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Debunking AI myths: what you need to know

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Debunking AI myths: what you need to know

Chris Cavey, business director at Dare

AI is developing. It’s exciting, and it’s very easy to consider diving right in and investing heavily. Look at BNY Mellon – last year it announced the deployment of 220 bots across its infrastructure, claiming that it’d save at least $300,000 annually.

But AI isn’t the answer to all of the financial sector’s problems. It too has its own flaws, and businesses shouldn’t be blinded by the shiny new possibility it offers. There are many myths, many party lines businesses seem to follow without fully investigating the topic.

This is particularly relevant when we speak about AI. The technology has the potential to transform your business, but only for very specific issues; however, all too often it’s sold as the silver bullet that will ensure greater productivity, profits and more. Here are the main myths we need to quash before we can have a proper conversation about AI’s capabilities.

We have to adopt AI solutions

Why do you feel you have to adopt AI? Because everyone’s talking about it? How are they talking about applying AI? Just because it works for someone else, doesn’t mean it’s right for your business. It won’t instantly improve operations. You need to carry out the due diligence before even considering serious AI investment. Because it relies heavily on data, algorithms, programming and machine learning. This is all stuff you can’t decide on a whim. Identify specific use cases where AI could actually add value across your business before diving in.

I’m putting all my tech/digital budget into AI, right now

Again, don’t rush in. It’s not as simple as throwing a load of cash at technology and willing it to work. Assuming that your business practices are in place, machine learning and algorithms still take time to extract insights that will move the needle for your venture.

Your digital transformation team should therefore set roadmaps with realistic expectations on AI-powered solutions, in short-term vs long-term scenarios. Work out what the highest priority use cases are; the routes that will deliver the best performance in all scenarios for your business. If it looks great for the long-term but not for the short-term, can you sustain yourself as you work towards the future? Likewise, is a short-term boost going to really reap benefits five, ten, twenty years down the line?

AI will instantly make my business run more efficiently

Not instantly. Dreaming of technological, man-made ‘brains’ with the cognitive ability to respond to your customers’ needs, in real time and with palpable emotional intelligence, is a long way off. You want to have real EQ, to create a system that genuinely works for everyone in your business, no matter what their role, experience or age.

But you must, must think IQ before EQ. Having identified the specific use cases mentioned previously, you should then apply the business model, practices and governance to be set up for success. AI use cases depend on vast amounts of data – the establishment and organisation of which is a task in itself – alongside specific, tailored programming requirements and training of algorithms.

Yes, the end goal for AI is to create a seamless, hyper-personalised experience that streamlines business, creating a bespoke working method for the individual using said technology. But to get here, you need to put in the groundwork. Get your IQ locked down first – EQ can wait.

AI will automate jobs… it is self-sufficient, isn’t it?

AI is already changing the way things are done, but it’s not going to wipe out the world of work as we know it. Jobs will be redistributed, rather than disappear. AI will drive many innovations, but we’re quite a way from programmes running entirely on their own.

The technology in question depends on the right skills in the workforce, policies, governance plans and supporting systems around it; implementing AI in one aspect of the business and allowing little to no room for expansion across the rest of the ecosystem creates a siloed model. As the rest of the company develops, your AI corner will become less relevant, less compatible with the evolving tech stacks in other departments.

But… there are shortcuts, right?

There are no shortcuts. It’s going to be hard work. And sometimes you can’t do it on your own. Sometimes you have to listen to outsiders, invite them into your business, collaborate with people who are empathetic to both the technology on offer and your business.

And that’s the beauty of humans relying on machines. Because by nature, we can sit there and think about one conclusion, then pivot and come to another, in the complete absence of data. AI can’t do that. Because, also by nature, AI isn’t human. We make the rules. We create the future. But don’t be fooled into believing the technologies are more capable than they really are.

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Shift to sun, ski and suburbs gives Airbnb advantage over hotels

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Shift to sun, ski and suburbs gives Airbnb advantage over hotels 1

By Ankit Ajmera

(Reuters) – Airbnb’s quarterly results are likely to show the pandemic may have helped the home rental company lure leisure travelers away from big hotels during the global travel collapse of 2020.

Weary of being locked up in their homes for months, travelers hit the road and booked homes and cottages on Airbnb, while avoiding flights and downtown hotels, analysts said.

Airbnb accounted for 18% of the total U.S. lodging revenue in 2020, up from 11.5% in 2019, data from hotel analytics provider STR and vacation rental data company AirDNA showed.

It outperformed the hotel industry and online travel agents such as Expedia and Booking.com thanks to its greater offer of ‘sun, ski, and suburban’ rental homes, Cowen & Co analysts said.

Shift to sun, ski and suburbs gives Airbnb advantage over hotels 2

(Graphic: Airbnb grabs bigger share of U.S. lodging market in pandemic: https://graphics.reuters.com/AIRBNB-RESULTS/yxmpjxqdopr/chart.png)

For an interactive graphic, click here: https://tmsnrt.rs/3pPbQwH

THE CONTEXT

In 2019, about 90% of Airbnb’s bookings came from leisure travels compared with about 20%-30% for large hotels chains, including Marriott and Hilton, that rely on business travel to grow their profits.

