Author Archives: Kevin L

Being a market leader II

Last year, I wrote a post about market leadership. And it is interesting to see the move by Home Depot to increase salary as an investment towards increasing market share and dominance. Retail and service are being automated more and more with the improvements in technology and rise of AI. It is not so much about the existence of the technologies as they had existed for a long time. But the investment made over the years have accumulated and mass acceptance have reached this stage where broad-based adoption becomes increasingly common.

In the situation where capital investment in machines and technology becomes a more level playing field for companies, the edge that companies can get from replacing humans with machines becomes smaller. But it takes market leadership to decide that the new basis of competition is probably not about having more automation than the competition but to be able to attract and motivate the best frontline workers serving the customers and making their day.

Market leadership is not about following what the rest of the industry is doing but deciding what is the next basis of competition and focusing on those parameters. Scale helps but more critical is the courage and strategic thinking of those in charge.

Planet, people and profits

Open dialogues with investors are needed by management of companies emitting lots of carbon dioxide. The investors are pushing for companies to decarbonise, disclose their emissions, create long term roadmaps for decarbonising their businesses. But what about making sure executive compensation is aligned with those goals?

What about the amount of returns they are willing to sacrifice in the short term to build greener supply chains? Must it be quantified in terms of reputational risks and climated-related financial risks? Are we overemphasizing the financial KPIs at the expense of the environmental values we should truly be caring about. Is our people and planet really put before profits? After all, businesses would claim that profits keep them alive to drive the goals of people and planet?

Maybe it is about agreeing on a minimum viable return or profit to keep investors there. Perhaps anything beyond that minimum viable return should be directed towards greater climate ambitions. If we truly believe that the future unit of competition is making a contribution to green rather than profits, we need to start acting as such.

Superconnections in organisations

Organisations work in silos and we often talk about breaking silos because it is a real problem. What is interesting is how silos form naturally and what keeps them functioning and feeds the way human behaves. The truth is that majority of people connect well only with a handful of people around them. It’s all they need to survive and even thrive. Organisations are set up for people to do their best work each day rather than over a long time horizon, and rightly so. Silos are natural tendency and efforts to resist them will be inefficient in short term.

The real solution to breaking silos is having superconnectors, being able to identify them in organisations and bring them into roles that allows them to help arbitrate across silos. They ought to be put in charge of coordination problems and given the authority to enable those connections. These people could also take the form of external consultants who have no stakes within the organisation.

Mathematically, clustering is just a natural population, psychological phenomena amongst people. Yet with just a handful of “super nodes” that connects across clusters, the other nodes within clusters can be quickly brought together and average degrees of separation reduced dramatically and really quickly.

Organisations need to recognise the role of these superconnectors that enable silos to continue working alongside in ways that are productive and non-duplicative. They allow everyone to remain efficient even as they ensure that the organisation overall operates strategically in the right direction.

Sunsetting infrastructure

At some point in my career I got involved with projects with utilities in Australia. First with electricity distribution networks, then with gas utilities as well. They are all energy networks or utilities because my role as an energy transition consultant is to help players in the economy to navigate the challenges and struggles around our transforming energy landscape. They are struggles that the players and our economy must go through in order to emerge more resilient and climate-relevant.

Electricity networks are seen as important for the energy transition – the drive to decarbonise the energy system – so much so that The Economist ran a cover in April this year that shows a man hugging a transmission tower and the cover text reads “Hug Pylons Not Trees“.

Gas networks and pipelines are on the other end of the spectrum. There’s a lot of concerns around what is going to happen and the expectations of a death spiral. Activists campaigning against the gas networks can sometimes claim that they should be written off completely while contradicting themselves that the assets should not be allowed to depreciate quickly given they still have some operating life or runway. There is a role for gas networks to actually consider the challenging question of getting renewable gas into their network and the struggle has to do perhaps with the question of which gas. Would it be hydrogen, or biomethane, or what? And on the other hand, will they need to transport carbon dioxide? Perhaps captured ones from the industry? What role can the pipelines or network play?

