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Improving lives through investment in development impact bonds

Business Impact: Improving lives through investment in development impact bonds

Improving lives through investment in development impact bonds

Business Impact: Improving lives through investment in development impact bonds
Business Impact: Improving lives through investment in development impact bonds
Development impact bonds are a promising financial tool that can improve the lives of those in need around the world, but measurement standards and guidance are needed to secure investors’ commitment. Woxsen University’s Disha Gupta and Kakoli Sen explain why, drawing on four case studies from India

Developing countries face a lot of challenges when it comes to economic growth and development, especially in relation to marginalised communities. For example, almost all developing countries have a mismatch of functions and finances in their federal structure, whereby the revenue generated by the government through taxation and other sources are insufficient to fulfil the exceeding demand for social challenges like unemployment, poverty, healthcare and education.

To address this gap and tackle the social issues with a flow of funds, a new financing model was developed in the UK in 2010 called the ‘development impact bond’. Development impact bonds (DIBs) are a cutting-edge method for allocating corporate funds to finance accessible housing, healthcare and education for all through government projects. The investor’s return on DIBs is based on social outcomes and these are highly dependent on the implementor of individual projects (often, government bodies) and can therefore look like a risky investment vehicle.

Theoretically, DIBs may not even be construed as ‘bonds’ but instead as a type of contract or commitment for future social outcomes. Historically, very few countries across the world have introduced such bonds and, as of July 2023, the use of these bonds globally is very sparse (please see the image below). However, here is a look at four DIBs that have been introduced and implemented in India.

Development impact bonds in India

In 2015, the first DIBs were first introduced in India, with UBS Optimus Foundation as the primary investor ($270,000 investment) and the Children’s Investment Fund Foundation as the result payer.

The funds raised were used in India’s education sector with an emphasis on girls’ education, which successfully enhanced literacy and numeracy for children’s education by 160 per cent and for girls’ education by 116 per cent, according to the final report by Golab.

Girls’ education students in the project’s Educate Girls (EG) schools improved by an average of 1.08 learning levels, or 28 per cent and 0.31 standard deviations, compared to students in control schools. A total of 768 out-of-school girls had been enrolled by EG by the end of the three-year programme, accounting for 92 per cent of all identified out-of-school schoolgirls who were eligible for enrolment. In this way, EG outperformed its enrolment goal of 79 per cent by 16 percentage points.

After the successful conclusion of this project in 2017, the government of India, New Delhi and the United Nations General Assembly launched a larger project in 2018 – the Quality Education India DIB. This project focused on improving on primary school education following an increase in the enrolment of children. It managed to outperform its target of enhancing students’ learning even after the impact of pandemic.

Meanwhile, the Utkrisht Impact Bond, the world’s first DIB supporting maternal and newborn health was issued in November 2017, with the aim of reaching more than 600,000 pregnant women and newborn babies in the Indian state of Rajasthan. According to the Golab report, this DIB helped improve facilities and more specifically, improving the prediction of a toll that tracks changes in mortality due to maternal and child health interventions known as the Lives Saved Tools. In total, facilities that met the quality standards set by the DIB were predicted to prevent approximately 13,449 maternal and neo-natal deaths across 405 private healthcare facilities in Rajasthan by 2023. 

Lastly, a Skill Impact Bond was initiated in October 2021 with the aim of imparting unemployed youths with the required skills to access waged employment in pandemic recovery sectors, such as apparel, logistics and retail. This DIB project is ongoing and aims to benefit around 50,000 youths in India over 4 years, with a targeted gender split of 60 per cent women.

Snapshot of India’s DIBs

DIB: Skill Impact Bond, 2021
Duration: Ongoing
Sector: Skills and employment development
Size of investment: $4 million

DIB: Quality Education India, 2018
Duration: Four years
Sector: Education
Size of investment: $3 million

DIB: Utkrisht Impact Bond, 2017
Duration: Three years
Sector: Health
Size of investment: $2.9 million

DIB: Educate Girls, 2015
Duration: Three years
Sector: Education
Size of investment: $270,000

Encouraging investment in social impact programmes

The target population for these DIBs has mostly been lower-income groups, individuals or those living in undeveloped areas, with women and youth of particular consideration. Indeed, one of the fundamental grounds for adopting DIBs is that, traditionally, the majority of governments, donor organisations and foundations have supported the provision of services based on inputs or procedures. While they release funds gradually as per the contract, a project’s success is critical for the continued commitment of investors who analyse the impact of their funding.DIB image Woxsen

For this reason, it is important to develop measurement standards for DIBS, so that corporates are motivated to sign up and support this category of bonds on a sustained basis. To date, it has not been possible to demonstrate the impact of this type of funding beyond numbers, which is a partial success indicator at best.

Buy-in for impact bonds and the complex negotiation processes that lead to projects’ implementation take time and money. To develop internal expertise, businesses and governments will therefore have to invest money in studying how impact bonds work in the long run. Outcome-focused funding organisations may also have reservations about the cost and effort involved in setting up an impact bond.

In short, DIBs in India need to be streamlined to encourage investors and charitable organisations to invest in social impact programmes. DIBs are a relatively new and promising financial tool that can be used to improve the lives of people and communities that are in need around the world. They can be used both in developing countries and in developed countries, where they can help manage the needs of aging populations, those who are homeless and other marginalised communities. However, it is because DIBs are relatively new that they require more awareness and guidance so that corporate donors will sit up, take notice and commit to them in the long run.

Headline image credit: Nikhita S on Unsplash

Disha Gupta Woxsen

Disha Gupta (left) is an assistant professor in finance and programme director for the bachelor’s of commerce programme at Woxsen University in Hyderabad, India.

Kakoli Sen is professor and dean of the School of Business at Woxsen University in Hyderabad, India. She teaches and trains in the areas of organisational behaviour, human resource management and leadership.

Kakoli Sen

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Regional variations in social mobility found in Chilean study

Business Impact: How technology is taking business education beyond borders

Regional variations in social mobility found in Chilean study

Business Impact: How technology is taking business education beyond borders
Business Impact: How technology is taking business education beyond borders
Social mobility between generations in Chile varies by region, according to a study from the University of Chile’s Faculty of Economics and Business. Tim Banerjee Dhoul reports

Social mobility between generations can be high in Chile, but only if you live in the right region. This is the suggestion of a new study from researchers at the University of Chile’s Faculty of Economics and Business.

In the northern region of Antofagasta (home to the port city of the same name), a child born to parents in the bottom quintile for national income distribution had a 30 per cent probability of belonging to the top quintile as an adult.

However, a child born to parents in the bottom quintile for national income distribution from the southern region of La Araucanía – home to the city of Temuco and the heartland of Chile’s indigenous Mapuche people – had only an eight per cent chance of reaching the top quintile as an adult. In addition, the probability of them remaining in the bottom quintile was 33 per cent – 20 percentage points higher than the equivalent figure for those in the region of Antofagasta.

The rich are also more likely to remain rich in some areas. The probability that a child will be in the richest quintile as an adult when born to parents in the richest quintile is, according to the study, as high as 45 per cent in the Antofagasta region, and 39 per cent in Chile’s Metropolitan region, home to the capital, Santiago. 

Authors Pablo Gutiérrez Cubillos and Juan Díaz Maureira say Chile is an interesting case study for intergenerational mobility because it has achieved significant development on GDP per capita over the past three decades yet continues to display hugely unequal income distribution, as reflected by its Gini coefficient.

