking space there will be a real shift in how banks are going to compete, particularly on the quality of service. Core system vendors need to be able to provide the tools for those banks to compete on that sort of quality and sat-isfaction level.

Hunt explains that she is excited about the entrance of new banking competitors that are not banks. “Peer-to-peer lending, with organisations like Zopa or Funding Circles who are not banking institutions but who are pro-viding loans to consumers and small and medium busi-nesses, is really changing the way that they interact and relate to their customers,” she says. “Now, the difficulty is that because they’re not banks, they’re not regulated so they don’t have to have such complicated reporting and infrastructures as the banks. But the banks do need to learn about the ways that these people are changing and the way they’re communicating and interacting with their customers.” n

Upgrading your systemLooking at what financial institutions can do to implement or replace

a core banking system, Hunt advises that a small institution should look to integrated core systems that are provided by a whole host of vendors and cover universal banking requirements. “I would say that smaller institutions need to investigate software-as-a-service models in terms of reducing CapEx and look towards an operational expenditure model. Certainly the pay-on-demand or pay-as-you-go models are interesting,” says Hunt.

Larger institutions need to look at evolving towards a service-orientated framework and follow standardised definitions of what services should be. Looking at component solutions it is possible to find out where the main business pain points are. “One of the issues for larger institutions is that core systems replacement is seen very much as an IT issue with little involvement from the business,” says Hunt.

“Increasingly this is changing to see decisions made by the business. The end user of the core system needs to be involved right at the beginning of the selection – they’re the ones who should be driving the core system transformation, not the IT department, because they’re the ones who have a vision of what the bank is doing, what it needs to be doing and where the real bottlenecks and pain points are.”

95% of consumers

chose their bankson quality of

service

MOBILE BANKING

GOING MAINSTREAM

With mobile banking figures set to soar over the next five years,

Juniper Research’s Howard Wilcox reveals the reasons behind the

phenomenal figures.

109MOBILE BANKING 109

The use of mobile devices to carry out banking transactions is cur-rently booming, and is set to stay that way. According to Juniper Re-search, 400 million mobile phone users will be using their devices for banking purposes by 2013. Mobile Banking Strategies: Applica-

tion, Opportunities and Markets 2010-2015, an industry benchmark report, provides the most detailed view of the mobile banking market to date.

Howard Wilcox, author of the Mobile Banking Strategies report, ex-plains that three main findings came out of the study. First, Juniper Research believes that user numbers will double over the next three years globally, from 200 million to 400 million. A large part of this is due to the ever-in-creasing importance of SMS-based banking services, but also the growth of mobile web banking services and, importantly, smart phone apps.

Second, SMS is going to play a critical role in the future. “We see the volume of messages growing to some 90 billion worldwide,” explains Wilcox. “It sounds like an awful lot, but what it actually equates to is roughly one message every two days for every mobile banking user at that time. Those messages will be delivering information like balances, recent transactions and other alerts being sent by users.”

The third conclusion from the report is that while, according to the Ju-niper survey, 80 percent of banks offer some form of mobile banking across all world regions, a number of banks are actually limiting their options because they’re offering insufficient mobile channel options. For example, they might offer a smartphone application, but not a web-based browser option or an SMS banking service.

The report suggests that banks really need to expand the channel choic-es they have on offer to make banking services more personalised. “Some banks haven’t got all three choices yet. Ideally they should have all three to really give customers the most choice across all three ways of accessing these services,” says Wilcox.

Looking at the reasons behind the growth in mobile banking, Wilcox believes that it is simply a case of increased supply and increased demand. He says that as more people realise mobile banking offers more convenience, greater ease of use and great services, the more people will come on board.

“At the end of the day, for most people, doing their banking is not an activity that you do just for the fun of it. It’s something you’ve got to do. And if you can do it, say, while you’re commuting or whilst you’re on your way to something else, then it saves time,” he says. “It becomes more convenient.”

The second aspect behind the increased adoption is the demographic factors at play, suggests Wilcox. “The factors are essentially related to people who are aged late teens to mid 20s, and these are people that have lived their lives based around their mobile devices. In fact, these people are not particularly online bankers. Because they organise their whole lives around their devices – they buy things, organise their social lives – it’s natural that they should do banking on their mobile.”

Wilcox believes that there will be a growth in demand in their demo-graphic group as these people – who have maybe got their first job – sud-denly have more money to manage. This will become a big opportunity for the banks.

A third reason for growth in the market is simply that more and more banks are going to be offering mobile banking services. Offering all three services – a smartphone application, web-based browser and an SMS ser-vice – will become more common. “Lloyds TSB, for example, advertised mobile banking in a high-profile, above the line campaign in the UK,” says Wilcox.

Customer serviceMore and more banks are offering these services worldwide in order

to appeal to their customers and improve customer service. Wilcox ex-plains that mobile banking can certainly improve this important element of the banking sector. “Take the simple example of the most common enquiry to a call centre from a banking customer which is, ‘What’s my balance?’ For somebody to call the call centre and ask that question it could take several minutes. Alternatively, you could have an alert set up to tell you your balance is X. It could be daily, it could be every other day, or once a week, but it’s sent to your mobile that you’ve got with you anyway and saves you phoning up.”

From the bank’s point of view, they are providing a much better service because they don’t have to be asked. It works very much in their favour and it also works with other types of alert, such as the last five transactions for example. Wilcox explains that there are several new in-formation alerts aimed at improving this area. “There are process alerts, so for example in mortgage or loan applications we’re increasingly find-ing that banks will offer you the opportunity to receive an SMS to say your application has been received or is being completed,” he says. “A quick message like that is faster than the post, and also cheaper.”

Wilcox also highlights the importance of alerts in relation to fraud. “One scenario could be this: you might get a message saying that your card has just been used in a particular location for a particular value and SMS back to confirm that this is you. This much improves the customer service side of things because it gives you immediate knowledge that the bank is watching and safeguarding you. It’s also good in terms of im-mediacy, so if it was a fraudulent transaction you’d know straight away and you could take action immediately. It makes so much sense from a customer service perspective.” He says that on the Wells Fargo website, for example, they offer alerts about credit card usage via their Rapid Alerts service.

Fraud is consistently at the top security concerns for banking and financial service firms, particularly within mobile banking. That said, Wilcox believes a lot of issues around security are perception rather than reality. He says the issue from the bank’s perspective is that they need to communicate the security of their products. Banks need to convince customers that it is secure to have financial information on their mobile phones – by explaining that there is no residual data stored on the device, for example. Other features include using aliases or nicknames instead of genuine names.

Wilcox goes on to explain that of the security companies he has spoken to, increasing attempts of fraud in the mobile banking sector are expected. He says one of the reasons it has yet to see much happening in this sphere is because it hasn’t had much PR and that it is only just beginning to come to the fore. “There will certainly be increased security threats in the future. All the threats that are currently experienced online will be seen on mobile. This will be an issue that banks will need to ad-dress more and more as time goes on.”

And it isn’t the only challenge currently facing the mobile banking arena. Wilcox claims that one of the major challenges is mobile data speed. He says that as banks look to offer all three of the technology plat-

GOING MAINSTREAM

“Once more people realise mobile banking offers more convenience, greater ease of use and great services, the more people will come on board”

110 MOBILE BANKING110

forms – SMS, web-based browsers and a smartphone application – there will be issues about the speed of delivery over the network so that the user experience is good.

“I also think that when you look specifically at web-based browser banking, the online experience has to be the same on a mobile device as it is on a laptop or desktop computer. So here there are a lot of technical issues to rendering the service to the small screen. This could, of course, be related back to why some banks are yet to offer all three technology platforms – they are maybe taking longer to develop them because they’re addressing those challenges.”

Another aspect to take into consideration is that smartphones remain a relatively small proportion of the market. So while iPhone applications will get a lot of PR, they are only addressing a small proportion of the mobile users out there. Wilcox believes that for a bank to have extensive mobile banking penetration, they have to provide an SMS service too.

Looking forward, Wilcox believes that mobile banking will really take

Banking has existed online since the late 1990s, but mobile bank-ing is relatively new to the offering. While mobile banking is simply part of the mix for most financial institutions, Japan’s Jibun Bank simply exists for mobile users. It was launched in 2008, through an alliance be-tween Bank of Tokyo-Mitsubishi UFJ and KDDi, a telecommunications company with more than 30 million subscribers in Japan.

According to Takeo Tohara, President and CEO of Jibun Bank, the new bank came into being as a result of the ever-growing shift in Japan toward using mobile phones for the many facets of daily life. Analysts claim the model has pushed the mobile channel as far as it can go, but

According to Juniper Research’s in-depth interview in the Mobile Banking Strategies report, new types of SMS mobile banking alerts will help to treble the volume of mobile banking messages to almost 90 billion every year by 2015. However, while many are grasping the im-portance of offering mobile banking services to customers, the report identified that some banks have yet to seize the potential of SMS ser-vices. The overall strategy behind alert messaging development is to encourage customers towards the self service world, with information delivery via SMS.

off in some key areas. He says the scope for alerts and messaging is almost unlimited. “Some banks are even talking about having alerts that banking customers can use to define themselves,” says Wilcox. “You could have so much flexibility that when your account reaches a certain level, or goes below a certain level, or that that you have an alert that tells you whenever a transaction goes through that’s over GBP£300.”

Wilcox believes this kind of customer flexibility represents an exciting opportunity for banks to attract younger, non-online users. “From a bank’s perspective, it also gives an opportunity to attract and retain customers. The statistics tell you that this is why banks address the student market so heavily because people tend to remain with the bank for their whole life,” adds Wilcox.

Indeed, having a mobile offering in the mix is a great opportu-nity for the bank. But it should remain just that, an additional chan-nel offered along with the bank branch, ATM, online services and the call centre. n

MOBILE-ONLY BANKING

THE ONLY WAY IS UPThe report also announced that Wells Fargo is the winner of the

Future Mobile Award for Mobile Banking 2010, taking account of its multiple platform strategy and continued service innovation, such as the recent near real-time warning of potentially fraudulent activity. Other findings included:• Over 80 percent of banks offer some form of mobile banking• Western Europe will be the region with the highest penetration of users

in 2015• Transactional mobile banking usage will see similar growth rates to SMS

add that it would be a poor fit for most other markets.Jibun Bank plans to develop a full range of banking services, from

account opening to account closure, and everything in between, via their handset. In addition to transactions such as deposits and funds transfers, Jibun offers credit cards and personal loans and more com-plex banking services such as foreign currency deposits and e-shop-ping payments. There are some examples closer to home too: UK-based start-up Mo Bank combines the capability to view details of existing bank accounts with mobile shopping for train and event tickets, books, DVDs, fast food and more.

COMMUNICATIONS

Flashback to 1999: John F. Kennedy Jr dies in a plane crash, the Scottish Parliament is officially opened and Shakespeare in Love is named Best Picture at the 71st Academy Awards.

January 1, 1999 will also be bookmarked in the collec-tive European imagination as the year that unleashed the single euro currency onto 11 member states: France, Spain, Germany, Italy, Portugal, Finland, Luxembourg, Belgium, Austria, Ireland and the Netherlands.

And when the New Years hangovers subsided, three hundred million citizens in countries that had previously

spent a large chunk of the last millennium waging war against one another woke up in a borderless euro zone to the reality of an integrated monetary policy, political con-vergence and a common currency.

Almost a decade on and despite the criticism that the euro has done little to create a cohesive European market, much of the initial scepticism has been swept under the carpet by more pressing issues such as the global economic crisis. Yet, for reasons as varied as the member nations’ lan-guages, one of the key euro-related initiatives, the Single Euro Payments Area (SEPA), is still far from a reality. A natural bedfellow of the euro that has been on the drawing board since 2002, SEPA is aimed at harmonising national euro payment schemes and was launched on 28 January 2008 to make it cheaper and easier to move money around the continent.

Essentially, SEPA is the area where citizens, companies and other economic entities can make and receive pay-ments in euro within Europe, whether within or across national boundaries under the same conditions, rights and

It’s been a long time coming, but recent developments mean a Single Euro Payments Area (SEPA) could finally become a reality. We background the long and winding road to SEPA. By Sharon Stephenson

COMMUNICATIONS 129

obligations, regardless of their location. All such payments will be considered domestic, because once SEPA is fully achieved, there will be no differentiation between national and cross-border euro payments. The geographical scope of SEPA includes the 27 EU member states, along with Iceland, Liechtenstein, Norway, Switzerland and Monaco.

While the euro bought some transparency to con-sumers, banks and businesses on a cash level SEPA is, if you like, it’s non-cash equivalent, introducing common payment schemes (business rules and standards) for the straight-through processing (STP) of electronic payments between banks, businesses and consumers across the EU region.

Technically speaking, the harmonised SEPA payment schemes based on global ISO standards are a set of inter-bank rules, practices and standards necessary for the func-tioning of payment services. A payment scheme defines, for example, the relevant currency, the format of the account and bank identifiers and standard messaging formats for banks. In essence, the harmonised SEPA payment schemes can be regarded as an instruction manual that provides a common understanding between banks on how to move funds from Account A to Account B in SEPA.

As two of the political drivers of the initiative, the eu-ropean Commission and European Central Bank, outlined in a statement, “the introduction of the euro as the single currency of the euro area will only be completed when SEPA has become a reality”.

