I by IMD Magazine - Preview Issue V

#05 March 2022

MASTERS OF THE METAVERSE GLOBAL v LOCAL

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ETHICAL INNOVATORS

INVENTORY OF CHANGE

EMOTIONAL SKILLS

CHAIN REACTIONS VIRTUAL ARCHITECTURE

TEAM ENGAGEMENT

OLD SCHOOL DISRUPTORS

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[ Foreword ]

Cooperation in a time of conflict

W

Illustration: Jörn Kaspuhl

ar has returned to Europe, the kind of war the continent has not seen in over 80 years.

Russia’s brutal attack on Ukraine has led to unspeakable suffering. Yet amidst the onslaught of armor and artillery, we can see clearly the difference that leadership makes – the seemingly superhuman steadfastness of Volodymyr Zelenskyy, Ukraine’s president, has given hope to his people and inspired a degree of unity across governments, businesses, and civil society in the West that few would have thought possible. The IMD community stands with Ukraine. We condemn this war. And we know this view is shared by our many friends in Russia, who overwhelmingly reject their government’s criminal conduct.

When we picked supply chains as the focus of this fifth issue of I by IMD, it was in part because the pandemic has reminded us just how many things that we take for granted depend on the seamless functioning in the background of highly sophisticated systems spanning the globe. For instance, in their contributions, Ralf W. Seifert and Richard Markoff spotlight the link between inventory management and inflation, and John Elkington and Louise Kjellerup Roper remind us that a single containership stuck in the Suez Canal, just over a year ago, led to $70 billion of unexpected costs for business. This centrality of supply chains also awards them a pivotal role in the quest for greater sustainability and more responsible business operations, as Elkington and Kjellerup Roper, as well as Ralf W. Seifert, Yara Kayyali Elalem and Işik Biçer show.

All of this leads Vivek Ramachandran, CEO of Serai, a Hong Kong-based digital B2B platform, to conclude that the data traveling up and down the supply chain is now as important as the physical goods themselves.

While the experience of the past two years has made many governments and businesses wary of their dependence on overseas suppliers, it is also true that global interdependence provides perhaps the best hope of ending the war in Ukraine by exacting an unbearably high cost on the Russian economy via coordinated sanctions. Interdependence cuts both ways. Supply chains, in short, are about a lot more than just business.

Thankfully, you will find plenty in this issue of I by IMD that inspires and gives hope – from spirited leadership to improve lives in Africa via insurance, to evidence of the pivotal role of women on boards, to a step-by-step game plan for bolstering your organization’s Diversity, Equity and Inclusion (DEI) performance while remaining mindful of local sensibilities. Plus, my IMD colleague Albrecht Enders and his co-authors remind us why good sleep is so important, especially for high performers, even when – or perhaps particularly when – there is so much to keep us up at night.

David Bach, Dean of Innovation at IMD

March 2022 • I by IMD 1

[ CONTENTS ] 04 [ In good company ]

Henry Ford set the template for industrial architecture in the 20th century, but today’s “virtual” landscape needs to be designed in a very different way, writes Jerry Davis.

07 [ Wellbeing ]

Lack of sleep can seriously affect your decision making as well as your health.

Read our essential guide on how to wake up refreshed for the working day.

42 7 Supply chains are being disrupted around the world by disease and conflict. Over 14 pages, specialists in the field offer expert analysis and guidance on where we are and where we need to go.

12 E-commerce, sharp increases in the cost of living, and over-stocking are all driving change in the way inventory is being managed. A fresh approach is needed.

14 Responsible, resilient and regen-

erative supply chains are urgently required in order to navigate through turbulent times.

17 Cutting lead times, incentivizing

local production and repurposing surplus stock could have a hugely beneficial impact on the environment.

20 Overwhelmed by supply chain

problems? Our detailed visual guide will help you to manage your way out of a crisis.

2 I by IMD • March 2022

22 Eric Baudier, former CEO of Tetra Pak’s supply chain operations, takes stock of the good and bad initiatives of the past 20 years.

24 Vivek Ramachandran, head of

the B2B platform Serai, says companies will need effective tools to track every step in their supply chain.

58

In an era of corporate scandals, hiring and maintaining an ethical workforce is vital. A multi-pronged approach to finding “good” people is needed.

32 [ Human resources ]

How good are you at reading others? The latest research can help you test and improve your abilities.