“Progress at the national level hides a notable geographic variation in the degrees of economic success achieved, where some regions of the country have attained remarkable upwards economic mobility while others have experienced relevant persistence through circles of poverty and circles of privilege,” Gutiérrez and Díaz explained.

So, why the differences? The study suggests that positive effects of mining on related sectors’ subsequent growth could be helping mobility in the north, while the south suffers from having the country’s lowest average labour income and being the poorest region overall. The study recommends addressing this with decentralisation policies that develop local government’s ability to improve regional public services and amenities. It also suggests tax reform to ensure public spending is concentrated in regions with less social mobility and is invested in the development of children.

Headline image credit: Nicolás Gutiérrez on Unsplash

Business Impact Issue 2 2023 Volume 16

This article originally appeared in the print edition (Issue 2 2023) of Business Impact, magazine of the Business Graduates Association (BGA).

Read this print edition here

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Tim Banerjee Dhoul

Content Editor
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BGA’s vision for professional growth | A guide

BGA’s vision for professional growth | A guide

Look to future vision
Look to future vision
If you want to continue to climb the career ladder, you’ll need to continuously seek professional growth opportunities

At the Business Graduate’s Association, we’re dedicated to aiding business school’s in their quest to become some of the best in the world. We are also passionate about providing business school students and graduates with a range of helpful tools and services, designed to encourage continued professional growth.

The road to reaching your professional goals is likely to consist of a series of pit stops, all of which must be navigated by you. If you want to continue to climb the career ladder and cement yourself as a formidable force in the world of business, you’ll need to be continuously seeking professional growth opportunities. 

Did you know that, if you’re a student or graduate of a BGA member business school, you’re eligible for exclusive access to a range of tools, designed to promote professional growth? 

Designed to give members access to CV-building services, thought-leadership webinars, partner discounts and so much more, student and graduate membership is completely free to all schools that hold a BGA membership. To find out if your business school is a member, click here. 

What does professional growth actually mean?

Defined as the process of gaining new skills and experience in order to reach a goal in your career, professional growth exists on a spectrum. 

Your first thought will probably be to link the term to educational advancements, like going back to school or completing a short course. However, you can also seek professional growth opportunities on a smaller scale, for example, by joining a mentoring programme or developing skills you already have.

To ensure you stand out in a long list of job applicants, adopt our vision for professional growth today. 

Focus on long-term goals

If you’ve ever found yourself umming and ahing after being asked – “where do you see yourself in five years?”, don’t worry, you’re not alone. Having an end goal in mind before beginning your career journey will enable you to adapt your life around your new objectives.

For example, if your end goal is to become an SEO, you need to make sure that your daily activities incorporate the development of skills that will help you get there. These could include anything from improving your people skills to challenging yourself to look at situations from an analytical point of view. 

Manage your expectations

Before you pursue a certain career or job opportunity, knowing what type of working environment is best suited to you is important. 

For example, do you prefer working alone or in a team? Do you want to work for a small or large company? What skills do you currently have that complement your desired role?

If you thrive in a client-facing role, you probably won’t be looking to apply for a work-from-home position. If you don’t want to be in charge of leading a team, you won’t be the ideal candidate for a managerial position. In order to enhance your professional growth, you’ll need to first establish a clear understanding of your expectations regarding the type of career you’re looking to achieve. 

Be open to new opportunities 

Seeking new opportunities in your quest to promote professional growth is incredibly important. From attending insightful webinars led by industry-leading experts to taking an evening class on business management, there are so many things you can do to ensure you’re always progressing. 

At the Business Graduates Association, we regularly host online social and learning events designed to empower the next generation of business leaders. If you want to  connect with fellow BGA business students and graduates why not join our exclusive BGA student and graduate members group on LinkedIn, join here. 

Challenge yourself

It might seem obvious, but you can not claim to be enhancing your professional growth if you regularly avoid challenging situations. 

If you are unhappy with where your career is heading, take that as a clear-cut sign to make a change. Don’t be afraid to approach your peers – you’re all on the same journey, so why not lean on each other? Attend all the conferences, training and networking events you can, after all, some of the most successful business professionals secured their former positions through recommendations from networking connections. 

When it comes to highlighting areas for professional growth, be honest with yourself. Recognise gaps in your resume and put systems in place to implement change.

Don’t underestimate the power of mental growth 

Before you pin all your efforts on promoting professional growth, it’s important to ensure you’re also prioritising your mental well-being. 

Meditating, journalling and practising daily gratitude techniques are excellent ways to attain mental growth. Just as important as your physical counterpart, taking the time to focus on your mental development is crucial to avoiding stagnation. Ready to secure your BGA students and graduates membership and start making use of an abundance of professional growth opportunities? Click here to register.

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Understanding the interconnected nature of organisations

Business Impact: Understanding the interconnected nature of organisations

Understanding the interconnected nature of organisations

Business Impact: Understanding the interconnected nature of organisations
Business Impact: Understanding the interconnected nature of organisations
Why leaders must understand how different organisational activities are interconnected to implement change successfully. Associate professor Eli Sopow outlines recent research from University Canada West

As businesses emerge slowly from the global Covid-19 pandemic, many are finding a very different idea of what a ‘workplace’ looks like. Employees have embraced the idea of working at least part of the week from home, the function of teamwork is being redefined and leadership approaches that were considered best practice pre-pandemic are now being re-evaluated.

One thing is certain. Many of yesterday’s answers to the dynamics of business have changed since the pandemic cocooned many of us into personal isolation chambers. As we now emerge, we are finding ourselves looking for answers to questions that didn’t exist before Covid-19. Questions like: “Has our organisational culture adapted to what is likely to be a future of endemic attacks by shapeshifting Covid-19 variants?” or “How do we stay innovative and adaptive through waves of uncertainty?” and “How do we deal with the increasingly important need for employees to feel valued in a psychologically healthy workplace?”  

To find answers to the above questions, MBA students at University Canada West (UCW) in 2022 helped design, with the guidance of their professor of change management and leadership, a diagnostic survey tool called the ‘LEADicator’ that discovered new connections between a workplace culture (including its focus on innovation and willingness to change) the structure of reporting lines, the different systems of management and how employees felt about their workplace climate, including both job satisfaction and morale.

The research also included diagnosing the organisational health of three different workplaces across Canada and a deep analytic dive into a mountain of Canadian federal public service employee survey data from 2020, covering 86,668 workers in 16 key departments serving the public in areas of health, gender equality, Indigenous services, immigration and public safety.

‘Organic’ organisations

For businesses that are searching for today’s ‘holy grail’ of innovation best practices, the UCW LEADicator analysis disclosed many solid results.

Taking ‘corporate culture’ to mean the values, beliefs, ways of doing things and traditions of an organisation, the research found, as anticipated, a very strong connection between the culture measures of ‘being open to change’ and ‘being innovative’. This means that for a business to be innovative, it must also be open to change and this includes being open to challenging past ways of doing things.

Of specific importance here is the connection found between being open to change and a structure that facilitates collaboration and systems of communication that are both useful and timely, as well as a workplace climate where employees gave high ratings to feeling respected.

Another important finding was confirmation of a basic principle of organisational life – that organisations of all forms do not exist in separate silos of existence and operations that move forwards in a straight line and machine-like fashion. Organisations are ‘organic’ in that different activities are interconnected to varying and often changing patterns.

For example, the research showed that any business plan calling for greater employee teamwork must incorporate the fact that ‘teamwork’ is tightly intertwined with measures of timely communication, conflict management and being open to constructive criticism. This may seem obvious, but the data confirmed that weakness in any one of those connections will decrease levels of teamwork.

