Countercyclical markups and news-driven business cycles

The standard one-sector real business cycle model is unable to generate expectations-driven fluctuations. The addition of countercyclical mark-ups and modest investment adjustment costs offers an easy fix to this conundrum. The simulated model replicates the regular features of U.S. aggregate fluctuations.

Designing innovative business models: Five emerging meta-models

Business models to date have remained the creation of management, however, it is the belief of the authors that designers should be critically approaching, challenging and creating new business models as part of their practice. This belief portrays a new era where business model constructs become the new design brief of the future and fuel design and innovation to work together at the strategic level of an organisation. Innovation can no longer rely on technology and R&D alone but must incorporate business models. Business model innovation has become a strong type of competitive advantage. As firms choose not to compete only on price, but through the delivery of a unique value proposition in order to engage with customers and to differentiate a company within a competitive market. The purpose of this paper is to explore and investigate business model design through various product and/or service deliveries, and identify common drivers that are catalysts for business model innovation. Fifty companies spanning a diverse range of criteria were chosen, to evaluate and compare commonalities and differences in the design of their business models. The analysis of these business cases uncovered commonalities of the key strategic drivers behind these innovative business models. Five Meta Models were derived from this content analysis: Customer Led, Cost Driven, Resource Led, Partnership Led and Price Led. These five key foci provide a designer with a focus from which quick prototypes of new business models are created. Implications from this research suggest there is no ‘one right’ model, but rather through experimentation, the generation of many unique and diverse concepts can result in greater possibilities for future innovation and sustained competitive advantage.

Early challenges of shifting an Australian manufacturer’s utilisation of design

This paper presents the findings from the initial exploration phase of an 11 month project, identifying the early challenges that a design innovation catalyst faces while initiating a shift in the way a medium sized manufacturing firm utilises design. Ultimately, the overarching aims of the project are to transform the utilisation of design within the participating company from a styling tool to a strategic process through the implementation of a design led approach to innovation. Insights were found through qualitative interviews with company staff and reflective journal entries as part of an Action Research methodology. Challenges identified include managing expectations, conveying the potential of a design innovation catalyst and a design led approach to innovation, and a siloed and risk averse culture. Findings presented in this paper will assist in identifying and understanding the preliminary challenges encountered by a design innovation catalyst when embarking on a design led transformation. Future innovation catalysts can prepare for possible barriers by highlighting considerations, opportunities and challenges when embarking on a design led transformation. Implications of this research are provided as possible approaches to overcoming these challenges.

Can emotion provide a new approach to business model innovation?

Companies require new strategies to drive growth and survival, as the fast pace of change has created the need for greater business flexibility. Therefore, industry leaders are looking to business innovation as a principle source of differentiation and competitive advantage. However, most companies rely heavily on either technology or products to provide business innovation, yet competitors can easily and rapidly surpass these forms of innovation. Business model innovation expands beyond innovation in isolated areas, such as product innovation, to create strategies that incorporate many business avenues to work together to create and deliver value to its customers. Existing literature highlights that a business model’s central role is ‘customer value’. However, the emotional underpinnings of customer value within a business model are not well understood. The integration of customer emotion into business model design and value chain can be viewed as a way to innovate beyond just products, services and processes. This paper investigates the emotional avenues within business strategy and operations, business model innovation and customer engagement. Three propositions are outlined and explored as future research. The significance of this research is to provide companies with a new approach to innovation through a deeper understanding and integration of their customers’ emotions.

Property development cycle and acquisition strategies

This presenation is part of the UDIA (Qld) Property Development Essentials program, which is a two-day introductory course designed for new entrants to the property industry. The course provides practical advice and direction for those looking to take the first steps into the development industry. This presentation identifies economic factors and their influence on land acquisitions, as well as providing an understanding the property development and business cycles and their impacts on acquisition strategies (long v. short term projects)

The cultural economy moment?

This paper explores the rise of cultural economy as a key organising concept over the 2000s. While it has intellectual precursors in political economy, sociology and postmodernism, it has been work undertaken in the fields of cultural economic geography, creative industries, the culture of service industries and cultural policy where it has come to the forefront, particularly around whether we are now in a ‘creative economy’. While work undertaken in cultural studies has contributed to these developments, the development of neo-liberalism as a meta-concept in critical theory constitutes a substantive barrier to more sustained engagement between cultural studies and economics, as it rests upon a caricature of economic discourse. The paper draws upon Michel Foucault’s lectures on neo-liberalism to indicate that there are significant problems with the neo-Marxist account hat became hegemonic over the 2000s. The paper concludes by identifying areas such as the value of information, the value of networks, motivations for participation in online social networks, and the impact of business cycles on cultural sectors as areas of potentially fruitful inter-disciplinary engagement around the nature of cultural economy.

