Dialogue Q3 2024

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Q3 2024

Connective intelligence Developing leaders for the AI era

Maximum velocity The firms setting new standards for speed

The New Business Context for Leaders

Where we work The evolution of hybrid working

Fusion strategy How industry can win on digital

Q3 2024

CONCISE ADVICE BIG LAB

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£9.99 / $14.95 conciseadvicelab.com

The nature revolution

The nature revolution Business’s new relationship with the natural world

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24/04/2024 10:15

THE HUMAN QUALITIES ESSENTIAL TO LEADERSHIP EXCELLENCE

HOW LEADERS AND EXECUTIVES CAN IMPROVE THEIR TEAM/ GROUP DYNAMICS

DR MARIA KATSAROU-MAKIN is the founder of the Leadership Psychology Institute and has over 20 years of experience in organizational development and executive coaching. She is a Chartered Psychologist and has done extensive work and research in team dynamics.

“This concise and thoughtful volume masterfully demonstrates the power of the leader who shows up mindfully, with clarity, calmness, compassion and courage.

It condenses a huge body of wisdom into an original and accessible framework, with tools and practical advice to improve both leadership skill and life fulfilment.”

MEGAN REITZ Professor of Leadership and Dialogue at Hult International Business School

“This is an immensely valuable book for anyone who would like to understand what good leadership behaviours look like and would like to improve their own leadership.”

“Sally-Anne’s book captures an important nuance of leadership through storytelling and blends her experience with a wealth of practical guidance.”

PAUL (PABLO) ETTINGER Chairman of TALENTBANQ and one of the founding team of Caffe Nero

LARISSA HARRISON Global HR Director

“…an intellectual tour de force through many of the primary sources, theories and research about effective teams…[the author] even sensitively examines the dark side of teams and frequent pathology. It is guaranteed to spark ideas about how to lead and infect your teams” RICHARD BOYATZIS

PhD, Distinguished University Professor, Case Western Reserve University, and co-author of bestselling Primal Leadership Available through all good book retailers

Available through all good book retailers Print edition: ISBN 978-1-912555-75-8 | E-book edition: ISBN 978-1-911671-26-8 Published by LID Publishing (www.lidpublishing.com)

Print edition: ISBN 978-1-911687-46-7 | E-book edition: ISBN 978-1-911687-47-4 Published by LID Publishing (www.lidpublishing.com)

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PATRICK WOODMAN EDITOR’S LETTER

Repaying our debts

“N

ature officially becomes a musician,” ran the headline. The story, reported by the BBC in April, was sparked by Sounds Right, an initiative by the Museum for the United Nations – UN Live. It has worked with major streaming platforms including Spotify to officially designate Nature as an artist. Now, when the sounds of the natural world are sampled for a track, Nature can be given appropriate credit – thereby earning royalties that will be distributed to environmental causes. It is hoped that the scheme will raise $40 million in its first four years.

This imaginative scheme is to be applauded. Yet music is hardly the only sector that needs a creative rethink of its relationship with nature. The truth is that humanity has run up a colossal debt with Nature over many decades. For years, we failed to account for the environmental costs of doing business. Such externalities could be comfortably ignored. But no longer.

The short-sightedness of that old approach is ever more apparent. From the forests to the oceans, natural systems are under unprecedented strain – yet there is some cause for optimism. A shift in attitudes is under way, as leaders increasingly recognize the impact of their companies’ activities.

ESG and sustainability have moved firmly into the mainstream of global business thinking. More and more leaders are re-thinking the relationship between business and Nature.

That shift is at the heart of this issue’s Focus.

Not only are organizations looking to reduce their impact: they are looking to find ways to become nature positive, as Wayne E Mayer explains (p16).

As they do, they can find inspiration for innovation to drive growth, while reducing costs and mitigating risks, writes Chris Wedding (p20).

Of course, making more sustainable decisions means that leaders and investors need better metrics about business’s impact on nature. That is the focus of the Taskforce on Nature-related Financial Disclosures, as Prasad Gollakota explains (p26). Gemma Butler, meanwhile, examines the

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challenge for marketers, who have a critical role to play in communicating nature-positive changes – not least helping consumers to adapt their behavior and engage with new products and services (p22).

Elsewhere, Dialogue speaks to the remarkable Ayanda Mafuleka about her career as a finance professional and the work being done to inspire and empower a new generation of women leaders in South Africa (p30). We also report from Duke CE’s latest brilliant Lead with Her conference (p82).

Vijay Govindarajan and Venkat Venkatraman explore how the industrial sector is being disrupted by digital technology, and explain the strategic shift needed for today’s market leaders to stay ahead of the pack (p72). Herman Vantrappen and Frederic Wirtz argue for the rehabilitation of organizational design – explaining why it matters and how leaders can succeed (p78). And Suzanne de Janasz, Joy Schneer and Nicholas Beutell reflect on what we’ve learned about home and hybrid working – and why leaders should prioritize connection when they make changes to working patterns (p44).

Indeed, it is our sense of connection – with the natural world, and with each other – that might prove most important in engaging people in the shift to a sustainable economic model. Speaking for the launch of the Sounds Right scheme, musician Brian Eno – of Roxy Music fame – expressed his optimism. “I feel that we’re in the middle of an enormous revolution,” he reflected.

The organizations developing nature-positive ways of operating are at the forefront of that revolution. More power to them.

Leaders need better metrics about business’s impact on nature

Patrick Woodman is editor of Dialogue

25/04/2024 13:12

Q3 2024

Dialogue is brought to you by: LID Business Media Editor Patrick Woodman patrick.woodman@lidbusinessmedia.com Art director Kate Harkus Chief subeditor Luisa Cheshire Editor-at-large Ben Walker Assistant editor Kirsten Levermore Publisher Martin Liu Associate publisher Alec Egan For advertising sales: alec.egan@lidbusinessmedia.com Duke Corporate Education Chief marketing officer Christine Robers Publisher Published in the United Kingdom by LID Business Media Ltd, LABS House (5.12), 15-19 Bloomsbury Way, London WC1A 2TH

Inside...

AGENDA

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Editor’s letter Patrick Woodman on business’s debt to nature

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Contributors Featured authors

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Dialogue Digest The issue’s key themes and topics at a glance

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Good business Sharmla Chetty on why women are great deal-makers

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Upfront Vishal Patel on the power of habits and how they can be changed

Disclaimer Copyright 2024 by Duke Corporate Education and LID Business Media Ltd. All rights reserved. Material may not be reproduced without permission of the publisher. While we take care to ensure that editorial is accurate, independent, objective and relevant for the readers, Dialogue accepts no liability for reader dissatisfaction rising from the content of this publication. The opinions expressed or advice given are the views of individual authors and do not necessarily represent the views of Dialogue. This journal is also supported by Knowledge Partners, including Duke Corporate Education as Lead Knowledge Partner. Whenever an author is related to a Knowledge Partner it will be noted as such. Dialogue takes every effort to credit photographers but we cannot guarantee every published use of an image will have the contributor’s name.

If you believe we have omitted a credit for your image, please email the editor.

LEADERSHIP

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Connective intelligence How can learning and development teams maximize the impact of existing leadership programs for the age of AI?

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Challenge the status quo Find your purpose to thrive in an era of disruption

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Cover image Getty ISSN 2053-4361 Printed by Paragon www.paragon.world

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The big interview Ayanda Mafuleka, chief executive of Fasset

Dialogue is the official journal of Duke Corporate Education

You empower a woman; you empower a nation!

The emotional dimension Why our primal emotions can be a source of unity when we are confronted by cultural divides

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Prioritize connection Leaders need to reassess the costs and benefits of home and hybrid models of work

Ayanda Mafuleka

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FOCUS The nature-positive business

INSIGHT

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News nation South Korea and the scandals damaging its biggest businesses

A positive impact Inspire growth by rethinking the relationship between business and the natural world

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Money trees From rainforests to boardrooms: the intersection between nature and finance is evolving fast

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Comms challenge Storytelling is key to marketing sustainability

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Circular economy Circularity means less carbon, more profit

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Nature’s taskforce The new framework driving reporting on nature-related impacts

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Review Lead with Her : Inclusive Futures

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Big ideas Perry Timms on Hoshin Kanri

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Last word Sanyin Siang on keeping good company

INNOVATION

FINANCE

MARKETING

STRATEGY

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Vivek Wadhwa on innovation Tech gurus should be a force for good

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Machines with meaning AI must enhance societal values

Artificial integrity emphasizes the development of AI systems that uphold human values

Joe Perfetti on finance Ask these three questions before investing in a company’s shares Maximum velocity Catch up with the winners from the latest research on financial cycle time in the US and Europe

Giles Lury on marketing Don’t overlook the case for functionality when building a brand AI revolution Follow these five steps to capitalize on the power of AI in marketing

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Selling sustainability Why marketers have a key role to play in protecting the planet

Rita Gunther McGrath on strategy Failure is as unfashionable as ever. And that’s a problem Enter the datagraph How to unlock value with data and AI

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Reshaping business Poor organizational design results in lost time. How can CEOs lead successful redesigns?

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Hamilton Mann, p50

Beyond CX Changing consumer expectations mean that marketers have to think about more than customer experience

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Digital detachment How leaders can articulate their firm’s digital ambition and build alignment

Dialogue Review

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25/04/2024 16:57

TRANSFORMING BANKS IN A NEW ECONOMIC LANDSCAPE Traditional banks have a future.

But they must accept that they have a different future. If bank leaders fail to make radical changes, they will perish. The time for those changes is now.

In the face of fast-moving, low-cost disruptors, bank leaders must acquire the ability to balance the short- and longterm, to reconcile equally the need to exploit existing markets and experiment with new ones – banks and their leaders must become ambidextrous.

IGNACIO GARCIA ALVES is the Global CEO, PHILIPPE DE BACKER is Managing Partner and Global Practice Leader of Financial Services, and JUAN GONZALEZ is a Partner at ARTHUR D. LITTLE, one of the world’s leading management consulting firms.

Available through all good book retailers Print edition: ISBN 978-1-911671-48-0 | E-book edition: ISBN 978-1-911671-49-7 Published by LID Publishing (www.lidpublishing.com)

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Contributors Wayne E Mayer Chief executive of When Everything Matters, a strategic sustainability consultant. Mayer guides multinational companies to transform sustainability into profitability. He is affiliate faculty at Duke University’s Nicholas School of the Environment, a senior fellow at the Duke Center for International Development, and an educator for Duke Corporate Education’s ESG Leadership Academy.

Focus p16

Chris Wedding

Prasad Gollakota

Executive in residence at the Fuqua School of Business at Duke University, where he teaches energy finance, management consulting, climate tech and ESG investing.

A former private equity investor, startup founder, investment banker and executive coach, Dr Wedding is the founder of Entrepreneurs for Impact (EFI), North America’s largest climate CEO peer group, where he also produces a weekly podcast and newsletter. Focus p20

Chief content officer at xUnlocked, a B-Corp best known for its flagship learning platform Sustainability Unlocked, serving global clients including Santander, Airbus and the London Stock Exchange. Gollakota previously spent 20 years in financial services including at UBS, where he was managing director within the combined debt and equity capital markets business. Focus p26

Venkat Venkatraman

Vijay ‘VG’ Govindarajan

Gemma Butler

The David J McGrath Jr professor of management at the Questrom School of Business, Boston University. He has previously taught at the Sloan School of Management at the Massachusetts Institute of Technology. Venkatraman is considered one of the foremost authorities on how companies develop strategies to win with digital technologies. Strategy p72

Widely regarded as one of the world’s leading experts on strategy and innovation, Govindarajan is Coxe distinguished professor and a Dartmouth-wide chair at Tuck School of Business at Dartmouth College. He is a former Marvin Bower Fellow at Harvard Business School, and author of the bestselling books Reverse Innovation and Three-Box Solution. Strategy p72

Co-founder and director of Can Marketing Save The Planet and co-host of the podcast series by the same name. A sustainable marketing consultant and two-times published author, Butler focuses on championing sustainable marketing and leadership, working across industries for a more sustainable future. Focus p22

Join the Dialogue Direct comments, queries and suggestions to media@lidbusinessmedia.com

Dialoguereview.com Dialogue Review

Read the digital issue of Dialogue and browse the full archive of back issues dialoguereview.com/download-dialogue-journal-archive/

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THE ISSUE AT A GLANCE

Dialogue Digest A quick look at the key themes and topics covered in this issue

Information and communication

Leaders need better information about their impact on nature.

We explain how the Taskforce on Nature-related Financial Disclosures framework could help (p26), and explore how marketers can help reshape consumer behavior (p22).

Nature-positive leadership

Industrial strategy

Leading businesses are reappraising the relationship between their activities and the natural world – and discovering how becoming nature-positive can boost innovation and growth, writes Wayne E Mayer (p16). Leaders can draw on nature to both grow revenue and reduce costs and risks, explains Chris Wedding (p20). As they do so, the concept of the circular economy comes to the fore, says Nic Gorini (p24).

The industrial sector has been less disrupted by the digital revolution than many others – but that is all set to change, warn Vijay Govindarajan and Venkat Venkatraman. Here’s how industrial firms can fight back, unlocking new value through data and AI (p72).

Images Shutterstock

The AI human-centric future

As co-piloted teams comprising both humans and AI become commonplace, leaders need to understand the three dimensions of connective intelligence, write Duke CE’s David Welsh and Kirsten Bischoff (p38). Leaders also need to carefully consider how AI affects human and societal values, says Hamilton Mann (p50). And with AI becoming more widely adopted, Rajkumar Venkatesan sets out five steps to capitalize on its power in marketing (p64).

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GOOD BUSINESS SHARMLA CHETTY

The truth about X and Y The legend of men being better negotiators than women ignores a crucial fact

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id you hear the one about men being better negotiators? You probably have, because the notion is so pervasive that it has become received wisdom: if you want to squeeze the best from a deal, send in a man. Yet, like so many generalized beliefs, scratch under the surface and you find the flaw. I was struck by the closing keynote speech at this year’s Lead with Her conference in London. Professor Ashleigh Shelby Rosette electrified the room with the real story: men might squeeze deals harder, but women tend to get more deals.

“One of the central functions of any leader is to negotiate,” said Rosette, the James Vincent Professor of Leadership at Duke University’s Fuqua School of Business, to delegates at Lead with Her. “And if you’re going to hold a leadership role, you must be perceived as able to negotiate. Existing research suggests that men may be better negotiators relative to women.”

The behaviors that often predict success when negotiating business deals are those associated with men: aggression, competitiveness and self-focus.

They are the opposite of female stereotypes: being relationship-oriented, being warm and being caring, Rosette said. “Research has demonstrated that masculine traits help negotiators get better deals and claim more value,” she said. “But the problem with much of this research is that it leaves out an exceptionally important consideration: the value of not getting a deal.”

When Rosette and her co-authors – Anyi Ma at Wisconsin School of Business and Rebecca Ponce de Leon at Columbia Business School – examined all deal-making scenarios, they unearthed a crucial, little-known truth. Men tended to extract more price value – more margin – in a deal that was made. But here is the rub: “Women were less likely to walk away empty-handed; women struck a deal more often than their male counterparts,” explained Rosette.

Organizations face polycrisis.

Solving these problems requires businesses to broker highstakes deals. Who do you want in the negotiating room?

Sharmla Chetty is chief executive of Duke Corporate Education

The very high cost to organizations in deals falling through was rarely quantified by the body of evidence, much of which focuses only on outcomes where deals were agreed, ignoring those that failed. “Much of the research that says men are better negotiators than women rests on the assumption of actually getting a deal,” Rosette told Lead with Her. “But there can be a cost to not getting a deal – sometimes a very high cost. Most research omits the impasses.”

The consequences of the more masculine makeor-break approach to deal-making can be huge. In organizational scenarios where the value of making an agreement is high and the cost of failing is also high, stereotypically feminine approaches are more likely to succeed. “We found that when the stakes are high – and the alternative is weak – women are the better negotiators,” said Rosette.

Organizations face polycrisis: geopolitical conflict, socioeconomic division and environmental threat. Solving these problems requires businesses and governments worldwide to broker high-stakes deals. Who do you want in the negotiating room?

A 2015 analysis of 40 peace processes since the end of the Cold War revealed a strong correlation, Rosette revealed. “When women exerted substantial influence on peace negotiations, the likelihood of reaching an agreement significantly increased. In cases where women wielded considerable influence, an agreement was nearly always achieved. When they couldn’t afford to lose, they put women at the table – and they got it done.”

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THE POWER OF BUSINESS

FOR THE COMMON GOOD OF SOCIETY

“Sakurada reminds us of what is required to build something both lasting and significant.”

– ALEXANDER C. KARP Co-founder and CEO of Palantir Technologies Inc.

“Drawing on thought-provoking lessons in collaboration, confidence and creativity, Bushido Capitalism is essential reading for post-pandemic leaders.”

– DANIEL PINK New York Times bestselling author of When, Drive, and A Whole New Mind.

Available through all good book retailers Print edition: ISBN 978-1-911671-58-9 | E-book edition: ISBN 978-1-911671-59-6 Published by LID Publishing (www.lidpublishing.com)

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UPFRONT VISHAL PATEL

Break the habit Leading the future is possible, but you must unshackle yourself from the present

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n Czechia, they have a proverb: “A habit is a shirt made of iron.” The idiom captures an uncomfortable reality about human lives. We shape our habits, thereafter they shape us. By midlife, much of what we do is so ingrained that, like an iron shirt, it becomes near impossible to cast off.

Yet when the business journalist Charles Duhigg investigated human behavior for his 2012 book The Power of Habit, he discovered a curious truth.

Habits, as iron-clad as they are, can be broken – if you know how.

Duhigg revealed that every human habit consists of three elements: cue, routine and reward. These apply to even the most prosaic of functions. Take our morning ritual. Waking is a cue for many leaders to crave a cup of coffee. The routine is their walking to the kitchen, finding a cup, brewing and pouring the drink. The reward is the caffeine hit they receive. Soon after drinking they are no longer bleary-eyed and languid, but alert and motivated. Thus, the cue-routinereward creates a powerful ‘habit loop’ that is enduring, and self-sustaining.

Few of us wish to abolish our cherished morning coffee, so there is little need to break that habit loop. Yet problems arise when there are habits of which we should – or must – be rid.

Leading for the future demands such uncoupling. If we, like old dogs, fail to learn new tricks, we are doomed. What’s next is alien to what has been. The AI age is dawning. And, like the advent of any other epoch, there are traps that must be avoided. The pitfalls with AI are manifold.

But they fall broadly into three categories.

The first is factual. AI optimizes all information, regardless of whether true

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or false. Hence the phenomenon of so-called AI ‘hallucinations’, which, in plain business English, are called ‘errors.’

This proliferation of disinformation and misinformation requires enhanced critical-thinking capacity among leaders and teams.

The second is procedural. Change is hard. People resist progress because they fear change or worry that AI tools might render them obsolete. As this column noted in Dialogue Q2 2024, people faced with change frequently flee or freeze, rather than calmly assess how they can survive, or thrive, in the coming shift.

The third pitfall is occupational.

Business’s recruitment needs have

AI – the most powerful tool of the next age – ought not to be feared, but must be prepared for

changed fundamentally. We traditionally hired for competency – to execute the jobs of the present. Yet, as AI makes things obsolete, we need to recruit instead for curiosity – to explore the prospects of the future.

Questioning purported facts, embracing change and hiring the curious over the competent demand the breaking of habits. Duhigg offers salvation: by tweaking one or more of the three elements in the loop, outmoded, ineffective, habits can be purged; and contemporary, successful, customs adopted. Imagine you want to transform recruitment in your organization, to build teams that can win in the AI era. Change the cue. Next time a team member leaves, don’t immediately advertise their job as it is today. Take the opportunity to reimagine your future needs.

Once the recruitment process is running, change the routine. Rather than asking candidates how they did something (competency), ask them to imagine hypothetical, so far unencountered, scenarios. Inquire how they would go about exploring their causes, opportunities, and threats (curiosity).

Finally, change the reward. Measure your recruitment success less on how new employees execute routine tasks, but how effectively they explore new trends and unearth novel opportunities. This mindset is imperative to winning not just the future but the present, by reframing work not just as ‘jobs to be done’, but as a forum for ideas. Rewarding experimentation will strengthen the link between the routine and positive outcomes, reinforcing your new, effective, habit loop.

Generative AI is the most powerful tool of the next age. It ought not be feared; but it must be prepared for.

Duhigg shows how that preparation is possible.

The Power of Habit gives the lie to the Czech proverb. Our habits weigh heavy like iron, shackling us to the past. But they can be refashioned into silks that catch the wind of the future.

Vishal Patel is president of global markets at Duke Corporate Education

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THIS ISSUE’S FOCUS

The nature revolution

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usiness and the natural world have sometimes seemed worlds apart. In an economic model driven by the pursuit of profit, nature was a mere afterthought. Yet for leading organizations, that one-dimensional worldview has long been obsolete. The interface between business and Earth’s complex natural systems has become a mainstream concern.

In this issue of Dialogue we explore the unfolding nature revolution. We look at how business can become nature-positive. We consider how an improved appreciation of nature points to new opportunities for growth, and ways for business to manage their nature-related risks. We explore how marketers can shape new narratives that support changes in customer behavior. We consider the role of innovation in the circular economy. And we take an in-depth look at the Taskforce on Nature-related Financial Disclosures, examining how its framework will help shape sustainable business decisions.

Read on

Articles 16 The nature-positive business 20 From rainforests to boardrooms 22 Marketing sustainability 24 The drive for circularity 26 A framework for change

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FOCUS COMMERCE AND THE ENVIRONMENT

developed the collective awareness that societies and economies tie to and depend on nature and biodiversity.) In any case, the concepts of naturepositive business and net-zero strategies came ready to nourish new ideas.