Businesses today are rightly focused on what a psychologically healthy workplace looks like and the need to ensure both emotional and physical health. The benefits here include greater employee job satisfaction and morale, less workplace conflict, fewer employee absences due to illness and a greater ability to both retain and attract employees. But what our research confirmed is that there is a very strong correlation between a psychologically healthy workplace (a reflection of organizational culture) and key measures of a workplace structure, including the coordination of activity and timely decision making, as well as key factors relating to human resource systems including timely and clear communication. Doing one thing alone to improve workplace wellness will not succeed.

The holistic nature of organisational life

What the research also demonstrated strongly is that any business that makes it a priority to focus time and resources on just one apparently weak element of its existence, for example the workplace climate measure of employee morale, will likely fail unless there is an understanding of the interconnectivity of organisational culture, structure, systems and workplace climate.

In one example from our research, a company found that its employees’ low morale was being caused by complaints about poor communication. Employees felt they were not being heard and that any communication that did occur was often top-down and neither useful, timely nor clear. These communication factors are indeed strongly correlated to morale, in that they relate to a description of how employees feel about the conditions of their workplace in contrast to ‘job satisfaction’ which is a measure of how much employees like what they do.

The company’s response to boost morale was to focus solely on improving employee communications. The use of time and expense in this area failed to move the needle. Our research showed the answer was obvious when looking at the holistic nature of organisational life.

Our data showed that morale is correlated to workplace system measures of internal communication, but it is also very strongly correlated to many measures of the workplace culture – including being open to constructive criticism and placing a priority on employee wellness – in addition to measures of the structure, including timely decision making. On all the above measures of culture and systems, the company in the aforementioned example was rated as ‘low’ by employees. Unless changes to communication were aligned with changes to organisational culture, tinkering with the workplace climate would never take root.

Covid-19 and its succession of shapeshifting variables has firmly established that we live in a highly integrated world of business, science, and ecology. What our recent research shows is that business leaders and managers must play the role of ‘boundary spanners’ and integrate the interconnected, yet constantly changing, nature of organisations.  

Eli Sopow is an associate professor of management at University Canada West in Vancouver, Canada, where he specialises in leadership and change management. He has served as director of continuous improvement with the Royal Canadian Mounted Police as well as holding executive positions with consulting firms and government.

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Business Impact: Improving lives through investment in development impact bonds
research

Improving lives through investment in development impact bonds

Development impact bonds are a promising financial tool that can improve the lives of those in need around the world, but measurement standards and guidance are needed to secure investors’ commitment. Woxsen University’s Disha Gupta and Kakoli Sen explain why, drawing on four case studies from India

Read More »
August 31, 2023
Discover more articles on research
Business Impact Volume 19

Download the latest edition of the Business Impact magazine

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Fuzzy set theory and fuzzy logic in management

Business Impact: Fuzzy set theory and fuzzy logic in management

Get a clearer view of uncertain, or fuzzy, sets and some of their latest applications in the field of management from Eötvös Loránd University’s Tamás Jónás

Nowadays, fuzzy sets and fuzzy logic have a wide range of applications in many areas of science including engineering, economics, management, and the business sciences.

This article offers an insight into the research results achieved over the past five years by the Faculty of Economics, Eötvös Loránd University, in fields connected with fuzzy set theory, fuzzy logic, and their applications in management.

Basic notions

Let us consider the statement: ‘Our company has a high operating profit rate.’ We do not know exactly what this statement means, but in our daily life, we tend not to see any problem with using this kind of statements. This is because we have a certain imagination of the meaning of the above statement, even though it is ambiguous and imprecise.

In classical set theory, the set of high operating profit rates can be exactly defined as an interval on the real line. For example, if the operating profit rate is between 10% and 30%, then we may consider it as high operating profit rate.

Now, suppose that an operating profit rate, x, is just a bit less than 10%. In this case, noting the previous crisp definition of the set of high operating profit rates, x is not an element of this set. However, we would describe this situation using statements like: ‘The operating profit rate, x, is almost high’ or ‘the operating profit rate, x, is close to a high operating profit rate’. Our human language allows us to express our uncertainty regarding this situation in a more sophisticated way than that of using the concept of crisp set. Based on this line of thinking, we may conclude that the classical set theory is not suitable for describing the uncertainty associated with vague situations.

The concept of fuzzy set was introduced by University of California, Berkeley Professor, Lotfi Zadeh, in 1965 as an extension of the classical notion of set. A fuzzy set is given by its membership function, which is a mapping from a given universe (set) to the closed unit interval.

The value of the membership function at x is the grade of membership of x in the fuzzy set. It should be emphasised that every element in the universe has its membership grade in the fuzzy set in question, and this grade is an element of the unit interval [0,1].

Using our previous example, we can define the fuzzy set of high operating profit rates such that the membership grade of 9% operating profit rate to this fuzzy set is 0.3. That is, this operating profit rate has a relatively low membership grade in the fuzzy set of high operating profit rates, but this membership grade is not zero.

We can see that this set has no crisp boundaries, and that its boundaries are instead rather ‘fuzzy’. This explains why these sets are called fuzzy sets. It should be added that the membership grade of x, which tells us how much x belongs to the fuzzy set on the scale [0,1], may also be viewed as a measurement of truth of the statement that ‘x is an element of the set under study’. Here, the values zero and one correspond to the ‘fully’ false and ‘fully’ true logical values, respectively. That is, the value of the membership grade can be interpreted as a fuzzy logical (continuous logical) value.

Evaluations using fuzzy numbers

A special class of fuzzy sets, called the fuzzy number, may be treated as an extension of the notion of number. Namely, a fuzzy number can be used to express the uncertainty related to a quantity. Moreover, using fuzzy numbers, traditional Likert scale-based evaluations can be extended to fuzzy rating scale-based evaluations that find many applications in the business sciences. For example, in relation to evaluating service features in healthcare, or the performance of university lecturers and supervisors.  

Ranking fuzzy numbers and multicriteria decision-making

The ranking of fuzzy numbers plays an important role in multicriteria decision-making, and as such, it has various applications in management as well.

Fuzzy logical operations

In many situations, we need to modify a fuzzy logical value or connect multiple fuzzy logical values to obtain a new one. These can be done using continuous-valued logical operators that may be viewed as extensions of the negation, conjunction, and disjunction operations of classical logic. You can see an example of our results connected with this area here.

Monotone (fuzzy) measures in decision-making and behavioural economics

The monotone, but not necessarily additive measures (set functions), which are also known as fuzzy measures, can be used to model various phenomena in decision-making and in behavioural economics. Our contributions to these fields include, for example, a methodology that can be used to generate parametric probability weighting functions.

Demand forecasting using fuzzy logic

Forecasting the demand for products or services is a crucial activity for all enterprises. In the past few years, we developed some soft computational methods that can be used in demand forecasting effectively, an example of which can be seen in a 2018 paper in the International Journal of Production Economics.

Tamás Jónás is an Associate Professor at the Faculty of Economics, Eötvös Loránd University (ELTE) in Budapest, Hungary.

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New batches bring in bigger MBM student numbers worldwide

Business Impact: Exclusive data on MBM programmes

Amid the transition to blended and online learning, exclusive AMBA & BGA research shows that Business Schools received more applications across an increased number of MBM programmes in 2020, although regional experiences for the format did vary

AMBA-accredited Business Schools received a larger volume of applications for their master’s in business management (MBM) programmes, on average, as many upped the number of programmes on offer between 2019 and 2020, according to new and exclusive data from AMBA & BGA. 