34 [ Innovation ]

Long-established companies can often find themselves overtaken by newcomers in the marketplace.

But decisive action can help them to become the disruptors rather than the disrupted.

37 [ Brain circuits ]

There are many factors to consider when building a successful team. In the first in a series, Ina Toegel offers advice on how to get it right.

38 [ Leadership ]

Being a leader in turbulent times requires adaptability.

Here we offer the five essential skills needed, and a way to evaluate your performance.

42 [ CEO dialogue ]

Takeshi Niinami, CEO of Japanese drinks giant Suntory, explains how he approached the cultural challenges of taking over the iconic American brand Jim Beam.

Photos: Wikipedia, Allianz, Simon Dawson/Bloomberg via Getty Images, Daniele Buso via Unsplash

[ Chain reactions ]

26 [ Hiring strategy ]

45 [ In the mind’s eye ]

In any negotiation, it is first vital to build a relationship with the person sitting across the table, writes George Kohlrieser.

46 [ Global equity ]

Values and laws vary worldwide. Here is a framework to understand local context while pushing for greater equity and inclusion.

53 [ Leaders of tomorrow ]

Hiring new talent? A survey by the Global Network of Advanced Management will help you to identify the key concerns of business students.

54 [ Leadership ]

Companies with more women on boards recall dangerous products far more quickly.

Our experts look at the latest figures.

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12

54

66 [ In my view ]

Solving strategic problems can be tricky.

Michael Watkins offers a six-step guide to increasing team engagement.

In a huge financial gamble, the euro was introduced 20 years ago. Arturo Bris assesses the overall impact of the single currency.

58 [ New frontiers ]

68 [ The forecaster ]

56 [ The leading edge ] Photos: www.oculus.com, Shutterstock, Adidas, MyriamZilles via Unsplash

17

For historical reasons, insurance take-up in Africa is low, but CEO of Allianz Africa, Delphine Traoré, sees a huge opportunity for growth. engagement.

Tech giants are struggling for mastery in the battle for the metaverse.

Howard Yu takes an in-depth look at the likely winners and losers.

61 [ Build a better board ]

Good governance is vital when it comes to improving the environmental and social aspects of a company.

Exploring the vocabulary used in annual reports can reveal whether or not an organization is well-governed.

72 [ Preview ]

46

Join us in June when I by IMD will investigate the nature of power and how to wield it responsibly.

March 2022 • I by IMD 3

[ In good company ]

How best to design the virtual architecture of startups?

Henry Ford's Model T factory in Detroit set the blueprint for manufacturing in the 20th century, but today’s enterprises require a very different set of raw materials, writes Jerry Davis

One reason for this flood of startups is that information and communication technologies (ICTs) have radically reduced the costs of starting a business. As I have described in previous columns, ICTs allow founders essentially to “rent” factories and distribution channels rather than buying them, and to rely on contractors for direct work. Markets have displaced traditional organizations in large swaths of the economy. The parts for an enterprise are like Lego bricks that one can snap together quickly and snap apart almost as easily. But what form will these new enterprises take? Will they enable innovation and variety and enrich their communities, or will they push us toward a precarious world of unstable work and popups for everything – like plastic bricks left on the floor that are excruciating to step on? The answer, I would argue, depends on how we teach design, and how we center humane values in the ways we create enterprises. We have been here before, and we can learn lessons from the past.

Raw materials and architecture

Detroit has a strong claim to being the birthplace of the 20th century.

The mass production methods of the auto industry spread from Henry Ford's Model T factory to nearly every country and industry on Earth, 4 I by IMD • March 2022

changing how we produce goods, grow food, educate children, fight wars, and heal the sick.

And while Henry Ford receives most of the credit for refining the moving assembly line, his architect Albert Kahn was perhaps equally crucial for his innovations in factory architecture.

The Model T, the car that changed the world, was conceived in a small corner workspace in Ford's Piquette Avenue plant in Detroit. The 1904 facility is tiny, constructed of lumber and brick, with a design suited to a 19th century New England textile mill. Parts arrived in batches from suppliers in the neighborhood, and teams of men assembled each car in separate bays.

Completed vehicles were lowered one by one in an elevator to the yard below, where they could be loaded onto trains for distribution.

For the Model T to achieve its world-changing potential required new kinds of architecture, both organizational and physical. And while Ford and his engineers schemed about mass production, Albert Kahn designed the buildings where it could happen, drawing on newly available raw materials.