Reduced footprint, increased handprint

The nature-positive business Reappraising the relationship between economic activity and the natural world can inspire innovation and power growth Writing Wayne E Mayer

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ears ago, in the lowland plains of Venezuela, I worked on a ranch and wildlife refuge. The ranch owners planned to set aside a portion of the land for ecotourism. In nature-based tourism, an obvious relationship exists between biodiversity and business. Now, more than 30 years later, the economic relationship between nature and business extends beyond tourism. An increasing number of major companies stride toward carbon net zero and nature-positive solutions – designing processes and operations that help repair and restore ecosystems. The two business models fit together since restored ecosystems capture carbon; yet achieving net zero challenges how we produce, consume, and travel. These challenges, ensconced in the United Nations’ Sustainable Development Goals (SDGs), inspire companies to innovate, create value, and build competitive advantage.

Early ecotourism endeavors took a lead role in nature-positive business. (Maybe that’s where we

Companies both impact and depend on ecosystems

Many companies now seek opportunities to reduce their negative footprints and increase their positive impact – their social and environmental ‘handprints.’ In 2023, S&P Global Sustainable1 published research entitled ‘How the world’s largest companies depend on nature and biodiversity.’

It declared that 85% of companies in the S&P Global 1200 – an index that covers the 1,200 largest companies across North America, Europe, Asia, Australia and Latin America – have “a significant dependency on nature across their direct operations.” It added that the larger S&P Global Broad Market Index (BMI), comprising about 14,000 companies across developed and emerging markets, shows a similar relationship to nature: “68% of companies in this index have a significant dependency on nature across their direct operations,” found the analysts.

These percentages sound high only if you try to separate the built environment from the natural world. Many products depend directly or indirectly on ecosystem services. When it rains, for example, it rains over an entire area with no distinction between built and natural. The rainwater offers value to the environment and to the businesses that depend on water. Ecosystems ‘serve’ people and businesses in many ways. They provide habitats for wildlife, which enable ecotourism companies to thrive. Many enterprises depend on forest ecosystems for timber and wood fiber, and, less directly, to absorb and filter rainwater, sequester carbon, control soil erosion, and maintain genetic diversity. River systems channel stormwater runoff, spin turbines for electricity, and offer places for outdoor recreation. Wetlands, especially along coastlines, mitigate floods and provide protection from severe storms. Companies both impact and depend on ecosystems. Understanding the relationship between business and the environment empowers business leaders to mitigate risks and create opportunities.

Product and process design In ecotourism’s early days, all the integrated conservation and development projects functioned as works-in-progress; they appeared disconnected from the financial realm of Wall Street. The pioneers of the time held high aspirations for conservation finance but didn’t always meet them, and their ideas sometimes took a shellacking by the establishment.

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FOCUS COMMERCE AND THE ENVIRONMENT

Nevertheless, business started to grasp the interconnection between natural resources (forestlands, wetlands, water, fisheries, minerals) and financial investments. Modern companies leverage this awareness to design products and processes.

Subaru, for example, manufactures its products in zero-waste-to-landfill production plants. Since 2004, its assembly plant at Lafayette, Indiana, has avoided sending waste to landfill. To achieve this goal, the plant brought in an outside waste management company to inventory what they disposed of, where, and how. The company’s underlying Kaizen, or continuous improvement, philosophy stimulated circular thinking. Soon, defective plastic polymer bumpers found their way to a grinder and then back to the molding machine. Employees dumped food waste from the cafeteria into a composter. Later, they used the organic compost to enrich the soil in their home gardens. The factory’s focus on waste reduction and environmental stewardship reduced risks and saved the facility $1-2 million a year, and the National Wildlife Federation recognized Subaru’s Indiana plant as a backyard wildlife habitat, enhancing its reputational value.

Unilever, under CEO Paul Polman’s leadership (2009-2019), pursued a Sustainable Living Plan to rediscover its purpose. During the process, Unilever achieved great financial growth and reduced Scope 1 and 2 greenhouse gas (GHG) emissions from their operations. They aimed to cut food waste in half by 2025 and engaged employees in companywide food-waste warrior programs. Like Subaru, Unilever understood that both environmental and financial success required employee participation.

When companies look at their work through a sustainability lens, they unleash innovation and uncover potential value

Searching for nature-positive solutions emerged as a powerful productivity program. In addition, Unilever committed to protecting and regenerating land, forests and oceans. The company took a nature-positive approach to sustainability, which resulted in higher productivity and higher stock prices.

In 2023, Salesforce, the customer relationship management (CRM) software company, published its Nature Positive Strategy to “articulate our company’s relationship with nature and how we plan to play our part in realizing our commitment to a net zero, nature positive future rooted in people and climate justice.” The strategy aims to “reduce environmental impacts, restore ecosystems at scale, and accelerate the nature-positive movement.” Salesforce aims to inspire other companies to integrate the natural world into their environment and climate strategies, and the firm is helping its customer base navigate their own netzero, nature-positive journeys. It makes Salesforce a leader in the nature-positive economy.

Companies like Subaru and Unilever use sustainability to reduce waste and haul-away fees and reduce energy and water consumption, which saves them money. Savvy companies also use social and environmental considerations to create efficient processes and increase profit margins. But what about the revenue side? How do business leaders use the natural world to drive innovation?

Internalizing environmental externalities drives innovation When companies look at their work through a sustainability lens, they unleash innovation and uncover potential value. Nature-positive thinking leads to new ways of thinking about business and biodiversity. Biodiversity protection ceases to be a cost of operations and becomes a source of inspiration and innovation. It leads to lucrative ways to do things. Once leaders understand how businesses depend on ecosystem services, they look to plants and animals for inspiration. Biomimicry – design modeled on biological structures and processes – adopts nature-inspired ideas to solve business challenges and protect biodiversity.

Creative companies leverage biomimicry to discover nature-positive ways to accomplish goals and create more value.

Janine Benyus, co-founder of the Biomimicry Institute, explains that designers study nature to discover ways to mimic form, processes, or whole ecosystems. This ties into the circular economy. As Benyus puts it: “There should be no such thing as a byproduct 18

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Images Shutterstock; Kate Harkus

THE BRIEFING

in a manufacturing facility that goes to landfill.”

Subaru mimicked an ecosystem’s circularity by approaching its production plants from a naturebased, ‘waste-is-food’ perspective. In nature, waste from one process becomes food for another, in an ongoing cycle. An animal dies, decomposers feed on it and produce waste, which nourishes the soil, which enables vegetables to grow, which feed the same kind of animals as the one that died. Similarly, Subaru transformed its production process into a circle, where the waste from one process transformed into ‘food’ for another. You can discover all sorts of new opportunities when you bring a biologist to the table.

In a similar example, Biome Renewables identified inefficiencies in wind turbines and wondered how to improve them. The inefficiencies come from an airflow problem at the blade roots known as “root leakage.” This pulls potential power away from the blades and creates turbulence. To solve it, according to Biome Renewables, they “turned to two of the natural world’s most effective ways of moving through fluids: the kingfisher and the maple seed.”

A kingfisher’s beak pierces water with minimal disturbance, cutting through water at a steady rate.

When maple seeds fall from a tree, they rotate like a helicopter’s rotor blades, descending through a pattern of least resistance. Biome Renewables designed its PowerCone wind-turbine retrofit based on principles found in the maple leaf and the kingfisher. Like the kingfisher’s beak, it directs wind “from the root to outer spans of the blade and channels it smoothly onto its surface,” while its blades mimic the energy efficiency of the maple seed. The effect is to increase the turbine’s capacity factor, maximizing its performance.

Another example brings us to coastal ecosystems, which protect wetlands and provide a buffer from storms. Coastal developments often disrupt or displace these ecosystems. To help stabilize coastal environments, Tel Aviv-based Econcrete created a low-carbon marine concrete that mimics nature and creates habitats for marine life, aiming to “build a future where marine ecosystems and infrastructure work symbiotically for the benefit of the environment.” The company designed its material for urban waterfronts, ports and offshore energy platforms, using a chemical balance and textured surfaces that support marine life such as oysters, corals and barnacles. These organisms bind to the Econcrete, strengthening the built structures, in a process the firm calls bioprotection. Its molds even create ecological niches, resulting in an uplift in marine biodiversity.

Nature positive approaches are also driving innovation in fields such as fashion. Bolt Threads, a biomaterials company, offers an innovative

Deeply dependent on nature Businesses increasingly recognize their dependencies on the natural world. Driven by a desire to reduce their negative environmental footprints and enhance their positive ‘handprint’, companies are integrating sustainability into their core strategies, focusing on the dual goals of carbon net-zero and nature-positive strategies that restore and strengthen natural systems.

Reducing costs, increasing revenue Achieving nature-positive strategies can both reduce costs and drive innovation that leads to increased revenue. Applying a sustainability lens to product and process design can unleash innovation and uncover potential value, including through biomimicry, using nature-inspired ideas to solve business challenges.

approach to materials for the fashion industry.

Working with brands including Adidas, Kering, Lululemon and Stella McCartney, the firm sources materials from the natural world and then seeks ways to turn them into low-impact – but fashionable – attire and accessories. It developed Mylo, a flexible material that resembles animal leather but is made from mushroom mycelium, grown in a vertical farm powered by renewable energy. The material is sold to luxury brands to make everything from wallets and handbags, to yoga mats and sneakers. Bolt Threads also makes Microsilk, a fiber based on the silk proteins spun by spiders. The company produces the silk proteins, spins them into fibers, and uses them to make fabrics and garments. The process creates low environmental impacts and generates a product that has the potential to biodegrade.

The power of nature-positive ideas

Dr Wayne E Mayer is CEO of When Everything Matters, and affiliate faculty in the Environmental Sciences and Policy Division at the Nicholas School of the Environment, Duke University

Nature-positive strategy transforms the way work gets done. It requires a suite of competencies including systems thinking, design thinking and circularity. It drives people leadership practices that engage employees throughout the enterprise, from management to health and safety, engineering, product design, supply-chain management, logistics and sales. And it thrives on a nature-positive mindset, where business leaders turn to nature for inspiration and use social and environmental issues to drive innovation, growth and profits.

One of the fascinating things about the early days of a mindset shift, such as that toward nature-positive business and biomimicry, is seeing the sparks of emerging ideas. When they catch fire, they can endure for generations.

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FOCUS FOREST PRESERVATION

From rainforests to boardrooms The intersection between the natural world and business finance is evolving quickly Writing Chris Wedding

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ver 25 years ago, I was doing research in the rainforests of Costa Rica and Panama.

I studied the impacts of deforestation, marveled at the jungle’s cornucopia, and avoided getting dengue fever or malaria. I thought, “Success. I’m on my path to changing the world.”

But I was wrong. Presenting to and writing for purely academic audiences was not enough.

I began a new path, working in environmental private equity during my PhD program. This experience helped me understand the power of capital and entrepreneurship to generate market-rate financial returns, while also tackling environmental challenges. I subsequently continued to move away from my environmental science roots – or so it seemed – as I worked in impact investment banking, coaching climate tech CEOs, and teaching energy finance and ESG investing at Duke University.

Until recently, it was unimaginable that my two disparate worlds – forest preservation and private capital markets – would overlap. Yet they are now increasingly aligned.

Recent headlines highlight the importance of understanding the intersection between nature and finance. Analysis by the World Economic Forum and PwC finds that half of the world’s GDP is “moderately or highly dependent on nature.”

Analysis finds that half of the world’s GDP is moderately or highly dependent on nature

In early 2024, it was reported that more than 300 organizations from 46 countries have committed to additional voluntary corporate reporting via the new nature-based reporting framework, the Taskforce on Nature-related Financial Disclosures (TNFD) [see page 26].

There are two primary ways for companies to capitalize on these natural capital trends: growing revenue, and reducing costs and risks.

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Grow revenue Research from Bain suggests that the share of revenue from circular products and services by 2030 could grow 30% from its 2021 levels. The old model – “take, make, and dispose” – assumes a linear throughput from supply chains to customers to landfills. However, new thinking is advancing industry towards a circular economy.

The European Parliament defines circularity well: “A model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible.” Companies that are implementing circular models well include outdoor clothing brand Patagonia, whose “Worn Wear” program facilitates the repair, reuse and recycling of customer clothing. That generates premium pricing – and fiercely loyal customers.

Sports brand Adidas has developed a “Three Loop Strategy,” which includes recycling plastic waste, designing footwear to be remade, and using renewable resources and natural processes, creating passionate supporters and new product innovation.

And furniture firm Ikea operates a “Buy Back & Resell” program, allowing customers to exchange old Ikea furniture for in-store credit, earning kudos from a range of stakeholders and repeat buyers.

These trends are also increasingly apparent among venture capital-funded startups. Many have made circular economy alignment core to their strategy, and at least 11 such startups have become unicorns – valued at over $1 billion – since 2020.

These include companies such as BackMarket, which deals in refurbished electronics; Apeel, which produces biomaterials to reduce food waste; Wallapop, a used goods marketplace; Grover, a technology rental platform; and Vinted, the fashion reselling platform.

But this is just the tip of the iceberg. The Ellen MacArthur Foundation’s Circular Startup Index tracks hundreds of sustainable material innovators working towards similar goals. One of the key ideas that is helping numerous companies grow the top line and capture market share by working with nature is the application of biomimicry. The consultancy Biomimicry 3.8 defines biomimicry as “learning from and then emulating nature’s forms, processes and ecosystems to create

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more sustainable designs.” Biomimetic product innovation includes examples such as Greenpod Labs, which produces packaging sachets that reduce food waste by mimicking plant-inspired extracts.

Velcro has developed non-chemical adhesive, influenced by the seeds of the burdock plant, while Soliome has produced non-toxic sunscreen inspired by compounds found in the lens of the human eye.

about $300 million at risk – while noting that mitigating those forest-related risks might take just $17 million. (Those numbers are significant, yet they pale in comparison to the Boston Consulting Group’s estimate of the total value of the world’s forests, of $150 trillion: approximately double the value of global stock markets.)

Third, in 2023, 140 countries signed the Glasgow Leaders’ Declaration on Forests and Land at COP26, which aims to “reduce forest loss and degradation, while promoting an inclusive rural transformation”.

The move towards more responsible supply chains is about more than just managing public relations and stakeholder risks. Research by Deloitte and the Circle Economy Foundation indicates that while 100 billion tons of virgin materials are extracted from the Earth annually, only 7% of the materials consumed by the global economy are secondary. Waste is usually a sign of inefficiency, an enemy of well-managed companies: there is clearly much room for improvement in cost reductions via a more circular approach.

Image Shutterstock; Kate Harkus

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Reduce costs and risks According to the Journal of Accountancy, in 2022, 98% of companies globally reported on corporate sustainability efforts, and 69% obtained thirdparty assurance for some of their sustainability disclosures. This trend has been particularly evident over the last three years for forestryrelated corporate impacts. Three key developments stand out. First was the launch of TNFD in 2021, encouraging disclosure and accountability on its four pillars including governance, strategy, risk and impact management.

Secondly, in 2022, over 1,000 large companies – a number that has grown three-fold in just five years – reported on their deforestation management via CDP (originally the Carbon Disclosure Project), a global NGO supported by 680 financial institutions with more than $130 trillion in assets that tracks 10,000+ companies disclosing their environmental data. CDP’s report, “The Forest Transition: from Risk to Resilience,” notes that, on average, reporting companies had

The impetus for new ideas Chris Wedding is an executive in residence at the Fuqua School of Business, Duke University

Forests are not just for hiking. They represent an impetus to rethink product design, lifetime value and corporate risks. From current and future investors to customers and employees, your stakeholders are watching to see how you value these precious assets.

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FOCUS THE COMMUNICATIONS CHALLENGE

Marketing sustainability It is a communications challenge like no other.

Storytelling skills will be essential for businesses to explain how their sustainability initiatives impact the natural world Writing Gemma Butler

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ublic awareness of climate change is undoubtedly increasing. People are becoming more concerned too, as reports from the likes of Porter Novelli, Kantar and Savanta reveal. It is also one of the top three concerns for employees, as Deloitte’s 2023 Gen Z and Millennial Survey highlighted. That makes sustainability one of the biggest conversations on the business agenda today.

However, we find ourselves facing a significant communications challenge. As green claims have increased, we have seen the rise of greenwashing – leading to new regulations and tighter guidelines.

Negative headlines are driving overwhelm, social media is spreading misinformation and sustainability terms – well, aren’t they for the scientists and sustainability team? Sir David Attenborough stated on his very first Instagram

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post in 2020 that, “Saving our planet is now a communications challenge. We know what to do, we just need the will.”

Marketing is well placed to use its skillsets in communication and storytelling to raise awareness, educate and motivate in ways that change mindsets and shape new behaviors – the outcome that is ultimately required to create sustainable markets and a more sustainable future.

To achieve this, three things should be taken into consideration.

In the drive to become more sustainable, marketing can – and must – be a force for good

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It has to start with collaboration While marketing strategies traditionally ladder up and support the organization’s commercial objectives around revenue and growth, there is also a need for them to align with and support the organization’s sustainability objectives.

Marketing teams and sustainability teams need to work together if sustainable marketing strategies are to be effective. It is imperative for marketers to be aware of organizational commitments to sustainability and what sits within that agenda, whether it is decarbonization targets, biodiversity and regeneration projects, or activities around circularity and waste reduction.

Marketing also needs to commit to staying up to date with the changing operating environment, evolving regulations, and the already-shifting macro-level behaviors evident across society.

These areas can inform and shape communication plans that go beyond just products and services.

Understanding them can allow marketers to unlock the ‘why’ in your future stories, bringing them to life and making them more relatable and engaging.

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Avoid talking about everything and nothing Sustainability is a broad and complex subject – and that can lead to content and communications becoming generic and repetitive. When building sustainable marketing strategies, it is important that you don’t try to cover everything at the same time: this can lead to overwhelm and your audience switching off.

In many ways, sustainability and why your organization exists – its purpose – should go hand in hand. And just as we need to address the balance between people, planet and profit, the question of how we balance our communications and narrative is equally important. Ask yourself: are you broadcasting or sharing? Are you talking about everything and nothing? Where does the focus need to be to allow you to meet both your commercial and sustainability objectives?

Are you considering both internal and external communications?

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Words and language are everything While awareness and concern about sustainability and business’s impact on the natural world is growing amongst key stakeholders, understanding remains low. The use of sustainability terms such as net zero, carbon neutral, circular economy or nature-positive mean very little to most people – which leaves them unable to relate to the discussion. A 2021 survey conducted by dairy brand Yeo Valley Organic in the UK highlighted that a majority of people find that sustainabilityrelated jargon makes it harder to determine what is being communicated – and that prevents people from engaging, even when they want to.

Equally damaging is the broadcasting of bold statements and pledges that give the impression that business will solve sustainability problems for us when the challenge is far greater. Words and language can either slow down progress or speed it up, so it’s vital that marketing connects the dots carefully, making sustainability accessible and relatable to people and their everyday lives.

For example, instead of broadcasting one-way communications about circularity, marketers can look at starting conversations around their new ‘return and refill’ initiative in a way that prioritizes the benefits for customers, based on the things they care about – like ease of use, the cost savings, and the fact that by engaging in the initiative, they can become part of the solution. The use of inclusive, action-orientated language can be both educational and motivational.

Wrapping a service around your products is a great way to keep the conversation going, and talking about progress through collaboration can lead to more-engaged communities and increased customer loyalty – which supports both commercial and sustainability objectives.

Speak with care

Gemma Butler is the author of Can Marketing Save The Planet? 101 Practical Ways to Use Sustainable Marketing as a Force for Good (Bloomsbury)

When it comes to talking about sustainability and business’s impact on the natural world, balance is key. Educating stakeholders about the challenges is one thing, but the need to talk about solutions and what we can do about them is equally – if not more – important.

As marketing grows its own awareness and understanding, it needs to be able to meet its audiences where they are. It is essential to use words and language that go beyond transactional relationships based purely on selling products, to develop an approach that looks at the long term and drives ongoing positive impact.

In the drive for business to become more sustainable, marketing can – and must – be a force for good. Sometimes the most effective way to communicate about sustainability is to avoid using the ‘s’-word altogether.

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FOCUS CIRCULAR ECONOMY

The drive for circularity Here’s why the circular economy means less carbon and more profit Writing Nic Gorini

entrepreneurship for the rest of my life. Fortyfour years on, I hold that memory very dearly as a symbol of evolution.

The ingenious act of turning waste into innovation epitomizes the essence of circularity.

Where others saw mere trash, one individual envisioned possibility – the transformation of discarded resources into valuable products. This concept not only celebrates human creativity and optimism, but also holds profound implications for the economy. By repurposing materials, entrepreneurs can slash production costs, boost profit margins and contribute to resource efficiency, thereby mitigating the strain on our natural ecosystems.

A journey in circularity In 2006, I started a venture with some friends, repurposing PVC billboards into accessories such as wallets, aprons and bags – following in the wake of the successful German start-up, Freitag. Our initiative demonstrated the viability of circular business models, leveraging waste materials to engage consumers and drive profitability – although operational challenges led to the

I

n 1980, as a child, I was walking on the beautiful island of Mauritius with my mother and grandfather when we stumbled upon a group of kids crafting cars out of discarded soft drinks cans. Little did I know that this chance encounter would shape my perspective on 24

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venture’s closure in 2010. It was to serve as a catalyst, propelling me to establish Spin Ventures as a venture capital firm and venture accelerator with a singular focus on circularity. My journey reflects the evolution of the wider discussion on circularity, within the entrepreneurial and business communities, and at a policy level.

Underpinning that evolution is a revolution in materials that is being driven by regenerative agriculture, biomaterials and recycled resources.

These are creating incredible opportunities, although discerning truly sustainable solutions requires rigorous evaluation. Superficial claims of environmental friendliness may mask hidden environmental costs, necessitating a holistic approach to life cycle assessment.

Yet the benefits can be real, and substantial.

Consider the shift from traditional manufacturing to distributed production facilitated by technology.