CRE workshop part I : comprehending the context

CRE (Corporate Real Estate) decisions should not simply deal with the management of individual facilities, but should especially be concerned with the relationships that a facility has with the corporate business strategy and with the larger real estate markets. Both the practice and the research of CRE management have historically tended to emphasize real estate issues and ignore the corporation’s business issues, causing real estate strategies to be disconnected from the goal and priorities of the corporation’s senior management. With regard to office cycles, a large number of econometric models have been proposed during the last 20 years. However, evidence from historical data and previous research in the field of real estate forecasting seem to agree only on one thing: the existence of interconnected property cycles that are concentrated on vacancy rates (demand). Vacancy also represents the linkage between the inadequacy of existing CRE strategies and the inability of existing econometric models to correctly forecast office rent cycles. Business cycles, across different industry sectors, have decreased from 5-7 years to 1-3 years today, yet corporations are still entering into leases of 5-10 years, causing hidden vacancy levels to rise. Possibly, once CRE strategies are totally in tune with the overall business, hidden vacancy will fade away providing forecasters with better quality data. The aim of this paper is not to investigate whether and when the supply-side will eventually evolve to provide flexible occupancy arrangements to accommodate corporate agility requirements, but rather to propose a general framework for corporations to improve the decision making process of their CRE executives, while emphasizing the importance of understanding the context as a precondition to effective real estate involvements.

Economic fluctuations and productivity in the Malaysian construction sector

Growth in productivity is the key determinant of the long-term health and prosperity of an economy. The construction industry being one of major strategic importance, its productivity performance has a significant effect on national economic growth. The relationship between construction output and economy has received intensive studies, but there is lack of empirical study on the relationship between construction productivity and economic fluctuations. Fluctuations in construction output are endemic in the industry. In part they are caused by the boom and slump of the economy as a whole and in part by the nature of the construction product. This research aims to uncover how the productivity of construction sector is influenced in the course of economic fluctuations in Malaysia. Malaysia has adopted three economic policies – New Economic Policy (1971-1990), National Development Policy (1991-2000) and the National Vision Policy (2001-2010) since gaining independence in 1959. The Privatisation Master Plan was introduced in 1991. Operating within this historical context, the Malaysian construction sector has experienced four business cycles since 1960. A mixed-method design approach is adopted in this study. Quantitative analysis was conducted on the published official statistics of the construction industry and the overall economy in Malaysia between 1970 and 2009. Qualitative study involved interviews with a purposive sample of 21 industrial participants. This study identified a 32-year long building cycle appears in 1975-2006. It is superimposed with three shorter construction business cycles in 1975-1987, 1987-1999 and 1999-2006. The correlations of Construction labour productivity (CLP) and GDP per capita are statistically significant for the 1975-2006 building cycle, 1987-1999 and 1999-2006 construction business cycles. It was not significant in 1975-1987 construction business cycles. The Construction Industry Surveys/Census over the period from 1996 to 2007 show that the average growth rate of total output per employee expanded but the added value per employee contracted which imply high cost of bought-in materials and services and inefficient usage of purchases. The construction labour productivity is peaked at 2004 although there is contraction of construction sector in 2004. The residential subsector performed relatively better than the other sub-sectors in most of the productivity indicators. Improvements are found in output per employee, value added per employee, labour competitiveness and capital investment but declines are recorded in value added content and capital productivity. The civil engineering construction is most productive in the labour productivity nevertheless relatively poorer in the capital productivity. The labour cost is more competitive in the larger size establishment. The added value per labour cost is higher in larger sized establishment attributed to efficient in utilization of capital. The interview with the industrial participant reveals that the productivity of the construction sector is influenced by the economic environment, the construction methods, contract arrangement, payment chain and regulatory policies. The fluctuations of construction demand have caused companies switched to defensive strategy during the economic downturn and to ensure short-term survival than to make a profit for the long-term survival and growth. It leads the company to take drastic measures to curb expenses, downsizing, employ contract employment, diversification and venture overseas market. There is no empirical evidence supports downsizing as a necessary step in a process of reviving productivity. The productivity does not correlate with size of firm. A relatively smaller and focused firm is more productive than the larger and diversified organisation. However diversified company experienced less fluctuation in both labour and capital productivity. In order to improve the productivity of the construction sector, it is necessary to remove the negatives and flaws from past practices. The recommended measures include long-term strategic planning and coordinated approaches of government agencies in planning of infrastructure development and to provide regulatory environments which encourage competition and facilitate productivity improvement.