So there’s no doubt the political will is there to make the full adoption of SEPA a reality. Or of the benefits that will accrue: last year 15.7 billon credit transfers and a fur-ther 17.7 billon direct debits were processed across the Euro area. Industry players point to how efficiently the euro pay-ments market will work once SEPA is fully implemented, while consumers will be able to make secure payments domestically and across borders without having to open separate bank accounts to handle business in different European countries. SEPA aims to introduce common pay-ment schemes for euro credit transfers and direct debits. As a result, bank customers enjoy increased choice of financial service providers.

And then there’s the issue of healthy competition within the payments arena. According to a study con-ducted at the behest of the European Commission, the replacement of legacy national payment systems by SEPA holds a market potential of up to €123 billion in benefits, cumulative over six years and benefiting the users of pay-ment services.

On the corporate side of the fence, the payback is even more bountiful: having shared standards allows merchants to easily accept and process payments with any card issued by a bank in SEPA. National borders no longer need to be a barrier to growth and businesses can have a more direct financial relationship with consumers across the Euro region and can even expand their operations across the continent. Similarly, B2B transactions across borders will enjoy similar ‘upgrades’ and will require much less over-head, be more transparent, secure and quicker than before.

On a wider scale, industry experts and the European Commission alike expect SEPA to stimulate economies by lifting legal, commercial and technical barriers associated with the myriad of local payments regulations and pro-cesses in place today.

It certainly looks impressive on paper. Yet the process of translating the framework into services for customers and businesses has been hamstrung by delays, prevarica-tion, cross-border fighting and ill will, sometimes on the part of the banks that question how much they have to gain.

Around two percent of payment transfers in the SEPA region are cross-border payments, so many banks feel there is not much of a business case to justify the invest-ments they have to make to adapt their payment systems.

Several have been reported as saying that it is “noth-ing more than a political agenda being foisted on us by the European Commission and the European Central Bank”. Nor has the scheme won favour with all participat-ing governments, a factor likely to be exacerbated by the global financial crisis, which has caused further concern about the cost of implementation in these economically straitened times.

The body charged with co-ordinating the European banking industry in relation to payments, the European Payments Council (EPC), estimates that, based on current market rates, it would take 30 years to accomplish migra-tion to SEPA if left to market forces.

In January 2008 banks started migrating custom-ers over to the new payments system. By summer 2010, some 30 months after the introduction of the SEPA Credit Transfer (SCT), around nine percent of payments within the EU were processed as SEPA transactions. Although this is a five percent improvement on the past year, the low usage can’t have caused too many celebrations among the suits at European HQ. Nor the fact that milestones such as the introduction of the SEPA Direct Debit (SDD) Scheme was delayed by a year.

Earlier this year, the European Commission and the European Central Bank established the SEPA Council to promote the realisation of an integrated euro retail pay-ments market by fostering consensus between all major shareholders on the next steps towards the full realisation of SEPA. The SEPA Council brings together the demand and supply sides of the payment market.

On November 1, 2010 the EPC released updated and enhanced versions of the SCT Scheme Rulebook and the SDD Scheme Rulebook. From this date, all banks in the euro are reachable for cross-border SEPA direct debits as mandated by EU law. In practice, this means that any consumer who holds an account in the euro area, which provides the option to make euro direct debit payments at a national level, can now make cross border payments by SDD as well. At the same time, companies are now able to collect payments by SDD across the euro area, resulting in enhanced business opportunities.

November 1 also marked another milestone in the long and winding SEPA journey – the EPC called on EU

“The introduction of the euro as the currency of the euro area will only be completed when SEPA has become a reality”

COMMUNICATIONS130

lawmakers to set an end date for migration to SEPA schemes through regulation.

According to EPC Chair Gerard Hartsink, “The single element now required to achieve an integrated euro pay-ments market is a clear deadline for the transition to the SEPA payment schemes.

“The majority of the market participants recognise that a clear deadline for migration to SEPA is now all that’s required to achieve an integrated euro payment market. Therefore, the EPC calls on EU lawmakers to set an end date for migration to the SCT and SDD schemes through EU Regulation. Earlier this year, the Commission intro-duced a concept for a regulation to establish end dates for compliance of euro credit transfer and euro direct debit schemes with ‘essential requirements’. In the Commis-sion’s own words, this approach would lead to new and competing credit transfer and direct debit schemes emerg-ing, complying with essential requirements.”

However, Hartsink admits to some concerns regarding the possible forthcoming regulation, including its failure to establish definite end dates for the phasing out of exist-ing national euro payment schemes.

“This would prevent the realisation of potential finan-cial benefits that could be reaped from migration to a set of harmonised SEPA Schemes,” says Hartsink. “Existing national euro payment schemes could become compliant with the ‘essential requirements’. As a result, domestic transactions would still be handled by national schemes whilst the SEPA Schemes would be used exclusively for cross-border transactions. This scenario is called a ‘Mini-SEPA’.”

There is also the fear that regulation could allow for multiple competing and ‘interoperable’ euro credit trans-fer and direct debit schemes. “This concept would do little to overcome the fragmentation of the euro payments market and disregards that an optimally efficient payment environment would require that all payment service pro-

viders and all payment service users adhere to the exact same scheme rules and standards (which does not prevent competition on SEPA payment products and services). The EPC does not understand why the European Commission contemplates now a scenario so radically different from the approach it has promoted over the past decade. The shared understanding has always been that SEPA aims at the re-placement of a multitude of national euro credit transfer and euro direct debit schemes by a single set of SEPA pay-ment schemes.”

The envisaged regulation could also render obsolete substantial investments made by early movers both on the demand and supply sides who, in response to previous calls by regulators including the European Commission, have already renewed their payment architecture to comply with the SEPA Schemes developed by the EPC, says Hartsink. “Banks and other stakeholders shouldered these invest-ments based on the shared expectation and understanding that national euro payment schemes would be phased out. The change of emphasis to ‘essential requirements’ and multiple competing schemes, however, fundamentally contradicts this original assumption upon which these investments were made.”

This makes it even more critical that the European Par-liament and the European Council must issue regulation that sets end dates for the phasing out of existing national euro credit transfer and euro direct debit schemes, he adds.

“This will ensure that the high costs of running mul-tiple payment schemes in parallel can be eliminated. A reg-ulatory intervention based on the European Commission’s considerations published in March and June 2010, would effectively derail the entire SEPA project and eliminate the extensive benefits SEPA offers bank customers. The EPC welcomes the recent announcement by the Commission that a public hearing will be held to ensure that all market participants are consulted on the most appropriate ap-proach to a regulatory intervention related to SEPA.” n

Consumer Bodies

Merchants

Public Admins

Coporate Associations

EU Level Design & Monitoring

National Implementation

Design Shemes and FrameworksSupport for national implementation

Stakeholders

SEPA Implementation Coordinating Bodies(Design and execution, national implementation and migration planning)

European Payments CoucilEuropean Central Bank

Implementation Plans Monitoring SEPA design and implementation

European Comission

Legal Framework

Banks

National Governments National Central Banks National Banking Associations

Consumers Merchants Corporates Public Admins

Consumer Bodies

Merchants

Public Admins

Coporate Associations

Around 2% of payment transfers in the SEPA region are cross-border

payments

Why China is pinning its hopes on new public transport solutions to help ease its growingroad infrastructure woes.........................................................................................

Transport Future

According to the Population Division of the United Nations’ Department of Economic and Social Affairs, by 2050 nearly 70 percent of the world’s population will live in cities. And with

the world’s urban population expected to double from 3.3 billion in 2007 to 6.4 billion in 2050, it’s time for govern-ment and city planners all over the world to get to grips with the master planning challenges, environmental pollu-tion, traffic congestion and other social problems currently plaguing cities. But that’s not the only item on the agenda.

Sustainability and eco credibility are increasingly creeping up the ‘must have’ list, and nowhere more so than in Asia. Indeed, now more than ever, there is an urgent need for a new and possibly more radical approach towards urban thinking and planning. Eco-cities and eco thinking are becoming more and more important.

Indeed, over the last decade a whole string of major new eco-city developments have sprung up across Asia. While eco-cities are not an entirely new phenomenon, they have increasingly hit the headlines, especially in regard to the debate over climate change and growing urbanisation.

The term eco-city began to surface in 1975, when Rich-ard Register founded Urban Ecology as part of his effort to transform Berkeley. It remained an innovative concept

throughout the 1980s and 1990s, with practical examples few and far between. It wasn’t until the 2000s that the eco-city phenomenon became more mainstream with examples in China, the UAE and Kenya.

According to Eco-cities – A Global Survey 2009, a recent report produced by the UK’s University of West-minister, some 80 towns and cities worldwide have pledged to become eco-cities and have embarked on related in-novation programmes. International organisations and networks are also promoting the development of eco-cities, such as the World Economic Forum through its ‘SlimCity’ knowledge transfer network; the Clinton Climate Initia-tive/C40 Cities network currently spearheading carbon emission reduction projects in 16 major cities worldwide; and the European Commission with its ‘Eco-City Project’ supporting initiatives in Scandinavia, Spain and Slovakia.

A NEW URBAN ENVIRONMENT

SUSTAINABILITY

A growing trend of new – and retrofitted – cities focused on sustainability, smart technology and strategic planning is hitting the headlines. Say hello to the eco-city.

SUSTAINABILITY

Beijing’s exampleThe Dawangjing District in Beijing, China, is one

such example of an eco-city project currently underway. Strategically positioned just over 11 kilometres from the Beijing Capital International Airport, the proposed district of public parks, cultural venues, and landmark high-rises would be a new global gateway for the city.

The redevelopment of the district will serve as an example of integrating environmental conservation tech-niques and the principles of urban planning, design and architecture. The plan is designed to support 1.5 million square metres of potential further development as the economy grows.

In response to the pressing demand to reduce carbon emissions and protect natural resources, the Chicago and China offices of Skidmore, Ownings and Merrill (SOM) have come up with a plan that calls for a new Central Park as a resource for geo-thermal exchange. The plan proposes to passively heat and cool many district buildings, reduc-ing the need for water-consuming cooling towers. The park would anchor the surrounding high-density, mixed-use development, including a cluster of landmark office and residential towers.

“We saw this project as a demonstration,” says Peter Ruggiero, a SOM Design Partner in a statement. “It of-fered us the opportunity to present new ways of thinking about reduced carbon footprints in cities. Our solution is an integrated comprehensive approach to urban design, architecture and the environment.”

The plan sets a goal for 80 percent of resident and worker journeys to be made by public transport, bicycle or walking. Transit stations are proposed on the M15 subway line, while a comprehensive network of bicycle lanes will reduce traffic and congestion.

CollaborationLikewise, the Sino-Singapore Tianjin Eco-city in

China is, as a result of a collaborative agreement between the Governments of China and Singapore, a joint proj-ect to develop a socially harmonious, environmentally friendly and resource-conserving city. Designed to be practical, replicable and scalable, the Tianjin Eco-city demonstrates the determination of both countries in tackling environmental protection, resource and energy conservation and sustainable development.

The eco-city will draw on renewable energy such as solar and geothermal and look at the production of clean fuel and all the buildings will conform to green building standards to ensure efficient energy usage. The use of clean and renewable energy will also be promoted. An efficient and easily accessible public transport system will be available in order to reduce the level of carbon emis-sions. Much like the Dawangjing District project, the target is for at least 90 percent of trips to be via walking, cycling or public transportation.

Water recycling and more efficient use of water and waste resources will be a key feature of the eco-city. Its location in an area of low rainfall means water from rivers through the region will not be able to meet the needs of the eco-city. To overcome this, and reduce its reliance on external water sources, the city will draw a significant part of its water supply from non-traditional sources, such as desalinated water and recycled domestic and in-dustrial wastewater.

Integrated waste management will be implemented, with a particular emphasis on the three R’s of waste man-agement: reduce, reuse and recycle. The conservation of resources and reduction of waste generation will be en-couraged through public education programmes. Where possible, non-organic waste will be recycled and reused while organic waste will be used as biomass for energy.

The Dawangjing District and the Sino-Singapore Tianjin Eco-city are not the only examples in China. The Chinese cities of Changxing, Rizhao and Tianjin are all planning ambitious retrofits to meet the demand for urban growth and environmental improvement. In India, six cities have been selected as pilots for various retrofit adaptations and several new eco-cities are expected in the Delhi-Mumbai growth corridor.

In Japan, the government selected six cities from more than 80 applicants for concerted eco-city innova-tion, while in South Korea, the new cities of Gwaggyo, Icheon and Songdo are currently being built and heralded as world-leading sustainable cities.

While there are numerous examples of projects going on across Asia and the world, it’s important to recognise that eco-cities are more than just a nice idea. By thinking about the way that these cities are designed – or retrofit-ted – we can and will fundamentally change urban living as we know it. n

SUSTAINABILITY82

ENVIRONMENTAL COLLABORATION

India plans to save 10,000 MW of power through energy efficiency improvements by 2012 and the major industrial private sector firms in the country have formed an Alliance for Energy Efficient Economy (AEEE). The AEEE aims to save 2000 MW of energy by 2012 by promoting energy efficiency and carbon mitigation projects.

The country is also forming a National Environmen-tal Protection Authority as part of its initiatives, which aims to enhance the authority of Indian environmental agencies, improve public information and transpar-ency, demonstrate progress in environmental compli-ance and enforcement. In addition, India also has an eco-labelling scheme in place called Ecomark, for the identification of environmentally-friendly products and is awarded to consumer goods that meet environmen-tal criteria.