Now imagine a plastic toy. Most plastic companies today manufacture toys in regions with lower resources, labor and logistics costs, leading to a strong marketing and promotional push to drive profitability. However, today’s technology enables a different approach. Imagine your children engaging with an interactive story on your iPad, then sending an order to purchase one of the characters. With advancements in technology, you can pick a plastic bottle, recycle it, shred it in your own building, and access a 3D printing hub – whether your own or a shared one on a distributed manufacturing platform.

This process results in minimal emissions, delivering a more engaging product at the same or lower price, and with higher profitability. This exemplifies the most important message for leaders: circularity equals less carbon and more profit.

While challenges abound in transitioning to circular supply chains, technological innovation and data accessibility offer promising solutions.

Investment in training and innovation is crucial to navigating this transformative journey toward a sustainable future aligned with economic growth.

Embracing circularity is not merely an environmental imperative, but a strategic opportunity for businesses to thrive in a rapidly evolving landscape. Leaders who embrace this evolutionary challenge stand to unlock new avenues of growth, profitability and sustainability.

The nexus of circularity, profitability and environmental stewardship represents a defining opportunity for businesses in the 21st century

A defining opportunity

Leading the pack

Image Shutterstock

In the realm of consumer electronics, consider the plastic toy industry. While traditional manufacturing methods contribute to environmental degradation, startups like Supernovas, a circular design company, offer sustainable alternatives. By prioritizing recycled materials and innovative production processes, Supernovas reduces carbon emissions while maintaining profitability.

Similarly, Sparxell leads the charge in sustainable pigments for coloring products. Their biodegradable color platform utilizes the physical structures found in nature, eliminating the need for toxic chemicals. With Sparxell’s innovative approach, companies can achieve vibrant colors without harming the environment.

In parallel with corporate initiatives, government regulations play a crucial role in incentivizing and enforcing sustainable practices.

In the European Union, mandates such as the Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive (widely known as CSRD and CS3D) compel organizations to prioritize environmental and social responsibility. Data infrastructure, powered by generative AI, facilitates transparency and traceability throughout supply chains, empowering consumers to make informed choices based on environmental impact.

In addition, the EU’s Circular Economy Action Plan sets out ambitious targets for waste reduction, recycling, and resource efficiency, signaling a paradigm shift towards circularity at the policy level. And global initiatives such as the Sustainable Development Goals provide an overarching framework for businesses to align their strategies with broader societal and environmental objectives.

The convergence of technological innovation, regulatory pressure, and consumer demand is certain to accelerate the adoption of circular business models. Companies that embrace this shift proactively will not only future-proof their operations but also position themselves as leaders in sustainability and innovation.

Real-world examples abound of companies that are embracing sustainable practices and reaping the rewards. One is Refresh Global, a team of worldclass designers, scientists and business innovators tackling one of the biggest environmental challenges of our time: textile waste. The firm turns it into new, planet-friendly raw materials.

Nic Gorini is general partner at Spin Ventures

The nexus of circularity, profitability and environmental stewardship represents a defining opportunity for businesses in the 21st century. By reimagining supply chains, harnessing technology and prioritizing environmental responsibility, companies can chart a course toward a more resilient, equitable, and prosperous future for all stakeholders.

As leaders, we are tasked with navigating the complexities of the modern economy. As we do, let us seize this moment to forge a path towards a truly circular and sustainable world.

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FOCUS ADOPTING THE TNFD FRAMEWORK

by the Taskforce on Nature-related Financial Disclosures (TNFD) will be central to that effort.

Nature in crisis

A framework for change More sustainable decisions are impossible without better information about business’s impact on nature – which is precisely what the Taskforce on Nature-related Financial Disclosures set out to encourage Writing Prasad Gollakota

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t the heart of the challenge of transitioning to a low-carbon economy lies an unaddressed market failure: we have not been paying for negative externalities related to the environment.

The failure to price the resources we use has undermined the long-term sustainability of the global economy and the environment. When corporations fail to bear the costs associated with their environmental impacts, they have little incentive to reduce emissions, protect biodiversity, or invest in sustainable practices.

The result has been over-consumption of natural resources, pollution, and habitat destruction, resulting in loss of biodiversity – and exacerbating climate change. The failure to internalize these costs distorts market signals, perpetuates environmental degradation, and poses significant risks to ecosystems, human health and future generations.

Yet in the years ahead, this dismal cycle could be disrupted as businesses and investors gain greater access to reliable and evidence-based information through the development of corporate reporting on nature. The framework developed

The global situation is dire. Just look at global wildlife populations: according to the World Wide Fund for Nature (WWF), they have plummeted by 69% since 1970. The rich biodiversity that sustains our planet is in crisis, putting every species at risk – including us.

Climate and biodiversity are inextricably linked. According to the UN, warming of 1.5 degrees Celsius will result in 4% of mammals losing half their habitat. At 2 C, 8% of mammals will lose half their habitat, and at 3 C, a shocking 41% of mammals will lose half their habitat. And this is just above ground. Below the ocean surface, things will be even worse. In the past 150 years, live coral reefs have already halved due to current warming levels. However, at 1.5 C, it is expected that 70-90% of coral reefs will have vanished; at 2 C we’ll reach a point of no return, with 99% of coral reefs expected to have vanished. If they go, over 1 million species that rely on them will disappear.

But it’s not all bad news. Biodiversity is not just a victim of climate change, it’s also part of the solution. Biodiversity contributes significantly to the Earth’s capacity to sequester carbon: by protecting and enhancing biodiversity we can develop a practical and effective strategy for combating climate change. Indeed, science has identified several significant carbon sequesters beyond trees. Recent studies suggest that the oceans are the real lungs of the planet. Phytoplankton – microscopic organisms – capture enormous quantities of carbon dioxide, at a level equivalent to four Amazon forests. Closer to shore, seagrasses, salt marshes, mangroves and kelp also serve as significant carbon sinks.

Global support to protect biodiversity was cemented in 2022, when an agreement known as the Kunming-Montreal Global Biodiversity Framework was established. It committed 196 nations to stopping and reversing nature loss by 2030 – a goal that may be operationalized by business adoption of the TNFD framework in the coming years.

TNFD: a welcome step forward

The rich biodiversity that sustains our planet is in crisis, putting every species at risk – including us

Announced in 2020, the TNFD is a science-based and government-backed global initiative that focuses on how to address organizations’ reliance on nature. Its final recommendations, published in September 2023, offer a risk management and disclosure framework to help companies and governments understand their nature-related dependencies, impacts, risks and opportunities.

It is intended to support a shift in financial flows

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away from nature-negative outcomes towards nature-positive outcomes. The TNFD Framework is built around the same four pillars previously developed by the Task Force on Climate-Related Financial Disclosures (TCFD), so the structure will be familiar to many.

Images Shutterstock

Governance To address the lack of formal governance around nature-related issues, organizations can start by integrating these concerns into role descriptions for sustainability officers and directors. Board upskilling is crucial.

Organizations should provide internal briefings, engage in dialogue with relevant teams and consult external experts to integrate nature-related issues into decision-making. They should also consider stakeholder engagement, particularly with indigenous peoples, local communities and other affected stakeholders, to understand their concerns and priorities.

Start by integrating nature-related issues into role descriptions for sustainability officers and directors

with nature; evaluate dependencies and impacts; assess material risks and opportunities; and prepare to respond and report. Utilizing multiple datasets builds comprehensive understanding, while adjusting materiality thresholds ensures manageable analysis. Defining short-, medium-, and long-term time horizons, aligned with organizational incentives and broader policy goals like the Global Biodiversity Framework, is crucial.

Lastly, organizations should assess the strategic implications of findings on their business model, value chain and financial planning.

Risk and impact management Organizations should assess their risks and manage their impact through methods including scenario analysis, identifying relevant approaches and understanding their limitations. Heat mapping, akin to climate risk assessment, can also be useful, especially for financial institutions. For scenario analysis, begin iteratively, focusing initially on specific business units or regions; use the Leap approach and the TNFD Tools Catalogue. Next, identify and adjust risk-management processes and organizational structures to address nature-related issues. This

Strategy Organizations should identify potentially nature-related issues in their operations and value chains using TNFD’s suggested ‘Leap’ approach.

This comprises four steps: locate your interface 27

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FOCUS ADOPTING THE TNFD FRAMEWORK

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Deepen your understanding of the fundamentals of nature To ensure effective engagement with naturerelated financial disclosures, organizations must grasp fundamental concepts. This includes comprehending nature’s components, biodiversity’s significance, and nature-related dependencies, impacts, risks and opportunities. While climaterelated language systems have matured, a similar framework for nature remains underdeveloped.

Utilize external resources, including the TNFD itself, to facilitate learning and capacity building.

includes reviewing risk processes, organizational structures, roles, responsibilities and tools.

Metrics and targets To initiate nature-related disclosure metrics, organizations should grasp TNFD’s core and additional metrics, expanding over time to include forward-looking indicators.

For effective target-setting, adopt the methods of the Science Based Targets Network (SBTN).

Start by setting targets for material impact drivers relevant to organizational activities. Consider how to monitor and assess progress and potential interactions with climate-related targets. Overall, organizations must progressively integrate naturerelated metrics and targets into their reporting and management practices to address biodiversity loss and nature degradation effectively.

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Make the business case for nature and gain buy-in from the board and management To build a business case for addressing naturerelated issues, consider the economic value, risk management needs, commercial opportunities, and long-term viability of your business models.

Start by addressing a subset of nature-related issues already on the radar, like deforestation or pollution. Engage with the board and management to secure commitment to adopt the TNFD recommendations, ensuring sufficient and timely information provision, and empower relevant teams with internal mandates to implement them, as part of a broader nature strategy.

What makes TNFD different?

There are several sustainability reporting initiatives aiming to enhance disclosure and transparency: they include the Global Reporting Initiative (GRI), the CDP (formerly the Carbon Disclosure Project), and the International Sustainability Standards Board (ISSB) to name a few. Each have nuances that leaders need to understand before committing to a specific approach.

The GRI is broader than the TNFD. It offers a range of standards covering a wide range of ESG topics, including environmental issues, labor practices, human rights and ethics. It allows organizations to communicate their impact on critical sustainability issues to a variety of stakeholders, not just investors.

The CDP, on the other hand, narrows the focus primarily to environmental aspects, especially carbon emissions, water security and deforestation.

It provides a platform for disclosing environmental impacts, with a data-driven approach that facilitates targeted insights into specific areas of environmental concern.

Finally, the ISSB aims to streamline global sustainability reporting, developing standards focusing on material sustainability-related information necessary for investors. While the ISSB covers a broad range of sustainability issues, its approach is centered on financial materiality.

The ISSB also recently assumed responsibility for monitoring the progress of companies’ climaterelated disclosures, taking over from the nowdisbanded TCFD.

3 Consider the economic value, risk management needs, commercial opportunities, and long-term viability of your business models

Start with what you have, leveraging other work Organizations can start aligning with TNFD recommendations by leveraging existing TCFD and ISSB-aligned disclosures. Many organizations are surprised to discover the amount of naturerelated data that is already collected but not shared across departments – so the TNFD’s Leap approach suggests beginning with an internal scan of relevant data sources. New information may also be needed of course. Using the Leap approach, organizations can prioritize material nature-related issues, even with limited data. This approach acknowledges the varying significance of naturerelated issues across sectors, biomes and regions.

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Plan for progression over time and communicate your plans and approach Organizations should develop a progression plan, focusing initially on specific areas like business lines or geographies before expanding. The plan should set clear goals with timelines or conditions for expansion, considering resource needs and alignment with other sustainability efforts.

Communicating these plans publicly helps manage user expectations and demonstrates a commitment to increasing disclosure over time. Organizations can also leverage existing TCFD-aligned disclosures and integrate climate and nature-related disclosures for a more comprehensive approach.

Where to get started?

Implementing the TNFD recommendations is no small task and will require significant resources. To help with this, the TNFD has published a quickstart guide to adoption, suggesting the following seven steps to get started.

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Encourage collective progress through engagement Organizations should recognize the interconnected nature of progress. Therefore, encouraging stakeholders to enhance their understanding and assessment of nature-related issues is crucial. This involves establishing dialogues, focusing on areas of mutual concern and promoting transparency along value chains. Financial institutions in particular can leverage public communication to inspire TNFDaligned disclosure among clients and investees.

A system for monitoring and evaluating progress is key to effective adoption

UK, have signaled their support and intention to consider adopting the TNFD Framework through domestic regulation. At a regional level, the EU has also integrated aspects of TNFD guidance into its regulatory reporting regime – specifically, the Corporate Sustainability Reporting Directive (CSRD), which requires in-scope entities to provide corporate disclosures in line with the European Sustainability Reporting Standards. Until mandatory TNFD reporting is incorporated into regulation, the TNFD has committed to tracking voluntary market adoption on an annual basis and will publish an annual status update report commencing in 2024.

More than 300 organizations have already signaled their intention to adopt the TNFD recommendations. These early adopters are likely to see several benefits, such as enhanced risk management and resilience, competitive advantage through sustainability leadership, and innovation and new market opportunities. One of those early adopters is the Swedish furniture chain Ikea. The company has highlighted that it views nature-related concerns as a pivotal strategic business matter, and it believes the guidance and recommendations provided by the TNFD will aid a more thorough evaluation of risks and opportunities. The company has recognized that its future is intimately connected to its current efforts to tackle these issues.

Don’t let data be the enemy of progress

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Monitor and evaluate your adoption progress A system for monitoring and evaluating progress is key to effective adoption. Build an internal roadmap and regularly assess adherence to the plan. Consider creating board and management dashboards to track nature-related issues, investor and regulator interests and internal progress.

Providing regular progress evaluation, potentially through annual reporting, allows organizations to update their plans, communicate actions to stakeholders, and make necessary adjustments for continued alignment with TNFD guidelines.

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Register your intention to adopt the TNFD recommendations Formally registering your intention to adopt the TNFD recommendations signals your organization’s commitment to nature-related issues. This public declaration can enhance your company’s reputation, attract like-minded stakeholders and differentiate your business in the marketplace.

The early adopters

Prasad Gollakota is chief content officer at xUnlocked

Adoption of the TNFD is currently voluntary – but a number of national governments, including the

For more on the TNFD, see tnfd.global

One of the most important aspects of nature-related reporting is, of course, data. There are no universally agreed metrics for quantifying nature-related impacts. Could this lead to greenwashing? Some concern about this risk may be valid, yet it should not impede progress in disclosing and reporting on nature-related risks and opportunities. Transparency and accountability are essential for addressing environmental challenges effectively. By establishing clear guidelines, rigorous verification processes and independent certifications, organizations can mitigate the risk of greenwashing while advancing genuine efforts towards sustainability. For example, organizations can consider getting their naturerelated targets independently certified under the framework for science-based nature targets being developed by the SBTN. Embracing the TNFD framework encourages responsible corporate behavior, fosters trust among stakeholders, and drives meaningful action to preserve biodiversity and mitigate environmental impacts. Rather than succumbing to fear, leaders should focus on building genuine commitment, robust reporting mechanisms, and continuous improvement to navigate the complexities of nature-related disclosures responsibly.

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INTERVIEW AYANDA MAFULEKA

The ascent of a woman Ayanda Mafuleka is giving 1,000 women the opportunity of a lifetime Writing Ben Walker

O

ne day in 1996, Ayanda Mafuleka looked up from her school desk and saw division. At the rear of the classroom, sat the boys; at the front, the girls. “We were in the same class,” she recalls. “But we could not engage with each other in the classroom. I could understand the separate sitting arrangement in church. But in the classroom, where we are supposed to derive learnings from one another, even in the absence of the teacher in class, we were not allowed to engage. I found it bizarre.”

The 16-year-old Mafuleka thought speaking out “might get me in trouble”, but she felt the fear and did it anyway. The school heard her, abolished the no-mixing rule in the classroom – and made her head girl the following year. It proved an early milestone in a life devoted to leading change and confronting discord.

It is a wonder that Mafuleka, now chief executive officer of Financial Accounting Services Seta (Fasset) – one of South Africa’s Sector Education and Training Authorities – attended the school at all. She was born when her mother was just 19, and her father 21. Largely because of her parents’ youth, she was brought up by her maternal grandmother. “My grandmother was not learned,” Mafuleka recalls. Yet although illiterate, her mother’s mother was wise, and thoughtful. She asked her granddaughter to read to her every day from the Bible and, by Mafuleka’s early childhood,

I would read business magazines where they would profile young ladies who looked like me.

I aspired to be like them

the girl from the Umlazi township was fully literate, an early reader with academic promise. Her grandmother was a gifted seamstress, fashioning and selling dresses. But accounts were beyond her. Mafuleka stepped up. “I became her informal bookkeeper and debt collector,” she says, “so that her customers would never see that she couldn’t read and write.” Mafuleka’s youthful literacy became precocious numeracy. The autodidactic child was to become a self-made woman.

Mama Maureen At 14, Mafuleka went to live with her other grandmother, on her father’s side. “By then my maternal grandmother was elderly and could not afford taking me to a better school, she said: ‘I’m old now. This is a girl growing up in a township.

Things are tough. She’s a teenager and it’s going to be hard to protect her in this environment. I want to hand her over to you now.’” Her paternal grandmother, herself an educated woman and a professional nurse, enrolled Mafuleka into a Catholic boarding school. “That was the best decision she ever made,” Mafuleka says. “That is where I learned to be independent.”

The head-girl-to-be blossomed and excelled.

She was fascinated by law but, self-conscious of her slight speech impediment (she has a mild stutter), wanted to avoid a profession that required frequent public speaking. “I did not follow my passion!” she reveals. “The only question that I asked myself was, ‘What is the career in which I will not need to speak?’ I knew that lawyers had to speak often.’”

Her early forays into bookkeeping, her youthful budgeting, gave her an out. “I came across a book about accountancy,” she recalls. “And I thought, ‘Wow. This is what I want to do, because I know that I won’t be doing much public speaking.’”

So good were her high school results that Mafuleka won a bursary via the Eden Trust from the South African Institute of Chartered Accountants to pursue the discipline at college. Her path looked set: she would study for three years, qualify, and become one of the few township girls to overcome poverty and prejudice to become a professional in apartheid South Africa. “I would read business magazines where they would occasionally profile young ladies who looked like me and had qualified as chartered accountants. I aspired to be like them,” she says. But there was a twist coming. Life – and love – got in the way.

“In my third year I fell pregnant,” she reveals.

Impending motherhood changed her outlook, as it often does, and her grades suffered. “I was supposed to graduate that year,” she recalls. “But the results came in and the results were not good. I was scared to even send my results to my final-year sponsor, Transnet (the South African transport

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INTERVIEW AYANDA MAFULEKA

CV Ayanda Mafuleka Current Serving on boards Netball SA Investment Group, Eskom, and Randwater Foundation 2019 Chief executive officer Fasset, a government entity responsible for the skills development landscape in the financial services sector 2014 Chief financial officer National Credit Regulator 2013 Achieved Chartered Accountancy South African Institute of Chartered Accountants 2003-2012 Transnet, Ministry of Finance, Department of Home Affairs, South African Post Office 2007 Honours in accounting sciences

infrastructure authority).” Mafuleka passed just a handful of modules. She would have to sit an extra year, with a newborn to care for, to have a chance of graduating. She feared the worst: “I was just waiting for a letter from Transnet telling me that they were going to cut my funding.”

But the letter never came. Instead, one day, the phone rang. “A lady we called ‘Mama Maureen’ from Transnet called and she said: ‘What happened?’ And I just broke down. I burst into tears. I told her that I was heavily pregnant. And she said: ‘I thought something must have happened to you. So now I know what it was, I will come back to you.’ And she did come back to me. And when she did, she said: ‘Once you’ve given birth, come back to campus, because we are going to continue to fund you.’”

It was another huge turning point in Mafuleka’s life. Someone had backed her: showed faith in her when the chips were down. “From that moment, I never looked back,” she says. “This lady had given me a second chance.” Mafuleka graduated, joined Transnet, and embarked on a wonderful career.

Via stints at big-budget public bodies in finance, mining, and transportation, she rose to the top of a profession in a nation that “has very few black female chartered accountants.” Did her ‘Maureen Moment’ change her worldview? “Oh yes,” she says.

“I knew then that I would pass that good deed forward. It gave me a fresh outlook in life.”

Empowering women An important outcome of that outlook is Fasset’s ground-breaking partnership with the International Women’s Forum South Africa (IWFSA): #1,000 Women. Backed by investment of about US$13 million, the program aims to train and empower 1,000 women leaders at executive and middle-management levels. Fasset hands the women an opportunity to develop their leadership skills and confidence and prepare them to accept leadership roles in all sectors, locally and globally.

The program comprises excellently curated and tailored academic modules. The mission to create a pool of 1,000 women ethical leaders looks set to be achieved within just three years – starting in 2022 and culminating in 2025. It will be a remarkable achievement. #1,000 Women is a tangible means to make a meaningful and long-lasting impact on women lives, families, communities, and places of work. “You empower a woman; you empower a nation!” Mafuleka says.

The framework is built on the combination of one-to-one and group mentorship. The women are mentored by prominent members of the IWFSA, and have access to global IWF mentors, such as those from IWF UK. For its first cohort in 2022, the programme scored an 80% attendance rate and an

EMPOWERING A NATION #1,000 Women will change the social fabric of South Africa, say Charmaine Houvet and Irene Charnley How and in what ways do you expect #1,000 Women to benefit female leaders in SA?

By September 2025, 1,000 graduates from the IWFSA Fasset Women’s Legacy Programme (IFWLP) will be working in the private and public sectors, adding their skills, knowledge and expertise to the economy at large. The program, designed to nurture and empower aspiring women leaders, has already seen remarkable growth and development among its graduates.

Will the program benefit the nation of South Africa as well as the women within it?

By coming together and driving ethics and change in public-private partnerships, these women leaders prove that collaboration plays a pivotal role, as they amplify impact and create lasting change for the country and society.

Developing, building, connecting and nurturing the future leadership pipeline of women leaders from diverse backgrounds is crucial to driving the economy. The women on the program

average 8.8 out of 10 participant rating. What is the secret to its success? “The unmatched commitment of the IWFSA, Duke CE and the participants!” says Mafuleka. “Notwithstanding the fact that these women are very hungry for personal and career growth. The delivery partners are led by women, who are intentional and deliberate around issues of women empowerment and gender equality – just like Fasset.”

