Analytics For The CFO (Part 1)

Rob Jenkins

George E. P. Box famously said, “All models are wrong, but some are useful.” Financial analysts strive to build accurate models that simplify yet reflect the complex adaptive systems in scope. In the financial markets, legions of PhDs unleash quantitative methods to identify and arbitrage inefficiencies with the prospect of outsized return relative to risk.

These abstraction models are part art and part science, with assumptions for probabilities, outcomes, non-linear relationships, and stochastic processes. When combined with the acumen of position sizing and the power of technology, bets are laid with winners and losers determined by the market. Sometimes the models are very useful with fortunes being made, and often they are really wrong with hedge funds suddenly shutting down.

In the corporate finance world, a less sophisticated, though vitally important, model is developed annually—the budget. This prospective view of the income statement, balance sheet, and statement of cash flows can take six months or longer to compile with input from multiple stakeholders in all reaches of the organization.

Model approaches vary from company to company

Some companies begin top-down with revenue and expense goals pushed down to the business units and support organizations. Others begin bottom-up and build the budget based on resources required for expected outputs. Notably, a few organizations have brought back zero-based budgeting to force teams to rationalize expenses each year without starting from a prior year baseline. Most financial planning and analysis (FP&A) teams update the budget monthly and this becomes the benchmark known as the forecast.

But when the model is off…

While these corporate finance budgets and forecasts historically haven’t used advanced analytics to project revenue and expense, they have been useful in measuring actual results against plan as well as reflecting and communicating the corporate strategy. The deployment of budget to certain products, customer segments, channels, geographies, and functional organizations sends a strong signal as to tradeoffs inherent in the strategy.  Budgets also shape organizational behavior and guide expectations.  Since the goal is typically “beat and raise,” when the model is off and actual performance misses, shareholders react.

Historically, the cadence of finance and accounting has been one of annual budgets, monthly forecasts, and multi-day hard closes. While this periodicity has become standard, it puts finance organizations in the position of using estimates and leading indicators to try and manage the inter-period latency.

How is real-time planning changing finance?

With dynamic, real-time planning and consolidation systems now available, finance can incorporate feedback into models based on new information and rerun the updated forecast at any time during the month. These continuous accounting models also simulate eliminating entries and other adjustments such as equity pickups that provide the management team with instant readouts—a great way to spare management the risk of surprises. Leaders can now proactively address challenges for immediate course correction.

CFOs are driving analytics into the finance organization to not only improve the accuracy of the financial plan, but also to provide real-time visibility into the ever-changing forecast. The CFO as strategist and storyteller is leveraging a new wave of analytic technology to create value for the enterprise.

So what’s the future of analytics in finance? In my next blog, I will discuss the ascent of the corporate finance quant. Stay tuned!

Learn more

If you want to learn more about how to leverage analytics and technology in finance click here.

Follow SAP Finance online: @SAPFinance (Twitter)  | LinkedIn | Facebook

This article originally appeared on SAP Analytics.

Comments

Rob Jenkins

About Rob Jenkins

Rob Jenkins is a finance executive with over 20 years of experience in leading high-technology and professional services companies. He consults with CFOs on technology, analytics and performance management. Rob has served as Vice President, Corporate Finance and led finance transformation. His leadership experience also includes Corporate Development, M&A, Strategic Planning and Consulting. He has designed and implemented customer profitability, business planning, process improvement and performance measurement systems in multiple organizations. Rob began his career as an Auditor with a Big 4 CPA firm. He holds an M.S. in Accounting and is a CPA, CMA, and CFM.

Analytics For The CFO (Part 3): Rise Of The Machines

Rob Jenkins

In my previous blog, I discussed the role of finance quants in developing new insights and how finance owning enterprise master data provides a strong foundation for analytics. Today, I want to discuss how new technologies will fundamentally change finance process management and resource deployment.