Meanwhile, South Korea is serious in its endeavour to curtail its fossil fuel dependence and has announced a green action plan with a budget of US$84 billion to support it, which will help cut car emissions and im-prove the energy efficiency of buildings and houses. The country is expected to be a green nation by 2020.

The South Korean government also plans to invest US$193 million in the development of alternative sources of energy – a 60 percent increase compared to previous years. The investment will cover solar, wind and biofuels, increasing the domestic supply of renew-able energies and reducing the import of oil. The green measures will receive two percent of the country’s GDP from now to 2013 and will also create 1.56-1.81 million jobs, according to official figures.

South Korea hopes to become the world’s seventh most competitive country in terms of energy efficiency by 2020 and as such is planning to invest in green tech-nologies like renewable energy, energy efficiency and other environmentally friendly projects, such as biofu-els and hybrid cars.

India and South Korea have also embarked upon a collaboration to implement environmentally friendly projects reducing carbon emissions and enforcing strict adherence standards for their industries. Both countries are members of the Association of South East Asian Na-tions (ASEAN), which means they can work in tandem towards the region’s economic development.

Delhi, for example, adopted a Korean eco-friendly road construction method for new roads. Known as Darin Asphalt Modified Additive, it features an additive of asphalt with pores and is packaged in an environ-mentally-friendly way so that even the bag will melt along with the bitumen mix and other materials.

SPECIAL REPORT74

On Monday October 25th 2010, an earthquake off the coast of Sumatra, Indonesia, caused a tsunami to hit the coastal towns and villages, destroying hundreds of homes and killing an es-

timated 400 people. Across the water, on Jakarta, Mt. Merapi volcano began erupting, killing 36 people and causing some 75,000 to be evacuated from their homes in the surrounding area. A week later, on Novemberthird, the volcano erupted again, this time with more force, bringing the death toll over 100 and doubling the number of people forced to evacuate their homes.

These recent events in Indonesia are just the latest natural disasters to destroy the homes, villages and towns of Asia’s people. Since 1900, Asia has experienced 611 earthquakes and tsunamis, killing a total of 1,796,928 people and affecting the lives of a further 27,251,849, with recovery costs reaching an estimated US$320 billion. These figures are more than double those of the Americas region, the next region most severely affected by natural disasters in the world.

A recent report from the United Nations and the World Bank entitled ‘Natural Hazards, UnNatural Disasters’ esti-mates that by 2100 global losses from natural disasters could reach US$185 billion a year, three times the rate they are now. This figure does not take into account climate change. And with Asia accounting for the overwhelming majority of disasters, such figures represent a significant cost for these developing economies. The UN’s special representative on disaster risk reduction Margareta Wahlstrom, speaking to a group of Asian parliamentarians at a meeting in Manila,

The cracks beneath the surfaceSuffering the highest rates of natural disasters of any region in the world, Asia has been ravaged by earthquakes, floods, volcanic eruptions and tsunamis, causing billions of dollars in damage and costing the lives of millions. In this special report, Asia Infrastructure takes a look at why the region is so vulnerable to the effects of earthquakes, and what can be done to help prevent the human and financial costs.

SPECIAL REPORT 75

Philippines, in November, recommended that the region’s governments should allocate at least one percent of nation-al budgets toward disaster risk reductions strategies, and explained that such projects would contribute to reducing poverty in developing nations by protecting people’s assets.

Indeed, poverty in developing economies is a signifi-cant factor contributing to the death toll and structural damage caused by natural disaster. Make-shift develop-ments, slums and shanty-towns in compact areas of urban environments, built without any cohesive regulation and standards are highly vulnerable to the damages caused by a earthquakes and floods. Similarly, the rapid popula-tion booms in Asian cities has resulted in wide-scale mass development of buildings without proper regulation or a holistic approach to infrastructure. According to the UN’s statistics, a number of cities in areas of the developing world – Latin America, Africa and Asia – have doubled their size in less than 30 years, and by 2015 12 of the top 15 cities in the world in terms of size will be in the develop-ing world, with much of the urban expansion taking place outside the official and legal frameworks of building codes and land use regulations.

And combined with high population densities and unsustainable urbanised areas, the Asia region experiences the highest levels of seismic activity in the world, exacerbat-ing the vunerability of its weak infrastructure. Of the eight

most populous cities that sit on an earthquake faultline, six of them are in Asia – Tokyo, Mumbai, Delhi, Shanghai, Kolkata and Jakarta. Similarly, of the top 10 most populous cities in the world exposed to costal flood hazard, again six are in the Asia region – Mumbai and Kolkata, Guangzhou and Shanghai, Ho Chi Minh City and Osaka-Kobe.

BuildingsA paper published as part of the UN’s ‘Making Cities

Resilient’ campaign highlighted that “Sustainable urban-isation requires comprehensive steps to enforce urban planning regulations and building codes.” The paper made some estimates as to the losses likely to be sustained if an earthquake were to occur in Asia’s megacities. For example Mumbai, which has been cited as having an extremely vulnerable building stock, is an urban environment with a wide variety of constructions; the paper estimates that a moderate earthquake in the city could result in a death toll of 34,000 people.

Significantly, available data indicates that up to 80 per-cent of deaths from natural disasters occur in the buildings that collapse during earthquakes. In the Sichuan earth-quake in China back in 2008 that killed at estimated 68,000 people, at least eight schools were flattened in the tremors. Of the total death toll, an estimated 12 percent were school-children and their teachers, a fact many have attributed to the poor building standards of the schools themselves. In the Beichuan county region of Sichuan province around 80 percent of the buildings were destroyed; across the whole affected area at least five million people were left without housing, although subsequent research estimated the actual figure could have been double that number.

Damage caused by the earthquake was exacerbated by the poor standards of construction in the region. The Chinese government implemented building regulations thought to be as stringent as those in the West after the devastating quake of 1976 in Tangshan that killed over 40,000 people. However, many of the buildings affected by the Sichuan quake – and indeed, a great number of build-ings across China as a whole – were built before these regu-lations came into effect. In addition to this, investigations following the 2008 disaster indicated that in a great many cases the building codes were not properly adhered to.

Indeed, a World Housing Encyclopaedia Report pub-lished in 2002 indicated an increasing use of multi-storey base isolated brick masonry building with reinforced concrete floors and roof over the preceding 25 years. The report found that the rubber isolation systems of such constructions were between four and 12 times stronger against seismic activity than non-isolated brick masonry buildings. However although these buildings withstood the effects of earthquakes well, they are currently to be found mainly in urban areas. Many reports suggested that though the engineering technology was available to Chi-nese developers, and was commonly practiced in wealthier, urbanised areas, it was not commonly used in rural areas.

Similarly Indonesia, a nation of high population den-sity but less economically developed than China, had no

SPECIAL REPORT 77

building legislation in place until 2002, and the law passed at that time had been originally drafted as far back as 1964. Local authorities put regulations in place regarding build-ing development before the 2002 law was passed, however in reality compliance with these regulations rested in the hands of the architects, engineers and contractors involved in a particular project. The World Housing Encyclopaedia reported on the wide spread use of unreinforced clay brick masonry housing in Indonesia, often found in rural areas, which have a low resistance to the lateral pressure of seis-mic activity. Indonesia suffers some of the highest rates of natural disasters of any country in the world due to its ge-ology, and vulnerable buildings contribute to a significant proportion of deaths each year.

Still, despite evidence that the poorest people are the hardest hit by natural disasters, Asia’s most economically developed countries and regions still lack the comprehen-sive disaster engineering found in the west. Japan, Asia’s most affluent nation in terms of per capita GDP, had a series of regulations implemented in the early 1960s, and while most buildings adhered to these standards, they were proved in the 1980s to be highly insufficient for protecting the buildings against the effects of natural disasters. Still, buildings that had implemented these standards remained in place, leaving them extremely vulnerable to the effects of the seismic activity, a fact highlighted by the damage caused by the 1995 earthquake in Kobe. Though the death toll and

building damage sustained was considerably less than that suffered in China in 2008, compared to a similar event in the West the figures represented significant shortcomings in the engineering standard of Japan’s infrastructure.

An earthquake in Los Angeles in 1994, with an im-mediate population base of roughly the same as the Kobe quake (around two million) and an intensity level of 6.6 compared to Kobe’s 7.2, left a death toll of only 72 while the figure in Kobe was over 6000. As in China, many of the buildings affected were unreinforced masonry construc-tions, which simply collapsed under the seismic pressure of the earthquake.

Flood reliefWhile poorly regulated building standards are

undoubtedly the most pressing challenge facing Asian governments, developers and engineers in terms of protecting against the effects of natural disasters, the implementation of comprehensive municipal infrastruc-ture is another issue contributing to the damage caused by earthquakes and floods. The UN’s paper cited Kath-mandu as an example of a city in which poorly devel-oped urban infrastructure created additional hazards to increasing the effects of natural disasters. Like so many Asian metropolises, the Nepalese capital had experienced a massive increase in population that strained public authorities’ ability to provide services. In addition to the buildings’ incapacity to withstand an earthquake, a lack of water infrastructure, unsafe electrical installation and roads too narrow for emergency vehicles to move down have all been identified as factors aggravating the damage of a natural disaster, which could easily be preventable with the correct infrastructure.

Since 1900, 1.8 million

people have died in Asia as a result of earthquakes and

tsunamis

SPECIAL REPORT78

And if the current climate change trend continues, Asian coastal cities will flood more often. According to a report carried out by the World Bank indicated that the cities vulnerable to such events, notably Bangkok, Ho Chi Minh and Manila are likely to sustain billions of dol-lars worth of damage as a result of flooding. And flood damage is exacerbated by the cities’ urban environmental management, with drainage systems blocked, waste left in canals and waterways and deforestation of upper wa-tershed areas.

Ultimately, the effects of the changing world such as increased extreme weather events and a greater preva-lence of seismic activity are factors beyond the control of the urban planners. However, comprehensive and resilient earthquake engineering in communities, both urban and rural, and a strategic infrastructure system equipped to provide relief can be implemented into the living environments of Asia’s communities. The UN de-

fines a disaster resilient city as one in which homes and neighbourhoods served by piped water, comprehensive sanitation and drainage systems, all-weather roads and secure electricity, as well as public services such as health-care and schools, emergency services and garbage collec-tions, in structures that meet appropriate building codes, and without the need to settle on vulnerable terrains in informal constructions.

The report also highlighted that disaster preparation should be a subjective strategy, based on a risk assessment prepared for an individual city and used as a planning tool when developing any project in an urban environ-ment. Additionally, investment in critical infrastructure that reduces risk, such as strategic flood drainage, should take place. Similarly, comprehensive but realistic build-ing regulations and standards, such as China’s based reinforced masonry buildings, should be introduced and adhered to. n

Great Hanshin earthquakeKobe, Japan

On the 17th January 1995, a 7.3 magnitude (JMA scale) earthquake hit the southern area of Hyogo Prefecture in Japan, lasting around 20 seconds. The epicentre of the quake was roughly 20 kilometres away from Kobe. The total death toll was estimated at 6434 and the quake caused a reported US$102.5 billion worth of damage.

Construction materials such as the traditional heavy roof tiles commonly found in Japan and the light wood used in the support frames combined with factors such as the lack of reinforce-ment in most buildings added to some 20 percent of houses in certain areas of the city being completely destroyed. In the central business district, 22 percent of the offices and 50 percent of the houses were rendered unfit to live in.

The elevated Hanshin Express-way was among the worst hit of the region’s infrastructure, with road-blocks in three locations and half the piers were damaged in some way. Daikai Station, on the Kobe Rapid Railway completely collapsed. Investigations in the aftermath of the quake indicated that most collapsed constructions had been built to outdated safety regulations, outlined in the 1960s and long known to be inadequate and in need of revising.

OIL NEWS

South East Asia’s largest economy has awarded four oil and gas blocks to local and foreign companies, including BP Exploration Indonesia, a unit of oil major BP, a government official has con-firmed.

The Indonesian government has selected four winners the new blocks it recently tendered via direct offer, the ministry said in a statement re-leased in November.

The North Arafua Block in Papua was awarded to BP Exploration Indonesia, a unit of BP, Director General of Oil and Gas at the Ministry of Energy and Mineral Resources Evita Legowo told reporters. The gov-ernment awarded the North Sokang Block in Riau to Ephindo Oil and Gas Holding, with an investment total of US$10.2 million. The Awe Con-sortium, which consists of Baruna Recovery Energy and Sillo Maritime Perdana, was awarded the Titan block in Java, although no details were provided about which provinces would be covered by the project. Mitra Energy is set to explore the Bone Block in South Sulawesi, with a total investment of US$6.1 million.

Legowo said that the successful bidders have pledges to invest a total of US$28 million during the first three years of exploration, including US$4.2 million signature bonus for the government.

Two other blocks, Oniin and East Baronang failed to attract investors due to limited data available on these blocks.

Medco Energi International, Camar Resources and Canadian Husky will totally invest US$4.58 billion in the next 20 years to develop their blocks and the contract extension will boost Indonesia’s production by 174 million barrels of oil and 1.78 trillion cubic feet of gas over that period, Legowo said.

The Bawean block, whose contract expires in 2012, is operated by Medeco subsidiary Camar Resources, which plans to spend US$1.239 bil-lion over the extension, according to Legowo. The Bawean block currently produces about 800-1000 b/d.

The Madura block, whose contract expires in 2012, is operated by Husky Energy. The company is committed to invest US$642 million over the 20-year extension. The block is still currently being developed but is expected to see initial production by 2013-2014 at 100,000 mcf/day and 600 b/d of condensate.