If we keep thinking about molecules and figuring out which molecules, we’ll be somewhat stuck. The trick it seems, is to consider potentially taking the lead. It is still fascinating that Jemena actually took the lead to initiate the Malabar biomethane injection project and saw through it to the recent operation with the first biomethane injection into a distribution network in Australia. Biomethane in most cases is the straight-forward solution – one that is tricky to pull off but can be handled just from supply-side as the end-use equipment will not have to switch from the ones that already use natural gas. Therefore, it is the logical choice for gas networks to start taking the lead on. Perhaps in the next two to three years, it would soon be a no-brainer. But for now, we do what we can to further accelerate the transition.

Way the system works

This is the way the system works. For everything you see in the wild, every specie of plant, insect, animal out there, they are the survivors. Somehow, someone, somewhere is keeping them alive. There is an ecosystem and while it is not like they could get by without doing a thing, their survival comes not from them alone. There’s a system thing going on. And overall, the system keeps all of them alive.

Why are the households running well, and companies making stuff, selling them? Why are we all with jobs or having kids growing up well and paying taxes? That’s because we are fed in a system that manages and coordinates those relationships. And keep things going. Of course, some systems are sustainable and some are not. In most cases, one could say no system is infinitely sustainable, just awaiting our discovery of the break in it.

The oil companies continue to extract and sell oil; and power plants continue to burn fuels and emit carbon dioxide because there’s a system that works with them in the place. That will always keep them surviving – at the expense of the future that we want to create. To overcome that system, we need to be able to dream up and work towards the alternative system.

Specialisation and impact

It’s becoming really hard to use experience as a way to measure people’s ability to perform certain work. The problems that our world is seeking to solve are what we have not seen before and if we know exactly what experience would help us find the solution, then we are already prescribing the solution somewhat. Moreover, a lot of innovations that are needed to deal with those problems only emerged in the last 3-5 years in a big way. The person with 10-20 years experience in wind or solar may not be adequately equipped to support a project today where one has to consider elements of energy storage and even green hydrogen production.

When we choose to specialise, and the area we enter is something growing and continually improving, we are caught in some kind of race – with the field itself and also other people who are pouring into the field. Energy and climate transition appears to be in that category and being a consultant in this space, I’m conscious that there are more consultancies who are entering this space without much credibility. It’s good to have more people championing this cause for mankind but there’s a risk that the transition gets slowed down by some of the ESG crowd that is distracting us from the true solutions by shifting the attention towards elements of compliance and reporting as opposed to real action.

In terms of recruitment and hiring, we are seeing more people trying to step up to the challenge but without the right or clear understanding what the energy or climate transition is about. I am seeing people who are intent on joining a hype train without recognizing its genuine significance in the world. The choice to specialise should not to be making more bucks but to make a greater impact than one would make merely from just doing the general. At this point when people are not going to be hiring for experience, young people have the opportunity to differentiate themselves. And this differentiation will not be just a matter of talking about passion but understanding the impact one is trying to make.

Age of mediocrity

Each leap forward by technology is accompanied by fears around humans becoming or being mediocre. And most fears are basically exaggerated versions of reality as it turns out. So indeed, mechanisation has reduced the need for physical human labour and it has made majority of mankind physically less able than our forefathers but we’ve also been healthier and lived longer lives.

With the rise of AI, there’s fear of depending on it and concerns in schools about teachers losing their jobs or students outsourcing their work to ChatGPT. Lousy journalists who had been churning out mediocre pieces of work can be now replaced by AI, customer service representatives that don’t know their stuff can be replaced by chatbots and so on. The problem isn’t really about chatbots or AIs, or quality of humans. It is the issue around industrialization specifying standards, creating processes and expecting humans to fit into that.

We should begin to see all of the roles we humans can take as something relatively temporarily. That does not mean we shouldn’t invest in our craft and up our skills but that does put into question where is the boundary between human and machine in the work that we do. Measured in a single dimension, machines and technology can always be optimised to eventually deliver better performance than humans. The issue isn’t human’s mediocrity because there are mediocre workers and they’ve long been easily replaceable. Seth Godin recently talked about the matter on his podcast through two episodes (here and here).

The fact that AI frees us up from having to do the basic, minimum kind of work should present an opportunity for all of us. It might threaten some of us, but only if we allow it to.