Changes to admissions numbers, 2019-20 

Although the number of applications to individual MBM programmes fell by 7% between 2019 and 2020, there was a 5% increase in the number of MBM applications per Business School, indicating that larger volumes of applications were spread across a greater number of programmes. Indeed, the number of MBM programmes offered by responding Business Schools worldwide in 2020 was 13% higher than in 2019. This increase might help to explain why, for example, applications per MBM programme available among Business Schools in India were down by 12%, yet the total number of applications received by each School in the south Asian country were up by an average of 4%. 

Globally, the uptick in programme options appears to have generated a greater number of applications from prospective students in a year marked by the impact of Covid-19, although these changes were more pronounced in some regions than others. In Europe (excluding the UK), for example, MBM applications per School were up 17% in 2020 and, among Business Schools in the UK, the rise was 23%. 

Regardless of the number of programmes on offer, the growing ranks of MBM students worldwide are demonstrated by the increase in the number of those enrolling onto programmes in 2020. Not only did enrolments per Business School (which encompasses their increase in programme number) rise – by 21% worldwide – but so too did the average number of students that enrolled on each individual programme, by 8%. MBM enrolments per programme were up by a regional high of 26% in Europe (excluding the UK). 

Third instalment of Business Impact’s MBM market analysis

This is Business Impact’s third report on the admissions landscape for master’s in management (MBM) programmes worldwide. The BGA publication’s inaugural investigation into data for international MBM applications and enrolments was released in 2020 and focused on the scale of demand for the MBM format in India. Released earlier this year, the report’s second iteration considered key demographics of those applying and enrolling onto MBM programmes – namely, the proportional splits between male and female students and between domestic and international students.  

This latest edition is focused on year-on-year variations in data, together with a deep dive into case studies of two key providers of the MBM format, France and the UK, to the left of this column. All findings are based on AMBA & BGA’s exclusive pool of data relating to admissions to 149 MBM programmes in the calendar year of 2019, rising to 168 MBM programmes in the calendar year of 2020, on offer among 49 Business Schools worldwide – all of which are accredited by BGA’s sister organisation, the Association of MBAs (AMBA).  

Tracking the impact of Covid-19 on teaching methods 

We know that many Schools have been forced to pivot on their delivery of programmes due to Covid-19, so this year’s data template asked for Schools’ ‘most used mode of delivery’ as well as their ‘intended mode of delivery’ with a view to determining the difference between theory and practice.

Comparing, firstly, how programmes were taught in 2019 to how they were intended to be taught in 2020, already indicates a slight global trend for programmes to be taught using blended or online modes of delivery, even before the disruption of Covid-19 has been considered. If all programmes globally had been taught the way they had been intended to in 2020, the classroom mode of teaching would have decreased in usage by five percentage points between 2019 and 2020. Yet, classroom teaching was the most used mode of delivery on only 14% of programmes globally in 2020, down from 84% in 2019. The majority of MBM programmes turned to a blended format (54%), with a further 32% of programmes using online delivery for the most part. This shift shows the very real impact that the Covid-19 pandemic has had on global teaching methods. 

Acceptance and yield 

Acceptance rates (the percentage of applicants who were given an offer by a Business School) varied significantly across regions, but the global average was 6% in 2020. MBM programmes in India had the lowest acceptance rate, on average, with only 1% of those who applied being accepted onto a programme. Elsewhere, acceptance rates were significantly higher, for example 37% among programmes in Europe (excluding the UK) and 48% in the UK.

Yield (the percentage of students who enrol onto programmes in Business Schools after being offered a place) also varied significantly by region. While the global average was 32%, the UK’s yield rate was 18% in 2020, compared to 41% among responding Business Schools in Europe (excluding the UK). This suggests that applicants to MBM programmes the UK were more likely to apply for more than one Business School and were left choosing between those from which they received an offer, whereas those applying to programmes in Europe (excluding the UK) were more likely to have their eyes firmly fixed on one Business School. 

Diversity in MBM admissions

Gender 

Globally, the proportion of female applicants to MBM programmes in 2020 was 37%, an increase of one percentage point from 2019. Enrolments, however, remained closer to an equal gender balance – 47% of enrolled students in 2020 were female and this worldwide figure is unchanged from its equivalent in 2019. 

On a global level, there was no change to the global proportion of female enrolees between 2019 and 2020, meaning that female students continued to represent the majority of enrolees in many areas of the world. In China (including Hong Kong, China) women made up 62% of enrolled students, in Africa it was 60%, Oceania 53% and the UK, 51%. 

Business Schools in India had the lowest proportion of female enrolees in its master’s in business management programmes, at an average of 37% across its cohorts in 2020. However, this represents an improvement of three percentage points on the equivalent figure from 2019. 

International students

When looking at the global picture, students who applied and enrolled onto MBM programmes in 2020 appear to come overwhelmingly from the domestic market. Among applicants, 96% were domestic, although this drops to 68% among enrolees. In each case, the figures represent a one percentage point decrease in the proportion of international students from the last year. 

Yet the global picture hides significant regional variations. While most regions did have a majority of domestic applicants to its MBM programmes, North America and the Caribbean and the UK provide two notable exceptions to this rule, with only 9% and 3%, respectively, of applicants and 15% and 12%, respectively, of enrolees coming from the domestic base of the Business Schools in these regions. 

Two European business education stalwarts: MBM admissions case study

France and the UK are two of the world’s biggest markets for business education and the options for studying a master’s in business management (MBM) degree at one of their leading Business Schools are often high on the list of many prospective students – both domestic and international. 

They are also countries with significant numbers of AMBA-accredited Business Schools. This case study compares admissions data from 98 MBM programmes on offer among 29 Business Schools in France and the UK which responded to AMBA’s application and enrolment survey for the calendar year of 2020. 

France 

Across 44 programmes, Business Schools in France received an average of 3,621 applications per programme in 2020 and ultimately enrolled an average of 453 students. The acceptance rate (the number of applicants who were offered a place at the Business School) was 43%. The yield (the proportion of those who chose to enrol after being were offered a place) was 29%. 

The vast majority (92%) of MBM programmes in France were intended to be taught in the classroom, with only 5% intended to be taught using a blended approach and 1% intended as being fully online. As the events of 2020 unfolded, the proportion of programmes that were actually taught in the classroom dropped to 33%, while blended and fully online teaching rose to 27% and 39%, respectively. 

Applicants to MBM programmes in France were a 50/50 split between men and women. Among those enrolling, 49% were female on average.  

MBM applications to Business Schools in France came largely from domestic prospects in 2020, with only 17% stemming from international prospects. However, this proportion rises to 23% among enrolled students. 

The UK

There were, on average, 800 applications and 68 enrolled students per programme across 54 MBM programmes in the UK in 2020. The average acceptance rate in the UK was 48%, while the average yield was 18%. 

The difference between pre- and post-Covid-19 teaching modes is stark. All programmes (100%) included in this data analysis were intended to be taught in the classroom in 2020, yet none ended up being delivered this way. Instead, 89% were taught using a blended mode and 11% were fully online.

There were, on average, more female applicants to MBM programmes in the UK than male – 57% of applications came from women. However, the average proportion of female students levels out to 51% when looking at enrolled students. 

Nearly all (97%) applications to MBM programmes in the UK came from international prospects in 2020. Only 3% of applicants were based in the UK itself. When looking at enrolled cohorts, the picture shifts slightly, with 88% defined as international students, and 12% defined as domestic students.

Key contrasts between France and the UK 

As can be seen from the above, there are some significant differences when comparing MBM admissions in France and the UK, based on Business Schools’ experiences in 2020.