Kahn's first factory for Ford was the Highland Park plant, an astonishing facility where Ford's moving assembly line was born. It was vast and unshakably strong: buildings from four to six stories connected by ramps, acres of concrete flooring held up by massive concrete pillars, and so much window area the initial building was called a "crystal palace". Such construction would have been unthinkable a decade before but producing thousands of cars a day on a moving assembly line required a different kind of architecture. Innovations in materials such as machine-rolled plate glass, structural steel, and particularly reinforced concrete (with steel bars inside) opened new possibilities for designers.

It happened that Albert Kahn's brother was one of the creators of cost-effective reinforced concrete, and Albert was a visionary innovator who had some practice with these materials in designing the Packard Plant. If you

Illustration: Jörn Kaspuhl

T

he pandemic has been catastrophic for people and communities around the world. And while Big Tech has flourished in an online-first world, achieving unheard-of valuations, small businesses have faced existential challenges. In spite of this, one surprising trend stands out: the rate of new business startups is booming. According to the US Census Bureau, the number of new business applications increased to over 4 million in 2020 and more than five million in 2021, jumping by over 50% compared to prior years. This is especially surprising because, by some measures, the rate of business startups in the US has been in long-term decline since the late 1970s.

have ever seen a factory from the first half of the 20th century (concrete floors, ceilings and pillars; endless windows; heavy-duty ramps from floor to floor) you have Albert Kahn to thank for its design. His Highland Park plant was visited by industrialists from around the world, and its innovations were emulated from Fiat's facility in Turin to the hundreds of Kahn-designed factories in the new Soviet Union. All a tribute to Detroit's genius for design.

The new raw materials for business

We are at a similar turning point today when it comes to the design of enterprise, as innovations in information and communication technologies, from the Web to the smartphone, enable new and surprising designs for organizing business.

Photo: Wikipedia

What are the raw materials of enterprise today – the analogs of structural steel, reinforced concrete, and plate glass in 1910? To create a business normally requires a mix of capital, labor, supplies, distribution, and methods of management, ideally along with a legal form. The digital revolution has changed how business organizers can access all these core materials in fundamental ways over the past generation. In particular, it is often cheaper for entrepreneurs to rely on outside markets for inputs rather than "making" them internally. For access to capital this takes the form of financialization, in which markets displace other sources of funding such as banks. Since the JOBS Act of 2012, online crowdfunding platforms have established themselves as a vibrant new format for raising capital. And vendors such as payment processors often find that the data they gather allows them to get into the financing business, as they have far more fine-grained information about prospective borrowers than banks. The Web has enabled enterprises to shop the world for suppliers, from generic factories to providers of accounting, payroll, and IT infrastructure – a process I call "Nikefication" after the company that designs and markets sneakers but contracts out their production.

Amazon and its ilk have transformed the distribution of tangible goods, enabling almost anyone to sell online. With Fulfillment By Amazon,

sellers can distribute products that they have never seen or touched.

Ubiquitous quick-delivery services like DoorDash and Gopuff enable even more rapid distribution from ghost kitchens and dark stores. And for books, music, software, and video content, the Web enables vendors to sell into a global marketplace at minimal cost.

Labor can now be recruited and managed virtually by the task, from getting a ride across town to virtual physician housecalls. Management-by-algorithm enables "bossless" work, from mind-numbing microtasks paid by the penny on MTurk to specialized legal work. Many businesses now declare themselves "remote first", foregoing the cost of physical facilities entirely.

‘Imagine explaining to yourself in 2015 a TikTok-based virtual restaurant enabled by ghost kitchens’ In light of these other changes, it is increasingly feasible to create an enterprise that looks more like a webpage than an organization, with management taking the form of algos that call on resources and coordinate outputs.

Lastly, the available legal strictures for enterprise have exploded, from Public Benefit Corporations to e-Estonia. If you're going to incorporate a virtual business online, there is little reason to be provincial when legal vendors around the globe offer a kaleidoscope of options. New technologies, particularly the smartphone, have radically expanded the range of possibilities for organizing enterprise – for better or worse. I have written previously about the unnerving changes in the restaurant industry, where ghost kitchens and smartphone-enabled delivery ser- »

Ford’s Highland Park plant, designed by Albert Kahn, inspired industrialists around the world. But business infrastructure in the 21st century is no longer defined by concrete and glass

March 2022 • I by IMD 5

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