The program has recently surpassed 500 participants, the 1,000 target in sight. “That decision that Maureen made, to call me, will now change not just my life but those of 1,000 other women,” Mafuleka tells Dialogue. “She enabled me to rise above the shame of an unplanned pregnancy, to thrive, to get to where I am, so that I was able to reach and change the lives of other women. I am paying it forward.”

Mafuleka is now in South Africa’s financial elite. She has overcome every barrier placed in her way: a township upbringing in a racist state; a speech impediment that led her to deliberately

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Their network really is their net worth! The graduates of the program are paying it forward Irene Charnley (second left) pictured with Ayanda Mafuleka ( far right)

benefit from impactful networking sessions, forging connections with accomplished peers and mentors who share their drive for success. Their network really is their net worth! The graduates of the program are the alumni who are paying it forward – by mentoring the middle management women currently on the program.

What do you see as the key advantages of #1,000 Women over other leadership programs?

The strategic partnership between IWFSA, Fasset and Duke CE lends itself to meaningful collaborations and powerful networking opportunities. The comprehensive curriculum

avoid public speaking; a youthful pregnancy amid her college finals. To what extent do those barriers – prejudice, disability, childbearing – persist as barriers to female advancement?

She rejects the notion that motherhood should ever be a hurdle. “We should need to be neither sympathetic nor apologetic about childbearing, because childbearing should never impede, hamper or interfere with our careers,” she says.

“Childbearing is a uniqueness that we women have been blessed with. My unplanned pregnancy ended up serving as a source of self-motivation. I was determined to overcome difficult circumstances to pursue my career aspirations.”

Building opportunities Dialogue attended IWFSA’s exclusive gala dinner in London in the winter. The energy in the room was palpable. It was the chromatic opposite of typical London formal dinners, with their excess of dark suits punctuated by the occasional splash of colour.

It was a kaleidoscopic scene that felt more like a

Childbearing is a uniqueness that we women have been blessed with. It should never impede our careers

curated for these participants, the commitment displayed to ethical leadership, and the collaborative efforts of the strategic partners, makes this a highly impactful leadership program that contributes to a more inclusive and equitable professional landscape for women in South Africa.

The package comprises the Executive Development Programme (EDP) and the Middle Management Development Programme (MMDP). Both are aimed at addressing the challenges experienced by women in management and leadership positions, through a series of academic modules, conversations with experts, group coaching, an action learning and research project, an international benchmark and networking study – which consists of a global immersion experience for EDP participants, and an African immersion for the MMDP participants. The graduates of the IWFSA Fasset Women’s Leadership Programme have seen their lives transformed and will go on to transform the lives of others. Our cohorts are committed to giving back to South Africa through legacy projects that leave a lasting imprint on communities.

By harnessing our collective potential,

festival than a black-tie event. Women laughed, danced – even burst into impromptu song. We few dark suits were joyfully carried along for the ride.

Does Mafuleka feel such opportunities to build strong female networks are too rare? There is warm laughter. “I want to put that question back to you, as a male, put you on the spot,” she says. “Do you play golf?” she asks. “Do you go to the pub with your business associates?” I tell her that I am a poor golfer, so avoid the former. But I admit to the latter. “Well, when you go to the pub, that is your way of networking, because business is about who you know. There is value in networks.

Yet for women it can be difficult: many of us don’t visit pubs or play golf. And the golf course is where deals are made. That is why we are building opportunities for these 1,000 young ladies to build their own networks – because your network is your net worth. That London dinner will have been a life-changing experience for many of them, to meet all those powerful and accomplished women. From that night, they established lifetime networks.”

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INTERVIEW AYANDA MAFULEKA

The impact of the mentorship program extends beyond the professional realm Charmaine Houvet (left), senior director, Africa, Cisco

we create meaningful change and leave a legacy of empowerment. The impact of the mentorship program extends beyond the professional realm, also touching on personal growth, emotional support, and a profound sense of fulfilment for both mentors and mentees. The testimonials and experiences shared by program participants illustrate the program’s transformative power. International mentorship collaborations and comprehensive feedback mechanisms further enhance the program’s effectiveness.

What are the key strengths of the mentors who participate in the program?

The unique feature of this program is the direct one-on-one mentorship that the

program participants receive from the globally acclaimed leaders who are members of or associated with the IWFSA. The IWFSA’s motto, ‘Lift as we rise,’ embodies the spirit of paying it forward and empowering participants along their journey. For participants on this program, mentorship has led to skills development, career advancement and increased confidence. Mentees gained valuable skills and knowledge from experienced IWFSA mentors. These skills include leadership skills, industry-specific expertise, problem-solving abilities, and effective communication techniques.

Mentorship on the program has opened doors to new professional networks. Mentees can connect with influential individuals in their field, potential employers, and peers who share similar career interests. For mentors, the program provides an opportunity for enhanced leadership development, personal satisfaction, and continued learning – because mentees hail from different generations and backgrounds. Through mentorship, the IWFSA is building a brighter and more equitable future for women in South Africa and beyond. The IWFSA considers mentorship a powerful tool for personal and professional development, offering a supportive and nurturing environment for individuals to learn, grow, and succeed.

How and in what ways can men become involved in the program now and in the future?

Fostering those networks, creating conduits by which women become upwardly mobile, is crucial in a nation where female talent still too often languishes in the lower end of organizations.

When, in 2020, Fasset examined the South African financial sector, it discovered that women occupied 75% of positions at clerical level. “This highlighted the slow progression in the sector,” says Mafuleka. The findings prompted Fasset to refocus on the industry through a transformative lens. That fresh focus gave birth to the Women Leadership Development Programme. The #1,000 Women partnership with IWFSA, which is delivered by Duke Corporate Education, promises to smash the glass ceiling across sectors. “We must create a pipeline of women leaders,” says Mafuleka, “so women can move up from that administrative level, through middle management, and then to the executive level. In the South African financial sector, we even now still have only one black female heading a commercial bank, Ms Mary Vilakazi, appointed in 2022. But it’s not about

race, it’s about women, and women of all races are underrepresented in the C-suite and boardrooms.”

Is she optimistic that rapid change will come?

“The program has already been life-changing,” she says. “We are creating a pipeline of women who are going to be ethical leaders, courageous leaders, 34

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At the heart of the IFWLP lies the mentorship component, where participants are mentored one-to-one by IWFSA or individuals associated with IWFSA. The cohorts in Phases 1 & 2 of the program were mentored by men sourced from our strategic partner the IE Group. The inclusion of male allies in this program demonstrates that when women rise, men don’t have to fall. Testimonials received from mentees mentored by men has been positive and uplifting. Mentees said that their male allies brought a diversity of perspectives, a different set of experiences, viewpoints, and insights, to the conversations. They also helped the participants navigate industries where men are the majority – because their mentors provided invaluable guidance on how to navigate such environments.

What are the key benefits Duke CE has delivered to the program?

Duke CE is ranked number one worldwide in custom executive education. This places it as the best in its class in teaching methodology, program design and customer satisfaction. Its primary differentiator is an immersive, locally relevant, but globally inspired, leadership experience engineered for impact. The accredited academic program, which is coupled with global immersion, is uniquely crafted by Duke CE to provide a world-class learning experience to the participants.

Duke CE gives the participants access to global

thought-leadership and educators, and tailored executive coaching that guides participants through their leadership journey.

The inclusion of male allies demonstrates in this program that when women rise, men don’t have to fall Irene Charnley, president of the IWFSA

Can you give some examples of nowfamous women who have gone through the program?

One powerful appointment recently announced was Dr Mampho Modise, who graduated from the program in 2022. She was recently announced as the Deputy Governor of the South African Reserve Bank (SARB) and a member of the Monetary Policy Committee.

The first step to becoming a member of the distinguished network of empowered alumni women leaders is to complete the IFWLP. There are currently 298 alumni members onboarded: however, the Steerco continues to recruit program alumni to the team. With many of the graduates sharing testimonials of promotion, I have no doubt that we will witness many more powerful announcements from our graduates soon.

Irene Charnley is the former president of the International Women’s Forum South Africa (IWFSA) and currently a board director of IWF. Charmaine Houvet is senior director, Africa at Cisco, an IWFSA board member and chairperson of the IWFSA Leadership Development Committee.

Left Charmaine Houvet (right) and guests at the 2024 IWFSA gala dinner in London Far left Participants on the #1,000 Women program

pathfinders, trailblazers, legacy creators, who will reinvest in other women and pay it forward. They will be women who will lift as they rise.”

The program is already having a clear impact.

Mafuleka says. “There are countless inspiring stories from these women: some have been promoted,

Ben Walker is Dialogue editor-at-large

regained confidence and purpose, found healing and liberation.’’ They will, she predicts, rise to the top. “We have created a women leadership movement,” she says.

When Mama Maureen gave Mafuleka that second chance all those years ago, she probably had no idea what she had started. “I am sure of that,” says Mafuleka, “The program has produced the deputy governor of the South African central bank,” she says, “and I firmly believe that the first black female governor of our central bank is going to come from the alumni.”

A thousands seeds are being planted. The nation of South Africa itself will reap the rewards.

“It recalls the words of the former president of Burkina Faso, President Thomas Sankara,” says Mafuleka. “‘There is no true social revolution without the liberation of women. May my eyes never see and my feet never take me to a society where half the people are held in silence.’

“The roars of the 1,000 women leaders shall be heard!”

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LEADERS ARE THE

FORCE MULTIPLIERS FOR POSITIVE

CHANGE Today, greater complexity and exponential change are stretching organization and leadership models to their breaking points.

So, what’s next?

The demand for leaders and leadership to solve new types of problems, execute faster, and connect with people is greater than ever.

We need a new kind of leadership — the kind that can transform organizations, and innovate and execute in the marketplace through rapid experimentation, greater agility, and harnessing the collective creativity and energy of people.

At Duke CE, we believe in the power of leadership and are committed to helping leaders become a force multiplier for positive change in the market, their organizations, and the world. We work with you to create transformational learning experiences for your leaders so they are ready to meet these transformational challenges.

www.dukece.com

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LEADERSHIP L&D FOR A NEW ERA

prepare the workforce for digital transformation, ensuring AI integration fosters an ecosystem where innovation, ethics and human talent prosper in unison,” notes Veldman.

Connective Intelligence

Connective intelligence How can learning and development teams maximize the impact of existing leadership programs as we accelerate into the age of AI? Writing David Welsh & Kirsten Bischoff

T

he launch of ChatGPT by OpenAI on 30 November 2022 marked a pivotal moment in the digital revolution: a transition that brought the processing of unstructured data to the public, removing many of the previous programming language hurdles and systems knowledge requirements. As a result, chief HR officers have been thrust into the role of trusted navigator. They are tasked with simultaneously advising chief executives on how best to structure access to unstructured data, while upskilling human capital to execute within this new, evolving environment.

It is the very definition of building a plane while mid-flight. “Managing these two tracks demands a strategic, forward-thinking approach, anchored in deep collaboration across functions and a keen eye on the organization’s human capital development,” as Brandon Veldman of AI advisory firm Pathfinder Ventures puts it.

However organizations might leverage AI systems, the consensus is that they will all move to some level of a ‘co-pilot’ human/AI team model.

The two expected variations are humans partnered with AI systems, which could increase the velocity of production and innovation – or a streamlined human effort backed by powerful AI systems, necessitating fewer people. Either way, people are central – so, as a recent Duke CE event identified (see Dialogue Q2, 2024) this is a vision of a humancentric future. And that means that developing people’s capabilities is key. “It is paramount to

Connective Intelligence integrates three fundamental components of leadership into a cohesive blueprint

As AI/human hybrid teams become the norm, learning and development (L&D) teams can maximize the benefit of existing leadership programs by identifying the portions that align with human-centric leadership skills and leveraging those moments for maximum future impact. To assist teams assessing current programs and integrating elements that bring in an AI conversation at pivotal moments, we introduce the Connective Intelligence Model. It is a foundational tool to be used during design and redesign conversations, or to assist in determining how well-prepared your leaders are for tomorrow’s AI challenges.

If the full potential of AI’s promise is unlocked through human partnership, then it is leaders who will create the environment for this dynamic to flourish. The leaders who are poised for success are those who possess a skill set that marries technical knowledge with emotional intelligence. They are adept at creating collaborative environments where human creativity and AI’s efficiency enhance one another. This balanced approach is not just about adapting to change: it’s about leading the charge in a world where the intersection of humanity and technology is the new frontier for innovation and productivity.

At its core, Connective Intelligence integrates three fundamental components of leadership into a cohesive blueprint for leading hybrid teams of human and artificial intelligence. It recognizes that our insights and our innate capacity for judgment, empathy and ethical reasoning, partnered with AI’s computational efficiency and data-driven insights, creates a powerful alliance. Marrying the innately human pieces with requisite leadership skillsets to develop provides a three-part approach.

1

Analyze and evolve Navigating the complexities of AI integration demands high-quality human intelligence (IQ), characterized by critical thinking and strategic insight. Leaders must possess a deep understanding of AI’s functionality and keep abreast of its rapid advancements, equipping them to address challenges, such as AI hallucinations or divergent decision-making paths. This knowledge is crucial for maintaining situational awareness, enabling timely interventions to correct or realign AI behaviors. The swift evolution of technology, exemplified by OpenAI’s significant improvement of GPT-4 in just six months, underscores the need for a mindset geared towards continuous learning

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Empower We are already witnessing transformative robotic surgery systems and revolutionary drug discoveries driven by AI/human teams, illustrating the importance of creating environments that embrace innovation to fully leverage the power of AI/Human connective efforts. Integral to creating these environments are leaders who possess emotional intelligence (EQ) which includes empathetic communication, effective conflict resolution, and the ability to inspire. Enabling leaders to construct teams deeply connected to a purpose that resonates on a personal level gives them the power to guide rapid decisionmaking and fosters a culture that encourages experimentation. Emotionally intelligent leaders balance the vast capabilities of AI with the core human attributes of creativity, collaboration and ethical responsibility, ensuring that technological progress amplifies rather than diminishes organization values.

Focus on: Empathetic communication, self-awareness, inspirational leadership, conflict resolution, as well as adaptive leadership.

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Image Shutterstock; Kate Harkus

Unify Leaders of organizations recognize AI’s indispensability for their future and need to move fast to integrate its capabilities. However, the AI space is fraught with regulatory voids and potential legal entanglements, making ethical, stakeholderfocused leadership an imperative. Leaders with a strong Decency Quotient (DQ) make decisions that ensure the collaboration between human and AI teams reflects the core identity and values of the organization. Upskilling leaders in areas that support a strong DQ ensures that the integration of AI within your organization drives financial success while prioritizing human capital. This approach emphasizes the creation of systems that are equitable, authentic to the organizational purpose, and resonate with all stakeholders.

Focus on: Ethical decision making, cultural sensitivity and awareness, inclusive strategy formulation, stakeholder engagement.

and adaptability. By staying informed about the latest developments and embracing an agile approach, leaders can ensure their strategies remain relevant and effective in the fast-paced world of AI. Focus on: AI literacy, data interpretation and analysis, logical reasoning, agility in learning and adaptation, growth mindset development, complex problem-solving, critical evaluation and decision making, and also innovative thinking.

David Welsh is regional managing director, North America, and Kirsten Bischoff is a business development specialist, at Duke Corporate Education

The Connective Intelligence Model offers a comprehensive foundational framework for leaders of hybrid AI/human teams who must prioritize and enhance the human element. It emphasizes the importance of a deep understanding of AI, heightened emotional intelligence, and a commitment to ethical inclusivity and establishing a new paradigm for leadership. By magnifying these skills in tomorrow’s leaders, CHROs and L&D teams can cultivate a workplace culture that is innovative and empathetic, ensuring that technology complements and elevates the human experience.

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LEADERSHIP CHALLENGE THE STATUS QUO

Light a fire Find your purpose to thrive in an era of disruption Writing Mark Bateman

W

hen Mark Cutifani joined the lossmaking, debt-laden global mining conglomerate Anglo American as its chief executive, he found a dysfunctional organization. After conducting an urgent asset review, he had a realization: “If we don’t shake our leg and get cracking, we’re not going to be here for much longer.” It was clear

that tough calls were needed. He needed to unlock the potential of the company, and in the process ensure that “everyone understand[s] how they could be a part of the change.” Cutifani changed half of the top leadership team and reduced the 160,000-strong workforce to 90,000.

Today, Anglo American is a very different company. While it reduced the number of its mines – from 68 when Cutifani joined in 2013, to 37 when he retired in 2022 – its output is 10% higher. The company scores highly across the Responsible Mining Index; Cutifani pursued a range of environmentally sustainable solutions that supported local communities.

Without his clear sense of purpose, the company would likely have failed. Yet speak to him about how easy it was to lead this disruptive transition and it becomes clear that it took a huge emotional toll. Leaders are not immune from the strain that comes with disrupting the status quo. But with clarity of purpose, we can find the

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spark to lead through disruption and achieve extraordinary things.

Write your story Struggling to define your purpose? Imagine a leading magazine commemorating your 75th birthday with an article on your life’s achievements, professional and personal. It reflects your values, motivations, and the impact you've made, moving you to tears as you recognize your life's influence. What do you want it to say?

Begin with 500 words.

What’s your purpose?

Those who lack clarity of purpose risk becoming like flotsam, prisoners to currents, winds and tides.

Compare these individuals with great leaders who are driven to achieve something purposeful, bigger than themselves. Like a fire, leaders expend energy in pursuit of the difference, or disruption they seek, generating heat. They attract fuel, in the form of cash and talented employees, and oxygen, in the form of customers. With heat, fuel and oxygen, we have a fire – and fire is always disruptive.

What fire are you building? The answer lies in your purpose. When Kate Ringrose was chief financial officer at UK energy giant Centrica, I asked her about her purpose. “This is an industry that matters at every single level,” she told me.

“On any given day, I can be as concerned about someone who is struggling with heating bills as with the geopolitics of a region, as well as the future of the planet. My role as the CFO is to tell the story of the company through numbers.”

Image Shutterstock

Defining your purpose Whenever I start working with a leader, I always begin by asking the same question: “What do you want to do with your life?” It’s a question I’ve asked thousands of times. The answers are reliably predictable. Depending on your life and career stage, you might tell me that you want a good job, a nice house, a loving partner, a happy family and career success, or that you want to make a difference.

These are all common desires, and rightly so.

But as a leader, I would press you to go deeper.

Who are you? What do you truly value? What is it about you that makes you unique? What deeply frustrates you? What change gets you excited?

This might be the first time you’ve given this serious consideration. In that case, start more generically and consider the things that matter most to you. If taking a whole-life view feels difficult, take a shorter-term perspective. Figure out what three key accomplishments you want on your résumé in, say, three years’ time.

If you’ve not taken the time to think through what you want to do with your life, being asked about your purpose is tough. Some people feel they are too busy to think about such things. I would argue they are filling their lives with the wrong things. It is easy to be ‘busy’. It provides a constant dopamine hit and sense of importance. But could your need to keep (or appear) busy actually be a way of trying to fulfill a deep need for self-worth by seeking the approval of others? The problem is, by only doing what you believe other people want

The clearer we are about our purpose, the easier decisionmaking becomes

of you, you’re not considering what you want. The result is a reactive life where others call the shots.

It has taken me years of reflection and distillation to be able to state my professional purpose in a single sentence: enabling leaders to achieve meaningful purpose. Once we are clear on our purpose it underpins every interaction, career decision, professional development, and what company you join or run.

When we decide what difference we want to make and start to expend energy to bring about that change, we rub up against the status quo, which acts to stop us from moving forward. The more disruptive an idea, the more it is resisted.

The status quo is the disruptive leader’s main enemy, and it makes achieving meaningful disruption tough.

As Heather Cykoski, senior vice president at Schneider Electric, puts it: “There’s too much following the status quo in this world, where people simply repeat the same thing over and over, even if it doesn’t particularly work. My purpose is to find a new way of doing things.”

If you don’t know what you stand for, neither will anyone else. Ultimately, your purpose will typically be a variation on one word: impact.

Everybody wants to make a difference. When we begin the pursuit of our purpose, we can have a tremendous positive impact.

Why purpose matters

Mark Bateman is chief executive of WeQual and author of Disruptive Leadership: Using Fire to Drive Purposeful Change

Our time on earth is short. The older we get, the quicker time seems to pass. Isn’t it ever more important that we expend our energy and time on what truly matters to us? If you are unsure or feel you’ve lost your way, write your retirement article (see box, above) and revisit it from time to time. Take the time to reflect. What really matters to you?

The clearer we are about our purpose, the easier decision-making becomes. The more we allow our purpose to burn within us, the more proactive we become as leaders. We can’t help but expend our energy in pursuit of the difference we want to make. Before we know it, we have all the elements required for a purposeful disruptive fire that, with time, leaves a legacy we can be rightly proud of.

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LEADERSHIP THE EMOTIONAL DIMENSION

the influencer can tap into and channel the primal emotions for positive outcomes.

Building bridges

Fear, pride & hope Our primal emotions are compelling forces of influence across cultural divides Writing Tsun-Yan Hsieh & Huijin Kong

I

n a time of deep division, we all need to dig deeper into our hearts and souls for the courage to put ourselves outside our psychological comfort zones and work to bridge our cultural divides.

It is not something that most business leaders are particularly comfortable with. Yet our emotions greatly influence how we act – especially in situations where we are being asked to make a significant, difficult change.

The primal emotions of fear, hope and pride are prominent in business. They play especially important roles because they impact our identity.

And in the increasingly divided, polarized world we live in, anything affecting our identity becomes a powerful chasm – or bridge, depending on whether

When we show others our genuine respect, we build a meaningful connection

Even in seemingly normal business situations, emotionally fraught cultural divides can require bridging. Yet too often, the underlying emotions and cultural identities go unacknowledged, or can even be violated – especially when we are emotionally triggered.