South Sumatra block and Block A in Nanggroe Aceh Darussalam, op-erated by Medco E&P Indonesia, have contracts set to expire in 2013 and 2011, respectively. The company has committed to invest US$1.411 billion and US$1.291 billion, respectively, the ministry said. Medco expects Block A to be on stream by Q2 2013 at 60,000 Mcf/day and expand to 110,000 mcf/day within the year.

In recent years Indonesia has become a net importer of crude oil as production fell after a failure to tap new fields fast enough. The country has been offering new exportation rights and financial incentives for oil fields in a bid to stem a steady decline in production. It has set a target to produce 965,000 b/d of crude and condensate this year as well as 7.56 bcf/d of gas.

Indonesia has awarded 42 blocks across the country for exploration this year (2010) in an attempt to help the country meet its increased oil production targets over the coming years. A number of recent incidents, including a major leak in a pipeline operated by Transportasi Gas Indone-

sia at the end of September has made reaching the ambitious target seem somewhat more unattainable. The September leak caused disruptions to approximately 20 percent of the nation’s total production capacity.

The country suffered another blow when Chevron Pacific Indonesia’s (CPI) Durt oil field in Riau stopped production in October after one of its pipelines burst. CPI is accountable for some 40 percent of the nation’s total oil output.

Indonesia has been trying to attract foreign investment to develop new oil and gas fields by offering incentives, including favourable tax treatment and production sharing.

Oil and gas company Salamander Energy are set to add an optimistic light on Indonesia’s state of affairs. The company have said that it is main-taining its 2010 production guidance at over 20,000 boepd, compared with the 2009 level of 13,600 boepd.

Production has also been forecast to rise to 30,000 boepd by 2013. The group said it was currently focused on delivering the seven wells in Indo-nesia and Thailand that are due to be completed by the end of January.

The group has a planned programme of 11 exploration wells and four appraisal wells in 2011, with exploration drilling in new licenses includ-ing: SE Sangatta PSC in the offshore Northern Kutei basin, Indonesia; Bangkanai PSC, onshore Barito basin, Indonesia; and the Cat Ba prospect in Block 101-100/04 in the Haiphong sub-basin, offshore northern Viet-nam.

In August 2010 the group reduced net entitlement proven and prob-able reserves by 1.8 million boe (7.5 million boe on a net working interest bases) after revising its reserve estimate for the Kambuna field, offshore North Sumatra. The decision came after the group observed faster than expected pressure decline in the Kambuna-3 well. Near term production and cash flow will not be impacted, Salamander Energy said.

James Menzies, CEO of Salamander Energy said: “We have main-tained production guidance for the full year at over 20,000 boepd and our production forecast of 30,000 boepd by 2013. Looking to the future, the group’s growing production base will support an active, diversified, multi-year exploration and appraisal drilling programme with material upside potential. The company will also look to maintain its track record of value creation via acquisitive growth in the region.”

A strong balance sheet was maintained with funds of US$154 mil-lion available and net debt of US$176 million at September 30. Continued expansion of the portfolio saw acquisition of the outstanding 40 percent of B8/38 in the Gulf of Thailand from Soco International and acquisition of Enulsa Bankanai Energy, providing a 69 percent-operated interest in the Kerendan gas development in East Kalimantan.

The oil and gas industry, both in Indonesia and globally, has expe-rienced dramatic highs and lows in recent years. The industry has been experiencing a significant resurgence in investment, coinciding with the rise in crude oil prices. The price peaked at US$145 per barrel in mid 2008, this was then tempered by the global financial crisis in the latter half of the year. Market confidence returned slightly in 2009 with the year ending at approximately US$75 per barrel. Renewed investor confidence in 2010 has lead to increased exploration spending and it is hoped to con-tinue throughout 2011. n

Indonesia releases new blocks for oil exploration.

OIL NEWS

1885First discov-

ery of oil in North Sumatra

1912Standard Oil exploration in South Sumatra

1921The biggest discovery

before WWII (Talang Akar field)

1944Caltex Minas – largest oil field in Southeast Asia – was discovered

1961Government signed

first PSC in Aceh

1962Indonesia joins OPEC

1976 PSC 45% tax rate

1978First LNG plant entersproduction and PSC share changes from net to gross production

1984PSC 35% tax rate

1994PSC 30% tax rate

2001New Oil and Gas Law No.22

promulgated (revoking Law No.44 and Law No.8)

2002Formation of BP Migas and BPH Migas

2003Pertamina becomes

PT Pertamina (Persero) with profit

making intent

2009Latest report from BMI predicts

the country will account for 4.41% of Asia Pacific regional

oil demand by 2013, while providing 10.97% of supply

2008OPEC membership suspended

2010Indonesia awards four new blocks for exploration

Indonesia has been an active player in the oil and gas sector for more than 125 years after its first oil discovery in North Sumatra in 1885, and continues to pursue a key role in the international oil and gas industry

Asia Pacific total oil reserves at the end of 2009( thousand million barrels)

Australia 4.2Brunei 1.1China 14.8India 5.8Indonesia 4.4Malaysia 5.5Thailand 0.5Vietnam 4.5

Other Asia Pacific1.3

Total Asia Pacific 42.2

Total World 1333.1

(Source: BP Statistical Review of World Energy June 2010)

Indonesian major oil producers as of December 2009

Chevron 47%Pertamina 16%Total 9%Conocophillips 8%Petrochina 7%Cnooc 5%Medco 4%Kodeco 2%BP* 2%*The BP assets repre-senting this production have been subsequently sold to Pertamina.

(Source: Petrominer Monthly Magazine)

CONTENTS

Reform to re-formAs we near the anniversary of Obama’s health reform bill, NGP takes a look at the plays that got pharma into the end zone

Setting a new courseWe speaks to Novartis chief executive Joe Jimenez about life as a CEO and his plans for the future of the firm

38Building the bricks

of excellenceEVP of Technical Operations Hanns-

Eberhard Erle opens the doors to Merck Serono’s House of Operations

78 Riding the waveFrost & Sullivan’s Maik Klasen details the second wave of emerging markets and what they mean for the industry

90

32

CONTENTS 10

92

FEATURES 46 Rapping on the door of sensor technologyFinesse Solution’s Mark Selker and Barb Paldus provide a quirky insight into dealing with lost batches

48 Innovation and collaborationJohnson & Johnson’s Ted Torphy examines the need for greater collaboration to boost innovation in R&D

52 Small is beautiful The future of SMEs in pharmaceutical development, by Jozsef Repasi

59 The new gold standardAmgen unveils its newly approved breakthrough therapy for the prevention of skeletal-related events

65 Manufacturing efficiencyWhat Nycomed is doing to progress its manufacturing and supply chain operations

68 Supply chain analytics: pharma has to do betterHow to improve operations, better understand customer demands and devise more creative responses to market challenges

74 Patent cliff to drive industry consolidation?New research confirms that the pharma industry is entering a critical phase as the patent cliff looms large

82 Trends in outsourcing analytical supportWith David Beyerlein of MicroConstants, Inc. and Dominic Moore of Waters Corporation

86 Asset management for the long-termAsset management is proving itself to be a pivotal player in pharma’s future, argues GE Healthcare’s Mike Benevento

96 Counteract the counterfeitAs the market for generic opens up, the industry faces a new backlash of counterfeit products, by Siemens’ Hans Bijl

100 The eye of the social stormNGP takes a look at why sailing into the eye of the social media storm could be a recipe for pharma industry success

106 Social media anxiety disorderPhil Baumann outlines why the pharma industry needs to submerge itself into the binary world of social media

5968

CONTENTS

DETAILS110 36 hours in… New Orleans

112 Why the Big Easy just got bigger By Tara Letort

114 Grand designs: Welcome to the workplace of the future

118 The crystal ball: Why 2011 will be a big year for tech

20 Final word: The lifecycle of the life science, by Patrick Leinert

ASK THE EXPERT36 Manfred Zurkirch, Dividella AG

43 Omar Chane, Capgemini

72 Michael Federico, ERT

94 Chris Ellins, Total Flow

98 Nico Scheer, Taconic INDUSTRY INSIGHT44 George Henderson, Navigator

Consulting Services

54 Rebecca Vangenechten and Sivarama Nalluri, Siemens

70 Jim Preuninger, Management Dynamics

88 James Drinkwater, Bioquell

EXECUTIVE INTERVIEWS56 Ali S. Faqi, MPI Research

64 Dave Shanahan, IDA Ireland

67 David Radspinner, Thermo Fisher Scientific

76 Mike Butler, Xceleron

84 Jeffrey L. Mooney, Corning Life Sciences

104 Chris Nikum, IMS Management Consulting

110114

COVER STORY36

With a multitude of industry-altering chal-lenges already in the pipeline, pharmaceu-tical companies also now have to contend with breaking the world of social media.

Phil Baumann outlines how – and why – companies should be doing precisely that.

There’s been an ongoing discussion about how the life sciences industry can face and integrate recently evolving media, which the web has been and continues to sprout. Re-markable as they are, the discussions are endless and most loop back into themselves without generating sufficient voltage to power an army of macrophages. Pharmaceutical companies, beset by a myriad of constraints, are anxious about flipping on social connection switches which the web furiously creates every day. We could say that pharma has a ‘social media anxiety disorder’. The question is – how can it be remedied?

The answer isn’t in social media. It’s not in what the US-focused FDA or its European equivalent decides to do. It’s not in echo chambers found within Twitter, blogs or conferences. It lies in simple, basic economic truths. It lies in radical acceptance and in brave recreation. It lies beneath the proverbial nose of obviousness. It lies far beyond any discussion about the meanings, promises and purposes of new media on the web. Pharma’s social media anxiety dis-order is merely a peripheral symptom of deeper pathologies – so it’s about time someone assessed the patient.

Deep concerns and peripheral risksSocial media is nothing – an oxymoron at best: media

are simply media, incapable of being at all social. People are social. Information isn’t social either – but it is everything. With that in mind, it’s important to talk about information and why it matters to the life sciences’ media challenges and wider business fundamentals.

Nobody doubts that the ultimate concern surrounding the development, production and marketing of molecules and medical devices is their safety, efficacy and effective-ness. From production and marketing to administration and application, every step of the way involves risks. Tiny flaws in R&D methodologies; overlooked nuances of human physiological processes; genetic mechanisms and anatomical structures; manufacturing and engineering oversights; misinforming marketing messages (unintended or otherwise); and administration error (provider or patient related) all contribute to this cauldron of risk.

At the core of all these risks lies information, which is the coherence of relevant data that helps to make decisions in light of risks. Any information indicating danger during any point of the entire pipeline can retard or terminate pro-duction, marketing or dispensation of a product.

Furthermore, the media through which information conveys its meaning determines its interpretation. There-fore, any discussion concerning the proper delivery of prod-uct information must base itself upon the most complete understanding of media possible. Few media are alike in properties, possibilities, limits and pliancy of re-purposing. Not all media can be used for the same purposes as other

Social media anxiety orderPhil Baumann outlines why the pharma industry needs to submerge itself into the binary world of social media.

2COVER STORY 37

media. Twitter may help Dunkin’ Donuts move sales, but that doesn’t mean it will work for the world of pharma.

The order of complexity that arises out of the tasks involved in creating and cultivating safe and engaging environments for patients, doctors, pharmacists, employ-ees and all other publics grows with every added layer of interaction. It’s one thing to say ‘let’s start a blog, tweet like sparrows, set up Facebook pages and create forums’. It’s quite another to do so remarkably without addressing both the deeper nuances of human communication, social interaction, individual psychological responses and their peripheral risks.

It sounds hopeless – in fact it’s anxiety provoking. But it isn’t hopeless and it doesn’t need to be an unstop-pable source of anxiety. But the reality is this: life sciences has far too many variables and concerns to tie together to ever completely satisfy everyone and everything when it comes to social media – certainly not right out of the gate. The enterprise considerations alone are almost impossi-bly daunting.

Natural versus unhealthy rates of returnLet’s take a quick pan-back for a moment from social

media to mention something about capitalism and eco-nomic fundamentals, as it’s the central economic context in which modern pharmaceutical marketing arose. An inqui-ry into the economic ramifications of a fast-changing world must be the foundation for any exploration into the role of media. And this will lead us to why simplicity is pharma’s best prospect for long-term viability. Bear with me on this excursion. Why? Because if there’s no industry, who cares about social media?

The rates of return for the pharmaceutical industry over the last 20 years have been quite remarkable. After the industry radically transformed itself decades ago from a primarily scientific endeavor into a marketing juggernaut, the stock prices of publicly traded life sciences companies soared. Blockbusters made careers. Fortunes bloomed. In-vestors beamed.

We could say that co-morbid with pharma’s social media anxiety disorder is an addiction to quick hits of Blockbusters and above-average rates of return. As we know, co-morbid conditions are often the hardest to treat. But the fact is, these rates of return were not natural rates of return. A sustainable long-term rate of return for industries in their natural states is on the order of a paltry two to three percent. Why? Because the resource-inflationary pressure of high returns inevitably leads to downward pressures on sustainability. When rates of return exceed rates of regener-ation, eventually capital systems collapse in on themselves. Sooner or later, pendulums swing back – the higher the summit, the more momentous the tumult.