  • More applications per programme in France (3,621 vs. 800 in the UK).
  • Smaller class sizes in the UK (68 enrolled students per programme vs. 453 in France). This is, in part, driven by France’s prestigious Grande École programmes which have high numbers of students. 
  • Higher yield in France (29% vs. 18% in the UK). This suggests that applicants to UK Business Schools are more likely to have applied to multiple institutions.  
  • Far higher proportion of international students in the UK (88% of enrolled students vs. 23% in France). 

Methodology

The AMBA & BGA Application and Enrolment Report 2021 outlines the current state of the world’s MBA market. As part of the data compiled for the report, 61 AMBA-accredited Business Schools also provided data on their portfolio of master’s in business management programmes (commonly known as MBMs or MiMs).  

These generalist, postgraduate, and predominantly pre-experience, degrees are most often designed to provide a thorough grounding in the theoretical fundamentals of management, accompanied by substantial practical input. As such, it typically provides a foundation for individuals starting a career in management and has been identified as a particular area of interest for members of the Business Graduates Association (BGA), which aims to ensure graduates of all levels of business education commence their careers with a firm understanding and appreciation of the principles of responsible management, positive impact and lifelong learning. 

Of the 61 Schools who provided data on their master’s programmes for the calendar year of 2020, 49 also completed last year’s study in which they supplied data for 2019, allowing figures to be compared directly between the same Schools, year on year. This analysis covered 168 programmes in 2020, which rose from 149 programmes in 2019. This like-for-like analysis is the most accurate measurement of changes in the AMBA & BGA network from year to year, as it compares an identical set of Schools that is not skewed by changes in the profile or participation of AMBA-accredited Business Schools.  

MBM programmes analysed in the like-for-like proportion of this report were delivered at Business Schools based in the following locations: Europe (excluding the UK) (38%); the UK (31%); India (15%); China (including Hong Kong, China) (1%); North America and the Caribbean (10%); Oceania (1%); and Africa (6%).  

This article is taken from Business Impact’s print magazine (edition: November 2021-January 2022).

Main image credit: Tom Hauk on Unsplash

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Can AI drones yield cleaner agricultural production and more ethical practices?

A tractor watering crops with a sprinkler system on a sunny day. This is symbolic to agricultural production.

How the use of pesticides exacerbates other barriers to cleaner agricultural production and why data-collecting AI drones offer a potential solution. Research from the UK’s University of Bradford School of Management

A changing agricultural business environment and the need to improve agricultural value chains, together with calls for more resource-efficient practices and sustainable approaches has meant that business and management research is just as vital for the agricultural sector as agronomic and other agricultural science-based research. 

The pressing need to boost agricultural productivity

There is a pressing need for food producers, technologists, academics, and policymakers to identify innovative, effective, and sustainable approaches to boost agricultural productivity for the immediate future, for a sustainable food supply chain. With the global population expected to grow to 9.7 billion by 2050, pressure on food systems – and particularly on the agriculture sector – is increasing daily. Only a 70% increase in food production would be enough to feed this global population sufficiently. The Covid-19 pandemic has worsened the situation. A labour shortage caused by health concerns and lockdown measures, including the closure of international borders, has caused inevitable disruptions to both the production and movement of agriculture and food produce globally.

These conditions have led to inflation and this has made nutritious food, or even food itself, unaffordable to some people, causing hunger to more than 130 million people across the globe. This makes goal number two of the UN SDGs – to end hunger – all the more difficult to attain.

In some parts of the world, Covid-19 has also led to an increase of unethical agricultural practices, such as the overuse of chemicals in farming and suppression of labour, to meet growing demand in difficult times. Addressing this requires a detailed understanding of how innovative solutions can be incorporated into the agricultural supply chains, particularly within production, to achieve ethical, sustainable and socially viable food production.

Despite a host of state-of-the-art developments in agriculture, such as automation and smart farming, many challenges in the agricultural supply chain remain and there is still a lack of practical solutions.

Barriers to cleaner agricultural production

Our research explored key agricultural challenges and how industry 4.0 technologies, such as AI drones, may be the solution to these challenges.

What are the barriers that impact cleaner agricultural production? We identified a host of agricultural challenges which play a role in diminishing and disrupting agricultural yields. These include the following:

  • Illegal deforestation
  • Lack of efficient practices
  • Lack of accurate predictions for seasonal output
  • Theft and sabotage
  • Inaccurate seeding methods
  • Unproductive workers
  • Pesticides application and hazards
  • Workers health and safety risks
  • Movement of produce within supply chain
  • Pollution
  • Poor soil conditions
  • Plant disease

Existing research in this field has highlighted the intertwined nature of these challenges, so a fundamental element of our research was to see whether the identified challenges were interrelated. This revealed that ‘unproductive workers’ and ‘pesticides application and hazards’ contribute towards at least 10 further challenges in the context of Cleaner Agricultural Production (CAP), including the above-listed challenges of ‘pollution’, ‘lack of accurate predictions for seasonal output’, and ‘plant disease’ (i.e. spread of) as well as workers’ health and safety, a factor that subsequently affects the movement of agricultural produce in the food supply chain.

In other words, we found that in order to overcome challenges impeding the sustainability of food supply chain, while managing worker productivity, food producers and farmers must minimise the hazards resulting through pesticide application and exposure.

Unravelling agricultural challenges

For insights into how Industry 4.0 technologies can support clean and ethical agricultural production, we applied the the Ellen MacArthur Foundation’s ReSOLVE framework and its six actions of Regenerate, Share, Optimise, Loop, Virtualise and Exchange.

Based on this framework, our research suggests that AI drones may offer a number of opportunities to unravel agricultural challenges, provide sustainable solutions and promote ethically conscious agricultural practices by addressing the ‘farm structure’, ‘food security’ and ‘environmental impact’ concerns, as depicted in the figure below:

Source: Drones ReSOLVE framework application from a 2021 paper in the ‘Journal of Cleaner Production’, co-authored by this article’s authors.

AI drones in agriculture

Prior studies have highlighted how industry 4.0 technologies, such as AI drones, can help minimise plant disease rates, using drone sensors that enable early detection.

Drone sensors can also help optimise the use of pesticides, for their ability to apply a precise amount of the required pesticide to specifically selected plants. By providing real data which can inform any decision to apply pesticides to a targeted crop, the drone is not just useful for the reduction of waste and pollution and the optimisation of economies of scales with regards to pesticide use and application, but also for facilitating the production of a healthier food produce – which is, of course, a more ethical practice befitting the health and safety framework.

Furthermore, AI drones are able to capture valuable data, such as temperature, moistness of soil leaf, level of precipitation and wind speed – data which is essential in keeping track of plant health and giving an indication of the amount of marketable produce.

The possibilities presented by AI-driven drones in capturing vast quantities of field data, in detecting diseases and in monitoring crops simply cannot be ignored, especially given the role of pesticide application in other barriers to the movement of cleaner agricultural production within the supply chain.

Because excessive pesticide hazards have an adverse impact on cleaner agricultural production, as well as on the movement of goods within the supply chain, it is vital for both agricultural producers and policymakers to explore ways to minimise their use and exposure. Equally, it is imperative that farmers and operational agricultural workers are aware of the underlying and interrelated role of excessive pesticide hazards in barriers afflicting the agricultural supply chain.

 

 

Dr Kamran Mahroof (left) is an Assistant Professor in Supply Chain Analytics and Programme Leader for the MSc in Applied Artificial Intelligence and Data Analytics at the School of Management, University of Bradford, UK.