In much the same way that industries like automobile manufacturing and agriculture have been disrupted by physical robots, artificial intelligence (AI) will have a dramatic impact on finance and accounting. The analytics engine and seamless workflow enabled by machine learning and robotic process automation will bring discontinuous change to transaction accounting. Shareholder-focused executives see opportunities for dramatic efficiencies, with some finance experts estimating that 40% of accounting jobs will be eliminated by 2020. A study by the Pew Research Center shows that most (72%) Americans are more likely to be worried than enthusiastic about automation. Thoughtfully redeploying task-oriented resources will be a source of competitive advantage.

The good news for analytical insight and productivity is the synergy in decision-making when AI is combined with humans. Medical professionals couple deep learning with doctors to magnify human capacity through the power of computer-aided diagnostics. Successful investment firms combine algorithms with fundamental analysis and human judgment in the search for alpha. Progressive CFOs are automating processes such as invoice matching, with one aerospace firm automating 95% of 3 million annual invoices.

Yet machines cannot demonstrate empathy, manage relationships, and tell stories. Nor do machines demonstrate cognitive biases that encumber our human decision-making. By pairing the rational analysis and speed of AI with the softer communication and social skills of financial professionals (at least for the foreseeable future), compelling analytics-based narratives will be part machine and part person.

Cloud changes everything

Millennials and “Gen-Z’ers” are taking over the boardroom. These digital natives have grown up with social media where engagement favors infographics that are more likely to be shared. The music is delivered via streaming connection to a cloud service. They look forward to application updates for new features and functions. They have expectations of real-time, live data that can be sliced and diced via browser and overlaid with spatial analysis for visual insight.

Enterprise software is rapidly migrating to the cloud. New apps are now born in the cloud, and the vast majority of new analytics projects will be cloud-based. Cloud eliminates the word “upgrade” from the lexicon. With the dramatic innovations in computing power, memory and database technology, data that score high on any or all of the 5 V’s (volume, variety, velocity, veracity, value) can be deployed and analyzed as never before.

Cloud is easy to try, buy, and use. Cloud is safe, scalable, and can be integrated with legacy on-premise systems. It is a global game-changer.

CFOs are embracing the power of advanced analytics to drive efficiency in finance operations, partner with the business in strategic analysis, and manage enterprise risk as corporate steward. By marrying art and science, equipping humans with machines, and modernizing technology platforms, CFOs will ensure that their models are as accurate as possible and most certainly useful.

Ready to start adopting technology? Read the research paper, Dynamic Planning: Live in the Moment to Succeed in the Future.

This article originally appeared on SAP Analytics.

Comments

Rob Jenkins

About Rob Jenkins

Rob Jenkins is a finance executive with over 20 years of experience in leading high-technology and professional services companies. He consults with CFOs on technology, analytics and performance management. Rob has served as Vice President, Corporate Finance and led finance transformation. His leadership experience also includes Corporate Development, M&A, Strategic Planning and Consulting. He has designed and implemented customer profitability, business planning, process improvement and performance measurement systems in multiple organizations. Rob began his career as an Auditor with a Big 4 CPA firm. He holds an M.S. in Accounting and is a CPA, CMA, and CFM.

How Can Today’s Accounting Talent Ascend To Finance’s Top Table?

Kirit Patel

The days of the one-dimensional CFO number cruncher are long gone. CFOs are increasingly expected to possess strong analytical and communication skills to make sense of and explain complicated financial data. They are required to master areas outside finance like regulation, information technology, risk management, business transformation, supply chain management, reporting, and human capital management.

As the relationship between CFO and CEO continues to evolve, CFOs must play a more active leadership role and rethink their usual approaches to overcoming cost pressures, identifying efficiencies, and finding new investment opportunities. That places growing demands on their time and adds pressure to build new capabilities.

It’s perhaps no surprise, then, that today’s CFOs are increasingly taking the lead on digitizing critical business activities and relying more and more on technology to transform all the data that process creates into actionable insights.

These new responsibilities present opportunities for future finance leaders to set themselves apart, but many companies aren’t fully prepared to attract the sort of talent they need. Investment in systems and processes haven’t yet caught up with the evolving demands of the CFO role, and the skills required to take full advantage of data aren’t always being addressed in HR priorities.

