Are we really so ignorant?

IE Focus | By Jose Mari O’Kean, Professor at IE Business School

The economic crisis has taught us an important lesson, namely that increases in wealth have to be based on real business, not on rises in the price of financial assets.We now have different books and reports on the financial crisis and they all have one common denominator: our ignorance of what happened and the difficulty involved in predicting it.

But if we stop and think for a minute, we can perhaps see that we aren’t really so ignorant:

a)We know that the market is what works best, but it has its faults. Several of them led to this crisis, namely the lack of information and the low-level transparency of financial markets, the principal-agent problem in bank management, behaviour among brokers that gave rise to moral risk, and inappropriate choices made by savers regarding financial assets and by banks regarding mortgage borrowers.

b)For better or for worse, states have intervened to correct these faults in economies, but we have no regulators to correct the faults of the global economy.

c)We operate in a global environment and this has made it possible to channel savings from where they were made to where they were needed with relative ease. The appearance of an emerging country such as China, with a savings rate of more than 40% of its revenue and a current-account surplus of 6% of its GDP, has brought an influx of funds available for loans on global financial markets.

d)And the newest facet of this crisis is perhaps that a generalized mega-expansionary monetary policy has been put in place coupled with the controlled inflation of the prices of goods and services, but nobody thought to control the significant increases in price it brought to financial and real assets.

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The iPad or cult of the apple

IE Focus | By Enrique Dans, Professor at IE Business School

Apple did it again. It focused everyone’s attention on the iPad launch, and it will be a success because it takes the best that tablets had to offer and adds the Apple touch.The world of technology has experienced another of those characteristic “cult of the apple” events, also known as the “field of distortion of reality”. Once again we saw how that high priest called Steve Jobs, thin and fragile after his liver transplant, hypnotised the world of technology from a stage, completely redefining, almost reinventing, an entire market segment. For several hours, searches on Twitter for the word “iPad” returned more than five thousand new results per minute, while devotees and critics eagerly followed the news via the several thousands of bloggers and journalists who were at the Yerba Buena Centre of San Francisco. Once again the mystical information system designed by the company worked its magic: a combination of obsessive secrecy seasoned with a few information leaks that were not confirmed until the moment of truth and a staging capable of creating a truly surprising level of expectation. 

Before the iPad, the world of mobile devices began with mobile telephones, continued with the so-called netbooks and ended with laptops, the category in which Apple´s sales reached their high. However, Apple had often snubbed the intermediate category of netbooks, which it referred to as small, limited computers that led to poor user experiences. As a result, Apple had a clear gap in its product range, a gap it has filled with a move that is strategically perfect. It offers a product that is familiar: after redefining mobile telephones with the iPhone and becoming the reference design, it has designed something that is simply a very big iPhone, something everyone who has ever had an iPhone in their hands knows how to use or, in the light of the company´s concept of usability, even if they have never held one. It is everything from a book or a magazine to a simple computer when used with a keyboard base. 

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Toyota, the just-in-time spirit is alive and well

IE Focus | By Daisy Escobar, Professor at IE Business School

Toyota has been shaken to its very foundations by the mechanical faults detected in some of its models, but it has managed to react fast, with improvements that are reminiscent of its just-in-time breakthrough.A company with faulty products is nothing new. Situations in which the fault affects its products en masse are not quite so common, but the business annals now contain several notorious cases, some of which have been solved more successfully than others.

The problem is therefore not a new one. The difference lies in that it is happening to Toyota, the company renowned for manufacturing fault-free products, that demonstrated the cost of ´no quality´ and that continuously works to eliminate any kind of wastefulness. Indeed, the concept of faulty product is what the company focuses on most in order to eliminate it from its plants. Toyota invented the famous poka-yokes, the alarms and controls that warn of errors so that they can be corrected before they become faults, in other words, before they are found by customers.