Dr Amizan Omar (right) is an Associate Professor in Strategic Management at the School of Management, University of Bradford, UK.

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Shedding light on MBM admissions and delivery worldwide

Fibre optic lamp in neon pink with a deep blue background. Business Impact article on Shedding light on MBM admissions and delivery worldwide.

Exclusive AMBA & BGA research throws light on the performance of MBM programmes on offer at leading Business Schools across the world. Ellen Buchan delves into the details

A major driver behind students’ enrolment on master’s in business management (MBM) programmes is the desire to develop a better understanding of technology and its impact on management practices. This was a standout finding of AMBA & BGA’s study of application and enrolment data for MBM programmes around the world last year, as reported in Business Impact in February 2020. The significant demand for MBMs in India was another result highlighted in this research.   

A year on, and for the second iteration of this research, Business Impact was able to analyse data from Business Schools in relation to their MBM application and enrolment data from the calendar years of both 2018 and 2019. This offered a fresh opportunity to identify trends in the sector on a like-for-like basis. 

A total of 46 Schools – all of which are accredited by BGA’s sister organisation, the Association of MBAs (AMBA) – submitted MBM data for both 2018 and 2019, and it is the data from those Schools on which the following research is based. 

Continuing demand in India

Applications per Business School were up by 5% between 2018 and 2019 across all responding MBM programmes. There was no change in the volume of applications per programme received in the same timeframe.  

The sheer scale of demand for MBMs in India continues, as applications received by programmes in the south Asian country represented 88% of all applications to MBMs in 2019, worldwide. Applications in India, meanwhile, grew 10% per programme and 5% per School between 2018 and 2019. 

Elsewhere, Business Schools in the UK also reported a substantial increase, with applications up by 22% per programme and 34% per School between 2018 and 2019. Schools in the UK accounted for 3% of overall volume of MBM programme applications reported in 2019. 

Between 2018 and 2019, there were also rises in the number of students enrolling globally, by 5% per programme and 10% per School. MBMs in the UK reported the world’s largest increase in enrolments, with a 10% increase per programme and a 21% increase in enrolments per School. 

Blended learning on the rise

There was no significant change in the mode of delivery for MBM programmes between 2018 and 2019. Globally, the majority (83%) of AMBA-accredited Schools’ MBM programmes were taught in the classroom in 2019. Almost all of the remaining programmes were taught using a blended approach (16%) while 1% of programmes were delivered fully online in 2019. This represents a three-percentage point increase in the use of blended learning, at the expense of classroom delivery from 2018. 

In North America and the Caribbean, 92% of programmes included in the study were delivered using a blended approach in 2019. Among MBMs in Europe, the equivalent figure was 24%. This represents a four-percentage point increase in the use of blended learning in both these regions from 2018. 

Gender diversity in MBM programmes 

Globally, the proportion of women among those applying to MBM programmes in 2019 was 37% – an increase of one percentage point on 2018. The global enrolment rate was far more gender-balanced – 47% of those enrolling globally in 2019 were female, although this same figure was also applicable in 2018. Looking regionally, however, shows that Business Schools in India and Europe were the only Schools to enrol a minority of women on their MBM courses in 2019. In Europe, 48% of those enrolling identified as female, while the proportion among Schools in India was 33% – significantly lower, but an increase of three percentage points on the country’s equivalent figure for 2018. 

International and domestic applications and enrolments

More than nine out of 10 (95%) of applications to MBM programmes included in the study came from domestic students in 2019 – the vast majority. However, this global percentage hides significant variations between different countries and regions. Business Schools in India received 100% of applications from domestic students – pushing up the overall average. Even so, Schools based in China (including Hong Kong, China), Europe, and North America and the Caribbean, all received more than 80% of their MBM applications from domestic candidates. However, at Business Schools based in the UK and Oceania, the reverse was true, with 97% of applications to MBM programmes in each region coming from international applicants.

The global picture on MBM enrolment is quite different, with international students representing a third of all enrolments in 2019, up from 30% in 2018. As such, the conversion rate for international students was far higher in some regions than for domestic students. In Europe (excluding the UK), for example, international candidates represented 16% of applications, but 28% of those who enrolled. In North America and Caribbean, 10% of applications came from international applicants, but 19% of students enrolling were defined as international.

Conclusion

The news is positive for providers of MBMs from within the AMBA network. Although there was no growth in applications per programme, there was a notable rise of 5% in enrolments per programme.  

In addition, applications and enrolments to a Business School’s full portfolio of eligible degrees were up by 5% and 10%, respectively – a sign perhaps of the increasing number of study options on offer to prospective students and the extent to which these resonated with their intended audience, ahead of the turbulence of the year 2020.  

Methodology

The AMBA & BGA Application and Enrolment Report 2020 outlines the current status of the MBA market. As part of the data compiled for the report, 58 AMBA-accredited Business Schools also provided data on their portfolio of master’s in business management programmes (commonly known as MBMs or MiMs). 

Of the 58 Schools that provided data on their master’s programmes in 2019, 46 had also supplied data for 2018 in the previous year, allowing for a year-on-year comparison between the same Schools. This analysis covered 140 programmes in 2019, rising from 133 programmes in 2018. MBM programmes in this like-for-like analysis were delivered at Business Schools based in the following locations: Europe (excluding the UK) (37%); the UK (28%); India (17%); China (including Hong Kong, China) (7%); North America and the Caribbean (4%); Oceania (4%); and Africa (2%). No data was collected from Schools in Asia (excluding India and China) and the Middle East.

This article is adapted from an original feature in Business Impact’s print magazine (edition: February-April 2021).

 

 

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The business master’s degree: global application and enrolment outlook

Trends in application and enrolment figures for MBM programmes around the world as well as insight into the role of technology and India’s high demand. Will Dawes and Tim Banerjee Dhoul report

The biggest enrolment and cohort numbers for master’s in business management programmes (commonly known as MBMs, or MiMs) were found among Business Schools in Europe (excluding the UK) and India, according to data compiled for AMBA & BGA’s Application and Enrolment Report 2019. The data, which relates to the calendar year of 2018, also shows that India was a clear leader for application volume and competition for places when it comes to MBM programmes.

Applications to MBM programmes

India generated by far the largest number of applications for its MBM programmes (889,730) among the 55 AMBA-accredited Business Schools included in this new analysis for Business Impact. Together, these Schools offered a total of 174 MBM programmes in 2018. 

In India, the overall application volume equated to 98,859 applications per Business School and 42,368 applications per programme, and represented 83% of all applications to MBMs measured worldwide. The next highest proportion of applications was in Europe (excluding the UK). Applications to the region totalled 14% of the global figure, with findings equating to 7,419 applications per School and 2,248 applications per programme. The remaining MBM programmes made up just 3% of the overall application total.  


MBM enrolment in 2018

The majority of the 25,020 enrolments onto AMBA-accredited MBM programmes were in Europe (excluding the UK). There were 16,519 enrolments in the region, equating to 66% of the global total. India enrolled the second-highest number of students (3,945, or 16% of the global share). Meanwhile, Schools in the UK enrolled 2,759 students (11% of the global market of AMBA-accredited MBM programmes). There were much smaller shares of MBM enrolments in Latin America (4%), China (including Hong Kong, China) (1%) and Africa (1%). The regions of North America and the Caribbean, and Oceania, each comprised less than 1% of the global share of MBM enrolments (124 and 225, respectively).  

Programmes in Europe (excluding the UK) and India had the largest average cohort sizes (250 and 188 enrolees, respectively). Other regions had substantially smaller average programme sizes, the largest of which were in Oceania (75) and the UK (67). In descending order, the remaining regional average enrolees per programme were Latin America (50), Africa (43), China (including Hong Kong, China) (32) and North America and the Caribbean (12). 