Grow your own

In Deloitte’s 2013 Finance Talent Survey, 40% of CFOs said they were pessimistic about their ability to meet talent acquisition demands in the future, despite expanding their recruiting strategies.

Since then, there has been a drive to upskill within finance and accounting departments. Given that the median annual salary for a typical CFO stands at £95,000 per year, the rewards for ambitious professionals are clear. What’s less clear is the best path to securing tomorrow’s CFO roles.

If being CFO means providing business insights that can shape corporate and sales strategy, the traditional trajectory—from chartered financial analyst to controller and treasury roles to financial director and then finally to CFO—must involve familiarity with the systems that provide those insights. The modern CFO candidate will need to be able to articulate the risks and benefits of cloud applications and the software-as-a-service (SaaS) model, Big Data analysis, cybersecurity, and other innovations now transforming the finance industry.

The spreadsheet culture that still permeates finance environments is a serious impediment to this. If future CFO candidates need to be current with the latest technology, the latest technology must be present and in everyday use today.

Focusing minds around cloud skills

Finance teams using the cloud and tools like corporate performance management are in a better position to build their own future stars or recruit top talent, as ambitious finance professionals want to work with the latest technologies to build their data-driven decision-making skills.

Cloud applications are quickly becoming the norm in all business roles. Whether yours is an SMB or a Fortune 500 company, the move to the cloud seems to be the direction everyone is heading in—and finance is no exception.

There are many proven savings and productivity benefits that the cloud brings, from improved business security to better service availability, from easier compliance requirements satisfaction to IT cost reduction. Sixty-seven percent of IT professionals use cloud services and applications, while cloud deployment is up to 40 times more cost-effective for an SMB, compared to running its own IT system. Crucially, 56% of organizations across the board are actively seeking to hire staff with cloud expertise.

Beyond finance: building a well-rounded CV

While it may not be necessary to become experts in IT, finance leaders will have acquired skills around data retrieval, interpretation, and analysis. This, however, won’t make you CFO material; it can only ever be an enabler. Looking beyond tools to the experience and perspective necessary to really use financial tech: This is where today’s accountant can really get prepared for the ascent to CFO.

CEOs and boards already expect CFO be strategic advisers on how best to grow the business while also protecting the bottom line. In five years, as that expectation increases, CFOs will need to demonstrate a more multidisciplinary skill set and broader career experiences, from holding more operational positions to working overseas.

From a career development standpoint, people whose backgrounds are primarily in finance and accounting, or who are looking to move up from the controller’s office, will need experience outside of finance. Aspiring CFOs should try and build a well-rounded CV, with lateral as well as progressive career experiences from across the broader spectrum of management.

In conclusion

Roles in finance are already pivoting towards performance management and data analysis, while new responsibilities in scenario planning, modelling, and simulation are on the rise. Demonstrating commercial insight fused with digital know-how is critical for aspiring CFOs, who will be expected to guide, if not lead outright, wider business initiatives like process reengineering, change management, and data governance.

These are the abilities that will be will be most in demand as finance operations continue to become more analytical. Finance teams must invest now in people with the appropriate capabilities who demonstrate the right behaviors to help the business deliver on its strategy. Part of that means supporting current teams with the tools and training to deliver higher-value, more strategically focused insights. For aspiring CFOs, finding work environments where this is the norm will be essential to career success.

Learn more

For more information, click here.

Comments

Kirit Patel

About Kirit Patel

Kirit Patel is regional managing director, UK & Europe, at EOH International.
A seasoned specialist with over 20 years’ experience in providing technology solutions that help organizations run faster, better, and smarter, Kirit is responsible for growing the EOH footprint across Europe. Kirit’s experience encompasses solution advisory and implementation services, consulting, project and people management, and sales and marketing. Prior to EOH, he was senior consultant at Comshare and managing director at Rinedata, where he established a track record for delivering improved business processes, continual customer satisfaction, and revenue generation. He is a keen amateur photographer and a long-standing, active contributor to a number of local not-for-profit causes. Kirit holds a masters degree in Computing and Accounting.