To most pharmaceutical executives, the very thought of rates of return that low could cause chuckles amongst other side-effects, but eventually pharma will face major reversals of fortune in the coming years for a number of reasons. Firstly, the disruption of traditional marketing, coupled with the infiltration of the web into consumers’

lives will dilute their effectiveness. Secondly, the mis-coordination amongst the various international regula-tory agencies and the industry will hamper innovation in customer outreach. Finally, the pool of bright, young talent will flow to technology and other sectors while flowing away from an industry whose public reputation has suf-fered years of traumatic wounds.

Therefore, the industry must undergo a radical re-alisation and acceptance that their fundamentals need serious attention. A critical dissection of assumptions and traditional business thinking will need to take place. The harsh realities of the 21st century’s upending nature must be faced without fear. The marketing models that were co-opted from the cereal and automotive industries will be tough to break down and replaced with fresh perspectives on the ever-shifting ways in which people consume their information.

Meanwhile, the social engineering foundation of modern marketing will continue to falter. Unless, of course, a few geniuses emerge who will discover some magical formula to mechanise social media into standard operating algorithms – as was done with traditional media. Not impossible, but it was much easier to do with unilateral oligopolies of mass communication.

There are times in our lives when incredibly hard and frightening decisions must be made. The same applies to companies and industries – entire countries in fact. And it’s always those simple decisions that must be made and are most often the most difficult to execute. The pharma-ceutical industry’s simple way out of its coming dark age is nothing less than the task of utterly re-vamping itself into an entirely new industry – one which will be supple, clever and ethical enough to win the attention and social capital so critically necessary to hold sway in the coming world.

The simple truthOf course, maybe it’s already too late for the large phar-

maceutical companies. If that’s the case, then the smaller enterprises have an open opportunity to gun for the future – especially if they refuse to be subsumed into the juggernauts. If 20th century capitalism taught us anything, it’s this: Jug-gernauts often jeopardise their long-term sustainability by assuming their ways of doing business are eternally solvent. They aren’t. Technology brings forth into the world both op-portunity and obsolescence. It reveals the status quo while it destroys it.

If the industry is to be what it aught to be – a leading cre-ator of technological solutions to biological problems – then it will have to abandon the now false hope of generating un-natural rates of return via outmoded mechanisms, processes, strategies and tactics. Because if it continues to believe its in-dustry is exempt from the eternal laws of supply and demand, of resource and allocation, and of creativity and innovation, then it will perpetuate a belief system that will continue to funnel its efforts into practices that forgo richer long-term prospects. This is not only a matter of industrial health – it’s a public health urgency. A bankruptcy of novel bio-molecular advancement would be catastrophic for health care.

COVER STORY38

Returning to the web of connections, it’s not that the web doesn’t matter – far from it. But the basic economic principles outlined above are the priority for all companies curious about how to integrate web media into their enter-prises. There are places for new media within life sciences but the industry needs to be very basic in its approach.

For one, companies won’t get very far with ‘social marketing’ efforts until executive leadership has hands-on experience with new media and a working comprehension of their properties. The only way things will move is when middle and executive managers start using these media personally. They need to go through this process before clear-headed strategies can be well formulated. To do this, they need to imagine the re-purposing possibilities of vari-ous media and then put together small teams of champions who, with permission, can go forth and lead the way with small steps. Finally, they will have to initiate the system-deep integration of social design into their companies – and enterprise versions of Facebook aren’t the solution.

Once they understand how to use these media them-selves, only then will they see the potential and pitfalls. They will realise the importance of accumulating social capital and will see more clearly what it takes to create con-tent and communities and the safe connections that engen-der markets where information can be safe and effective.

The economics of life science products and the reali-ties of emerging shifts in the properties of adopted media dovetail each other over time. Perhaps not immediately, but it won’t be too long before the industry sees the need to change, which is why the previous discussion about capi-talism is so important and relevant to any discussion on social technologies.

The pharmaceutical industry will have to get back to fundamentals in economic design and collaborative networks. It needs to bring the life scientists back to front-and-center as pioneers of not only innovation but also creativity. It will have to develop new ways to work with doctors and nurses, patients and the public.

The imperative for leaders in life sciences businesses to understand the emerging roles of emerging media has never been more important. Moreover, the enframing of these media must line up with a fresh perspective on the nature of capitalism in an age where social curren-cies emerge as substantive elements in the capital system at large.

It’s time to get back to the science of life and the art of being a hero. Re-examine the fundamental meaning of marketing. Remember that marketing is about presence. Realise the costly long-term error in mistaking messaging for marketing. If you’re going to integrate rapidly shifting new media into your efforts, keep things simple. Don’t aim for marketing gold – you’ll not only miss the pot, you’ll ruin your reputation forever because the Web is your last hope, even if it’s your biggest fear. It’s that simple. But like life itself, simple is rarely easy. n

This article was reprinted with permission from Phil Baumann. For more information, visit: www.philbaumann.com/2010/03/22/overcoming-pharmas-social-media-anxiety-disorder/

Baumann outlines a few simple tasks that could change everything for the world of

social-pharma marketing.Invest in education: Where will the next generation

of molecular biologists, geneticists and engineers come from? Set up a consortium of education that extensively funds

captivating educational programmes that spark the attention of a youth easily distracted by the temptations of the web by using those

temptations to your advantage.Shift capital-flows from over-marketing back to R&D: The future of

traditional marketing is bleak. Accept the losses now. A robust portfolio of novel pipelines for products – in conjunction with re-designing public relations

with valuable social propositions – will lead to healthier long-term prospects for capital accumulation.

Re-design infrastructure and process from an assembly-line basis into info-social ecosystems: As the cost of technologies shrink while their powers expand, the opportunities to more fully realise the power of ideas and experiences expand. How many more discoveries and advances in molecular genetics can be made if businesses were based upon social designs instead of mechanical rigors?

Extract value from the innate experiences of human capital within the enterprise: Entrenched stiff organisational structures have buried the col-

lective values that can be derived from the vast array of product and service ideas inherent in these collective talents. Investing in re-

designing business towards info-social ecosystems will de-velop the platforms necessary to yield the potency

of human creativity and innovation.

The social injection

“The only way things will move is when middle and executive managers start using these media personally. ”

ROUNDTABLE80

Trends in outsourcing analytical support in pharmaceutical

development

With David Beyerlein of MicroConstants, Inc. and Dominic Moore of Waters Corporation

ROUNDTABLE 81

What do you see as the main trends in outsourcing of analytical and bioanalytical support for pharmaceutical development?David Beyerlein. One continuing trend is the emergence of new “one-stop shop” service providers. While these models seem attractive initially, the overhead for these organisations is often so high that you lose out on the cost savings out-sourcing makes possible. Additionally, drug developers need to ensure that the bioanalytical/analytical support function is indeed the core expertise of the vendor, rather than an ancillary service, or an afterthought. This can be avoided by choosing a CRO that has a niche focus with strong relation-ships and partnerships formed with other niche CROs to provide services all along the drug development continuum.Dominic Moore. Partnerships are the key way forward to pharmaceutical outsourcing relationships. Every month we see announcements that a pharmaceutical company has part-nered with an outsourcing organisation to help develop their drug and this extends into the analytical arena. Numerous companies now rely on their outsourcing partners to provide the majority of their analytical and bioanalytical expertise, not just in a routine sense, but from early method development onwards. As such, the scientific presence in these providers is growing exponentially, thus the demand for state-of-the art instrumentation and data systems is growing.

What are the current expectations of customers in the analytical outsourcing function?DB. Our clients are always looking for quality above any-thing else. While cost and timelines are important to any drug development study, if you can’t have complete confi-dence in the data that is produced, then money and time have been wasted. As an outsourcing provider, quality has to be the top priority. Every study needs to adhere to the latest relevant regulatory guidelines in the industry so that there is no question about the validity and accuracy of the results generated.DM. Customers are looking for quality, timeliness and then cost. They want to know the provider can generate good quality scientific data, using high quality, state-of-the-art instrumentation and data systems which are used in an ef-ficient and compliant manner which allow the customer to accelerate their drug development plans.

What are the main challenges the CRO industry has to face with regards to outsourced analytical and bioana-lytical work?DB. Today every CRO faces challenges with competition, both from foreign markets and with the internal resources of drug developers. With regards to bioanalytical work specifically, the compounds being outsourced are becoming increasingly challenging analytically and the methods can be extremely difficult to develop. However, service providers with the most experienced and talented method developers will embrace these challenges and view them as opportuni-ties to be scientifically creative to achieve success.DM. To remain competitive, CROs need to remain flexible to all of their clients’ demands, be able to work efficiently, and

have the most productive systems and processes available. In order to do this, they need to invest in the latest rapid and sensitive analytical solutions, and ensure that processes are geared around getting the highest level of productivity from these investments at all stages of the cycle.

How do you see the analytical outsourcing model chang-ing over the next 10 years?DB. One of the biggest changes recently in the pharmaceuti-cal industry has been the decreased focus of big pharma’s internal R&D functions. This change in in-house capabili-ties is going to have a huge impact on the outsourcing model over the next 10 years. It has already led to an increase in virtual drug development and outsourcing models which will eventually increase the role CROs play in the drug de-velopment process.DM. The role of the CRO will increase to a point where they lead the strategic and development efforts for the pharma-ceutical companies rather than being a partner in the pro-cess. In order to do this, the CRO industry will continue to innovate in areas of science and operations, ensuring they have the best tools possible to maintain high levels of pro-ductivity and quality for years to come. n

David Beyerlein, MicroConstants, Inc. David Beyerlein has over 12 years of experience managing laboratory operations, is an experienced analytical chemist and is highly skilled in the use of the mass spectrometer.Beyerlein co-founded MicroConstants, a bioanalytical and pharmacokinetic-specialty CRO, in 1998 with Dr. Gilbert Lam, and currently serves as Vice President of Global Operations.

“Today every CRO faces challenges with competition, both from foreign markets and with the internal resources of drug developers”

Dominic Moore, Waters CorporationDominic Moore is a Senior Business Manager in the Waters Pharmaceutical Business Operations team, working to deliver solutions that will positively impact customers’ laboratories and business objectives. Moore brings several years of experience in pharmaceutical development at AstraZeneca in the UK. Prior to joining Waters, he was pivotal in growing the analytical services business at Charles River Laboratories, a global CRO, focusing on formulation support.

With wages stagnant, inflation on the rise and the rich getting richer, just what will happen to the average American worker?

UPFRONT

Travel the globe and the thing that strikes you – almost as much as how diverse and beautiful the world is – is the realization that much of mankind is tremendously

homogenized. The English language is dizzyingly widespread; Coca Cola is universally recognized; Rihanna tunes can be heard pumping out of bars and cars from Manilla to Milan; denim is the unofficial uniform for vast swathes of the world’s population, and even in the seemingly poorest or most remote areas, pulling an iPhone 4 from your pocket will register barely a flicker of bewilderment among the locals.

We did this, the USA. With the help of the Brits (the language, the Beatles, the invention of TV and the Internet), the Anglicized world has spread faster, farther and more ferociously than any other cultural export in history. And it’s happened because, since World War II, the USA has had a clear run at global domination, catalyzed by economic exceptionalism that no other country has been able to even get close to.

Right up until the 1970s, Americans enjoyed year-on-year increases in wealth, wages and living standards. The harder you worked, the better off you became and the more you consumed. And yes, while the richest got exponentially wealthier than the middle classes or the blue-collar workers, nobody became poorer – the lowest levels were soon higher than what passed for ‘middle class’ elsewhere, even in Europe. This unstoppable beast of US capitalism meant demand was always running a few blocks ahead of supply; a situation that created jobs, attracted waves of immigration, kept wages high and kept careers on an upward trajectory.

But since the 1970s, the USA has been merely riding that same wave rather than creating new ones. And then in 2007, it all came crashing down. In the 1970s, the capitalists and free marketeers saw that profits could be increased if work was offshored and outsourced; as technology improved, machinery and computers began to do the work of the massed unskilled, and as women’s rights became more liberalized, the woman’s place was no longer the home, but the office, thus diluting the labor force further.

In response to these drastic changes to American society, wages ceased rising. Labor scarcity turned into labor excess, and since then most US workers have – in real terms – become poorer than their counterparts from the 1970s. However, it has only been in the past few years that this realization has begun to hit home.

Since the subprime crisis became the first flimsy sezment of the house of cards to fall, it has become more and more apparent that the past few decades were merely a bubble of false credit, inflated prices and a postponement of reality. Capitalism changed irrevocably during this period. Work was still plentiful, but borrowing and debt became unsustainable. In effect, the credit bubble delayed the crash for longer than could have reasonably been expected, but now people are discovering just how flat their wages are, how hindered their purchasing power has is and how difficult life might yet become.

With such high unemployment, wages are going nowhere but down. It is now extremely difficult to borrow, and we all have to work longer hours in jobs that, at any minute, could be offshored to cheaper destinations or made obsolete by technology. Expanding consumption will soon retract as inflation continues and take-home pay remains stagnant.

And all the while, the richest 10 percent of America are cashing in. They can keep wages low thanks to the crisis ¬– a crisis caused by their irresponsible speculations on a whole plethora of untested financial instruments (such as the aforementioned subprime mortgages, credit default swaps and asset-backed securities), and they can use the crisis to increase this wealth disparity.

The government is currently ploughing through a budget of austerity, which is compelling the ordinary working American to carry the costs of the government’s imbalanced response to the crisis. By siding with AIG, Fannie Mae, Freddie Mac and GM, the trillions of dollars spent saving these conglomerates has been diverted away from the truly deserving, and much of these funds have been ‘borrowed’ from rich investors, left flush with cash because they were not taxed sufficiently enough when the crisis hit. So the whole cycle begins anew, and it is the average American worker who is paying the price.

