Interesting article and comments above. To my mind, Deutsche Bank might be caught between the devil and the deep sea here. Having had a rough 7-8 years (stock down 70% from its post-crisis high and ~85% since pre-crisis, LIBOR scandal, fines for violating US sanctions, money laundering, depleted capital levels, the list goes on), investors are showing much higher levels of scrutiny towards the company and its risk mitigation initiatives. Do not demonstrate a comprehensive plan of action and concrete steps towards preparing for a “hard Brexit”, and investors might criticize the company for being too complacent yet again. Have a contingency plan on paper and play the waiting game in anticipation of a possible “soft Brexit”, and investors would be up in arms if a “hard Brexit” caused yet another round of event-based value destruction of the bank stock. Ultimately, Cryan is simply sending a strong signal to the market as to where the bank sits today on the spectrum of conservatism. For now, the move does not seeming to be affecting investor sentiment as much (stock is up 50+% since June 2016), only time and the benefit of hindsight will tell how this eventually pans out for the embattled banking giant.
Thanks YW for shining a light on the sustainability-related impact of a company, Inditex, and an industry, fast fashion, that I find quite fascinating from an operating model perspective. Fast fashion has become such an integral part of millennials’ and young professionals’ wardrobes that it begs the question – can we as individuals, especially those of us who are becoming increasingly aware of the adverse environmental impact of some of these business models, actively move away from them given the amount of waste they generate simply to satisfy our obsession with sporting the latest fashion trends?
I do believe that by running their own proactive sustainability campaigns such as Selfridge’s Buying Better, Inspiring Change initiative (http://www.selfridges.com/GB/en/features/articles/selfridges-loves/selfridges-lovesthebrightnewsustainables) or Inditex’s “Join Life” collection, companies are at least attempting to influence consumer behavior to some extent, even though financially speaking this might not be in their best interest. We, on the other hand, could certainly do more.
Thank you for this eye-opening analysis! As someone whose meat consumption levels have risen meaningfully over the past decade, I was shocked to hear the quantity of resources and potential losses associated with meat supply chains. Upon further research, I was even more disheartened to learn that according to a recent study, three of the largest meat companies in the world (one of which is Cargill) are estimated to have emitted nearly as much GHGs last year as oil companies like ExxonMobil [https://www.grain.org/article/entries/5825-big-meat-and-dairy-s-supersized-climate-footprint]. Moreover, it is not just meat but also dairy companies that are substantial contributors to global GHG emission levels. Thus, considering your final thought around the US pulling out of the Paris Climate Accord and how that might impact corporations’ ability and willingness to undertake independent climate control measures, I believe that the third major stakeholder in this equation, namely the individual, ought to shoulder some responsibility as well. A modest change to one’s lifestyle in the form of lower meat and dairy consumption, or the substitution of these resource-guzzling foods for more sustainable alternatives like almond milk (almond requires an order of magnitude less water than dairy), might be a good place to start.
In addition to protectionist rhetoric in the US and the call to “bring manufacturing jobs back home”, Apple is also having to deal with early challenges at its new manufacturing location in India. Given the inherent complexity of Apple’s global supply chain and the need to establish a supplier ecosystem around its production base, Apple has been seeking tax incentives from the Indian government for its suppliers so they can set up shop in the country. However, the Indian government has not readily accepted Apple’s demands, thus derailing its ability to drastically reduce the price of iPhone SEs being produced in India (since component import duties are extremely high). Thus, while the India move might bring benefits associated with a lower dependency on and exposure to China, it does not come without its own problems.
A very interesting and relevant discussion of what some might characterize as existential threats affecting the ~$150-billion Indian IT industry as a whole. To your point, there are numerous business (margin compression from shrinking labor-cost arbitrage) as well as social implications (large-scale elimination of jobs traditionally viewed by millions of Indians as stable and aspirational) of this digital storm, making the questions you raised all the more complicated.
Despite all the complexities, however, I do believe that Infosys must absolutely focus on building strong robotics, AI, AR, and other futuristic capabilities or risk being left behind. I agree that given the pace at which these technologies are disrupting traditional business models globally, Infosys might be better served partnering with or acquiring firms already specializing in these areas. It seems as though the former CEO was making progress in this direction, but the speed at which he was departing from the traditional “people-factory”-led model might have rankled some powerful feathers. Thus, with the return of Mr. Nilekani and the continuing influence bordering on interference of the “old guard”, I question whether Infosys has the organizational will and disruptive mentality required to not incrementally but radically transform itself and quickly move away from traditional ideas that might have helped it achieve success so far, but are becoming increasingly less relevant and financially sustainable going forward.
Very interesting read! Insurance is often hailed as the next frontier for digital disruption within financial services, and rightfully so – the possibilities from underwriting to customer acquisition to distribution chain efficiencies that can be unlocked through digital are endless. My concern with radical digital transformation, however, is not only that it might alienate existing agents, as highlighted, but also customers, a number of whom may still value the human relationship and personalized nature of physical, agent-led insurance distribution.
I believe that AllState should very much leverage digital to rapidly expand its middle and low-income, “mass” segment, who are likely quite price-sensitive and therefore much more amenable to transacting with a player that leverages digitalization to lower costs and in turn, the premiums these customers are required to pay. However, for upper-middle to wealthy segments, it may be worth analyzing in more depth whether digitalization of the insurance purchase experience might actually turn such customers, whose complex insurance and risk management needs may not be answered by a simplified digital portal, away. Here, AllState could perhaps take a more incremental approach on the front-end (while maximizing the use of digital on the back-end), such as empowering the agent with all the digital tools she needs to enhance the service experience rather than eliminating her altogether.