More Than Noise: Digital Trends That Are Bigger Than You Think

By Maurizio Cattaneo, David Delaney, Volker Hildebrand, and Neal Ungerleider

In the tech world in 2017, several trends emerged as signals amid the noise, signifying much larger changes to come.

As we noted in last year’s More Than Noise list, things are changing—and the changes are occurring in ways that don’t necessarily fit into the prevailing narrative.

While many of 2017’s signals have a dark tint to them, perhaps reflecting the times we live in, we have sought out some rays of light to illuminate the way forward. The following signals differ considerably, but understanding them can help guide businesses in the right direction for 2018 and beyond.

When a team of psychologists, linguists, and software engineers created Woebot, an AI chatbot that helps people learn cognitive behavioral therapy techniques for managing mental health issues like anxiety and depression, they did something unusual, at least when it comes to chatbots: they submitted it for peer review.

Stanford University researchers recruited a sample group of 70 college-age participants on social media to take part in a randomized control study of Woebot. The researchers found that their creation was useful for improving anxiety and depression symptoms. A study of the user interaction with the bot was submitted for peer review and published in the Journal of Medical Internet Research Mental Health in June 2017.

While Woebot may not revolutionize the field of psychology, it could change the way we view AI development. Well-known figures such as Elon Musk and Bill Gates have expressed concerns that artificial intelligence is essentially ungovernable. Peer review, such as with the Stanford study, is one way to approach this challenge and figure out how to properly evaluate and find a place for these software programs.

The healthcare community could be onto something. We’ve already seen instances where AI chatbots have spun out of control, such as when internet trolls trained Microsoft’s Tay to become a hate-spewing misanthrope. Bots are only as good as their design; making sure they stay on message and don’t act in unexpected ways is crucial.

This is especially true in healthcare. When chatbots are offering therapeutic services, they must be properly designed, vetted, and tested to maintain patient safety.

It may be prudent to apply the same level of caution to a business setting. By treating chatbots as if they’re akin to medicine or drugs, we have a model for thorough vetting that, while not perfect, is generally effective and time tested.

It may seem like overkill to think of chatbots that manage pizza orders or help resolve parking tickets as potential health threats. But it’s already clear that AI can have unintended side effects that could extend far beyond Tay’s loathsome behavior.

For example, in July, Facebook shut down an experiment where it challenged two AIs to negotiate with each other over a trade. When the experiment began, the two chatbots quickly went rogue, developing linguistic shortcuts to reduce negotiating time and leaving their creators unable to understand what they were saying.

Do we want AIs interacting in a secret language because designers didn’t fully understand what they were designing?

The implications are chilling. Do we want AIs interacting in a secret language because designers didn’t fully understand what they were designing?

In this context, the healthcare community’s conservative approach doesn’t seem so farfetched. Woebot could ultimately become an example of the kind of oversight that’s needed for all AIs.

Meanwhile, it’s clear that chatbots have great potential in healthcare—not just for treating mental health issues but for helping patients understand symptoms, build treatment regimens, and more. They could also help unclog barriers to healthcare, which is plagued worldwide by high prices, long wait times, and other challenges. While they are not a substitute for actual humans, chatbots can be used by anyone with a computer or smartphone, 24 hours a day, seven days a week, regardless of financial status.

Finding the right governance for AI development won’t happen overnight. But peer review, extensive internal quality analysis, and other processes will go a long way to ensuring bots function as expected. Otherwise, companies and their customers could pay a big price.

Elon Musk is an expert at dominating the news cycle with his sci-fi premonitions about space travel and high-speed hyperloops. However, he captured media attention in Australia in April 2017 for something much more down to earth: how to deal with blackouts and power outages.

In 2016, a massive blackout hit the state of South Australia following a storm. Although power was restored quickly in Adelaide, the capital, people in the wide stretches of arid desert that surround it spent days waiting for the power to return. That hit South Australia’s wine and livestock industries especially hard.