MBM programme delivery 

MBM programmes offered by AMBA-accredited Schools in 2018 were typically delivered in a physical classroom setting (89% of all programmes), while 10% were conducted in a blended format and 1% were offered fully online. It should be noted that not all Schools in our sample provided data on the format of study, meaning that these statistics should be treated with a degree of caution. Nevertheless, the findings offer an indication that blended MBM programmes were more common among those on offer in North America and the Caribbean (70%) and in Europe (excluding the UK) (15%). In the remaining regions, all programmes were delivered exclusively in the classroom, other than in the UK, in which the equivalent figure was 98%.

Gender diversity on MBM programmes  

Overall, almost two fifths of applicants to MBM programmes in AMBA & BGA’s sample were women (37%), while more than three fifths were men (63%). Although there is some variation throughout the world, the global proportion of women who applied to an MBM programme was substantially skewed by the large number of Indian applicants overall. Women applying to programmes in India made up a third (34%) of all applicants in the country and had a large impact on the overall proportion of female applicants worldwide. Indeed, when India is excluded from the global figure, the average proportions of male and female applicants were equal (50% each). 

Looking at individual regions, India’s proportion of female applicants was the world’s lowest, and only Latin America (38%), Africa (47%) and Europe (excluding the UK) (49%) had a minority of female applicants for MBM programmes among AMBA-accredited Schools in 2018. There were more female than male applicants in the UK (53% of applicants were women), North America and the Caribbean (64%), China (including Hong Kong, China) (67%) and Oceania (69%).  

Globally, there was a slightly more equal split when looking at the gender balance of those who enrolled on MBM programmes in 2018 – 54% of those enrolling worldwide were men, and 46% were women. The proportion of women enrolling increases slightly, to 48%, when India is excluded from the global analysis. MBM programmes in India were again below the global average, with women making up 31% of those enrolling. In some other regions, female enrolees were in the majority. This included North America and the Caribbean (55%), Africa (58%) and China (including Hong Kong, China) (66%).

International and domestic
applications and enrolments

Applications from individuals based in the country in which an MBM programme was offered made up 95% of global MBM applications. However, this figure falls to 70% when excluding results from programmes in India, to which all applications came from domestic candidates. In addition to India, regions with large proportions of domestic applicants included Latin America (94%), North America and the Caribbean (88%), China (including Hong Kong, China) (88%), Europe (excluding the UK) (81%) and Africa (62%). In contrast, applications from overseas comprised the great majority in the UK (97%) and Oceania (86%). 

Seven in 10 (71%) enrolments were domestically based, a figure which drops to 67% when excluding India, in which all enrolments were from within the country. The balance between domestic and international enrolments followed a similar pattern to applications, albeit with some
small variances. China (including Hong Kong, China) and Africa had higher domestic enrolments than applications (88% and 62% of enrolments, respectively, were domestic).  Meanwhile, Oceania and Europe (excluding the UK) had a slightly higher proportion of international enrolments than applications (91% and 25%, respectively). 

A UK Business School leader who wished to remain anonymous commented that the influence of students from China is a significant factor in the overall demand for MBMs, and most notably in terms of the demand among international students. ‘There is certainly increased demand from China, which is probably due to the number of individuals wanting to get an overseas qualification.’ 

Survey sample and background to MBM analysis 

AMBA & BGA’s recently released Application and Enrolment Report 2019 outlines the current status of the AMBA-accredited MBA market. The report describes the growth in both MBA applications and enrolments at AMBA-accredited Business Schools, much of which was driven by increased demand in China (including Hong Kong, China). The study highlighted that, despite the geopolitical and economic pressures in the global economy, AMBA-accredited Business Schools are performing strongly. 

As part of the data compiled for the report, 55 AMBA-accredited Business Schools also provided data on a range of master’s in business management programmes (commonly known as MBMs, or MiMs). These generalist, post-graduate, and predominantly pre-experience, degrees are most often designed to provide a thorough grounding in the theoretical fundamentals of management, accompanied by substantial practical input. As such, it typically provides a foundation for individuals starting a career in management and has been identified as a particular area of interest for members of the Business Graduates Association (BGA), which aims to ensure graduates of all levels of business education commence their careers with a firm understanding and appreciation of the principles of responsible management, positive impact and lifelong learning.   

MBM programmes analysed in this report were delivered at Schools in the following locations: Europe (excluding the UK) (36%); the UK (25%); India (16%); China (including Hong Kong, China) (7%); North America and the Caribbean (5%); Latin America (4%); Oceania (4%); and Africa (2%). This is the first year in which AMBA & BGA has conducted a separate analysis of MBM programmes offered by AMBA-accredited Business Schools responding to its annual Application and Enrolment Report. In the future, we would like to track trends in this dataset over time and, where possible, incorporate the admissions experiences of BGA Schools. 

To learn more about AMBA & BGA’s research projects and to access recent reports, including the Application and Enrolment Report 2019, please visit: www.businessgraduatesassociation.com/about-us/research 

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Exploring the digital marketing revolution

Exploring the digital marketing revolution

Screen Shot 2019-02-27 at 14.07.21
Screen Shot 2019-02-27 at 14.07.21
To create and communicate superior customer value, marketers must now combine traditional advertising with social and digital tools, argues American marketing guru Philip Kotler, in an interview with David Woods-Hale

You’ve written Marketing 4.0? What has changed since Marketing 3.0 was published in 2010?

Marketing is undergoing a digital revolution. We published Marketing 3.0 seven years ago to help companies broaden their view of how computers and the internet impact marketing theory and practice. We stressed the importance of meeting the needs of women, young people, and ‘netizens’ in carrying out company marketing activities. 

Today there is a need to pay attention to the growing role of social and digital media. Social media – such as Facebook, Instagram, Pinterest and Snapchat – create an increasingly connected world and they stimulate greater communications and sales to a wider world. Digital media is enabling artificial intelligence (AI) and the ‘internet of things’ (I0T) and increasing the rate at which robotisation and automation is penetrating business. Our aim in Marketing 4.0 is to illustrate the growing role and impact of digital marketing. I’ve also described this 'new marketing' in my 15th edition of Marketing Management. 

How can Marketing 4.0 help in bringing marketers up to date with the current skills required – from traditional to digital?

In the past, consumers made purchase decisions largely in retail outlets, whether in an auto dealership or in a large department store. Some consumers also used the telephone or mail order catalogues. Today, a growing number of consumers are making more of their purchases online via online retailers. In-store retailing is facing a major decline: witness, in the US, the news of Macy’s closing many stores, clothing store The Limited going out of business and shopping centres in deep trouble. 

Consumers still go into stores to sample and touch the product and then use their smartphone to see if they can a better deal elsewhere. Many retail shops are evolving into ‘showrooms’, partly charged by the company to its advertising budget. Business-to-business transactions are being increasingly conducted with digital media. Most companies list their product catalogues on the internet. Purchasing agents are happy to compare prices on the internet and are less interested in accepting sales calls. All this points to the need for companies to acquire social and digital skills before they are outclassed by more sophisticated digital competitors.

You describe ‘shifting power dynamics’ in the market. Can you explain this in more detail? 