Nationwide, every State is undertaking some sort of austerity measure and they are reinforcing this disease of falling wages, rising taxes and fewer government-funded benefits. Americans are becoming poorer and less secure in their jobs, even though the IMF has estimated that the US GDP will grow by three percent in 2011. At the same time, the Federal Reserve has warned that the USA’s unemployment levels are still too high – at around 9.8 percent at the end of 2010 – to effect an upswing in fortunes.

In December 2010, just 39,000 new jobs were created throughout the States, leaving an estimated 15.1 million people officially out of work, and many millions more working part-time hours and finding daily living expenses a constant struggle. With wages unlikely to rise for the next 18 months at least, and inflation set to push close to five percent, the majority of Americans will be feeling the squeeze in 2011. But the rich, as ever, are set to get even richer…an unequal society.

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1970sDuring the 1970s, the income of America’s richest 20 percent rose by 14%, while the poorest fifth’s income rose by 9%

1990sIn the 1990s, the wealthiest fifth saw their income increase by 20%, while the poorest fifth had an income increase of just 10%

TodayInequality is regarded by experts as one of society’s greatest threats, causing nations with greater income disparities to suffer immensely on a number of social indicators, including a higher murder rate (South Africa is one of the most unequal countries in the world – it also has the highest homicide rate), poorer na-tional health, lower life expectancies and a greater propensity for debt-fuelled living, as evidenced by the recent financial crisis.

Bonus time for the economy?

A recent BLR poll suggests fewer orga-nizations eliminated end-of-the-year bonuses in 2010 (9%) than 2009

(25%). There was also an increase in the per-centage of organizations that paid out more than they did in 2009.

The poll asked respondents: “How will your organization’s end-of-the-year bonuses compare with those given last year?” The an-swers were as follows:

• We don’t give end-of-year bonuses: 29 per-cent in 2010; 26 percent in 2009.

• We’ll pay out more than we did last year: 28 percent in 2010; seven percent in 2009.

• They’ll be about the same as last year: 19 per-cent in 2010; 26 percent in 2009.

• We’ll pay out less than we did last year: 15 percent in 2010; 14 percent in 2009.

• We had to eliminate them this year: nine per-cent in 2010; 25 percent in 2009.

On the up?

The Economic Policy Institute (EPI) jobs report for December 2010 has shown continued improvements in the U.S.

job market. This could, however, be an overenthusias-

tic view. The unemployment rate dropped to 9.4 percent during this time, but around half the improvement was due to 260,000 people dropping out of the labor force, leaving the labor force participation rate at 64.3 percent – a new low for the recession.

Payroll employment growth was just 103,000, and average hourly wages increased by just three cents. The U.S. labor force is now smaller than it was before the recession started, though it should have grown by over four million workers to keep up with working-age population growth over this period, EPI reports.

On the plus side, the December report caps of an entire year of job gains in the private sector. But three full years after the recession officially began, the gap in the labor market remains on the order of 11 million jobs, despite December’s modest achievements.

Employees who spend the major-ity of their time working from home experience less stress

and greater job satisfaction than those who work full-time in an office environment, a new study by the University of Wisconsin-Milwaukee has found.

During the research, the advantag-es and disadvantages of both working arrangements – from home and at the office – were compared, and evidence revealed that a week where three days consisted of home-working proved the most satisfying, with a far better work-life balance achieved among the participants.

Working from home, or telecom-muting, still carries a certain stigma within many industries, with business leaders said to be sceptical about the value this set up brings. Poor and in-frequent workplace communication is often cited as a drawback, although the home workers studied for the re-search claimed that his lack of daily in-formation exchange, while noticeable, did not hinder their ability to do their jobs, and that important, work-related information was always imparted to them in a timely fashion.

Conversely, remote workers found they were better able to focus on their daily duties with fewer distractions, with the home environment prov-

Home comforts ing an effective buffer from the daily grinds of office politics, interruptions, needless (and endless) meetings and information overload.

“Our findings emphasize the advan-tages of restricted face-to-face interac-tion, and also highlight the need for organizations to identify and address the problematic and unsatisfying issues inherent in collocated work environ-ments,” said Kathryn Fonner, one of the lead researches on the study. “With lower stress and fewer distractions, em-ployees can prevent work from seeping into their personal lives.”

Fonner touts teleworking as just one in-ventive way to shake up the workplace and increase job satisfaction. Other tips include:

• Limiting mass emails and unneces-sary meetings

• Streamlining communication by adopting collaboration tools

• Designating time and space for uninterrupted working

• Creating a supportive climate where employees can register concerns free from repercussions/retaliations

• Encouraging employees to cease all work communications once the work-ing day is over

Most employees feel guilty when calling in sick, even if their sickness is le-gitimate, a new survey has revealed.

The research, conducted by CareerBuilder, has found that nearly three-quarters (72 percent) of workers typically go to work when they’re ill, and 55 percent said they ‘feel guilty’ if they miss work due to illness.

With the cold and flu season instill full swing, workplace pressures and ‘pre-senteeism’ may be impelling workers to head into work despite the obvious threats of contagion and prolonging the suffering. More than half of the 3700 workers surveyed nationwide from November 15 to December 2, 2010, said they picked up a bug from someone who was sick on public transport going to or from work.

“It’s important for employees to take care of their health and the health of others by staying at home if they aren’t feeling well,” said Rosemary Haefner, vice president of human resources at CareerBuilder. “Even if workers feel pressure to be at the office, they should talk to their managers about staying home if they are sick, or ask about other options such as working remotely. Most employers are flexible and understand that employees are more productive if they are feeling their best.”

In order to encourage a healthy workplace, nearly one-in-five (19 percent) of employees said their companies provided flu shots at their office. Nearly two-in-five workers (38 percent) said they were proactive and sought out a flu shot this year (2010). When workers were asked what other ways they attempt to avoid germs, 78 percent said they wash their hands often; 32 percent carry and use hand sanitizer; 30 percent regularly clean their office space; 15 percent avoid shaking hands with people and three percent skip meetings where they know someone is ill.

The survey was conducted online within the US by Harris Interactive on behalf of CareerBuilder.com among 3910 US workers (non-government, employed full-time rather than self-employed); aged 18 and over between November 15 and December 2, 2010.

Workplace pressures impacting employees’ sickness decisions

Total employment throughout the USA is expected to increase by 15.3 million jobs over the decade of 2008-18 ac-

cording to the most recent employment pro-jections from the Bureau of Labor Statistics (BLS), with job openings stemming from the need to replace displaced or retired workers projected to be more than double the number of openings created by economic growth.

Here are the top ten professions that will add the most workers this decade, according to the BLS:

1 Registered nurses2008 employment: 2.62 million2018 employment: 3.2 million

2 Home health aides2008 employment: 922,0002018 employment: 1.38 million

3 Customer service representatives2008 employment: 2.25 million2018 employment: 2.65 million

4 Combined food preparation and serving workers, including fast food2008 employment: 2.7 million2018 employment: 3.09 million

5 Personal and home care aides2008 employment: 817,0002018 employment: 1.19 million

6 Retail salespeople2008 employment: 4.49 million2018 employment: 4.86 million

7 Office clerks, general2008 employment: 3.02 million2018 employment: 3.38 million

8 Accountants and auditors2008 employment: 1.29 million2018 employment: 1.75 million

9 Nursing aides, orderlies and attendants2008 employment: 1.47 million2018 employment: 1.75 million

10 Post-secondary teachers2008 employment: 1.69 million2018 employment: 1.96 million

Ten-able employment

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Breakfast meetings make long lunches toast

A OnePoll survey in the UK has revealed that morning break-fast meetings have replaced traditional lunchtime meetings as the businessperson’s preferred get-together timeslot.

The survey found that 67 percent of polled workers valued breakfast meetings over lunchtime ones for the generally positive outcomes they generated, with the majority commenting that they felt much more alert in the morning. Additionally, 60 percent of those polled said that morning meetings were becoming more commonplace in the wake of the recession, as bosses try all they can in order to extract more productivity from their staff.

The poll also surveyed workers on their breakfast habits in general and found that 79 percent regularly eat breakfast during the working week, claiming that in doing so they felt more alert and productive at work. More than half of those surveyed said they were more likely to arrange an early morning meeting, and a quarter admitted they have cancelled an afternoon meeting because of fears over their own levels of concentration and fatigue.

Additional revelations from the 3000 workers polled in the OnePoll study include 42 percent of employees who regularly attend meetings over breakfast, 36 percent who believe it is easier to track someone down before 11am and one in twenty admitting to holding job interviews over breakfast.

Relocation requirements

TOP10

All families that relocate for their careers have different priorities, but a study by IMPACT Group

has identified a trend of the 10 most important pieces of research conducted by relocating families in 2010:

1Demographic and crime reports

2Employers in a specific industry/occupation

3Physician/Dentalreferral services

4Recruiters/Temporary staffing agencies

5School rankings

6Company lists

7Driver license/Vehicle registration facilities

8School district reports

9Preschools and day care centers

10Fitness centers

Despite women taking up almost 50 percent of management positions in professional industries throughout the US, a mere six

percent of Fortune 500 companies have women as their top earners. And it’s not just at the very top of the pay scale that gender divisions exist – throughout every level of the employment tree women are either underpaid or under-recognized, reveals a report by recruitment giants Adecco.

The recent Adecco survey, conducted among British, American and German female workers, finds that a third of those questioned believed they were being underpaid by as much as 25 percent when compared to a male counterpart performing an identical or similar role. The same study also showed that a third of women are hankering after a pay increase of up to four percent this year, which is slightly more than the pay aspirations of men.

In contrast, men were shown to be more likely to know what they should be earning, and were more likely to bring the matter to the attention of their bosses should they feel their contributions were being undervalued. “It’s particularly disturbing that female workers have the perception that they are underpaid but are not confident in understanding what they may be worth in the jobs market,” said Andy Powell of Adecco. “We would actively encourage both male and female workers to understand what the market rate is for their role, taking a realistic view of their skills and experience.”

Gender pay gap rears its ugly head

HealthCheck360, an innovator in integrated wellness and population health management solutions, shows actual results with perfor-mance-based wellness and health management solutions. With the

recent financial crisis and realization that slower growth is the new norm, busi-ness leaders are keen to only implement solutions that demonstrate measurable outcomes and a positive effect on the bottom line.

Wellness initiatives have been around for decades, but Americans are get-ting less and less healthy. The prevalence of obesity, diabetes and cardiovascular risks continue to skyrocket, along with other lifestyle related health issues. Tra-ditional wellness has obviously failed. A recent Price Waterhouse Coopers study demonstrated that 71 percent of companies had some sort of wellness program…few of them said they were effective at lowering costs. Corporate leaders are de-manding accountability and results before they implement another traditional wellness program and give away one more water bottle or tee shirt.

Performance based wellness and health management solutions allow a company to manage health care costs proactively. Rather than navigating by looking in the “rear view mirror” when it comes to health care costs, a company can have access to forward looking data that allows them to “look out over the horizon.” HealthCheck360 gives companies the ability to identify and ad-dress risks before they become costs. It also drives accountability and positive behavior change among members. When coupled with meaningful incentives, smart lifestyle decisions effectively turn into a “safe driver” discount for those who make the right choices. An April 2010 Towers Watson study demonstrated that the number of companies planning to implement performance-based wellness programs tripled from one year earlier. Clearly, fewer and fewer com-panies are willing to gamble on traditional wellness strategies and are look-ing to the favorable odds of performance-based wellness solutions to drive meaningful results.For more information, please visit: www.healthcheck360.com

Don’t gamble with traditional wellness

ILO predicts ‘weak jobs recovery’

The International Labour Organization (ILO) has called on governments worldwide to prioritize job creation, as its latest trends report predicts ‘weak jobs recovery’ throughout 2011.

The ‘Global Employment Trends 2011: The challenge of a jobs recovery’ report from the ILO said that global unemployment has remained at record highs for the third consecutive year. This is a serious concern for the ILO as unemployment has remained high despite many countries seeing a sharp eco-nomic rebound.

In 2010 there were 205 million people unemployed around the world, es-sentially unchanged from 2009, and 27.6 million more than before the global economic crisis in 2007. Key economic indicators such as global GDP, private consumption and investment have all recovered in 2010, surpassing pre-crisis levels.

The ILO has predicted a global unemployment rate of 6.1 percent for 2011, the equivalent of 203.3 million unemployed. The 2010 figure is 6.2 percent down from 6.3 percent in 2009, but up from 5.6 percent in 2007. More than half (55 percent) of the total increase in global joblessness between 2007 and 2010 occurred in the developed economies and European Union region, yet these areas only account for 15 percent of the world’s labor force.

UPF

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AustraliaAustralian workers are more likely to change employers over the next 12 months compared to staff in 16 other countries, according to research by employee engagement consultants Infogroup/ORC. Based on responses from 9300 employees worldwide, the study found that 57 percent are engaged with their current organizations, with Australia placed 7th, narrowly behind the United States and Germany. The report by Phil Pringle of Infogroup/ORC found that Australian organizations were more affected by a lack of employee commit-ment to stay in the medium to long-term, bedevilled by a current unwillingness to contribute, or perceptions of their organizations as a bad place to work.