South Australia’s electrical grid currently gets more than half of its energy from wind and solar, with coal and gas plants acting as backups for when the sun hides or the wind doesn’t blow, according to ABC News Australia. But this network is vulnerable to sudden loss of generation—which is exactly what happened in the storm that caused the 2016 blackout, when tornadoes ripped through some key transmission lines. Getting the system back on stable footing has been an issue ever since.

Displaying his usual talent for showmanship, Musk stepped in and promised to build the world’s largest battery to store backup energy for the network—and he pledged to complete it within 100 days of signing the contract or the battery would be free. Pen met paper with South Australia and French utility Neoen in September. As of press time in November, construction was underway.

For South Australia, the Tesla deal offers an easy and secure way to store renewable energy. Tesla’s 129 MWh battery will be the most powerful battery system in the world by 60% once completed, according to Gizmodo. The battery, which is stationed at a wind farm, will cover temporary drops in wind power and kick in to help conventional gas and coal plants balance generation with demand across the network. South Australian citizens and politicians largely support the project, which Tesla claims will be able to power 30,000 homes.

Until Musk made his bold promise, batteries did not figure much in renewable energy networks, mostly because they just aren’t that good. They have limited charges, are difficult to build, and are difficult to manage. Utilities also worry about relying on the same lithium-ion battery technology as cellphone makers like Samsung, whose Galaxy Note 7 had to be recalled in 2016 after some defective batteries burst into flames, according to CNET.

However, when made right, the batteries are safe. It’s just that they’ve traditionally been too expensive for large-scale uses such as renewable power storage. But battery innovations such as Tesla’s could radically change how we power the economy. According to a study that appeared this year in Nature, the continued drop in the cost of battery storage has made renewable energy price-competitive with traditional fossil fuels.

This is a massive shift. Or, as David Roberts of news site Vox puts it, “Batteries are soon going to disrupt power markets at all scales.” Furthermore, if the cost of batteries continues to drop, supply chains could experience radical energy cost savings. This could disrupt energy utilities, manufacturing, transportation, and construction, to name just a few, and create many opportunities while changing established business models. (For more on how renewable energy will affect business, read the feature “Tick Tock” in this issue.)

Battery research and development has become big business. Thanks to electric cars and powerful smartphones, there has been incredible pressure to make more powerful batteries that last longer between charges.

The proof of this is in the R&D funding pudding. A Brookings Institution report notes that both the Chinese and U.S. governments offer generous subsidies for lithium-ion battery advancement. Automakers such as Daimler and BMW have established divisions marketing residential and commercial energy storage products. Boeing, Airbus, Rolls-Royce, and General Electric are all experimenting with various electric propulsion systems for aircraft—which means that hybrid airplanes are also a possibility.

Meanwhile, governments around the world are accelerating battery research investment by banning internal combustion vehicles. Britain, France, India, and Norway are seeking to go all electric as early as 2025 and by 2040 at the latest.

In the meantime, expect huge investment and new battery innovation from interested parties across industries that all share a stake in the outcome. This past September, for example, Volkswagen announced a €50 billion research investment in batteries to help bring 300 electric vehicle models to market by 2030.

At first, it sounds like a narrative device from a science fiction novel or a particularly bad urban legend.

Powerful cameras in several Chinese cities capture photographs of jaywalkers as they cross the street and, several minutes later, display their photograph, name, and home address on a large screen posted at the intersection. Several days later, a summons appears in the offender’s mailbox demanding payment of a fine or fulfillment of community service.

As Orwellian as it seems, this technology is very real for residents of Jinan and several other Chinese cities. According to a Xinhua interview with Li Yong of the Jinan traffic police, “Since the new technology has been adopted, the cases of jaywalking have been reduced from 200 to 20 each day at the major intersection of Jingshi and Shungeng roads.”

The sophisticated cameras and facial recognition systems already used in China—and their near–real-time public shaming—are an example of how machine learning, mobile phone surveillance, and internet activity tracking are being used to censor and control populations. Most worryingly, the prospect of real-time surveillance makes running surveillance states such as the former East Germany and current North Korea much more financially efficient.