“Unfortunately, the hotel operators do not have as much supply in locations where people are willing to travel,” said Jamie Lane, vice president of research at AirDNA.

Lane said with mass vaccinations later in the year, the share of alternative accommodations including Airbnb will drop before continuing to grow at 2%-3% per year once normal travel patterns return.

Shift to sun, ski and suburbs gives Airbnb advantage over hotels 3

(Graphic: Airbnb U.S. sales against top hotels: https://graphics.reuters.com/AIRBNB-RESULTS/gjnpwzkdbvw/chart.png)

For an interactive graphic, click here: https://tmsnrt.rs/3dPKvsd

THE FUNDAMENTALS

* The San Francisco-based company is expected to report gross bookings of $23.10 billion in 2020, down from about $38 billion a year earlier, according to the mean estimate of 12 analysts according to Refinitiv; gross bookings are seen rising by 50% in 2021.

* Analysts’ mean estimate for Airbnb’s full-year net loss is $3.52 billion, bigger than a loss of $674.3 million a year earlier. Full-year revenue is expected to drop 32% to $3.27 billion.

WALL STREET SENTIMENT

* Of 34 brokerages, 20 rate Airbnb’s stock “hold”, 12 “buy” or higher and two “sell” or lower

* Wall Street’s median 12-month price target for Airbnb is $156​, about 22% below its last closing price of $200.20.

* The company’s stock has nearly tripled since listing in December

Shift to sun, ski and suburbs gives Airbnb advantage over hotels 4

(Graphic: Airbnb’s stock has nearly tripled since debut: https://graphics.reuters.com/AIRBNB-RESULTS/jznpnoqrlvl/chart.png)

For an interactive graphic, click here: https://tmsnrt.rs/3dG2lOd

(Reporting by Ankit Ajmera in Bengaluru; Editing by Sweta Singh and Saumyadeb Chakrabarty)

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Britain to introduce greener gasoline at petrol stations by September

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Britain to introduce greener gasoline at petrol stations by September 5

LONDON (Reuters) – Britain is set to introduce E10 gasoline, a motor fuel blended with 10% renewable fuels, by September this year, a move that could cut annual CO2 emissions by 750,000 tonnes, the government announced on Thursday.

Current gasoline blends in Britain contain no more than 5% ethanol (E5), but the introduction of the E10 grade could cut transport emissions equivalent to removing 350,000 cars from the roads, the government said.

Bioethanol is made from materials including low-grade grains, sugars and waste wood.

“Using bioethanol in place of traditional petrol can reduce CO2 emissions and, therefore, increasing the ethanol content of petrol could help us meet our climate change targets,” the government said.

Farmers welcomed the move which should lead to a significant rise in demand for some crops.

“Not only will this mandate provide a boost for the UK wheat and sugar sectors, it will play an important and immediate role in delivering the government’s green agenda, especially as it may be some years before we are able to make a countrywide shift to fully electric vehicles,” the National Farmers Union said in a statement.

The government said that the E5 blend would remain available at pumps in the “Super” grade for older vehicles that may not be compatible with E10.

Britain consumed around 11.7 million tonnes of gasoline in 2019, according to the latest government data, accounting for about a third of overall road transport fuel use.

The move is a major boost to Britain’s biofuels producers with Vivergo Fuels announcing plans to reopen a bioethanol plant in Hull, north-eastern England, which has been closed since September 2018.

Vivergo Fuels, a unit of Associated British Foods PLC., said the plant would start manufacturing ethanol in early 2022.

The bioethanol plant can produce up to 420 million litres of bioethanol and use up to 1.1 million tonnes of feed wheat.

The government statement also said a bioethanol plant owned by Ensus in north-east England would increase production.

Ensus is a unit of CropEnergies.

“Ensus is even now running at a high capacity usage level. But naturally such a market expansion is very welcome in view of the plant’s future development,” said CropEnergies Chief Executive Stephan Meeder, adding he expected the British ethanol market to grow by up to 600,000 to 700,000 cubic metres per year.

(Reporting by Ahmad Ghaddar and Nigel Hunt, Additinal reporting by Michael Hogan; editing by David Evans and Jonathan Oatis)

 

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How can finance leaders regain a long-term planning focus amidst the Covid crisis?

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The coronavirus crisis is highlighting one of the most fundamental tensions that business leaders face:Do they pursue purpose or profit.

Vicky Wordsworth carved a reputation as a financial management specialist within private-equity backed businesses, before becoming CFO of the 158-year-old family-owned group of communications specialists – Bailie Group. Here, she considers the need for finance leaders to look beyond the turbulence of the pandemic and plan for the future…

The role of a finance leader is multifaceted. At the core, is a need to protect the balance sheet. However, in supporting the strategic progress of a business, there is increasingly a need for the profession to manage uncertainty to mitigate risks and leverage opportunities too.