The mechanical problem affecting the accelerator pedals on some of its models and the brake pedals on others has struck the very heart of Toyota´s ideology: its commitment to quality. The company has not had long to wait to feel the effects of the problem: more than ten million cars recalled for a service; around two million dollars in costs (estimated figure); and a somewhat tarnished image as far as its customers are concerned

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The IE “Marketing Gurus”

Original published at Bangkok Post on May 4, 2010 Earlier this year, Patr Bhalakula, a talented young Thai pursuing a Master in Marketing Management degree at IE  Business School, and his team won the second prize in the Novartis Masterminds Challenge in Spain.  The challenge is a competition involving the London Business School, IESE (Instituto…

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Mobiles and children

IE Focus | By Enrique Dans, Professor at IE Business School

If you still think the main purpose of your mobile phone is voice transmission, and you can’t understand why younger users seem permanently obsessed with their mobile screens, then you are missing out on something.For those of us who are at a certain age, it is a challenge for the memory to put some perspective on the technological advances we see as completely normal and as an intrinsic part of our everyday life today. One of the best examples is the mobile telephone, a device that has found its way into thousands of millions of pockets of people all over the world who never leave home without it. 

One recent study in the United States shows that the average age at which children get their first mobile telephone has now fallen to 12 years. Depending on the purchasing power of these children´s families, the penetration levels in the upper-middle-class segment are higher than 87%. If we look back in time, many of us would find it hard to remember that when we were 12 years old, not only did we not have a mobile telephone, but there was also no possibility of us having one. Not only that, the vision of anyone speaking apparently on their own in a car or while walking down the street would have made us immediately think that they had some kind of mental problem. The telephone was a device connected to the wall by a cable, with two different parts joined together by a coiled cable. It had a dial (show one to today´s children… they take knowing what to do with “that” as some kind of challenge) the use of which was also strictly limited as far as we were concerned. 

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The future of the Chinese economy

IE Focus | By Rafael Pampillón, Professor at IE Business School

One of the major landmarks of the 20th century has been China’s spectacular awakening, but the country now faces a series of challenges that will require deep change to maintain rates of growth.The economic boom in China is one of the most important events of the 21st century. The boom has come on the back of China’s great demographic potential (with a population of 1,350 million), its high internal rate of saving and the way it has opened up to the rest of the world, turning it into the biggest exporter on the planet. 

Since 1978 the economy has been gradually freed up and prices have been progressively deregulated. There has been encouragement for foreign investments and the private ownership of businesses has been made legal. In 2001, foreign trade was deregulated when it joined the World Trade Organisation. Since then, China´s trade relations with the rest of the world have grown spectacularly.

As pointed out in a recent article by Enrique Fanjul, former trade director of the Spanish Embassy in Peking, China´s economy still has an unquestionably high level of state intervention and state businesses continue to play a key role. However, it cannot be considered as a socialist economy: most of the production takes place under private-sector conditions and products are marketed at free prices. There is a tendency towards a growing importance of private players in the economic system

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Apple and Google in the headlines

IE Focus | By Ricardo Perez, Professor at IE Business School

Apple and Google go head to head in the race for mobile dominance. Apple is pushing for pay-per-click services while Google defends flat rates.Apple and Google have been making the headlines with revolutionary product launches these last weeks. American news programs once again held Steve Jobs up as as a champion of innovation, design, envy, advanced technology and anything else you might like to name.

Meanwhile, the boys at Google haven’t been idle. They have launched their own telephone to compete with the iPhone and Nokia and RIM (Blackberry) intelligent phones. What started out as a close collaboration and agreement between companies trying to “reinvent the game” in their respective markets is now morphing into direct competition. Their view of the growing convergence of communication networks, technologies and social behavior leads to collisions in key markets like content consumption, mobile technologies and entertainment. Let’s analyze their collision courses.

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PwC/IE Public Sector Center underscores the role of innovation in a sustainable economy

The PwC/IE Public Center presented ‘Towards a sustainable economy’, a report focused on the role of innovation in promoting a sustainable economy, environment and social well-being. The report was authored by IE Business School professors Javier Carrillo and Totti Könnölä, and Pablo del Río of CSIC, an included a prologue by Jordi Sevilla, senior advisor…

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