According to a 2015 discussion paper by the Institute for the Study of Labor, a German research center, by the 1980s almost 0.5% of the East German population was directly employed by the Stasi, the country’s state security service and secret police—1 for every 166 citizens. An additional 1.1% of the population (1 for every 66 citizens) were working as unofficial informers, which represented a massive economic drain. Automated, real-time, algorithm-driven monitoring could potentially drive the cost of controlling the population down substantially in police states—and elsewhere.

We could see a radical new era of censorship that is much more manipulative than anything that has come before. Previously, dissidents were identified when investigators manually combed through photos, read writings, or listened in on phone calls. Real-time algorithmic monitoring means that acts of perceived defiance can be identified and deleted in the moment and their perpetrators marked for swift judgment before they can make an impression on others.

Businesses need to be aware of the wider trend toward real-time, automated censorship and how it might be used in both commercial and governmental settings. These tools can easily be used in countries with unstable political dynamics and could become a real concern for businesses that operate across borders. Businesses must learn to educate and protect employees when technology can censor and punish in real time.

Indeed, the technologies used for this kind of repression could be easily adapted from those that have already been developed for businesses. For instance, both Facebook and Google use near–real-time facial identification algorithms that automatically identify people in images uploaded by users—which helps the companies build out their social graphs and target users with profitable advertisements. Automated algorithms also flag Facebook posts that potentially violate the company’s terms of service.

China is already using these technologies to control its own people in ways that are largely hidden to outsiders.

According to a report by the University of Toronto’s Citizen Lab, the popular Chinese social network WeChat operates under a policy its authors call “One App, Two Systems.” Users with Chinese phone numbers are subjected to dynamic keyword censorship that changes depending on current events and whether a user is in a private chat or in a group. Depending on the political winds, users are blocked from accessing a range of websites that report critically on China through WeChat’s internal browser. Non-Chinese users, however, are not subject to any of these restrictions.

The censorship is also designed to be invisible. Messages are blocked without any user notification, and China has intermittently blocked WhatsApp and other foreign social networks. As a result, Chinese users are steered toward national social networks, which are more compliant with government pressure.

China’s policies play into a larger global trend: the nationalization of the internet. China, Russia, the European Union, and the United States have all adopted different approaches to censorship, user privacy, and surveillance. Although there are social networks such as WeChat or Russia’s VKontakte that are popular in primarily one country, nationalizing the internet challenges users of multinational services such as Facebook and YouTube. These different approaches, which impact everything from data safe harbor laws to legal consequences for posting inflammatory material, have implications for businesses working in multiple countries, as well.

For instance, Twitter is legally obligated to hide Nazi and neo-fascist imagery and some tweets in Germany and France—but not elsewhere. YouTube was officially banned in Turkey for two years because of videos a Turkish court deemed “insulting to the memory of Mustafa Kemal Atatürk,” father of modern Turkey. In Russia, Google must keep Russian users’ personal data on servers located inside Russia to comply with government policy.

While China is a pioneer in the field of instant censorship, tech companies in the United States are matching China’s progress, which could potentially have a chilling effect on democracy. In 2016, Apple applied for a patent on technology that censors audio streams in real time—automating the previously manual process of censoring curse words in streaming audio.

In March, after U.S. President Donald Trump told Fox News, “I think maybe I wouldn’t be [president] if it wasn’t for Twitter,” Twitter founder Evan “Ev” Williams did something highly unusual for the creator of a massive social network.

He apologized.

Speaking with David Streitfeld of The New York Times, Williams said, “It’s a very bad thing, Twitter’s role in that. If it’s true that he wouldn’t be president if it weren’t for Twitter, then yeah, I’m sorry.”

Entrepreneurs tend to be very proud of their innovations. Williams, however, offers a far more ambivalent response to his creation’s success. Much of the 2016 presidential election’s rancor was fueled by Twitter, and the instant gratification of Twitter attracts trolls, bullies, and bigots just as easily as it attracts politicians, celebrities, comedians, and sports fans.