Credit matters differently

More than 10 years ago, I took a course in microfinance and then spent some time in a village in Ghana’s Central region designing a village savings scheme for the villagers to pool capital in a manner that allowed them to access the mainstream banking system and also to invest in machines that the farmers could share in, and enhance productivity. It was microfinance but applied differently, a model the team created after consulting the people in the village and concerns around creation of debt.

Microfinance was quite popular then and the common belief was that there were productive people with the opportunities to put capital into productive use but did not have access to credit to allow them to do so because traditional finance were not accessible by these folks.

What was missing from the picture was that these people had struggled to save as well because they did not have places to safekeep cash or other asset instruments they had. This could be why the pre-paid mobile credits were popular and important economic enablers in some of these environments. Credit and savings are different sides of a coin and the way these services are valued works differently in different cultural contexts and markets.

The next generation of retail finance will have to start examining these cultures more to develop stronger value propositions. Central banks paying attention to consumer credit and savings behaviour would be wise to appreciate these elements too.

Small firm in energy transition

The energy transition exposes the weakness of the current energy system of the world. It reveals how much we are reliant on a few resources to draw our energy to power the economy despite how dispersed and distributed energy resources are.

Take for example a rural area in Indonesia, where there are small farms and villages – and they are relying on diesel or kerosene refined and fetched from some far flung areas in order to power their generators or farm equipment. All the while just sitting beside heaps of bioenergy resources that are seen as waste.

The emphasis on low-carbon economy helps us recognise that we may have to start shortening our supply chains and reducing its complexity if we want to decarbonise our economies. Part of this has to do with how stuck we are between the CAPEX and OPEX distribution of the manner we consume energy. By consuming fossil fuels, we shift the burden of costs mostly to the OPEX since equipment are mostly standardised and so they are cheaper to procure and use while we adopt the long supply chains needed to achieve the delivery of fossil fuels on regular basis.

If we were to shift to shorter supply chains where the distributed energy resources were consumed instead, there might be more local equipment needed, the CAPEX might increase. But OPEX may actually decrease because now you’re saving on storage or disposal costs of some of the feedstock that might go into making the fuel you need.

If the world is to develop shorter supply chains, it will need more small firms. And governments all around the world needs to know better how to encourage, support and empower small firms to rise up to the challenge. We need local firms who are familiar with the local constraints, context and needs. They need to be upskilled technically to rise up to the challenge and generate solutions.

This mode of development is vastly different from the old school model of having a big multi-national firm come into a less developed location to help ‘develop’ it by reshaping local demands. Aside from how much this harks back to colonialism, it is creating long supply chains which seem to create more jobs but is not doing much for the climate and environment.

Whose responsibility?

So Singapore’s target for net-zero is 2050, with the public sector aiming to reach the target in 2045. And with coordination being touted as one of the core strengths of the Singapore government, we have a Chief sustainability within the government to manage that. This role in businesses is still very ambiguous and it is not clear whether the person is managing the process of decarbonisation for the the company or to manage the sustainability offering of the firm.

Likewise, it is not entirely clear whether the Chief sustainability in the government of a country should be responsible only for the public sector emissions or taking charge of the reduction of emissions across the entire country. Frankly, the public sector emissions are already very significant. Part of the challenge is that almost all of the wastewater treatment and water supply plants are owned and operated by the government; at the same time, the government also own and operate incineration plants. This is probably why in the business times article, it was stated that Ministry of Sustainability & Environment is itself one of the large emitter.

But Singapore’s approach to decarbonisation is unlikely to be about the government just dealing with its own emissions and then trying to create structures to drive decarbonisation of the private sector. The fact that the Chief sustainability starts talking about costs, value and trade-offs is already a clear sign that the government is probably thinking about abatement cost at a system level. And it is true that the government in Singapore is uniquely positioned to evaluate this. We might have a shot at being able to collectively determine what are the lowest hanging fruit across the society to reduce emissions and then collective work through the curve of diminishing marginal returns. In other words, we can look at the avenues of abatement that incur the lowest costs while making the largest reductions first.

This means that while the government might be able to try to reduce energy use in the desalination plants or secure green electricity, they might not because there may be other industries that can reduce the emissions at lower costs. This sort of system level optimisation may not be possible in bigger countries; but for a small island state where our renewable resources are too scarce, that might be the only way.