Power has been shifting from the advertising giants who used 30-second commercials to inform and persuade consumers, to savvy consumers – who rely on their friends and acquaintances, plus online product ratings, to make their brand choices. Power has moved from companies to consumers. Companies must now develop fresh pictures of how consumers journey toward making their final purchases. It’s no longer a journey from a 30-second commercial to a purchase but from a stimulus on the internet, or from a friend, to a search for further information, to a purchase. Marketing 4.0 discusses the key steps in consumer journeys and the various touch points that will have an impact on the final purchase decision.

You explain how the rules of marketing regularly change, but this time the very customers have changed – and this is revolutionary – can you talk a bit more about this?

The basic maxim of marketing hasn’t changed. Decide on the consumer need your company wants to meet and the individuals who strongly have this need. Create a solution that meets this consumer need better than any competitor can meet it. See your job as one of creating superior customer value and communicating this value in a superior way.

What is revolutionary is the need for the company to incorporate social and digital tools to carry out this work. Companies need to collect ‘big data’ about individual consumers who have specific needs and apply sophisticated marketing analytics to arrive at consumer insights that can be converted into compelling consumer value propositions.

How do cyclical trends in the economy affect marketers? More specifically, if demand-led growth is on the decline, what single marketing effort is the most important to avoiding a loyal consumer defecting to a competitor?

Buyer behaviour obviously changes in times of market growth versus market decline. When a recession, or a fear of recession, occurs, consumers will intelligently reduce their expenditure and move towards lower-cost products. Every competitor will have a choice: increase the value of the offer, or cut the price of the offer. Normally it makes sense for the company to retain the price and better document and confirm the offer’s superior customer value. If superior value doesn’t exist, the company either has to add more value (for example, free shipment) or cut its price.

Do you think the original elements of the traditional marketing mix will still be relevant in 10 years’ time? 

The marketer’s main toolkit remains the 4Ps (product, price, place, and promotion) and STP (segmentation, targeting, positioning). Each of these elements undergoes modernisation all the time. Product includes packaging, as well as service products. Place is being redefined into omni-channel marketing but it is still place. Promotion is including digital and social communication alongside print and broadcast media. I would welcome a new marketing framework if it promised to address marketing decision problems in a more decisive way. Until then, most companies will use the traditional framework in preparing their marketing plans.

How will creative and media agencies need to evolve over the next five years to keep up with the pace of technology? 

The agency of the future will develop skills in both traditional and digital advertising. This would be better than hiring separate traditional and digital agencies because companies must connect traditional and digital advertising. A 30-second commercial may need to include a digital address showing where viewers can go for more information. The job of the ‘full-service agency’ is to find synergies between the two types of communication, so that 2 + 2 = 5, not 4.

Do you think that the chief marketing officer (CMO) role will be replaced by a combination of chief tech officer and chief analyst, or is this still a viable career path?

I’d like the CMO position to continue to manage the integration of all the elements that will impact on customer demand. The CMO should spend at least 50% of their time working with the other ‘chiefs’ in the company. The real value of the CMO will be realised when he or she is included in all the strategy planning. It would be unwise to confine marketing to designing tactical moves. The CMO is in the best position to foresee where the particular market is going economically and technologically. The CMO’s staff must include an excellent digital person and technology person. 

Do you think marketing and HR may evolve into one business function, as people leadership and organisational branding become increasingly connected, with shared goals and purposes?

I would prefer the heads of marketing and HR to work very closely together but remain separate functions. The CMO is highly interested in seeing that HR hires very service-minded people. In the hotel business, Marriott says that the first job is to hire the right employees and then the customers will come. The CMO should support the HR person to gain a sufficient budget to hire excellent employees, not just average employees. The evidence is strong that excellent employees have a productivity impact that is several times that of average employees.  

Do you think that zero-based budgeting for marketing, based on the Unilever example, will be widely adopted, to make marketing entirely accountable? How can value be measured throughout all channels since tracking is harder offline? 

Zero-based budgeting for marketing means starting each year with no budget allocated to marketing, until marketers propose specific marketing spend – along with the evidence that results will exceed costs. This is in contrast to normal budget setting where the budgets of the past year are the starting point, raised or lowered slightly. We acknowledge that some past marketing expenditures were not productive, and that from time to time, it is worth reviewing each major budget item to decide whether it should be eliminated, decreased or increased. 

The problem with zero-based budgeting for marketing is two-fold. Many campaigns need continuity and they shouldn’t be cut off before they have achieved their full impact. 

Also, it is increasingly difficult to assess the financial impact of a particular digital tool or a particular marketing channel in an increasingly complex and interactive world. 

Zero-based budgeting is a highly impractical tool for yearly budgeting. However, I grant that it could raise marketing efficiency by being introduced every few years.

Do you believe leaders across all disciplines and functions need to change their mindsets to succeed in a volatile world? 

Today’s world is increasingly characterised by volatility, uncertainty, complexity, and ambiguity (VUCA). Donald Trump’s election as US President has greatly contributed to VUCA. If Hillary Clinton had been elected (she won the popular vote by 3 million votes), we would arguably not be in a VUCA world. Events would have taken their normal course and businesses would carry normal expectations. 

But Trump sends out tweets in the middle of the night, many of which attack companies, journalists, judges, pollsters, or the voters themselves. These attacks are a sign of paranoia. Many business leaders have to think twice about any move for fear that the president will call them. Consumers are worried about their health benefits and they are no longer certain about social security and Medicare. They, and businesses, are spending their money more carefully, which slows down economic growth.

My answer to that? Business leaders must change their mindsets, in light of Trump’s erratic behaviour; he issues executive orders almost daily. His behaviour has been copied by populist leaders abroad with the effect of introducing even more instability into the world economy. 

Are there marketing skills that all MBA students and graduates need to thrive in a VUCA business world?

Most Business programmes are training their students in social and digital skills. They are also making students more aware of the effects of climate change. Professors are increasingly criticising shareholder value as the measure of business success and replacing it with stakeholder value as a more comprehensive measure of business performance. Marketing students graduate with a broader view of the factors that affect corporate image and reputation than previous Business School graduates. 

And finally, do you feel optimistic about business adaptability as the world becomes more uncertain but also more connected? 

Business literature increasingly emphasises company agility and responsiveness to rapidly changing conditions. Companies need to monitor technological trends, political debates, and economic issues. Companies such as Unilever, Starbucks and Amazon show incredible business adaptability. But many companies are still coasting and need a few more shocks to wake up. My hope is that an increasing number of companies recognise that growing income inequality will hurt, not help them, and that they need to take a more expansive customer benefit and welfare view of what makes an economy strong.

Philip Kotler is the SC Johnson & Son Professor of International Marketing at the Kellogg School of Management, Northwestern University, Evanston, Illinois

Professor Kotler received his Master’s Degree at the University of Chicago and his PhD Degree at MIT, both in economics, conducting post-doctoral work in mathematics at Harvard University and in behavioural science at the University of Chicago.

He is the author of 57 books and has published more than 150 articles in leading journals. He was the first recipient of the American Marketing Association’s ‘Distinguished Marketing Educator Award’ (1985) and has received a host of other accolades, being inducted into the Management Hall of Fame in 2013. 

Kotler has consulted for such companies as IBM, General Electric, AT&T, Honeywell, Bank of America, and Merck in marketing strategy and planning, marketing organisation and international marketing. He has travelled throughout Europe, Asia and South America advising companies on applying economic and marketing science principles to increase competitiveness, and governments on developing the skill sets and resources of their companies for global competition.

He has been Chairman of the College of Marketing of the Institute of Management Sciences, Director of the American Marketing Association, is a member of the Board of Governors of the School of the Art Institute of Chicago and of the Advisory Board of the Drucker Foundation. 

He has received a number of honorary doctoral degrees from several international organisations.  

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