EgyptA million protesters swarmed Tahrir Square in Egypt after a week of protests on February 1. President Hosni Mubarack responded to the protests, and the biggest challenge to authoritarian rule in 30 years, by refusing to step down before the election in September. It is thought that we will now transfer his powres to his deputy, Vice-President Omar Suieman. The country’s military, meanwhile, has said it will “support the legitimate demands of the people.”

International News

UKUniversity leavers face slightly less daunting prospects in 2011 as the jobs market shows improvement for the first time since the recession, research suggests. A survey of more than 200 em-ployers in the UK reveals an 8.9 percent annual increase in graduate jobs. Tough competition, however, means it is still an “employers’ market”, the Association of Graduate recruiters says. The survey shows that average starting salaries have not risen for three years, sticking at £25,000 per year. The report confirms an upward trend in job opportunities for graduates, after a huge fall in the after-math of the financial crisis. The demand for jobs continues to outstrip supply and intense competition is allowing employ-ers to freeze starting salaries.

JapanJapan has seen a sharp rise in the number of foreign workers. A total of 649,982 foreign workers were employed by 108,760 organizations in Japan at the end of October 2010, up 15.5 percent and 14.1 percent from a year earlier. Chinese workers accounted for a third of the total, with Brazilians making up another sixth. In explaining the rise, the labor ministry said that Chinese, Brazilian and other workers who were laid off amid the economic downturn are being called back for short-term jobs in the Chukyo area in central Japan, where a large number of manufacturers operate.

China30 provinces in China increased their minimum wages by the end of 2010, a spokesman for the Ministry of Human Resources and Social Security has revealed, according to the Global Times. The rise in minimum wages is expected to continue throughout 2011 as inflation builds. Tianjin, a province near Beijing in the northeast of China, is considering raising the minimum wage by 16 percent. Jiangsu, the municipality of Beijing, and the municipality of Chongqing also indicated they will raise minimum wages as well as Guangdong, which is expected to raise minimum wages by as much as 18.6 percent. The debate among Chinese officials is between improving the purchasing power of the poor or keeping wage costs down for business, Global Times reports.

IsraelIsrael’s Oscar entry for Best Foreign Language Film, The Human Resources Manager, will be shown on March 27th at 7pm at the Philadelphia International House. Based on the novel by A.B. Yehoshua and directed by Eran Riklis, The Human Resources Manager won Best Feature Film, Best Director, Best Screenplay, Best Soundtrack and Best Supporting Actress, all from the Israel Film Academy. Described as a touching tragic comedy, the movie tells the story of an HR manager at Israel’s largest bakery who is blamed for not noticing that one of his employees is missing.

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What would you say are the biggest trends and challenges affecting the research industry right now?

Over recent years, real estate has become established as the dominant “alternative” asset, driven by its performance behaviour and attractiveness to institutional investors around the world. But it remains an “alternative” and has been deeply impacted by the global financial crisis, so research continues to play a big role in helping the industry to mature. This revolves around improved understanding and better risk management throughout the industry.

How has IPD tackled these challenges and grown throughout the global financial crisis?

The financial crisis has generated significant stress throughout the industry. This stress has increased demand for better information and improved risk management, and IPD has responded to these trends by focusing its activities on those markets (such as US and UK) and industry sectors (such as banks and global real estate managers) with greatest need for assistance in these areas.

What advice would you give to those in the financial services industry wishing to succeed in a harsh economic climate?

The experience of IPD through the crisis reaffirms three important themes that have driven IPD’s growth through its history. First: strong technical development to enable the creation of innovative business tools and applications. Second: a focus on the needs of customers and the ways they vary through the economic cycle, from country to country and by segment. Third: the building of a well-co-ordinated and collaborative team straddling global markets, to ensure local innovation whilst preserving a strong global framework and brand.

Founded in the UK in 1985, IPD began by compiling data and developing benchmarking services for leading commercial property investors. Building up its property-by-property information, IPD soon became the UK’s first reliable index of property returns, and the approach started to be deployed in markets outside of the UK. Today, with a staff of over 300, they operate in over 20 countries including US, Canada, Australia, New Zealand and Japan. Earlier this year they were awarded the Queens Award for International Trade, after already having received the award in 2005.

Breaking boundaries

Peter Hobbs has widespread experience of advising investors across European, US and Asian markets. As Senior Director of Group

Business Development at IPD (Investment Property Databank), he is focused on developing the com-mercial strategy of the company, overseeing IPDs client facing. This includes responsibility for three main areas of IPD: product development, marketing and overall research. FST asked him to share some of his expertise in heading up a successful company in this challenging time.

Marka Hansen, the head of Gap North America who oversaw the retailer’s

attempt to update its logo, has quit. Gap abandoned its attempt to change its blue box logo last fall within a week in the face of a customer revolt. Ms Hanson has overseen recent falls in underlying sales.

After an unsettling sales year and a disappointing holiday season, the 24-year veteran of Gap – a chain that also includes Old Navy and Banana Republic – is leaving the ap-parel retailer. Ms. Hansen has been in the position for four years and was the third person to lead the brand in the last nine years.

Gap plans to name a successor from within the company. Gap brand North America, which accounts for roughly 27 percent of the company’s total sales, has struggled in the past decade. Sales at stores open at least a year have fallen each year from 2004 to 2009, and will likely post another decrease for 2010 when the company reports full-year earnings in a few weeks.

Mind the gap

Prior to joining IPD, Dr. Hobbs was Managing Director at Deutsche Bank, working as Global Head of Real Estate Research for RREEF, the real estate division of Deutsche Asset Management. He was responsible for leading the com-pany’s global research coverage.

IPD is a global real estate information business with services related to the commercial real estate market, producing research and analysis for some of the world’s leading real estate investors, occupiers, advisors, lenders, analysts and researchers.

The company is the world leader in performance analysis for the owners, investors, managers and occupiers of real estate. To guarantee independ-ence IPD do not participate in real estate investment markets and do not offer consultancy advice on investment decisions or other real estate issues.

IPD offer: real estate performance analysis; market indices; research and publications; and events and training in most of the real estate markets it operates in.

“The way we work is designed to give you clear, timely information and the research and the training you need to understand the world of real estate and performance analysis and making it work for you. In order to meet your evolving needs we are continu-ally refining our services and adhere to the highest standards of real estate data collection, validation, processing and reporting.” IPD says.

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Realizing the American Dream

E ver wondered how America’s billionaires came to be so successful? HRM takes a look at the first jobs of seven savvy business leaders to find out…

1. Who? Warren Buffet How? Buffet started a newspaper delivery busi-ness at the age of 13 before launching a pinball-machine business at high school. By the time he graduated from college, his various business ventures were worth a combined $10,000.Now? Buffet’s net worth is estimated at $47 billion.

2. Who? Oprah Winfrey How? Now the queen of broadcasting, Winfrey came from lowly beginnings as a grocery store clerk next to her father’s barbershop in Nashville, Tennessee. She later moved on to her media calling – newsread-ing for the local radio station at the age of 16. Now? Winfrey’s net worth is $2.7 billion.

3. Who? Michael BloombergHow? Bloomberg took a more traditional route to success – working his way through college and earning a master’s in business administration from Harvard University.Now? Bloomberg is now the mayor of New York, with a net worth of $18 billion.

4. Who? Bill Gates How? Gates was a computer programmer for TRW in his senior year, before dropping out of Harvard to follow his passion for technology. Now? Gates is one of the world’s richest men with a net worth of $53 billion.

5. Who? Steve Jobs How? During high school Jobs found employ-ment at Silicon Valley pioneer Hewlett-Packard, where he met Apple co-founder Steve Wozniak. Now? The bulk of Jobs’ fortune comes from the sale of digital animation company Pixar to Walt Disney for $7.4 billion, making his net worth a whopping $5.5 billion.

6. Who? Giorgio ArmaniHow? The fashion powerhouse was an as-sistant photographer at Milan department store La Rinascente, and was quickly promoted to the store’s style office as a buyer. Now? The designer and fashion mag-nate’s net worth is $5.3 billion.

7. Who? George LucasHow? The Star Wars founder had a humble career which began as a teaching assistant for Navy students who were studying documentary filmmaking. Now? With a resumé that includes the entire Star Wars series, the Hollywood icon’s net worth is $3 billion.

Source: www.money.msn.com

Obama offers hope

The President is focusing on creating jobs and engaging the healthcare-reform law, offer-

ing positive signs for HR leaders. In his State of the Union speech on

Tuesday, January 25, President Barack Obama emphasized his intention to have government do more to help create new jobs. “We need to out-in-novate, out-educate and out-build the rest of the world,” Obama said. “We have to make America the best place on Earth to do business.”

He spoke of investing in “biomedi-cal research, information technology and essentially clean-energy technol-ogy – an investment that will strength-en our security, protect our planet and create countless new jobs for people.”

This news comes as the Labor Department reports a rise in unem-ployment in 20 States throughout December-January. While the national unemployment rate in December was 9.4 percent, it was as high as 14.5 percent in Nevada, followed by 12.5 percent in California and 12 percent in Florida.

Obama also spoke of increasing ef-forts to reform the nation’s education-al system to help “train [people] for new careers in today’s fast-changing economy.” He then asked Congress to make permanent a tuition-tax credit of $10,000 for four years of college.

How to manage the Facebook generation

From baby boomers to generation X’ers, generation Y’ers and now the Millenni-als –the workforce is being continuously

labelled, re-labelled and compartmentalized, and now we have the next batch: the Facebook generation. And as with any new generation to enter the workplace, they bring with them a new mentality towards the world of work. So how should HR departments begin pre-paring for this next wave of workers?

Here’s a few HRM tips…

Get your tech up to speed. The Facebook generation have not so much ‘grown up’ with technology as actually devoured more Apples than a famished Snow White. They’ll likely know more about iPads, Macs, social networking and video conferencing than your average office incumbent, so be sure to have the latest technology in place in order to keep them engaged and motivated.

Provide clear job descriptions. Instruction manuals for new pieces of kit are universally ignored, but Facebookers are accustomed to fol-lowing direct instructions. Indeed, the clearer the directive, the more comfortable this generation feels, so spell out everything to them – from work-ing hours to the explicit duties their job requires.

Make them feel valued. This generation are constantly connected to their peers, friends and families, so it makes sense to extend this level of connection and communication to their new colleagues too. Give them responsibility, but also invite them to meetings, ask for their opinions and generally involve them from the get-go.

Create a clear career path. The Facebook generation are used to instant access to every-thing: music, film, friends, information. And while they’ll not get to the top of the corporate ladder as quickly, make it obvious to them that hard work, innovation and dedication will eventually reap the rewards. If they can see an end result, they will be much more focused on reaching it.

Consider a dress code overhaul. This all depends on your industry of course, but the newest generation to enter the workplace is likely to be more image-conscious than ever, what with their endless Facebook albums, Flickr accounts and camera phones. So, if your younger members of staff are made to feel comfortable at work, they are much more likely to be productive and creative – which, if you’re honest, is the reason you employed them in the first place, right?

Obama offers hope

New York is most unionized state

New York has retained the title of most unionized state in the nation, according to new US Census Bureau data.

The Census Bureau reports that 24.2 percent of the city’s workers belonged to unions in 2010. This is the highest of any state, followed by Alaska, Hawaii, Washington, California and New Jersey.

New York plays host to 1.96 million union members, second only to California, which boasts 471,000 more union members. Union rates still dipped in New York however; a small part of a nationwide drop in union membership as the recession continues. The strain on labor will be heightened further this year as state legislators tackle an $11 billion deficit, with Governor Andrew Cuomo calling for limits on state spending as well as pay freezes for state union members.

In 2009, New York had 60,000 more union members, meaning 25.2 percent of workers in the state belonged to a union. Last year also marked the first time the US had more public sector union members than private. This trend continued in 2010, when 7.6 million public sector workers (36.2 percent of employees) belonged to a union. There were 7.1 million private sector union members, which meant that only 6.9 percent of private sector workers were in a union.

Public sector workers earned a median weekly wage of $917 according to the Census Bureau. This is $200 more than the median weekly earnings of their private sector counterparts.

The South remains the least unionized part of the country. North Carolina again had the lowest rate of union members, with 3.2 percent of workers in the state belonging to a union. Arkansas, Georgia, Louisiana, Mississippi, South Carolina and Virginia had the next lowest rates.

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N ew products, a new Incentive website, a new iPhone app – it’s easy to engage with Omaha Steaks this year and get a generous helping of exciting new things to try.

First up are the new products. Zingy and easy Italian Bites, a bold and beefy Top Sirloin Roast, the Ultimate Chicken Burger, deli delightful Old World Beef Franks, Red Velvet Dream Cake, and creamy and delicious Individual NY Cheesecakes. Omaha Steaks is always adding to its product line to ensure there is something to thrill everyone. And these latest additions are no exception.

Refreshed, renewed and ready for business, Omaha Steaks’ recently reinvigorated Incentive Website is perfect for help-ing you figure out how to most effectively use Omaha Steaks Incentives for your business needs. You can explore a wide variety of incentive programs, take quizzes to figure out what program would work best for your business, peruse gift programs or shop for a great deal. No matter what your needs are, this website will steer you in the right direction.

Looking for something useful today? How about an inge-nious app that will help you cook the perfect steak for dinner? Omaha Steaks offers that too, in a powerful and relevant new iPhone app that can help you cook multiple steaks, of multiple varieties, to various levels of ‘doneness’ all at once. Now that’s a handy tool to have!