Variety matters

Countercyclical markups are a key transmission mechanism in many endogenous business cycle models. Yet, recent findings suggest that aggregate markups in the US are procyclical. The current model addresses this issue. It extends Galí's (1994) composition of aggregate demand model by endogenous entry and exit of firms and by product variety effects. Endogenous business cycles emerge with procyclical markups that are within empirically plausible ranges.

Design LED innovation to rejuvenate local food systems and healthy communities : an emerging research agenda

Food Sovereignty (food freedom) is about empowering people to develop their own local food system. Food Sovereignty challenges designers to enable people to innovate the local food system, rather than having a food system which is dictated by corporate interests and failed business ethics. Communities are realising the potential for design to assist in the innovation process, and add strategic value to potentially localise the food system. Design Led Innovation (DLI) offers a strategic framework to address large-scale cultural, systemic and economic changes. The DLI approach empowers communities to take organised action to achieve a healthy, prosperous and happy way of life. DLI can assist with business models in the business world and it is evident this approach can assist with creating social change too. This paper presents on an emerging research agenda aimed to assist designer’s focus from individuals and systems to communities and urban problems. This paper also presents the research proposition that DLI and service design coupled with social entrepreneurial ventures such as local food projects and creative community inventions, have the potential to enable social innovation for healthy and happy communities.

Teaching design thinking and design led innovation to non-designers : a tertiary facilitator multidisciplinary study

This paper aims to address the knowledge gap in regards to the potential intermediary role tertiary institutions can play in developing generic design thinking/design led innovation capabilities in non-designers. Specifically, it investigates the value derived from the contribution of postgraduate design students as facilitators/educators for undergraduate non-design student cohorts. It examines a design immersion workshop designed to encourage the use of design thinking capabilities for project brief development for undergraduate multi-disciplinary student teams involved in a community service learning project for a social enterprise. The workshop was facilitated by design led innovation masters students embedded in industry organisations to research the integration of design led innovation capabilities in business. Data was collected from participating non-design students and postgraduate facilitators’ in the form of reflective journals and semi-structured interviews. The thematic analysis provided insight into the value of design thinking/design led innovation immersion programs for both the postgraduate facilitators and the undergraduate non-design students. The research results will inform a tentative foundation prototype framework to allow for ongoing program developments and research in design thinking/design led innovation integration in higher education, facilitating the development of generic capabilities required to empower future generations for business innovation and active citizenship in the 21st century knowledge economy.

From production to purpose : using design led innovation to Build Strategic Potential in a Family-Owned SME

There is an evident need to develop the strategic capabilities of companies from within, to ensure competitive competence in a time where strategy is a necessity. This paper is based on the first 4 months of a longitudinal embedded case study of a family-owned Australian small to medium enterprise, in their journey towards design integration. The first author was embedded as a ‘Design Innovation Catalyst’ to collaborate on overcoming early barriers of strategic development, using design led innovation. Action research methodology, semi-structured interviews with seven out of eight employees and a reflective journal revealed the absence of a shared vision, conflicting drivers and a focus on operational efficiency rather than strategy. Through the Catalyst’s facilitation, a company vision, general awareness, practice and knowledge in strategic development have emerged as the first steps to generating strategic design competence within the firm.

The challenges of adopting design-led innovative strategies in not for profits : the role of consumers, culture and employees

Major changes to regulations, funding and consumer demand in the Australian aged care industry are driving not for profits in this sector to reshape and rethink the services they offer and the ways in which they deliver their services to consumers. Many not for profit organisations facing these new challenges are also facing organisational cultural barriers in the development and implementation of innovative strategies. This paper presents a case study where one organisation, using design led innovation, explored consumer insights and employee values to find new ways to facilitate change.

Design led innovation : shifting from smart follower to digital strategy leader in the Australian airport sector

This paper presents and discusses organisational barriers and opportunities arising from the dissemination of design led innovation within a leading Australian airport corporation. This research is part of a greater action research program which aims to integrate design as a strategic capability through design led innovation within Australian businesses. Findings reveal that there is an opportunity to employ the theoretical framework and tools of design led innovation in practice to build collaborative idea generation by involving customers and stakeholders within the proposal of new to world propositions. The iterative gathering of deep customer insights also provided an opportunity to leverage a greater understanding of stakeholders and customers in strengthening continuing business partnerships through co-design. Challenges to the design led approach include resistance to the exploratory nature of gathering deep customer insights, the testing of long held assumptions and market data, and the disruption of an organisational mindset geared toward risk aversion instilled within the aviation industry. The implication from these findings is that design led innovation can provide the critical platform to allow for a business to grow and sustain internal design capabilities necessary to challenge prevailing assumptions about how its business model operates to deliver value to customers and stakeholders alike. The platform of design led innovation also provides an avenue to support a cultural transformation towards anticipating future needs necessary for establishing a position of leadership within the broader economic environment.