Think of a young leader given 12 months to turn around an automobile plant that is about to be shut down by corporate HQ, where defeated workers are full of fear and anger. Or a successful mother who vehemently opposes a daughter’s desire to pursue a creative path, worried that her daughter could potentially fail. Or of a passionate founder in his 50s, who is shocked by Gen Z workers who want more pay and more flexible working hours, negating his definition of working hard and taking pride in one’s work. Each scenario can be laden with emotion.

Culture divides are hard to tackle because we all have our psychological comfort zones. Behaviors or values outside that comfort zone are unfamiliar and can therefore be destabilizing, triggering strong reactions. Beyond visible differences, such as ethnicity, skin color, and gender, equally challenging divides occur across value lines – rich versus poor, union versus management, longtenured versus newer employees, young versus old – and they pervade every human organized activity, especially when the stakes are high. “Us” and “them” is a natural reaction, especially in the case of a power gap, which makes it doubly hard to understand “them.”

At times, such barriers are accentuated by misunderstandings, deep hurts from past conflict, distance (physical and otherwise), and selforiented use of power. We don’t untie these knots by addressing them directly. Instead, we must go ‘underneath’ them by tapping into the primal emotions that unify all humanity – fear, pride and hope – and that are linked to our wish to better lives (our own and others’).

When we recognize and acknowledge primal emotions in others and show them our genuine respect, we build a meaningful connection.

Harnessing this sense of shared humanity raises empathy, compassion, and the possibility of outcomes that benefit everyone. The hard step is having the will to build a connection with people from a culture different from our own.

Primal emotions affect our deeper sense of who we are and our attitude toward others. They act as a base upon which other emotions rise and fall more transitorily. Because of their more foundational nature – much like colored glasses –

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they affect our fundamental attitude towards tasks that may be especially difficult and that we don’t want to do, or that we sense are risky or hard. How we manage our fears, whether we take pride in what we do and who we are, and whether we have a hopeful orientation, all make a difference to whether we take on tough tasks and persevere.

Influencing across divides Having had to influence people across cultural divides throughout our careers, including in highly adversarial, conflict-ridden situations spanning from shop floors to board rooms, we’ve found the following to be helpful in influencing people across cultural divides.

Understanding people on the other side of a culture divide isn't possible until youʼve controlled your own primal emotions

Consider how others relate to your own primal emotions Logic alone is rarely sufficient to persuade others. For example, in one consulting assignment with a company in decline, one of us shared with the workers how on one previous assignment we had been unable to save a business from shutting down. That firm’s collapse resulted in some of its workers committing suicide.

Sharing the intense feelings generated by that experience helped many differences melt away, and enabled the building of a bond that withstood months of difficult collaboration.

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Master your primal emotions Understanding people on the other side of a culture divide isn’t possible until you’ve controlled your own primal emotions. In the scenario concerning generational differences in attitudes toward work, the founder must recognize his own sense of pride in his work, something he grew up with, in order to respect that younger generations value a worklife balance. Only then can he develop innovative staffing solutions to lead his industry. Otherwise, he risks becoming a dinosaur. Different people take pride in different facets of their lives.

1

Tap into primal emotions to encourage others to see a different course of action In the scenario of an automobile plant turnaround, the young leader’s most promising course of action is to remind the workers of their past pride in assembling sought-after cars. Restoring their pride in working for the plant could convert their fear to hope and action.

2 Images Shutterstock

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Recognize how primal emotions affect you, and others’ thoughts and feelings In the case of maternal anxiety over a child’s career choices, the mother must reestablish control over her natural fears, which perhaps arise from conventional wisdom or past trauma. She can do so by recognizing the hope and pride that underlie her daughter’s desire to pursue an unconventional path.

Tsun-Yan Hsieh is chairman and lead counselor, and Huijin Kong is principal, of LinHart Group. They are authors of Positive Influence: The First and Last Mile of Leadership

To overcome today’s culture wars and divisions, make it your practice to appreciate the hopes, fears and points of pride in yourself and others. You will see things in a new light. After all, people condemn others when they feel at risk or attacked, but are willing to form a bond when there is a genuine effort to understand.

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LEADERSHIP WHERE WE WORK

Prioritize connection After the global experiment in home and hybrid working, leaders need to reassess the costs and benefits – and put renewed emphasis on creating a sense of connection between team members Writing Suzanne de Janasz, Joy Schneer & Nicholas Beutell

T

he lure of working from home remains strong. Despite the rising tide of CEOs demanding that employees return to the office, some remote workers refuse. They cite special circumstances, play the game (clocking in before returning home), or find another company that will let them work remotely.

They are steadfast in their resolve to hold onto a good thing.

But is it a good thing? There has been plenty of discussion about the convenience, autonomy, flexibility and cost savings for employees, but the conversation has mostly ignored the downsides of working from home (WFH). Tradeoffs exist: the lack of social support, face-to-face interaction and spontaneous conversations can result in loneliness, isolation, and decreased wellbeing for some.

Research also suggests that home workers are less likely to be promoted than in person or hybrid workers. Even in the hybrid arrangement, for which promotions and opportunities may match in-person work, some employees don’t seem to get the best of both worlds.

WFH tradeoffs, including the lack of social support and face-toface interaction, can result in loneliness and isolation

“When my employer mandated two to three days of in-office work, I was excited,” one professional told us. “I missed chats, lunches and happy hours with my colleagues. But there I was, sitting in a random office (not officially mine as we were hotdesking), having meeting after meeting on Zoom. What was the point of coming in?”

This highlights two important fallacies. First, a return to the office does not mean a return to normal. It is not business as usual, even when employees have supposedly returned to the office.

As one person whose company ended the WFH option told us, “You could roll a bowling ball down the hallway and still not hit anyone.”

Secondly, based on our research, WFH is not a panacea for the challenges of working life, as it has sometimes been presented. Not only do remote workers experience isolation and loneliness, but absent supportive relationships, such as a supervisor (who can buffer unaccommodating policies or culture) or colleagues (who can step in should a worker need to address unexpected situations), they can also experience blurred and conflicting work and family domains, or work/ family conflict.

As for the companies who employ these workers, it has become clear that we need to review the cost-benefit analysis of WFH, considering the advantages (such as decreased office rent, attractiveness to workers) and disadvantages (reduced engagement and productivity of lonely, isolated, and unwell employees).

Our research suggests it’s time to rethink virtual and hybrid policies, starting with a more thoughtful approach to the appropriateness of WFH for the business as well as for employees – as opposed to enforcing a choice that sounds good, but really isn’t.

What works for employees and the business We gathered data from 136 Airbnb hosts to empirically examine if gig/remote work cures some problems while creating others. The findings were clear: while hosts may have found the autonomy, flexibility and independence they were looking for, they were also experiencing significant downsides such as greater isolation, loneliness and declining wellbeing.

For organizations considering a change in policy (from or to WFH, hybrid, or in-person), we suggest the following three principles.

Respond, don’t react Gather and analyze data to make an informed decision and enforce new policies with measures that make sense, as opposed to those that invite gamesmanship. Data might include answers to questions such as: what is the nature of work processes? How are products/

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services delivered? Where are employees located?

How much of a burden is there for working from a particular location? Is there appropriate space in the office for workers to return? Will employees have the resources they need to be productive?

What is the appetite for, and satisfaction with, the WFH policy? What metrics would highlight differences in performance as well as employee wellbeing? Would a change in policy differentially affect certain groups, such as parents, or those with limited mobility? When only some jobs can be performed remotely, will this create inequity within the organization? Will valued employees need additional support (e.g. childcare or relocation assistance) for in-person requirements, especially those with family responsibilities? Are there trends in the yearly employee satisfaction surveys that uncover growing disengagement or feelings of isolation?

Ultimately, mandates should be supported by data, and HR policies should align with how and where employees work most effectively. Moreover, if mandates are differentially enforced and in-office

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employees are not getting the benefits of social connection, the policy is undermined.

Research evidence suggests that home workers are less likely to be promoted

Out with the old New ways of working may require new ways of meeting that balance cost savings with employees’ psychological needs.

Social interaction is important for connection and trust, but it should be authentic. Rather than requiring employees to come in for meetings filled with ‘administrivia’, use face-to-face gatherings to build connection and enable creative, innovative problem-solving. And if WFH works, build in bimonthly or quarterly summits at interesting locations.

We spoke to the chief executive of a mid-cap firm in the educational publishing sector whose employees (fewer than 20) and consultants (up to 250) had been hired from around the world. When she noticed signs of employee Zoom fatigue such as muting, leaving video off, and avoiding conflict, she organized a three-day working summit/retreat at a resort town for her staff. It was preceded by a planned weekend of golf, swimming, meals and

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LEADERSHIP WHERE WE WORK

beach time. After a relaxed weekend together (which also included partners), the team spent three days on team building, project planning and management strategy.

Following the summit, the CEO noticed a considerable difference among the staff: a softness in speech, more empathetic listening, and more collaboration. Virtual work remained the norm, but face-to-face summits two to three times a year have helped maintain a more positive, collaborative culture. “The cost of the summits is well worth the investment. These face-to-face events help inject a sense of connection that strengthens the bond between staff so when stressful times arrive, we’re better able to work together to get through them,” she said.

Support employees’ interpersonal skillbuilding and mental health needs Three years of pandemic stress and disconnectedness have stunted some employees’ interpersonal skills. Many Gen Zs have spent their college and early work years

in a near-complete virtual environment. Their interpersonal skills are deficient and they avoid conflict.

Organizations need to support employees’ interpersonal skill-building to ensure they’re able to work effectively when interacting and collaborating with colleagues, regardless of work mode. Leaders can ensure that soft-skill capability is specified in job descriptions and gauged during interviews, while also supplementing these skills (e.g. emotional intelligence, team collaboration, conflict management) with appropriate training – and not just computer-based learning.

To address and support employees’ mental health, make conversations about loneliness, isolation, and mental health ‘okay’ by having senior leaders (and other employees) speak or write about their personal experiences and share these in regular company-wide communications.

Organizations might also provide access to mental health apps (such as Live Happy or Headspace). For example, at the start of the pandemic, one of our academic institutions provided employees with free access to Burnalong, offering online physical and mental health programs. While the focus in 2020 was on the loss of opportunities for physical exercise, mental wellbeing is generally now a bigger concern. Of course, mere access to an app doesn’t have an impact unless employees use it, but – as with weight management, smoking cessation, and psychological counseling programs – free access may entice a subset of employees to engage, benefiting both themselves and the organization.

By shifting from “Find help yourself ” to “Here’s what we offer all employees,” organizations may encourage more WFH and hybrid workers to take up the offer.

Leaders should promote and provide adequate resources for employee resource groups (ERGs).

These shared identity groups provide opportunities for belonging to a community, reducing feelings of isolation. Connecting with ‘like’ others can give employees important validation for their professional and personal experiences. When supported by realistic budgets to fund workshops or engage keynote speakers, employees are more likely to find their ERGs worthwhile.

Leading WFH and hybrid workers

Leaders should strive to support a working culture that fosters authentic connections

Despite the experiences of the last four years, we see many leaders continuing to struggle with the challenges of leading teams through WFH and hybrid ways of working. To improve how things work for all, we point to the following four steps.

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Honor individual preferences if possible Leaders should ask employees about their

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THE BRIEFING

working preferences, and, where possible, meet them, on an individualized basis. While certain groups may tend to have a preference one way or another – such as parents, or neurodiverse workers – recognize that one’s demographic characteristics do not guarantee that WFH is the solution. Recall that the massive migration to WFH, while initially a boon for many, was eventually shown to hurt women disproportionately: as our research shows, greater autonomy and flexibility may also mean greater isolation and work/family conflict.

While a growing number of companies have mandated a return to the office, working from home remains hugely attractive to many employees, who value the convenience it offers. Yet it is not without downsides: the cost is paid in a loss of connection. Leaders need to refresh their cost-benefit analysis and build an approach that meets both employee preferences and business needs.

How to change policy well

2

Encourage workers to engage in job crafting Originally coined by Amy Wrzesniewski and Jane Dutton, job crafting refers to the changes employees can make in the tasks, relationships, and meaning of their job to better align with their values, needs and abilities. Doing so can result in higher performance, greater positivity, and increased work-related satisfaction and wellbeing. For example, employees can visit customers, engage with an ERG, or initiate efforts to evaluate a new product or service offering. This could empower them, increase their engagement, and enable them to prioritize elements of the recrafted job to feed their needs.

To inform and manage any change in policy on working location, leaders should first ensure they have full data pertaining to the decision. Second, be clear about the rationale for office working, and structure office and face-to-face time to maximize connection. Third, support employees’ mental health, and encourage the development of their interpersonal skills – which may be deficient as a result of the pandemic.

together. Eschew the hotdesking or “grab the first desk you find” approach and arrange to co-locate people. Encourage a “no devices” policy for face-toface meetings, encouraging people to look at each other when they are together.

3

Align behavior to organization culture Actively work to ensure that your behaviors align with the articulated components of the organization’s culture, and reward employees who do the same. We can’t overstate the importance of culture and its impact on employee productivity and retention. The culture of a primarily remote organization will look and feel different from one in which daily in-person attendance is required.

And if a change is made from WFH to hybrid or inoffice, leaders should utilize tools to gauge changes in how employees experience the culture. Not long ago, one of us facilitated the initial Zoom meeting of a virtual team within a company that values creativity and innovation. We used a show-and-tell method at the kickoff, wherein each team member introduced themselves along with a chosen item from their home office, such as a framed photo, objet d’art, pet, or meaningful memento.

Each member shared while listeners paid rapt attention, providing a strong foundation of trust and openness.

The trade off

Suzanne de Janasz is a professor and corporate learning executive. Joy Schneer is a professor of management at Rider University.

Nicholas Beutell is a professor of management at Iona University

4 Images Shutterstock

Convenience versus connection

(Re)focus on connection to reduce isolation and loneliness Employees may feel that working in-office bears a cost that they pay in lost convenience. Leaders should maximize the pay-off by focusing on its value for building connection. If in-office work is needed, insist on overlapping workdays: not any two to three days, but specific ones to ensure people are in the office

The WFH debate is a balancing act between the comfort of home and the need for human connection. While the freedom from commuting and formal attire is appealing, it can come with hidden costs like stalled promotions and feelings of isolation. As we step further away from emergency pandemic measures, it’s time for a thoughtful reassessment of remote and hybrid work policies that truly consider the wellbeing of employees and the needs of the business. A change of working mode, such as returning to the office, has ripple effects: organizations must take measures to prioritize the humanity of remote workers, as well as in-person and hybrid workers.

Companies should make data-driven decisions that reflect actual work dynamics, employee needs, and employee satisfaction. Meetings should be meaningful and build real connections, and if WFH is effective, consider periodic in-person gatherings to keep the team spirit alive. Finally, support for interpersonal skills and mental health is crucial for maintaining a productive and engaged workforce.

Leaders should strive to accommodate individual preferences and support a culture that fosters authentic connections as the company culture adapts to the new ways of working.

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SPEED UP YOUR TIME TO VALUE CREATION WITH BIG DATA AND AI 3

“Richard Benjamins draws on his years of experience in the data journey to offer very practical advice for any company serious about becoming data-driven.

This is a book you must read if you want to avoid the typical mistakes in this sort of transformation” – DAVID DEL VAL, CEO of Telefonica R&D

“So many talk abstractly about Big Data and AI in large organizations. If you are interested in the nuts and bolts of being data-driven; if you care about success and all the things that really matter, read this book!”

– VIKTOR MAYER-SCHONBERGER, co-author of the bestselling Big Data

The author RICHARD BENJAMINS is Chief AI & Data Strategist at Telefonica. He was named one of the 100 most influential people in data-driven business (DataIQ 100, 2018) and serves as an expert to the European Parliament’s AI Observatory (EPAIO).

Available through all good book retailers Print edition: ISBN 978-1-912555-88-8 | E-book edition: ISBN 978-1-911671-31-2 Published by LID Publishing (www.lidpublishing.com)

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VIVEK WADHWA ON INNOVATION

Beware the Valley’s fake utopia Northern California looks nothing like the rest of the world

W

hat drives he who sees only perfection?

Rarely is it social change. Most tech investors inhabit a utopia that tells them precisely nothing about the struggles of the world at large. And this matters, because seeing is believing, and believing is doing.

I recently welcomed 91 Indian students to my adopted home in California. My advice to them was simple, but stark. Do learn as much as possible from the tech bros of Silicon Valley. Do not become them.

When your daily bread is the manicured lawns of NorCal tech complexes, when your weekend existence comprises hiking state parks, skiing impeccable mountains, surfing the Pacific, and enjoying every comfort and luxury life has to offer, it is too easy to forget that the world outside your window is rarefied and abnormal: alien to most.

An ignorance of the world’s challenges is why tech entrepreneurs waste so much cash on nonsense. Billions of dollars every year are siphoned into silly apps and other meaningless vanity projects when they could be used to address humanity’s greatest challenges. My Indian compatriots see such problems at close quarters.

Thus, they are better placed than America’s techrich to solve them.

The Valley is not universally reprehensible.

Much of what happens there is worthy of spreading to the world. It has a wonderful culture of openness that prizes the sharing of information and learning, believing the advancement of technology will benefit everyone, at least in Santa Clara and – perhaps – beyond. Yet it also has a malign obsession with greed and making money.

The accrual of dollars has become little more than a crude and vacuous way of keeping score.

When I met with the budding Indian entrepreneurs, we considered an alternative to the dismal status quo. I told the students that they have opportunities unimaginable to their parents. As the tech elite in the world’s most populous nation, they can build a future in which we worry more

Our period in human history is unique: only now do entrepreneurs have the clout to do what governments and big business could do before

about sharing prosperity than fighting over the few scraps we have. Our period in human history is unique: only now do entrepreneurs have the clout to do what governments and big companies could do before.

While Valley bros luxuriate over their latest gimmicks, epoch-shifting technology is emerging that can transform the human existence. Crispr is a new gene-editing system derived from bacteria that enables scientists to edit the DNA of living organisms. It promises to eradicate hereditary diseases and design plants that are far more nutritious, hardy and delicious than those we have now. Banana and mango varieties that can thrive in the harshest corner of the Rajasthan desert are no longer the preserve of outlandish Star Trek scripts.

Science fiction is becoming science reality: tech can be used to feed the world, and make it greener.

It was Pierre Mendès France, when president of France in the mid-1950s, who noted that “To govern is to choose.” Tech capitalists are, increasingly, the world’s governors. What they choose to do with their power will literally shape the world’s future.

In Silicon Valley there are few visible problems, so tech bros seek solutions for problems that do not exist. Yet tech excellence extends outside North California, as my Indian visitors know.

To govern is indeed to choose. Those that see the real world's problems should choose to solve them, rather than fix some imaginary challenge that is defined only by an arbitrary profit motive.

Vivek Wadhwa is author of The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent

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INNOVATION MACHINES WITH MEANING

grounded in human values. This challenge transcends the simplistic debate over human versus AI supremacy. It leads us to focus instead on achieving a synergistic relationship that not only safeguards but enhances fundamental human values through unwavering integrity.

Systems designed and operated with this purpose will embody not just artificial intelligence, but artificial integrity.

Artificial integrity

The new AI: artificial integrity AI should be developed in ways that not only safeguard, but enhance human values Writing Hamilton Mann

J

ohn McCarthy, a pioneer in computer science, coined the term artificial intelligence (AI) in 1955, setting the stage for the domain’s formal inception at the 1956 Dartmouth Conference. Inspired by Alan Turing’s foundational work on machine intelligence, McCarthy envisioned AI as the science and engineering of making intelligent machines capable of performing tasks requiring humanlike intelligence, such as reasoning, learning and autonomous action.

However, although McCarthy’s vision was revolutionary, it largely overlooked a crucial aspect without which all intelligence, including that of systems, is an empty shell devoid of meaning: integrity. As AI becomes more and more intertwined with societal functions, the lack of a comprehensive framework for embedding integrity from the beginning represents a critical oversight.

The main challenge for leaders now is to shape a future where the collaboration between human insight and AI amplifies value exponentially,

Artificial integrity aims to ensure that AI systems contribute positively to society

The concept of artificial integrity emphasizes the development and deployment of AI systems that uphold and reinforce human-centered values, ensuring that AI’s integration into society enhances rather than undermines the human condition.

Through a holistic approach that combines external guidelines, internal operational consistency, and a commitment to a synergistic human-AI relationship, artificial integrity aims to ensure that AI systems contribute positively to society, marking a pivotal evolution in the field’s trajectory.

This perspective underscores the importance of carefully assessing AI’s societal impact, particularly how it balances ‘human value added’ and ‘AI value added’, which is among the most delicate and consequential considerations. It is crucial not only to map out the current interplay between human intellect and AI capabilities, but also to envision a future where the synergy between humanity and technology redefines value, labor and knowledge in ways that enhance the greater interest of society, preserving and sustaining its integrity. This equilibrium for artificial integrity can be established by exploring four distinct modes (see graphic, p52).

Marginal mode When it comes to value creation, there exists a quadrant where the contributions of both human and artificial intelligence are notably restrained, reflecting scenarios of limited impact. This segment captures tasks characterized by their minimal marginal benefits when subjected to either human or artificial intelligence inputs. Such tasks are often too inconsequential to necessitate significant intellectual investment, yet simultaneously too intricate for the present capabilities of AI, rendering them economically unjustifiable for human endeavor.

This domain frequently encompasses foundational activities, where the roles of humans and AI are either embryonic or rudimentary, primarily involving routine and monotonous tasks that scarcely profit from higher-order cognitive or AI-driven enhancements.

Consequently, transformations in this quadrant are typically incremental, signifying a plateau of productivity where neither human nor AI inputs

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precipitate marked advancements. An example is document scanning for archival purposes: a task that, while manageable by humans, succumbs to monotony and error, and where AI, despite capabilities like optical character recognition (OCR), offers only marginal improvement due to challenges with non-standard inputs.