Services such as Twitter, Facebook, YouTube, and Instagram are designed through a mix of look and feel, algorithmic wizardry, and psychological techniques to hang on to users for as long as possible—which helps the services sell more advertisements and make more money. Toxic political discourse and online harassment are unintended side effects of the economic-driven urge to keep users engaged no matter what.

Keeping users’ eyeballs on their screens requires endless hours of multivariate testing, user research, and algorithm refinement. For instance, Casey Newton of tech publication The Verge notes that Google Brain, Google’s AI division, plays a key part in generating YouTube’s video recommendations.

According to Jim McFadden, the technical lead for YouTube recommendations, “Before, if I watch this video from a comedian, our recommendations were pretty good at saying, here’s another one just like it,” he told Newton. “But the Google Brain model figures out other comedians who are similar but not exactly the same—even more adjacent relationships. It’s able to see patterns that are less obvious.”

A never-ending flow of content that is interesting without being repetitive is harder to resist. With users glued to online services, addiction and other behavioral problems occur to an unhealthy degree. According to a 2016 poll by nonprofit research company Common Sense Media, 50% of American teenagers believe they are addicted to their smartphones.

This pattern is extending into the workplace. Seventy-five percent of companies told research company Harris Poll in 2016 that two or more hours a day are lost in productivity because employees are distracted. The number one reason? Cellphones and texting, according to 55% of those companies surveyed. Another 41% pointed to the internet.

Tristan Harris, a former design ethicist at Google, argues that many product designers for online services try to exploit psychological vulnerabilities in a bid to keep users engaged for longer periods. Harris refers to an iPhone as “a slot machine in my pocket” and argues that user interface (UI) and user experience (UX) designers need to adopt something akin to a Hippocratic Oath to stop exploiting users’ psychological vulnerabilities.

In fact, there is an entire school of study devoted to “dark UX”—small design tweaks to increase profits. These can be as innocuous as a “Buy Now” button in a visually pleasing color or as controversial as when Facebook tweaked its algorithm in 2012 to show a randomly selected group of almost 700,000 users (who had not given their permission) newsfeeds that skewed more positive to some users and more negative to others to gauge the impact on their respective emotional states, according to an article in Wired.

As computers, smartphones, and televisions come ever closer to convergence, these issues matter increasingly to businesses. Some of the universal side effects of addiction are lost productivity at work and poor health. Businesses should offer training and help for employees who can’t stop checking their smartphones.

Mindfulness-centered mobile apps such as Headspace, Calm, and Forest offer one way to break the habit. Users can also choose to break internet addiction by going for a walk, turning their computers off, or using tools like StayFocusd or Freedom to block addictive websites or apps.

Most importantly, companies in the business of creating tech products need to design software and hardware that discourages addictive behavior. This means avoiding bad designs that emphasize engagement metrics over human health. A world of advertising preroll showing up on smart refrigerator touchscreens at 2 a.m. benefits no one.

According to a 2014 study in Cyberpsychology, Behavior and Social Networking, approximately 6% of the world’s population suffers from internet addiction to one degree or another. As more users in emerging economies gain access to cheap data, smartphones, and laptops, that percentage will only increase. For businesses, getting a head start on stopping internet addiction will make employees happier and more productive. D!


About the Authors

Maurizio Cattaneo is Director, Delivery Execution, Energy, and Natural Resources, at SAP.

David Delaney is Global Vice President and Chief Medical Officer, SAP Health.

Volker Hildebrand is Global Vice President for SAP Hybris solutions.

Neal Ungerleider is a Los Angeles-based technology journalist and consultant.


Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

Comments

Tags:

No Longer Soft Skills: Five Crucial Workplace Skills Everyone Should Learn

Carmen O'Shea

My child’s elementary school focuses on skills they believe support children in becoming changemakers. Through use of an integrated, project-based curriculum, they explicitly teach and assess “learner values” such as iteration, risk, failure, collaboration, and perspective. Their philosophy is that these attributes long considered “soft skills” have become the crucial educational priorities for this generation.