But amid all this new excitement, the staples of Omaha Steaks’ exemplary Incentive programs remain the same. They make incentivizing employees, motivating sales teams, showing appreciation to customers and even holiday gift giving custom-ized, unique and tailored to your budget.

A leading industry body has urged HR departments throughout the world to take greater responsibil-ity in resolving workplace conflicts.

The UK’s Chartered Institute of Personnel and Development (CIPD) has announced the findings of its ‘Managing Conflict at Work 2011’ study, which revealed that the issue of workplace grievances takes an average of 14 days per case in management time.

The CIPD claimed that their findings showed that “HR professionals, line managers and those dealing with disputes and tensions in the workplace need to be able to manage conflict and tackle difficult situations with confi-dence.”

Employee relations adviser at the CIPD, Mike Emmott, further added that HR departments the world over need to develop ‘more positive strategies’ for dealing with work-place conflict.

“Once a disagreement goes down the path of formal action, it can become increasingly difficult to secure a sat-isfactory outcome and the legal ramifications can be both costly and time-consuming,” he said. “Organizations, there-fore, need to manage workplace disputes better and seek to resolve them early on.”

HR has a fundamental role to play in the support of this process, and there is a responsibility on HR departments to ensure that all line managers within an organization are suitably trained and sufficiently supported to achieve these outcomes.

The CIPD also outlined a series of tips for dealing with work-place conflict, including:

• Identifying an ideal end result – each party’s viewpoints, while at loggerheads at the time, might not actually be all that far apart; try to identify that middle ground.

• Allowing all parties involved the chance to clarify their position and perspectives about the issues raised – it is HR’s responsibility to make sure all participants

feel supported.

• Finding a realistic solution that will come close to each individual’s goals – if action is taken, consider how this might affect other staff members, projects

or objectives.

• Providing appropriate training for all staff – teach everyone what to expect of them and the company, and inform all on good conflict-resolution skills and responsibilities.

Managing conflict – an increasingly vital HR issue

New at Omaha Steaks in 2011

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As you probably know from the excruciatingly embarrassing Facebook comments your mom recently added to your latest snaps from a

particularly drunken night out, the baby boomer gen-eration (moms and dads to many of us) have begun devouring the joys of social media in record numbers.

Use of social media sites such as Facebook and Twitter among Internet users aged 65 and older in-creased by 100 percent in 2010, with one in four from that age group now fully signed-up members of the Facebook fraternity, according to research conducted by the Pew Internet and American Life Project.

The study also looked at the following generation, the soon-to-retire boomers aged between 50 and 64. It revealed that almost half (47 percent) of Internet users in this demographic use social media, which is an 88 percent increase on 2010. In total, the number of Facebook users in the US aged 55 and over grew from an estimated 1 million at the beginning of 2009 to close to 10 million by 2010, according to figures pub-lished by istrategy.com.

Such research has prompted industry watchers to analyze what is driving this generation to adopt social media. Many believe that Boomers are simply opening

their mind to the possibilities that technology brings, attracted by the ease in which they can communicate with their children and grandchildren. Additionally, high-speed broadband in now much more afford-able, widespread and universally accepted as a ‘must have’ in today’s society. Other possibilities for these increased adoption rates include good, old fashioned bargain hunting, business ventures, socializing among peers and even dating.

“The ability to reconnect with family and old friendships is the primary driver that encourages Boomers to start experimenting with Facebook,” says Brian Solis, author of Engage and new media expert. “One of the things they learn almost immediately is that when their profile is public they receive plenty of inbound connection requests from other friends and family, and it takes on a new life form for them. It’s a baptism-by-friend-request, learning the value of social networking.”

Although Facebook is the dominant medium among Boomers, Solis reveals that his own research has found that approximately 15 percent of all Twitter users are aged 55 or over. For Facebook, that figure is closer to 10 percent.

Boomers join social media at record pace

UK workforce most disengaged in Europe

British workers are the least engaged in Western Europe, according to a study by Engagement Matters, which found that

one in four workers were described as ‘ineffective’ by management during the survey.

More than half of employees in the UK are cur-rently regarded as ‘disengaged’: a description de-fined by staff who are deemed as unwilling to go the extra mile for their employers and are currently frustrated by their inability to rouse themselves from their torpor or conduct their roles effectively due to understaffing, poor resources or inefficient processes and procedures.

The widespread scale of this problem has caused consternation among C-level executives at some of the UK’s largest firms, with 82 percent of top-level management figures citing disengage-ment as one of the three greatest threats to their business. In response, employee engagement has become one of the top boardroom topics through-

out the country, with 52 percent of C-suite execu-tives discussing the issue regularly, compared with just 41 percent across the rest of the continent.

“Employee engagement is understandably vulnerable after two years of recession and uncer-tainty, and disengaged employees can have a det-rimental effect on a business’s bottom line,” said Graeme Yell, director of Hay Group. “Companies must act to safeguard and maximize engagement levels among their staff or risk suffering financially and losing key talent.”

The study looked at employee engagement across Europe’s five leading economies – Germany, UK, France, Spain and Holland, surveying 300 C-level execs and 3000 middle managers. The Hay Group, which has analyzed the findings, estimates that top performing organizations – those with the highest levels of employee engagement – are able to achieve revenue growth that is 4.5 times greater than their rivals.

Employee engagement: A European comparison

1. Netherlands 89%

2. Spain 88%

3. Germany 86%

4. France 82%

5. UK 71%

Motion Infusion is a revolutionary company that brings motion into the workplace – in a positive and proactive way. Why does

that matter? Because movement helps people get healthier, happier, smarter. And that’s good news for your bottom line.

In fact, more movement can lead to increased productivity, higher employee morale, reduced stress, better leadership, and a whole lot of teamwork. That is why Motion Infusion was created - a company that’s dedicated to bringing movement into the workplace.

What’s the problem?We sit too much: at our desks, at meetings, on airplanes, in our cars. To make matters worse, we do too many repetitive tasks, like typing, texting, and cradling the phone. This lack of healthy motion is giving us aching backs, stiff knees, numbness and tingling, slow thinking – and shortness of breath. Not exactly the ideal scenario for a productive workplace!

Time to get moving!Movement keeps our blood circulating, our muscles tuned, and our brains firing. Studies show that “on the move” companies have decreased healthcare costs, re-duced absenteeism, and increased employee productiv-ity and retention.

Movement in the workplace =a happy + healthy bottom line

More movement – one step at a time.We create customized programs to specifically meet the needs of your company. Here’s a snapshot of what we offer.

Step 1: Presentations – This is the starting point. Through lively seminars, employees learn why movement is so important. With easy-to-use tips as well as before-and-after case studies, our presentations offer a basic over-view of the benefits of living a life that’s infused with motion.

Step 2: Workshops – This is the next step. Experiential, interactive, and a whole lot of fun, these workshops teach employees how to make movement a daily part of their lifestyles – and, how to translate knowledge into action.

Step 3: Consulting – This pulls it all together and offers dramatic results. Through on-site evaluations, targeted instruction and our signature Peer Coaching Program, we help you to bring about long-lasting and systemic change to get your company “in motion.”

Make your move.Want to find out more? Give us a call at 415-310-5505 or visit motioninfusion.com to set up a free consultation.

More movement can lead to increased productivity, higher employee morale, reduced stress and better leadership

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J ust as you were losing all hope; just as your resume’s ‘recent achievements’ section was beginning to resemble that of a particularly bored stay-at-home-mom’s (highlights include:

‘baked a lovely batch of cookies last week’ and ‘made it to the store un-showered for the fourth day running…and still nobody said any-thing!’); just when that hitherto, previously-overlooked job scraping chewing gum off the soles of the desolate in return for a thimbleful of water began to look attractive…just then, at that lowest ebb you never thought you’d sink to – Google goes and announces that this year, 2011, is to be their ‘biggest hiring year in company history’.

Yes, as most corporations are still looking at ways to downsize without incurring the wrath of their redundant and disgruntled em-ployees, Google is bucking the trend and planning for 12 months of massive growth.

“We’re looking for top talent,” said the official Google blog post. “Across the board and around the globe, we’ll hire as many smart, creative people as we can to tackle some of the toughest challenges in computer science: like building a web-based operating system from scratch, instantly searching an index of more than 100 million gigabytes and even developing cars that drive themselves. There’s something at Google for everyone – from geo, to enterprise, to video – with most work done in small teams, effectively working as start-ups.”

To which the only sensible response can be: Yikes! One of the most innovative, creative, influential and, well, cool companies in the world is on the lookout for the best and the brightest, just as the majority of American jobseekers’ confidence is probably at an all-time low. Feel like applying? Thought not.

But wait, come back! It’s not all bad. It’s apparently a great place to work. Don’t just take HRM’s word for it – you can turn to page 44 for an exclusive interview with Google’s Global HR honcho Lianne Hornsey if you want – but also the thousands of ex-Googlers who are sad to no longer work there.

Sad because, you see, leaving Google is like coming down the mountain. The dark side of the mountain that is, where noth-ing grows, the sun don’t shine and jagged rocks underfoot draw blood at every step. A career at Google represents the pinnacle of achievement for millions. And it could for you, too: just think – no more working in an office sat next to that sweaty, mouth breathing Twilight fan who spends their entire lunchtime spilling soup down their blouse and chuckling at their crazy friends’ antics on Facebook. Oh no, at Google, people have lives: actual, fully-fledged lives. Lives that mean something. Careers that they can care about, and attain-able goals to aim for.

To get the juices flowing, here’s a choice excerpt from an ex-employee re: the wonderful world of Google…

GoogleEmployee22k: “Google is a great place to work. These are the things I like about my job:

doles out rolesSurvey reveals interview mistakes

A new survey conducted by CareerBuilder has exposed the most common inter-viewee mistakes prospective employees

make – with answering a cell phone call during the interview and dressing inappropriately amongst the most common (and frankly unbelievable) slip-ups.

The nationwide survey of more than 2400 hiring managers exposed mistakes such as texting and an-swering a cell phone – the blunder committed most frequently – with 71 percent of managers reported to have witnessed this during an interview. Dressing inappropriately and appearing disinterested came a close second with 69 percent of managers com-plaining of these mistakes. Also on the list were: ap-pearing arrogant (66 percent), speaking negatively about current or previous employer (63 percent), and chewing gum (59 percent). Not providing spe-cific answers (35 percent) and not asking good ques-tions were also featured.

With competition for jobs at an all-time high, such added pressure and stress may be attributing to the mistakes some jobseekers are making during interviews.

“The good news is that the number of open jobs continues to improve month over month. However, competition will remain high for some time to come,” said Rosemary Haefner, vice president of human resources for CareerBuilder. “The goal of any interview is to stand out from the other candidates and ultimately land the job, but make sure you stand out for the right reasons. Even though the job search process can be frustrating, candidates should stay positive, focus on their strengths and be prepared on how to best sell their skill set.”

Also revealed were more unusual gaffes man-agers have encountered, including one candidate who threw his beer can in the outside trash before coming into the reception office, and another who constantly bad-mouthed a spouse. One manager reported an interviewee talking about an affair that cost him the previous job, with another having a friend come in and ask, “How much longer?”

The survey was conducted online within the U.S. by Harris Interactive on behalf of CareerBuilder among 2482 US hiring managers (employed full-time; not self-employed; non-government) aged 18 and over between November 15 and December 2, 2010.

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COMPANY INDEX Q1 2011

Ace Relocation 126Accountemps 108Bank of America 42, 118Capgemini 34Cigna Healthcare 78, 79Cleveland Clinic 38, 75Clip Training 112, 116CORT 8, 93CPA Australia 124Deloitte 34Easy Small Business HR 108Fidiciary Benchmarks 106, 107Google 44, 108Healthcheck360 23,19Healthesystems 76,77Hilton 43Incentive Marketing Association 108IPD 22IWS 12KFC 94Kronos 66LifeSynch 70, 71Motion Infusion 10, 29Omaha Steaks 26, 27Online Rewards 112, 113Penn Medicine 69Perform RX 32, 33Prudential 2, 36, 56, 57Qualligence 84, 89SAS 108Secova 98Svm Gift Cards 111Sutter Health 72TheLadders.com 6, 50, 51, IBCUMR 65, OBCVirgin 52Viterra 80Wellness Partners 62Wellsource 60Worldwide ERC 90WTC 58Yackstar 34Zion Bank 861800 Flowers 4, 114

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Companies in this issue are indexed to the first page of the article in which each is mentioned.

1) Everyone is super smart

2) 18 different cafes

3) Free breakfast, lunch and dinner

4) The food is gourmet quality (e.g. omelet bar, chefs that make custom sandwiches for you, sashimi, free drinks 24/7, free snacks of all sorts 24/7)

5) The seven-person conference bicycles

6) Every Friday, Larry, Sergei or Eric takes questions from us (in person), and we get free beer (e.g. Downtown Brown).”

Yes, this techie Nirvana, this php promised land, this den of geeks is great because…of the perks. Google staff members are treated like adults, particularly in terms of the way HR deals with them, but outside of the daily job duties, the entire company comes across as an overblown, worldwide university campus, complete with the pres-tige, frat clubs and sorority sideshows that can make or break a typical college experience.

Of course, this is just one opinion of a former em-ployee, and the likelihood is all they remember is the extra-curricular stuff anyway. But with Google looking to employ as many as 6000 new staff members this year, it might well be time to dust off that resume, get it updated and fire it off to Larry, Sergei or even Lianne. You never know – it might well be the best career decision you ever make.

doles out roles

Google headquarters in California