Marginal mode comprises a sector of tasks that remain fundamentally unaltered in their simplicity and limited in their demand for evolution, and represents scenarios where the deployment of sophisticated AI systems fails to justify the investment.

The deployment of AI is strategic in areas where human contribution does not add value

AI-first mode In this paradigm AI is the linchpin, spearheading core operational functionalities. It spotlights scenarios where AI’s unparalleled strengths – its ability to rapidly process extensive datasets and deliver scalable solutions – stand out.

This AI-centric approach is particularly relevant in contexts where the speed and precision

of AI significantly surpass human capabilities.

AI emerges as the driving force in operational efficiency, revolutionizing processes that gain from its superior analytical and autonomous capabilities.

The deployment of AI is strategic in areas where human contribution does not add significant value. AI’s prowess in handling data-intensive tasks far exceeds human performance; it has a notable advantage in domains like big data analytics. The AI-first quadrant is where AI’s capacity to distill insights from voluminous datasets, working at speeds beyond the reach of human analysts, demonstrates critical value.

An example is observed in the financial industry, particularly in high-frequency trading.

Here, AI-driven trading systems leverage complex algorithms and massive datasets to identify patterns and execute trades with a velocity and scale unachievable by human traders. It showcases the transformative potential of AI for redefining operational capabilities.

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INNOVATION MACHINES WITH MEANING

Human-first mode In this segment, the spotlight shines brightly on the indispensable qualities of human cognition, including intuitive expertise, contextual, situational, emotional and moral discernment.

AI is deployed in a supportive or complementary capacity. This approach champions human capabilities and decision-making, particularly in realms necessitating emotional intelligence, nuanced problem-solving, and moral judgment.

It emphasizes the irreplaceable depth of human insight, creativity and interpersonal abilities in contexts where the intricacies of human thought and emotional depth are critical, and where AI’s current capabilities are not a match for the full breadth of human intellectual and emotional faculties.

Here, the contribution of humans is paramount, with AI serving to enhance rather than replace core human functions, especially evident in fields such as healthcare, education, social work, and the arts. These domains rely heavily on human empathy, moral judgment and creative intuition, underscoring the unmatched value humans bring to high-stakes decision-making, creative endeavors, and roles requiring profound empathy.

For instance, in psychiatry, the nuanced interpretation of non-verbal communication, the provision of emotional support, and the application of seasoned judgment underscore the limitations of AI in replicating the complex empathetic and moral considerations inherent to human interaction. This perspective is bolstered by empirical evidence, reinforcing the critical

AI can augment physicians’ capabilities with precise diagnostic suggestions

importance of the human element across various landscapes.

Fusion mode This segment illustrates a synergistic integration where human intelligence and AI coalesce to leverage their distinct strengths: human creativity and integrity traits paired with AI’s analytical acumen and pattern recognition capabilities.

It represents an innovative approach within forward-thinking organizations that strive for a unified strategy, optimizing the combined assets of both human and technological resources. In such environments, the amalgamation of human intuition and AI precision forms a powerful alliance, elevating task execution to unprecedented levels of efficiency. In this mode, AI amplifies human capabilities, making both indispensable for peak performance and enhanced decisionmaking. This cooperative dynamic yields benefits unattainable by either humans or AI alone.

Research across various domains validates this synergy. In health, for example, AI can augment physicians’ capabilities with precise diagnostic suggestions, and enhance surgical precision in medical procedures. In engineering and design, it can support creative problem-solving.

This vision suggests an ecosystem where AI enriches human capabilities, promoting a synergy where human creativity, complexity and empathy are bolstered by AI’s efficiency, consistency and capacity for processing vast quantities of information.

Assessing AI and its potential impact As AI becomes more integrated into our lives, a focus on artificial integrity will ensure that it is deployed in a manner that enriches human capabilities, respects human dignity, and contributes positively to society. Across all four modes, the call for artificial integrity emphasizes a holistic approach to AI development and deployment – one that considers not just the technical capabilities of AI but its impact on human and societal values. It is about building AI systems that not only know how to perform tasks, but also understand the broader implications of their actions in the human world.

Whether they are in business, the public sector, the nonprofit sector, or multilateral institutions, leaders aiming to pair the power of AI with an integrity-driven approach should use these four lenses to assess the purpose of the AI systems that they may develop and deploy.

The appropriate approach for leaders to adopt varies according to which of the four modes they are working within. Here are some of the central guiding posts for each.

AI high value added

A I - F I RST MODE

FUSION MODE

AI low value added

Establishing AI equilibrium

M A RG I N A L MODE

H U M A N - F I RST MODE

Human low value added

Human high value added

Source: Hamilton Mann

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In Marginal mode Focus on optimizing AI to perform tasks that, while marginal, can significantly enhance operational efficiency without replacing human intelligence. This involves identifying areas where AI can provide the most value in automating routine and low-impact tasks, freeing humans to focus on more complex and creative endeavors.

Conduct thorough assessments to ensure the deployment of AI in marginal tasks justifies the investment, not only in financial terms but also in terms of societal impact, including job displacement and human considerations.

Embrace simplicity in AI design for marginal tasks, ensuring that systems are not overly complex for the problems they solve. This involves focusing on straightforward, reliable solutions that perform their intended functions without unnecessary elaboration.

Images Shutterstock

In AI-first mode Develop AI systems with built-in mechanisms for transparency and accountability, particularly in decision-making processes, to build trust among users and stakeholders. This includes clear documentation of AI decision pathways and the ability to audit and review AI actions.

Prioritize the assessment of social impacts, ensuring that the benefits of AI advancements are accessible to all and do not exacerbate existing inequalities. Implement integrity-driven AI frameworks that guide development and deployment, focusing on principles such as transparency, accountability, fairness, and respect for privacy, to ensure AI acts in ways that are consistent with human values.

Ensure that as AI solutions are scaled, they maintain their capacity to algorithmically act in ways that are integral, adhering to principles that uphold human values and respect human rights. This requires continuous monitoring and updating of AI systems to align with evolving societal values.

that include stakeholders from diverse backgrounds to ensure AI systems are culturally sensitive, developed with a focus on cultivating integrity with regards to authentic human necessities.

In Fusion mode Aim for a seamless integration of human and AI capabilities where each complements the other’s strengths, leading to innovative solutions that neither could achieve alone.

This involves developing interdisciplinary teams that understand both technological and humanistic perspectives.

Foster environments and development approaches where both AI systems and humans engage in continuous learning and adaptation.

Ensure that the evolution of AI is guided by integrity-driven considerations that evolve in tandem with technological advancements. This involves establishing guidelines that are rooted in integrity, flexible and adaptable to new discoveries and societal changes. Such guidelines could include requirements for AI systems to undergo regular impact assessments that evaluate not only their immediate effects but also their long-term implications in various scenarios.

In Human-first mode Design AI systems to complement and augment human intelligence, not to replace it. Focus on developing AI that supports human decisionmaking, creativity, and problem-solving, especially in fields where empathy and human judgment are paramount.

Maintain a high level of human control and autonomy by ensuring AI systems serve as tools for enhancement rather than control.

This involves creating AI that respects human decisions and augments human abilities without undermining human agency.

Engage in collaborative development processes

Integrity will shape our future Hamilton Mann is group vice president of digital marketing and digital transformation at Thales, and senior lecturer at INSEAD, HEC and EDHEC Business School

Just as with artificial intelligence, developing artificial integrity is a journey. It begins with a commitment to the principle that these machines should be developed and deployed to exhibit not only intelligence, but integrity – because the definition of value that businesses seek to create today determines that of the society in which we will live tomorrow.

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INNOVATION HOW TO ALIGN ON DIGITAL AMBITION

D

o your senior leaders have a clear and aligned perspective on their organization’s digital ambition? Our recent report, The Digital Leadership 2024 Perspective, based on research among 2,138 leaders, suggests not.

Many boards and senior leaders are suffering a perception gap from the rest of the organization that we term ‘digital detachment.’

This digital detachment is resulting in organizations investing in the wrong technology, doubling down in the wrong areas, and leaving employees starved of the resources they require, leaving them frustrated. Closing the gap is increasingly urgent: it is slowing organizations down at a time when leaders are under pressure to accelerate their digital transformation, as speed is now the currency of competition. Leaders’ digital detachment is also destroying value. A high DigEx (digital expenditure) investment is typically required – and organizations are failing to deliver the necessary return on investment.

From detachment to digital determination We have identified five key steps to move boards and senior executives from digital detachment to digital determination, as captured in our IDCLA© Framework (see p55). The framework assists leaders in articulating their digital ambition and customer focus, and creating alignment across the organization. Discussing the five steps provides a structured digital conversation that enables leaders to articulate their organization’s digital purpose.

The framework expands on the first strategic stage – Future Thinking – of our Ticking Clock Model©, which identifies the three strategic stages and 11 operational steps required to transform from a traditional to a digitally-driven organization. (See Dialogue, Q1 2020.)

Leaders’ digital detachment A perception gap risks holding back digital transformation

1

Identify – digital ambition Uncover how your customers are using, and want to use, digital in their interactions with you.

DBS Bank in Singapore has been named as the world’s best bank for five years in a row. It drove its digital transformation by recognizing that banking was painful and that they could make it joyful for customers, by leveraging technology to make banking invisible. Today, DBS Bank has twice as many engineers as it does bankers: it has achieved its goal of being a mid-sized technology company providing banking services.

Outcome: Reveals the journey to better understand how digital technologies and ways of working will supercharge the customer experience.

2

Decide – efficiency or customer or both Articulate the driving force that delivers the expected value. Top-performing organizations

Writing Robin Speculand & Jeremy Blain

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recognize that their digital ambition can go far beyond cost efficiency and focus on creating great customer experiences.

Bosch Mobility Aftermarket in China found itself under threat by digital natives looking to penetrate its market. The organization had been operating in traditional ways; it managed to digitally transform, resulting in its highest customer satisfaction standards, double-digit sales growth and two times investor equity value.

The organization’s three-year journey focused on improving both internal efficiency and the end user’s experience.

Outcome: Makes clear what digital transformation means to the organization.

The IDCLA© Framework 1 IDENTIFY Digital ambition

ACTIVATE Awareness to action 5

3

Cultivate – transformation culture Ensure the culture is evolving at the same speed that your organization is transforming (as it typically lags behind). Leaders are responsible for identifying what the culture needs to be in order to support and drive employees in taking the right actions.

The failure to do so is one of the top three reasons why digital transformations fail (see Dialogue, Q1 2020).

When developing its Covid-19 vaccine, Pfizer recognized it had to reinvent the way that vaccines were developed, shortening the time to market from 10 years to 10 months. To achieve this, they blew up the bureaucracy and did whatever was required to deliver rapidly. Team members were free to challenge the accepted norms with out-of-the-box thinking – and the CEO provided an open checkbook.

Outcome: Provides employees with the right environment and conditions to encourage and support them in performing digitally-driven activities.

DIGITAL DETACHMENT

LEVERAGE Data operating model

Image Shutterstock

DECIDE Efficiency or customer or both

CULTIVATE Transformation culture

3

4 Source: The Digital Leadership 2024 Perspective

5

Activate – awareness to action Align the whole organization in taking the right actions. The digital ambition articulates what digital means to the customer and the business; its implementation requires employees to take the right actions in a culture of psychological safety.

Adobe is a classic example of an organization that restructured its business model and aligned all employees in taking the right actions. In 2012 they shifted from selling perpetual licenses for their software suite, including Photoshop and Illustrator, to offering these as part of a subscription service.

As part of the transformation, employees were trained to understand the data so as to become more customer-centric, as well as how to innovate to improve customer experience and internal processes.

Outcome: Employees engaged in taking the right actions to drive digital transformation.

4

Leverage – data operating model Develop a robust data operating model, driving faster and better decision-making across every part of the organization.

In the next few years, the simple truth is that any organization that is not data-driven is not going to be in business.

Netflix was one of the first companies to adopt customer science: a fusion of data, behavioral science and technology – predominantly AI – used to understand and predict customer behavior.

Netflix teams scrutinize individuals’ profiles for recommendations, run focus groups and test assumptions, generating insights that underpin tailored experiences and in-house content successes, such as the TV dramas Black Mirror and The Queen’s Gambit.

Outcome: Develops a powerful data platform that allows for better decision making, which results in better decisions and performance.

2

Jeremy Blain is chief executive of Performance Works International.

Robin Speculand is chief executive of Bridges Business Consultancy Int and a Duke CE facilitator.

The Digital Leadership 2024 Perspective is available via performanceworks.global

Align on digital ambition The five-step IDCLA framework is a powerful way of ensuring that senior leaders are on the same page, customer-driven, and able to drive returns on their DigEx – and that the whole organization is aligned behind the digital ambition.

When digital detachment emerges, it can have devastating results. Leaders need to ensure they shift to being digitally determined.

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MAKE MANAGEMENT YOUR COMPETITIVE ADVANTAGE Better is the yardstick for management with agile, people-centric and dynamic features. As such, it turns management into a competitive advantage – one of the few advantages left in a time where they dissolve faster than ever before.

Better Management gets work done, creates value; it is unique and hard to copy, it prevents short cuts and is deeply rooted in culture. That’s why it deserves the attention of every manager.

“Better management is badly needed.

We learn about it daily from the media. Failures in management are often attributed to managers. Lukas Michel makes the case that theory and practice need an upgrade and offers six principles for the fix.”

MICHAEL KÜHNER, CEO, Strametz & Associates

“Lukas Michel’s new book Better Management provides every leader with compelling insights and tools and serves as a time-tested and validated blueprint that will help to shift an organization from activity-based leadership to true and sustainable organizational effectiveness.”

MARK W BELICZKY, President and CEO, ProHome Holdings, LLC

Available through all good book retailers Print edition: ISBN 978-1-911687-26-9 | E-book edition: ISBN 978-1-911687-27-6 Published by LID Publishing (www.lidpublishing.com)

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23/04/2024 10:37 24/10/2022 13:24

JOE PERFETTI ON FINANCE

How to pick a stock Three tests form a good guide when investing in shares

A

s a finance professor who teaches equity analysis, I am all too often asked by my students for stock recommendations. I am not a financial adviser, so I will not give specific stock picks. However, I do provide the three questions necessary to make an investment in an individual stock.

than expected. Even Tesla is unable to escape the market challenges, which are suppressing its growth rate and its sales margins. Specifically, its first-quarter sales of 2024 are expected to decline year over year between 2023 and 2024.

What is the historical performance of the company?

A company is worth the sum of its future cash-flows, and it is important to understand what will drive those cash-flows. We start with the industry or market and its expected growth rate over time, and then estimate the company’s growth rate. We then look at the

Let’s start here. Past performance sets a baseline for a company. It is important to remember that a company is worth the sum of its future cash-flows – not its historical cash-flows. Understanding the past, however, may give us a useful guide as to how a company will do in the future.

For publicly traded companies, examining the last five years is helpful.

Financially, what are the growth rates, what are the margins, what is the level of return on investment? These are all important in understanding how a company generates cash-flow.

It is also important to do what is called an EIC analysis, standing for economy, industry and company. The economic analysis looks at the macro environment to understand how it is affecting the industry and the specific company that is being analyzed. Industry analysis focuses on market attractiveness.

Approximately 50% of the performance of any company will be impacted by its external environment. Evaluating sources of competitive advantages over time is a key part of a company analysis.

Take Tesla, which announced a 10% workforce reduction in April 2024. A glance at the industry for electric vehicles suggests a slowing market. The transition to electric vehicles is taking longer

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What is the expected performance of the company?

Past performance sets a baseline. Understanding a company’s past may give us a guide to its future

company’s margins, so that we understand how much cash will be generated on an average sale. We then look at investments the company is expected to make over time in working capital and capital expenditures, to help us better understand return on investment.

Value is based on the future growth of a company and its future return and investment. That is what must be estimated when we look at the future performance of a company. Generally, the next five years are the most important for an evaluation. If the company is in a cyclical business we must look across the entire cycle. To understand why Nvidia saw its share price skyrocket in 2023, it’s useful to know that the company’s revenue is expected to grow to over $150 billion and its operating profit to over $92 billion by 2027.

Does the current price accurately reflect the expected performance?

If a company is expected to do well, and the price reflects it, then there won’t be much upside to the investor. For more than 40 years, Warren Buffett has invested in what he calls ‘broken stocks’ – that is, companies where the price does not accurately reflect future expectations.

Buffett exploits this, and that allows him to earn above average returns.

In early 2024, Nvidia’s stock price reached $900 per share. At that price, the full expectations of Nvidia’s improved performance were built into the stock.

From an investor standpoint, returns above $900 per share would mean that Nvidia would have to do even better than the current expectations of the company.

As such, Nvidia may not be a great investment at its current price. It is not that it is performing poorly or even that it did not have improving expectation for the future. It is that the market had appropriately priced those expectations and that would limit the upside in the near term.

Professor Joe Perfetti teaches equity analysis at the University of Maryland and is an innovation fellow with Duke Corporate Education

24/04/2024 10:10

FINANCE FINANCIAL CYCLE TIME

Maximum velocity The speed a business moves can be a critical source of competitive advantage. Here are the winners from the latest research on financial cycle time in the US and Europe Writing Joe Perfetti

I

n 1972, upstart Southwest Airlines was facing an existential crisis. It was swimming in a sea of red ink and was down to just $143 in its corporate checking account. The airline was flying four 737s to three Texas cities – Dallas, Houston and San Antonio. Its leadership made a

desperate gamble to stay afloat. They calculated that if they could get the turn-around time down to 10 minutes, it could maintain its schedule with three planes rather than four. Southwest decided to sell its fourth plane for $500,000 in cash, and convinced its employees that the 10-minute turnaround target was do-or-die for the company.

The company’s vice president of operations was a seasoned industry veteran named Bill Franklin. When he was asked at the time whether the company could pull off its audacious plan, his answer was simple: “We can and we will.”

Franklin’s team consisted of mostly nonindustry veterans who believed in the mission to get it done to save the company. Identifying over 100 tasks that needed to be completed for a plane to depart, the airline studied professional car racing for inspiration, searching for the precious minutes and seconds that could be shaved off every task. All members of the airline, from its founder Herb Kelleher to the pilots to the gate agents, were enlisted to do the tasks found necessary to achieve the goal.

Southwest survived – and the policies it instituted, starting in 1973, continue to allow

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Southwest to have an efficiency advantage through to today: the airline takes Gold in the 2023 Financial Cycle Time (FCT) rankings, presented here (see tables p60-61).

Cutting turn-around time Today, Southwest Airlines typically has an average turnaround time of 35 minutes or less, for a flight: that is, the time it takes to unload and load passengers and baggage. This is considerably shorter than the industry average of 45 minutes.

This advantage allows Southwest to fly the same type of plane for between one and three additional segments per day compared to a traditional airline.

In short, it gets greater use from one of its most important assets, its planes. Here’s how.

Single aircraft type Operating primarily Boeing 737s simplifies maintenance, training and turnaround processes. It also allows its flight crews to easily switch between aircraft. This would not be possible at other airlines that operate Boeing 737s and Airbus A321s simultaneously.

Point-to-point routing This strategy reduces the complexities associated with hub-and-spoke systems, allowing for quicker gate turnarounds.

Key lessons from understanding your Financial Cycle Time FCT measures on average how long it takes to turn investment into sales FCT can be a source of advantage if you can move faster than your peers True FCT does not sacrifice quality or safety in the name of speed The reason a company borrows money is to fund its FCT. The less the gap, the less the need for outside cash FCT is a key driver of ROI, which is a function of profit (how much) and speed (how often)

Flying to less-crowded airports Southwest began its expansion at secondary airports in the larger cities, and continues to fly to mid-size cities with less congestion. (However, other airlines are now copying this strategy to reduce their own turnaround times, while Southwest has been expanding into larger cities with more congested hubs.

Its hub in Philadelphia has some of the worst delays in the US. This has mitigated some of Southwest’s advantages.)

Team coordination Inspired by Nascar pit crews, Southwest’s ground operations are highly coordinated, with tasks clearly delineated and timed to precision. This not only speeds up the turnaround but also ensures safety and thoroughness.

Images Shutterstock

No assigned seating The lack of assigned seating speeds up boarding of the airplane. It incentivizes passengers to get to their seats quickly, lest they end up with an undesirable seat.

Inspired by Nascar pit crews, Southwest’s ground operations are highly coordinated

Role of the flight crew Flight attendants assist in cleaning a plane while passengers are disembarking.

Cultural impact Rapid turnaround times are not just about logistics and operations: they also reflect Southwest’s company culture, which emphasizes

teamwork, high employee engagement, and a sense of urgency. This culture is facilitated by leadership that motivates and supports staff in achieving these ambitious turnaround goals.

Free checked baggage When other airlines started charging baggage fees, Southwest continued to offer free checked-in baggage. On other airlines, rather than paying the fees, passengers increasingly took their carry-ons on board, slowing down the boarding process.

Southwest continues to innovate its turnaround processes. For instance, they have tested new technologies, such as handheld baggage scanners and mobile gate readers to further reduce turnaround times. The airline also holds workshops to ensure all team members understand their roles during the turnaround process, fostering a deeper sense of teamwork and efficiency.

Competitive advantage and trade-offs Its strategy has provided Southwest with significant competitive advantages. Reducing ground time maximizes flying time, which translates to better asset utilization and cost efficiencies. These savings allow Southwest to maintain low fares, attracting more customers and gaining a significant market share despite competitive pressures.

Southwest Airlines’ ability to maintain short turnaround times has been a cornerstone of its business model, allowing it to remain profitable and competitive in a challenging industry.

Its success is built not only upon operational efficiencies and technological innovations, but a strong organizational culture that supports and drives these processes.

Time is money: calculating FCT Why do profitable companies borrow money? If they generate more revenue than expenses, one might think that they shouldn’t need to borrow any money. But that isn’t the way things work.

They have to spend money before they get paid, they need to fund the timing gap between when they spend the money and when they get paid.