Why do they believe this? Much knowledge is now easily accessed and readily queried, such that the acquisition of specific content or know-how is far less important than how to apply that content in different situations and how to interact with others in the pursuit of goals. This holds true in the workplace as well as the academic environment. When I think about how I operate in my job at a large technology company, it’s not really what I know but what I do with what I know, and whom I engage to get things accomplished.

Watching the school teach these skills just as they do math or language has made me stop and consider what they look like for an employee. I wanted to share my thoughts on five qualities beyond relevant academic skills or professional experience that are just as important (if not more so) in predicting top work performance. These are more qualitative skills that managers should hire for, employees should develop, and organizations should optimize for.

  • Empathythe ability to see and integrate multiple perspectives and to understand the impact of how others think. Empathy can also mean advocating and showing empathy for oneself and for others. Empathy is assuming a good intention even when someone has said or done something we dislike – to stop and pause, attempt to understand, and respond compassionately in a difficult workplace situation. Empathy also extends to intuiting beyond just the professional environment to more of a personal level to truly understand what drives a colleague or employee.
  • Resiliencethe ability to take risks even when you know you may fail and then to bounce back, sometimes repeatedly, from failure. Inherent in resilience is the idea of iteration – that it is often essential to try things multiple times, in multiple ways, from multiple angles, before achieving a desired outcome. Resilience is receiving difficult yet constructive feedback from a manager or peer and resolving to act positively on it instead of wallowing or harboring a grudge. Resilience is maintaining a sense of optimism even in a down quarter at work.
  • Creativitythe ability to think differently or expansively and to approach a problem from multiple angles. Sometimes it’s called “thinking outside the box.” Creativity often includes inquiry, the act of questioning and satisfying one’s curiosity about particular topics. Torrance defined it along several parameters – number of ideas generated, number of categories of ideas, originality of ideas, and how detailed each idea is elaborated. We see it in action during brainstorming phases of projects, but it’s also possible to apply creativity on a continual basis, by pushing colleagues to expand on their thoughts, by not being satisfied with a less than stellar answer, by taking time to understand how multiple approaches to an issue could be combined, or by simply trying something new in a familiar situation.
  • Collaborationthe ability to interact and work productively with others, in all size groups. Effective collaboration requires empathy, especially when collaborators have different backgrounds, styles, or thought processes. Collaboration also requires exemplary communication skills, both oral and written, as well as reflective listening. So much of our tasks on the job require collaboration with others, whether to inform, persuade, learn, or engage, and these interactions form the bedrock for innovation. It’s tough to innovate without collaborating.
  • Flexibilitythe ability to adapt or change course if that is what the situation demands. Flexibility includes letting go of one’s idea in the interest of attaining a goal more quickly. It can also include development a comfort level with uncertainty or ambiguity, especially in times of change. Flexibility is a willingness to absorb feedback objectively and course correct as needed without personalizing the information or demonizing the provider of it. Expounding on another’s idea (not our own) in a brainstorming session demonstrates flexibility, as does remaining calm while an org change takes effect and roles are temporarily unclear.

When employees exhibit these qualities, they are better able to understand their purpose at work and to unleash their passions in the pursuit of that purpose. When teams exhibit these qualities, achievement and employee engagement are higher.  I wager that retention and innovation will improve as well. It’s heartening that as a society we’re beginning to consider how to best prepare our children educationally for the kind of work environments they will encounter after they finish their academic journey.

Do you also see these qualities as valuable in assessing employee fit? How can managers and organizations better identify, train and reward employees for living these qualities?

For more on this topic, see Your Business Needs People With Skills, Not Just Qualifications.

Comments

Carmen O'Shea

About Carmen O'Shea

Carmen O’Shea is the Senior Vice President of HR Change & Engagement at SAP. She leads a global team supporting major transformation initiatives across the company, focused on change management, employee engagement, and creative marketing and interaction. You can follow Carmen on Twitter.