This was true long before the onset of Covid-19. A Gartner guide from 2019 for example, highlighted that finance leaders were spending 25-50% of their time navigating unfamiliar situations, even then. And many years earlier, a Wall Street Journal article from 2014 cited advice from Deloitte which encouraged senior finance executives to drive corporate-wide, critical decision-making, that balances strategy, risk and finance in uncertain times.

So, while the health crisis has been a colossal blow to not just the world of commerce, but humanity on the whole, from a finance perspective, we do know what to do.

The onset of short-termism

Another Gartner report, issued in the earlier wave of the pandemic, warned CFOs against short-term and unsustainable cost cutting measures, and understandably so – knee-jerk financial decisions can have devastating longer-term consequences in terms of everything from supply chain security to the retention of valued talent.

However, for many organisations – particularly those without the luxury of healthy cash reserves – it very quickly became about survival. So yes, finance leaders may have been forced to take some rapid actions they would have rather not, but in most cases the decisions will not have been made recklessly. They will still have been considered, albeit at pace.

This agility is an important trait for finance professionals – crisis or no crisis. As a private equity CFO – my former role – the fluidity of decision making reflected the speed with which stakeholders wanted to drive up the value of the business and realise an ROI as quickly as possible. Here aggressive targets may have been the pressure points – not a global pandemic – but the need to act fast and think about a comparatively more short-term outlook, was key.

Moving the dial

For businesses that are a going concern, the objectives are very different to those associated with the PE model. So, the challenge for CFOs in these environments, is to regain a longer-term outlook, ASAP.

Admittedly this isn’t easy amidst so much economic turbulence, and some companies, sadly, are having to manage cash on a daily basis just to ensure staff get paid. But we know that pure short-termism can jeopardise the future financial integrity of businesses, while stifling innovation in the process.

At Bailie Group, for example, the purpose of our organisation is to invest in ideas and people which make a positive difference, and properties that inspire. We therefore have some bold ambitions – not to mention a sharp monthly reporting rigour – and we’re continually growing, both organically and via acquisition. But we naturally have a longer horizon too, which cannot – and will not – fall by the wayside because of Covid. The board needs to support the company, the people within it, and society, far into the future.

Vicky Wordsworth

Vicky Wordsworth

Looking inwardly to develop long-term plans

To do this, last March was all about looking inwardly to check that we were OK. We temporarily paused a commercial property overhaul for example, and some due diligence work on an impending acquisition also took a momentary back seat while we ensured our ‘house was in order’. Thankfully, in our case, we have a robust management structure and strong cash reserves from previous years’ reinvestment, so our position was stable. But this evaluation exercise was important nonetheless as we certainly didn’t have ‘global pandemic’ on our risk register.

We formed a Covid-19 committee who met every day to make rapid decisions, under pressure, for the benefit of the business, our people, and clients. But we were quick to look outwardly again – after only 1-2 months – to begin focusing on the medium term.

The pace with which this shift can take place will naturally vary from one organisation to the next, and it would be wrong to suggest it’s easy. But the most important point to note is that the adjustment is almost always essential, as soon as practicably possible, and it’s never too late to turn the dial.

Nurturing a vision

Personally, 2020 was less about long-term planning for Bailie Group, as we were already in the final year of a three-year plan. We’re fortunate, in that respect, to have previously had that vision, not to mention an operating model which doesn’t bog decision makers down in tactical constraints.

But even without these fortunate elements, and however prolonged this period of difficulty may feel, finance executives and their senior management teams can still be visionary.

Presuming organisations have taken advantage of all funding currently available, and undertaken sensible cost reviews to remove unnecessary spend, the next key action is to devise a plan inclusive of clear milestones, roles and responsibilities, to bring it to life. Love or loathe the term ‘pivot’, it is evidence that lateral thinking can ignite previously untapped revenue streams, and some businesses may be yet to fully realise their potential here.

We’re about to currently formalise our new three-year plan – purely because we’re at that part in our strategic cycle, not because of Covid. And while our tactical goals for the next 12 months naturally reflect the current climate, our purpose remains true, and so our strategy is largely unchanged as a result. We’re going to push boundaries and drive more positive change in our communities, because that’s why we exist. We’re still looking out for additional acquisition opportunities, having completed on one in October 2020, and we have recently announced a substantial innovation fund to ignite the fire in the bellies of our progressive Group companies.

We’ve earmarked investment for wellbeing too, as the health of our people will prove crucial to our longer-term success, and training and development is currently in sharp focus. We’re keen to ensure our colleagues feel engaged, fulfilled and supported now, in readiness for us returning to some degree of BAU, in the future. In fact, this has been an essential part of our budget setting.

We also feel prepared, which is important. Nobody can say with any real certainty what the future holds for the economy. If confidence starts to build, particularly in H2, we will see GDP rise and market opportunities open up once again. We have to maintain that optimism, but we’re continually looking outwardly for cues that influence our ongoing decision making, and advice from peers who also want British business to succeed.

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