The longer the timing gap, the more financing is required. This timing gap is the financial cycle time.

This metric can reveal substantial differences between otherwise similar-looking businesses.

Imagine two companies in the same industry with very similar market focuses and financials.

They both generate a profit margin of 8%. But the first company makes that margin every 365 days, compared to the second company’s cycle time of 183 days. Annually, that translates to 16 cents of cash for investors, compared with eight cents of cash for the slower company. The more productive

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FINANCE FINANCIAL CYCLE TIME

Winners in the 2023 FCT rankings US – S&P 500 INDUSTRY Aerospace & defence

Airlines

Apparel & textiles

Automotive

Beverages

Biotech

Chemicals

E-commerce discretionary

AWARD

Europe – Stoxx 600

COMPANY

FCT

PCT

AWARD

COMPANY

FCT

PCT

Gold

General Electric

82

10

Gold

MTU Aero Engines

10

(17)

Silver

Boeing

113

75

Silver

Safran

12

(61)

Bronze

Lockheed Martin

131

73

Bronze

Leonardo

65

(28)

Gold

Southwest Airlines

176

162

Gold

IAG

122

118

Silver

United Airlines

220

190

Silver

EasyJet

139

122

Bronze

American Airlines

226

198

Bronze

Deutsche Lufthansa

144

141 97

Gold

Deckers Brands

105

104

Gold

Adidas

118

Silver

Nike

107

105

Silver

Hermès International

133

131

Bronze

Ralph Lauren

208

157

Bronze

Puma

141

131

Gold

Tesla

117

116

Gold

Volvo

36

36

Silver

Ford

155

154

Silver

Valeo

97

46

Bronze

BorgWarner

213

135

Bronze

Forvia

116

47

Gold

PepsiCo

167

96

Gold

Coca-Cola

149

84

Silver

Monster

189

117

Silver

Britvic

168

124

Bronze

Coca-Cola

209

63

Bronze

Carlsberg

242

43

Gold

Incyte

76

60

Gold

Zealand Pharma

38

38

Silver

Moderna

81

81

Silver

Genmab

101

101

Bronze

Vertex Pharmaceuticals

81

41

Bronze

Ipsen

129

56

Gold

Avery Dennison

199

111

Gold

Johnson Matthey

73

64

Silver

LyondellBasell

208

193

Silver

Umicore

100

97

Bronze

Sherwin-Williams

211

91

Bronze

Brenntag

153

83

Gold

Etsy

27

9

Gold

Zalando

57

52

Silver

Amazon

159

145

Silver

Allegro

356

40

Bronze

Ebay

326

172

Bronze

–

and efficient company wins financially and will have a higher return on investment (ROI).

The algorithm that we have developed for measuring FCT using companies’ financial statements helps to measure the speed at which a company’s business model operates. As long as quality or safety do not suffer, moving faster and more efficiently can be a boon to cash flow generation for a company, and can be a source of competitive advantage.

To estimate FCT, we start with the total investment in operating assets and liabilities for each company and divide by annual revenue. This gives the percentage of a year that it takes to sell the investment. Multiply by 365 and you get FCT time in days. Lower is faster. We also produce a second metric: production cycle time (PCT). This is

Above Nike is a silver winner in the US for apparel, while in Europe, Adidas leads the way

produced by focusing on only working capital and net property, plant and equipment (PP&E).

Divide by annual revenue then multiply by 365 to arrive at PCT. We applied this methodology to firms in the S&P 500 and the European Stoxx 600 to identify

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US – S&P 500

Europe – Stoxx 600

INDUSTRY

AWARD

COMPANY

FCT

PCT

AWARD

COMPANY

FCT

Food

Gold

Tyson Foods

171

103

Gold

Glanbia

118

69

Silver

Kellanova

228

84

Silver

Cranswick

157

124

Bronze

Hershey

232

144

Bronze

AAK

170

149

Gold

Verisign

(196)

(209)

Gold

Rightmove

38

21

Silver

Booking Holdings

(36)

(85)

Silver

Just Eat Takeaway

217

18

Bronze

Netflix

(11)

(11)

Bronze

Delivery Hero

226

(5)

Gold

John Deere

129

105

Gold

Andritz

25

(10)

Silver

Caterpillar

211

182

Silver

Wärtsilä

87

10

Bronze

Veralto

227

43

Bronze

Rational

120

120

Gold

AbbVie

194

(23)

Gold

Novo Nordisk

73

66

Silver

Johnson & Johnson

197

40

Silver

GSK

151

69

Bronze

Eli Lilly and Company

224

171

Bronze

AstraZeneca

203

43

Gold

Nvidia

80

54

Gold

ASML

153

92

Silver

Lam Research

164

130

Silver

Inficon

160

160

Bronze

Applied Materials

171

120

Bronze

BE Semiconductor Ind.

162

133

Gold

Apple

15

15

Gold

Logitech International

93

56

Silver

HP

23

(35)

Silver

Ericsson

96

23

Bronze

Jabil

55

49

Bronze

Nokia

122

31

Gold

T-Mobile

400

343

Gold

Freenet

210

18

Silver

Verizon

429

366

Silver

Elisa

389

195

Bronze

AT&T

630

428

Bronze

Deutsche Telekom

396

329

Internet media & services

Machinery

Pharmaceuticals

Semiconductors

Technology hardware

Telecommunications

PCT

PCT: Production Cycle Time represents the number of days it takes for a dollar of core invested capital to result in a dollar of sales.

FCT: Financial Cycle Time represents the number of days it takes to turn a dollar of operating investment, including leases, into a dollar of sales. Note that some companies are paid in advance and have a negative FCT or PCT. For both metrics, lower is better.

leaders of the FCT metric. The firms with the lowest FCT in each industry are awarded a gold medal for being the most efficient in their segment.

Going back to Southwest: its financial cycle time of 176 days in 2023 means that, on average, it took 176 days to turn a dollar of investment into a dollar of collected cash. Each of those days tied up $124 million in cash. You can think of Southwest’s total financing to its business as: 176 days x $124 million per day = $21.8 billion of invested capital. Since Southwest is 44 days faster than its closest rival, it has saved $5.5 billion by being more efficient.

Apple is the winner in the technology hardware segment, based on its much-vaunted global supply chain, which was set up by Tim Cook to reduce its inventory. It achieved an FCT of just 15 days.

Professor Joe Perfetti teaches equity analysis at the University of Maryland and is an innovation fellow with Duke CE

Nvidia was the most productive semiconductor firm with an FCT of 80 days. Nike is a silver winner in the US for apparel with 107 day cycle time, while in Europe, Adidas leads the way with an FCT of 118 days. Novo Nordisk, the maker of weight-loss drug Ozempic, leads all global pharmaceutical firms with an FCT of 73 days. Tesla is the fastest North American automobile maker, with an FCT of 117 days, but Volvo takes the crown globally for that industry, with an FCT of just 36 days.

Leaders need to understand how fast their organization can move. Financial cycle time is one metric of speed that can give insight into this question. It can be a source of benchmarking against peers and allow for performance to be tracked over time. So, ask yourself: is your organization moving fast enough?

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The Future of Luxury Fashion THE NEW GUIDING PRINCIPLES FOR CHANGE AND GROWTH

PHILIP KOTLER is known around the world as the “father of modern marketing” and has been a Professor at the Kellogg School of Management at Northwestern University for the past 50 years.

He is the author of over 80 business and marketing books.

GIUSEPPE STIGLIANO is the Global CEO of Spring Studios, a leading communications agency in fashion, beauty, lifestyle and luxury.

Prior to that, he was CEO of Wunderman Thompson Italy.

RICCARDO POZZOLI is an entrepreneur, advisor and investor, who has founded and advised a dozen startups in the past ten years, innovating within the fashion, media and food industries.

A HANDBOOK OF NEW RULES BY THE GURU OF MARKETING – PHILIP KOTLER – AND TWO LEADING PRACTITIONERS. Original contributions and insights from fashion leaders, including Domenico De Sole

(President of Tom Ford International), Leo Rongone (CEO of Bottega Veneta), Alfonso Dolce (CEO of Dolce&Gabbana), Remo Ruffini (CEO of Moncler), Jonathan Akeroyd (CEO of Versace) and Francesca Bellettini (CEO of Yves Saint Laurent).

Available through all good book retailers Print edition: ISBN 978-1-911687-08-5 | E-book edition: ISBN 978-1-911687-09-2 Published by LID Publishing (www.lidpublishing.com)

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GILES LURY ON MARKETING

The case for functionality The vogue for building brands on emotional appeal overlooks the real drivers of consumer perceptions

T

he marketing world has got all emotional.

I have lost count of the number of brand managers and marketing directors who have told me that they need their brand positioning or brand propositions to be more emotionally led. They are worried that their brands are too – or solely – functional.

Sometimes they have a point: their brands would benefit from being more emotional. But others are taking this to extremes. They are trying to flip their brands a full 180 degrees. And like many things in marketing, there is a tendency to see things as black or white, rather than accepting a duality. When these brand leaders say “emotionally led”, they don’t mean a balance of emotional and functional. They mean emotional, period.

Perhaps surprisingly for an emotionally led person, I want to make the case for functionality – or rather the case for a balance of what I’ve long known as “emo-func”. The term was introduced to me by Paul Walton, one of the co-founders of The Value Engineers. It relates to the notion that the best brands are a combination of what you need (the functional – how a brand performs), and what you want (the emotional – how you perceive the brand and how it makes you feel).

I was taught that there isn’t one hard-and-fast rule as to what balance between the two makes for the best brands. For many years, P&G put more emphasis on the functional and Unilever put more weight on the emotional – and both were highly successful. But there was always a combination of the two sides to their brands. Likewise, a brand like BMW combines Germanic engineering prowess with the pleasure of driving.

I believe one of the reasons for the current vogue to bias brands toward the emotional is because of the prevalence of technologically led brands. They are often, by their very nature, functionally led. Some people cite the famous Ridley Scott-directed “1984” commercial for the Apple Macintosh as the guiding star for how

Product performance – not brand image – is the thing that truly drives perceptions of a brand’s value

technological brands can be emotional, positioning the soon-to-launch computer as the antidote to a dystopian, conformist future (a dig at IBM).

A more recent example of effective branding for a technology solution was the launch of the iPad. Its advertising was very straight-forward, demonstrating the functionality and practicality of Apple’s innovation. Both ads were successful despite taking very different start-points.

Perhaps the most compelling argument for including functionality comes from recent research

by PwC. It found that what consumers really value is a good customer experience. Not only was this a key deciding factor in choosing a brand, but product performance – not brand image – was found to be the thing that truly drove perceptions of the brand’s value.

The results may be slightly inflated in terms of the expressed preference for performance. People dislike admitting that they buy brands based on their image and ‘personality’. Yet in recent years people have been more willing to say they want brands that match their beliefs. The results of PwC’s research are so clear-cut that it seems unlikely they negate the findings completely. The bottom line: performance and functionality are key for success.

This brings me back to the importance of duality, and reminds me of a quote from F Scott Fitzgerald, who said: “The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function.” In other words – make sure your brand thinking is emo-funcky.

Giles Lury is a senior director at brand consultancy The Value Engineers

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MARKETING AI BLUEPRINT

The AI marketing revolution Follow these five steps to capitalize on the power of AI Writing Rajkumar Venkatesan

One successful example is Unilever’s Dove company. It created stickers for social media to directly connect with consumers, which they shared via Line, a messaging app popular across Asia.

They particularly focused on Thailand, where the company’s stickers were downloaded 6 million times. As a result, the corporation’s database for Thailand now encompasses nearly one-third of the population.

Unilever’s case offers valuable insights for other companies who likewise want to leverage AI in their marketing strategies, whatever their sector.

Here is a five-point blueprint for businesses to consider and follow when navigating the current AI marketing revolution.

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Foundation: gathering the data The journey toward AI-driven marketing begins with the foundational stage. Companies must focus on collecting the data required to fuel AI-powered initiatives. The key differentiator here is the source of the data – first-party data, gathered directly from consumers.

This approach offers a competitive advantage, especially in regions like Europe, where stringent data protection rules – such as the General Data Protection Regulation (GDPR) – limit the

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rtificial intelligence (AI) and advancing technologies have revolutionized marketing. In the digital economy, businesses around the world are turning to data-driven marketing to gain deeper insights into customers. The magic lies in personalization – understanding the unique preferences of each customer and delivering targeted content, offers and experiences that resonate deeply.

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use of third-party data. By directly engaging with consumers, companies can build robust foundations for their AI-driven marketing efforts.

A good example of the benefits of the foundational phase can be found with The CocaCola Company, which gathered data through its Freestyle dispenser – an innovation that enabled customers to personalize their soda by mixing and matching various flavors. The data generated by this customization was sent to corporate headquarters, paving the way for successful product development, such as Sprite Cherry, and the more advanced Powerade Power Station, which offers one-to-one personalization.

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Experimentation: refining the consumer experience Once the foundation is established, the second stage involves experimentation. Here, companies embark on a journey of trial and error, conducting a plethora of experiments aimed at enhancing the consumer experience. These experiments can span various objectives, such as attracting new customers, retaining existing ones, stimulating growth and fostering advocacy.

Consider Starbucks and its highly-rated rewards program. Through experimentation, the coffee chain gathered a wealth of data, including customer contact information, purchase behaviors, redemption of offers and even mobile device ID. Starbucks refined its approach over a decade of experimentation, ultimately shifting from sending 30 handcrafted emails per week to employing AI to send 400,000 hyper-personalized emails in real time.

The critical aspect at this stage is not only to innovate, but also to keep a watchful eye on the financial returns. Experimentation allows businesses to refine their strategies, aligning them more closely with consumer expectations.

shoppers with algorithms distilling data from various sources. This approach allowed Thread to serve tens of thousands of customers with a personalized service, far more than human personal shoppers could have done alone.

4 AI and advancing technology have revolutionized marketing.

The real magic now lies in personalization

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Image Shutterstock

Transformation: all-encompassing personalization The fourth stage, known as transformation, represents the pinnacle of AI maturity in marketing. At this point, companies aim to personalize every facet of consumer engagement using AI. This requires substantial investments including the development of in-house capabilities or even acquisitions of specialized companies.

Transformation ensures that every interaction with the consumer is finely tuned and customized to their individual preferences, further strengthening the brand-consumer relationship.

Disney’s MagicBand is one example. This RFID wristband enables monitoring of the theme park visitors’ movements and buying patterns, with each device promptly transmitting its data to Disney.

It simplifies the customer experience by helping the company to predict customer actions, adapt staffing levels, and encourage guests to visit other attractions. The results are improved efficiency, increased operating margins and strong footfall.

Expansion: a holistic approach to personalization As companies gather valuable insights from their experiments, they enter the third stage: expansion.

This is where businesses grow their understanding of consumer behavior and preferences. The aim is to extend personalization beyond one specific aspect of the consumer relationship. The focus shifts to tailoring various touchpoints in the consumer journey. Companies build on the knowledge gained during experimentation to create a more seamless and personalized consumer experience.

Thread, now owned by the British retailer M&S, exemplifies the expansion stage. Leveraging AI, the fashion brand personalized wardrobes by combining recommendations from personal

Rajkumar Venkatesan is Ronald Trzcinski professor of business administration, University of Virginia Darden School of Business, and co-author of The AI Marketing Canvas, A Five-Stage Road Map to Implementing Artificial Intelligence in Marketing

Monetization: expanding opportunities In the final stage of AI maturity in marketing, companies have honed their skills and capabilities to an exceptional level. With a solid foundation, a wealth of data and advanced AI expertise, businesses can now explore monetization.

This may involve developing a new business model, offering AI as a service to other companies, or creating revenue streams by capitalizing on the AI capabilities they have cultivated. Monetization opens new horizons, enabling companies to extend their AI prowess beyond their own operations and into the broader market.

Alibaba serves as a good case study. Starting as an online marketplace for buying and selling goods, Alibaba has evolved into a data-centric ecosystem that links together vendors, advertisers, service providers, logistics firms, manufacturers and financial service providers. Underpinning this transformation is Alibaba’s “smart business” model, which incorporates machine learning, enabling businesses with common goals to make strategic decisions together within a digital network.

By following the five stages of AI maturity, companies can leverage AI and data-driven strategies to create deeply personalized experiences, setting the stage for a more engaging and impactful future in marketing.

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MARKETING WITHIN EARTH’S BOUNDARIES

Marketing for good With Earth’s systems under unprecedented strain, marketers have a key role to play in transforming consumer behavior Writing Adeline Ochs, Aurélie Merle & Sihem Dekhili

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ll corporate functions need to evolve to incorporate the challenges of environmental and social transition into their practices – and marketing is no exception. Positioned at the interface of supply and demand, marketing bears some responsibility for encouraging unsustainable production and consumption patterns. Therefore, it must transform itself and become part of the solution. This involves rethinking the innovation process and facilitating consumers’ adoption of more sustainable modes of consumption, guided by the company’s missionpurpose and adherence to sustainable practices.

The scale and urgency of the challenge is plain.

Human activities, principally through emissions of greenhouse gases, have unequivocally caused global warming. Six of the nine planetary boundaries – the processes that regulate the stability and resilience of the Earth – have been exceeded, including biosphere integrity, land system change and freshwater change. To advance environmental and social transition, a profound and rapid transformation of our patterns of production, consumption and ways of life is imperative. The challenge of making marketing truly sustainable and aligned with planetary boundaries is complex, particularly in transposing global indicators to the scale of an organization and, more specifically, its marketing practices.

Marketing is responsible for guiding consumers towards more eco-friendly practices

to be anchored in the company’s strategy, with its mission – incorporating environmental and social issues within its sector – serving as a pillar.

For example, the purpose of eyewear company VisionSpring is to “make the wonder of clear vision possible for everyone.”

Expanding beyond the confines of the company, marketing needs to reconsider the beneficiaries of the value created, at three levels: value for the company, value for the consumer, and ‘extended value’ – that is, environmental and social value.

From a sustainable marketing perspective, extended value should become the priority. Marketers assume a pivotal role through two interconnected and complementary approaches: developing more sustainable offers and supporting consumers in their adoption of sustainable practices. No sustainable marketing is possible without a radical shift in the available offerings. Innovating differently requires addressing several questions. re innovation projects compatible with A planetary boundaries and the “social floor” represented in the Doughnut? (The Doughnut model, developed by UK economist Kate Raworth, combines the planetary boundaries with social considerations.) Brands may need to renounce certain offerings, whatever their profitability. For example, Mustela has announced that it will stop selling baby wipes in 2027; these products account for 20% of the child skincare company’s sales.

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alongside after-sale product care, thus helping to extend products’ lifetime and limit the deleterious effects associated with their use. This may involve increasing consumers’ skills. For example, the fashion brand Sezane organizes workshops in their stores to (re)educate consumers in how to repair their clothes and make them last longer.

Third, marketing must also contribute to the creation and dissemination of desirable narratives and images that align with planetary boundaries and address social challenges. Promoting simpler lifestyles and more sustainable practices can become a new social norm and contribute to reshaped lifestyles that benefit the planet. This is embodied in Back Market’s communication campaign “New is old,” which aims to deconstruct the idea that newer is necessarily better, and makes refurbished technology products more desirable.

o innovations seek to address an environmental D or social problem, placing extended value at the heart of the process? Or do they, at the very least, have societal utility? For example, all the innovations developed by the start-up Phenix are dedicated to fighting food waste. An associated question is: has an eco-innovation methodology been used in the innovation process?

Images Shutterstock

Supporting consumers Another priority involves supporting consumers in adopting sustainable practices and, more broadly, promoting the necessary lifestyle changes.

First, marketing must play an essential role in making more sustainable options desirable, whether it’s promoting the concept of use versus ownership, advocating for second-hand over new, or endorsing eco-responsible solutions. For example, Eurêcook, a service of French consortium the Seb Group, offers short-term rentals of a wide range of cooking appliances. It promotes access to the products, as well as the conviviality benefit related to cooking.

In shops, choice editing techniques can help prioritize more sustainable alternatives by removing non-sustainable products and including eco-friendly ones. For example, Whole Foods, whose motto is to “nourish people and the planet,” has prohibited 230 preservatives, flavors, colors, sweeteners and other ingredients in the food they sell.

Second, beyond the purchasing process, marketers must also extend their responsibility to promote the proper use of products and services

A force for good Adeline Ochs is professor of marketing at Audencia. Sihem Dekhili is professor of marketing at ESSCA School of Management – BETA CNRS. Aurélie Merle is professor of marketing at Jean Monnet University, IAE Saint-Etienne School of Management, Coactis.

They are the authors of Marketing durable (Pearson, 2021)

Marketing cannot become a force for good without rethinking the role of companies and brands in society. Marketing must carefully consider the scale of the challenges related to sustainability, and all components of the marketing mix must evolve, through a re-evaluation of price, place and promotion, with products positioned at the core of the transformation.

Ultimately, marketing has the power to guide consumers towards more eco-friendly practices by disseminating narratives and images more in line with our planet’s boundaries. It must use it wisely.

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MARKETING BEYOND CX

believes in, before they decide if they want to be ‘associated’. This customer interest extends beyond the organization to its supply chain. Companies must begin thinking in terms of transparency-bydesign to safeguard brand resilience through trustbuilding. Companies can’t simply say “trust us” when customers are demanding “show us.”

The evolution of CX

This is not customer service Changing consumer expectations demand that companies go beyond the established wisdom on customer experience and establish a sense of shared values Writing Alan Williams & Dave Stubberfield

“Customer service shouldn’t just be a department, it should be the entire company.”

Tony Hsieh, internet entrepreneur and venture capitalist

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he area of customer experience (CX) has exploded in recent years to become a powerhouse driving growth and revenue at companies across the world. As the discipline has grown in importance and credibility, so too has the number of people working in the field. CX is regularly put forward as leading-edge thinking in many areas of business. It might, therefore, be a surprise to you that the phrase ‘the experience economy’ was coined in 1998 – more than 25 years ago. Have we not moved forward from this?

We believe that we have: that an ‘experience’ is no longer enough for a customer; and that, in the emerging values economy, customers want to know more deeply about the organization providing them with a service, what it stands for, and what it

Values-driven organizational alignment focused on delivering a great customer experience is key

The emergence of CX as a respected discipline brings risk with it in the same way as with other specialist functions. We have experienced organizations – you probably have too – where the existence of a health and safety, or innovation, or people and culture function has resulted in an abdication of responsibility by some team leaders.

The same can happen with customer experience.

We predict that the successful organizations of tomorrow will be those that establish a sense of shared values with customers and other stakeholders: employees, service partners, owners or investors, and local communities. This mindset and relationship focus is key. Models and systems do not exist in isolation: the human factor plays a huge role. Embracing this and developing a whole-organization customer-focused culture can yield great rewards. Equally, ignoring the human dimension can result in underperformance, at best – or at worst be terminal for the organization.

With all the resources out there on the topic, why is great customer experience so rare? This is the acid test of traditional approaches. For any organization wishing to excel in this area, we believe that values-driven organizational alignment focused on delivering a great customer experience is the key.

Importantly, this cannot be copied from another organization, even one lauded for their performance. Every organization has its own unique set of circumstances. To deliver optimal results, the customer experience strategy needs to be developed considering the context. The key areas for alignment and coordinated execution are brand identity (often owned by marketing), employee engagement (often owned by HR or people and culture) and customer experience (delivered by ‘operations’).

This ‘service triad’ needs to be supported by two further areas: the organization’s systems and processes, or day-to-day operating infrastructure; and an aligned approach to measurement and insight. This is quite different from the more traditional organization structure and functionled approach. It can help to mobilize everybody representing the organization in an aligned way, rather than relying on the chief executive or other leadership functions, and it helps to prevent organization structures and in-company power

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be reflected in all aspects of the customer experience across all channels?

3 How can the organization’s systems and processes support the alignment and coordination of the brand identity, employee engagement and customer experience elements?

4 What measurement and insight processes can help us to understand and assess impact and performance across brand identity, employee engagement, customer experience, and systems and processes?

dynamics adversely affecting the organization’s direction and performance. It aligns activities to deliver measurable impact and ultimately creates a culture based on customer focus, high performance and continuous improvement.

Four questions

Images Shutterstock

When you are considering what to introduce in your organization, you will achieve the best results by taking an aligned, joined-up view. It is worth involving appropriate people from different disciplines, and considering all activities from strategy, management and delivery perspectives for the best possible impact.

Here are four simple questions that are helpful to bear in mind.

How do your customers feel?

Alan Williams is the founder of Servicebrand Global.

Dave Stubberfield is director of Carter Consultancy. They are the authors of Supercharging the Customer Experience (LID Publishing)

1 How can the organization’s brand identity be reflected in our people processes for directly employed employees and service partner employees?

2 How can the organization’s brand identity

As the famous quote, often attributed to Maya Angelou, has it: “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

That is the essence of customer experience.

The bottom line is that CX is neither a function or department, nor a set of tools or processes.

Rather, it is a philosophy or mindset – and a way of being.

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SHAPING THE WORKPLACE OF THE FUTURE “[Simone Fenton-Jarvis] uses a wealth of personal experience and the latest psychology insights to rethink the purpose of the workplace and how we can create spaces that allow us to bring our best to every visit.”

ANTONY WILTSHIRE Director of Workplace, UK&I, Edelman

“If you want to truly understand what it means to bring your full self to work, how the brain is both rational and emotional, what good leadership looks like, how to detect a supportive workplace culture and what roles space and technology play, this book is for you.”

DR KERSTIN SAILER Professor in the Sociology of Architecture, The Bartlett School of Architecture, University College London

Available through all good book retailers Print edition: ISBN 978-1-911671-62-6 | E-book edition: ISBN 978-1-911671-63-3 Published by LID Publishing (www.lidpublishing.com) (www.lidpublishing.com (www.lidpublishing.com www.lidpublishing.com))

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RITA GUNTHER MCGRATH ON STRATEGY

The failure facade Failure is as unfashionable as ever. And that’s a problem

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ailure has had a cheerful rebrand.

Yet, despite the warm words about failing fast and failing well, humans remain deeply uncomfortable with it. Failure avoidance infiltrates most systems. Take education.

In the 1960s, general systems scientist George Land evaluated the creative potential of school children over time.

Some 98% of five-year-olds performed at genius level. Yet only 30% of 10-yearolds achieved such status. By age 15, the proportion of geniuses stood at 12%. And adults? Sorry, folks, only 2%. Why? One explanation is that we systematically reward children for getting the right answer and punish them for getting the wrong one. Furthermore – as multiple psychologists have demonstrated – well-intentioned parents try to protect their children from any conceivable risk, cutting off the experimental elements of their development.

Such featherbedding is deadly for innovation and creativity. Many popular and important innovations – from cultural phenomena such the James Bond movie series, to lifechanging biotech, such as the mRNA vaccines – were ridiculed when first proposed. People encouraged to conform and to avoid failure are unlikely to risk suggesting a controversial new idea.

Yet hiding failures, or being unaware of them, creates systematic errors in learning. Learning is fundamentally a process of considering what we expect to happen (the theory), then comparing it with what did happen (the reality). When the unexpected occurs, that’s a signal to update our expectations. Let’s examine a few ways in which mismanaging failure can hobble learning.

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Survivor bias This is a huge issue in any study that purports to discover the secret of success by studying successful people or organizations. A far greater number are likely to have disappeared along the way. Without being able to compare the successes and the failures, we have no way of drawing sensible conclusions about whether a particular practice was more likely to lead to a good (or bad) outcome.

Many pages have been written about the success of bet-the-company entrepreneurs.

Hiding failures, or being unaware of them, creates systemic errors in learning

Accounts of bad bets are rarer. With such information it’s easy to conclude that risk-taking is good, without understanding when it works and when it doesn’t.

Missing data points Scientists understand that a well-designed experiment in which a hypothesis was not supported remains valuable. In business, however, ventures or projects that fail are buried and become undiscussable.

The result is that no-one learns from the original failed effort and are prone to repeating the same mistakes.

Management by exception Management by exception is popular, the idea being that issues need not be escalated to the next level unless something goes wrong. This has two problems. First, the manager to whom problems are being escalated lacks any idea of the total number of problems that are coming up. (Is this one in 10? One in 100?) Second, the practice cuts off the creativity of those doing the escalating, as they worry that if they fail to escalate, they can be blamed if their preferred course of action disappoints.

Limited goals The easiest way to hit performance goals is to ensure they are unchallenging. There are several risks here. The leader of a business growing at 5% might be seen as doing a great job, unless you realize that comparable rivals are growing at 15%. A manager routinely delivering results on an existing situation doesn’t know (nor do their superiors) how effective they could be in a novel one.

Remedies It needn’t be this way. Postmortems on failed projects can assist learning. Keeping a record of things we tried with interesting results, even if they weren’t the expected ones, is helpful. And making failures discussable – turning them into humorous stories – can go a long way to correcting business’s endemic learning disability.

Rita Gunther McGrath is professor of management at Columbia Business School

22/04/2024 17:36

STRATEGY FUSION FORCES

The power of the datagraph The industrial sector faces seismic shifts as digital technology grows ever more powerful. Now is the time to unlock value with data and AI Writing Vijay Govindarajan & Venkat Venkatraman

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he narrative of digital technologies reshaping industries is not new. Since the advent of internet browsers, online platforms and smartphones, digital innovations have revolutionized many sectors.

Digital-first enterprises have outpaced traditional leaders who underestimated the impact of digital technologies. Until now, the transformation has primarily influenced sectors characterized by low physical asset intensity and high information dependency, affecting roughly 25% of global GDP. The remaining $75 trillion global economy, representing the more asset-intensive sectors, has seen limited impact. That’s poised to change.

We will witness a strategic reshuffle in the industrial domains, driven by data analytics and artificial intelligence (AI), including generative AI. Today’s industrial sector leaders must prioritize digital strategies at the helm of their agendas.

We will witness a strategic reshuffle in the industrial domains, driven by data and AI

The digital challenge to industrial businesses It isn’t like industrial enterprises have ignored digital technology – but they have yet to experience the seismic shifts that digitalization brought to industries like photography, music, telecommunications, financial services and entertainment, where digital renditions replaced

physical products. Industrial giants such as GM (automotive), Deere (farming), and Caterpillar (construction) have excelled in creating highquality analog machinery, but now face the challenge of transitioning to digital-driven business models where their products must become digitalindustrial. Industrial giants have experiences with digital technologies that have redefined their processes with big enterprise systems (ERP) in areas such as supply chain management (SCM) and customer relationships (CRM). Adopting those technologies didn’t change the core of what they did, but the how.

The next turn of digitization, however, will impact the core of what these companies do – the product’s architecture. The emergence of digital natives, deeply versed in leveraging data and AI, poses a significant threat.

Tesla’s reinvention of the automobile as a cloud-connected supercomputer exemplifies how digital could have an extensive impact on industry structures, supply chains and value propositions. Suppose consumers shift their preferences away from owning an automobile to accessing transport as a service, provided by the likes of Uber, Lyft, Didi and Ola. In that case, it will reduce the demand for new private automobiles,

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but create new opportunities for shared vehicles and innovative new form factors. The shift from industrial combustion engines to hybrid and electric powertrains will reorder the portfolio of capabilities of automobile companies. Value will migrate towards entities controlling software and analytics rather than traditional manufacturing.

The architecture of an automobile is much closer to computing than the horseless carriage powered by industrial combustion engines introduced by Bertha Benz in the late 19th century. This architectural shift is more than just technological: it could shift the profit pools in extended ecosystems.

This transformation will not be limited to the automotive industry. For instance, John Deere’s initiative to develop tractors as “computers on wheels on farms”, capable of operating based on cloud-delivered instructions to distinguish plants from weeds, showcases the potential for digital integration in agriculture. In buildings and construction, Honeywell, Otis, Siemens, Hitachi and other industrial giants are analyzing how they could infuse their traditional offerings with digital functionality to create and capture new value beyond delivering the systems throughout the life cycle of operations.

Fusion forces and your datagraph

Today’s industrial sector leaders must prioritize digital strategies at the helm of their agendas

In our latest book, Fusion Strategy: How Real-time Data and AI Will Power the Industrial Future, we argue that industrial companies must adapt their strategies to recognize and respond to the ‘fusion forces’. These include blending physical and digital domains, merging human and machine capabilities, integrating digital logic into traditional engineering disciplines, connecting physical and virtual environments (e.g. through digital twins that have an end-to-end view), and fostering inter-company collaborations to form a network of competencies across industries. The ability to collectively harness these converging fusion forces will distinguish future leaders from those stuck in the old analog ways.

Let’s look at how digital companies disrupted asset-light, information-rich sectors. They developed multi-sided platforms with cross-subsidy (Google, Facebook), focused on the long tail of customer needs (Amazon, eBay), leveraged increasing returns to scale (Windows, Android, WhatsApp, Apple iOS), and offered ‘free services’ (search, email, social network and messaging) in return for access to personal data on individual behaviors. Many of those ideas do not readily apply to the industrial world – so we delved deeper.

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STRATEGY FUSION FORCES

One powerful idea emerged with profound applicability in industrial settings. Digital giants possess unprecedented data on how their consumers interact with them in real time.

By collecting such data from customers, they amass data network effects. Using graph analytic techniques to decipher patterns across customers, each digital giant has constructed a unique datagraph. Google has its search graph, Spotify has its music graph, Netflix has its movie graph, Facebook has its social graph, LinkedIn has its professional graph, and Amazon has its purchase graph. Each is based on what they uniquely know about how their customers interact with them in real-time, every time. Their revenue and profits are intricately tied to their unique datagraph. This data is privileged and proprietary, unavailable to others.

Learning from such an approach, every company should ask: “What do we uniquely know about how our customers interact or use our products in real-time, and how are we leveraging them to deliver distinct value?” This is not static data, but data-in-motion; the differentiated analytics are not focused on descriptive and diagnostic, but predictive and prescriptive.

Could datagraphs drive strategies in the industrial world? Yes. The instrumentation of analog machines to transmit data at the point of use will shape the digitization of the industrial sectors. Powerful sensors are available at affordable prices to be designed into industrial products like cars, trucks, tractors, trailers and industrial equipment. When they are seamlessly connected to cloud functionality from companies such as AWS, Salesforce, Oracle, Google and Microsoft, industrial companies can now know their machines in use in more detail than ever possible. By analyzing such data across their diverse customer base, they can construct their unique datagraphs.

It doesn’t stop there. With their analytical prowess, including generative AI, they can go from description (what happened) to diagnosis (why did it happen), to prediction (what could happen) and prescription (what should be done). Digital giants showed the way in consumer sectors when they took advantage of the widespread adoption of

THE BRIEFING

Without realtime data on how their machines operate in the field, industrial companies cannot construct their unique datagraphs

smartphones. Industrial companies can now apply the ideas as the Internet of Things (IoT) and related technologies digitize the physical world.

Real-time data What’s holding industrial companies back from making this leap? A major factor is that they have detailed high-quality data on machines designed and manufactured in multiple uncoordinated ‘systems of record’. They typically don’t have data on machines as deployed or in use, except aggregated data on machine failure that is unconnected to other databases. And without real-time data on how their machines operate in the field, they cannot construct their unique datagraphs.

A typical automaker, for example, has data about its cars as designed, manufactured and delivered – but not as driven. That data was impossible to collect until Tesla designed such data-collection functionality into the vehicle.

Other automakers are catching up: Mercedes has embarked on a five-year roadmap to architect its cars as computers with an end-to-end view from the chip to the cloud, with internal investments focused on its operating systems, and partnering with Nvidia for computer chips. Armed with the scale, scope, and speed of data on machines as deployed, industrial companies can potentially unlock new value for customers and capture a fair share for themselves.

We call these actions fusion strategies, which combine what manufacturers do best – creating physical products – with what digital businesses do best: using AI to mine dynamic, ever-expanding, interconnected data sets for critical insights.

Four fusion strategies There are four distinct fusion strategies relating to products, services, systems and solutions. Each strategy is defined by how industrial companies use the reach and richness of their datagraphs.

Fusion products When analog architecture is adapted with the capability to track and trace products in use, they become fusion products that can be monitored, maintained and upgraded

The challenge to industry

Datagraphs and fusion strategy

Industrial giants face significant and growing competitive threats. Digital natives that excel in leveraging data and AI are affecting industry structures, supply chains and value propositions. The next turn of digitization will impact the core of what industrial companies do, transforming their product architecture and driving a strategic reshuffle.

Every company should ask, “What do we uniquely know about how our customers interact or use our products in real-time, and how are we leveraging them to deliver distinct value?” By constructing a unique, proprietary datagraph using real-time use data, industrial leaders can pursue fusion strategies relating to products, services, systems and solutions.

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Four fusion strategies Multiple linked products

Fusion systems strategy

Fusion solutions strategy

Fusion products strategy

Fusion services strategy

Richness of product-in-use data

Single product

Machine efficiency

Reach of product-in-use data

Customer outcomes

Source: Fusion Strategy

Fusion solutions The final strategy combines fusion products, services, and systems to improve a customer’s performance directly. Rather than developing solutions through traditional consultative sales processes that approach each customer problem as a one-off, companies develop them with insights from product-in-use data and design them to apply to many customers. However, creating these solutions effectively requires industrial companies to be experts at solving customer problems in ways no other company can.

The winner in the clash of customized solutions would have earned an unusually high level of customers’ trust and tied their revenues and profits to customer success using outcome-based contracts and profit-sharing agreements (as they may eventually do with fusion systems).

remotely with software updates. Fusion products are not labeled ‘smart’ because they have digital displays and cellular connectivity; they are smart because they transmit valuable data on how they perform from different locations. The winner in the battle of brilliant machines is the one capable of deriving insights from data and insights from their far-flung network of machines.

Fusion services Industrial companies shouldn’t stop with fusion products. They should explore how to deliver differentiated services that directly impact customer profitability. By extending the reach of datagraphs to understand how their machines uniquely work in customer locations, fusion services aim to enhance customer profitability. Improving aircraft engines’ fuel efficiency by 1% in civil aviation could save $2 billion annually. Rolls-Royce’s R2 Data Labs saves its customers $200,000 per aircraft annually by analyzing the fuel consumption patterns revealed by product-in-use data, such as the routes that planes take, the altitudes and speeds at which they fly, weather conditions and the load carried. The winner in the battle to deliver remarkable results is the one who can fine-tune the machines to optimize customer profitability based on data network effects and powerful algorithms.

Fusion systems Industrial customers often use complex systems that include multiple machines and equipment made by specialized suppliers. Most customers manage these machines’ interoperability

independently, but some hire systems integrators and consultants to install, connect and upgrade them. A fusion systems integrator must connect all the machines and equipment it has sold and interlink them with those of partners and competitors. Instead of being responsible just for interconnecting different elements and getting the system to work, as traditional systems integrators are, the creator of a fusion system must ensure that it improves continually as new parts are added.

The winner in the showdown of smart systems is the one best able to differentiate by leveraging datagraphs and AI. Most industrial companies are comfortable synthesizing structured data such as names, addresses, machines bought and parts serviced. But fusion systems leaders feed unstructured data – like images of defects, the sound of faulty machines, and video feeds – into generative AI in real-time to develop complex, realistic digital twins of systems. They then use those twins to experiment with mixing and matching different permutations of products, machines, components, and peripherals to determine which combination of technologies works best.

The moment of opportunity

Vijay ‘VG’ Govindarajan is Coxe distinguished professor at Tuck School of Business, Dartmouth College.

Venkat Venkatraman is David J McGrath Jr professor of management at the Questrom School of Business, Boston University.

They are the authors of Fusion Strategy: How RealTime Data and AI Will Power the Industrial Future

The industrial inflection point is now. The potential $75 trillion in the addressable market is too big for digital giants to ignore. Industrial leaders have now competed by developing proprietary technologies and integrating vertically. To execute fusion strategies, most must partner with digital natives and start-ups on new technologies and applications. They must focus beyond developing prototypes to designing pathways to scale up and be counted. This will require industrial CEOs to lead digital efforts – a responsibility they’ve usually delegated. Since digital and physical domains are inextricably fused, they have no choice except to lead from the front.

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STRATEGY RESHAPE YOUR BUSINESS

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meaningfully and sustainably? Second, how to ensure that when an organizational change is made, a critical mass of people buys into it and that decisions are implemented for real? And third, what values, skills and style characterize a successful leader of a forward-looking company?

A clear purpose, careful change and exemplary leadership are undeniably essential to a company’s success. Today’s management literature offers abundant and often sensible advice on these topics.

Nevertheless, many organization redesign exercises still go off the rails. Much time, resources and emotional energy is wasted. How come? Reflecting on the major organization redesigns we have accompanied in the past 30 years across continents and in a wide range of sectors, we find that effective CEOs and their executive teams set great store on three behaviors when doing a redesign exercise.

They demand craftsmanship, safeguard nuance in the debate, and engage personally from A to Z.

Craftsmanship in organizational design

Rehabilitating organizational design Poor organizational design choices result in lost time and wasted resources. How can chief executives lead successful redesigns?

Writing Herman Vantrappen & Frederic Wirtz

Q

uestions of organization are timeless. In the biblical Exodus story, for example, Jethro advises his son-in-law Moses to structure his enterprise and then delegate decisions. That was then. Today, board directors and company executives are admonished about three other organizational issues: purpose, change and leadership. First, how to organize so that the company can fulfill its societal role

Effective CEOs rehabilitate the so-called midstream phase of organizational design, which today is often neglected in favor of the upstream and downstream phases. The former deals with defining the company’s purpose, values and vision: consider it the corporate equivalent of US President Kennedy’s 1961 statement, “I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth.” The latter deals with execution and change management: it is the corporate equivalent of the mission control center that manages the spacecraft’s flight.

The midstream phase is about crafting a new design through an orderly process: defining the business objectives and desired benefits of the redesign; defining the criteria for assessing alternative design concepts; clarifying the limits to the design freedom; defining the design variables with which one can play (i.e. architecture, processes, culture, people and technology); developing alternative design concepts; selecting the concept that best meets the predefined criteria; detailing the selected concept; and, finally, preparing the transition toward the go-live of the new design on ‘Day One’.

Clearly, change management intensifies during that transition and it continues well into the downstream implementation phase. We do not question that smart change management is critical. However, no degree of change management can make up for essentially flawed design choices.

Fundamentally, flawed design choices lead to unsuccessful outcomes: at the end of the change process, one will find that the new design does not deliver the aspired benefits, and a lot of resources,

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STRATEGY RESHAPE YOUR BUSINESS

time and energy will have been wasted. In addition, flawed design choices lead to a needlessly long and painful transition process, as the flaws gradually become visible to a growing number of people, and possibly even pit people against each other. It pays, therefore, to devote a bit more time to in-depth thinking about meaningful and acceptable design choices, rather than rush into change.

Nuanced debate Effective chief executives care for nuance in organization design discussions. They realize that there is not an indisputably best, let alone a perfect design. The eventually chosen design is the ‘least bad’: it is the outcome of the careful balancing of the advantages and drawbacks of a couple of valid alternative designs. Before deciding on the best possible design choice, effective executives ask all the right questions and address all relevant design variables in their discussions.

Specifically, they steer clear of three temptations that tend to lead to doctrinal and hence emotional debates.

First, they don’t get sidetracked by vocal advocates of a momentarily hot topic such as agility or – more likely today – resilience. They realize that one flavor-of-the-year concern alone cannot drive a major organizational overhaul.

Second, they have long abandoned the illusion that one can infer from anecdotes about the spectacular performance of a sample of today’s superstar firms, a generalizable and replicable recipe for the 99% of firms like theirs that are ‘ordinary’. They know from experience that pulling off an organizational redesign requires hard work, boots in the mud.

Third, they are no longer seduced by the seeming simplicity promised by formula-based solutions, such as: “If your business strategy focuses on customer-centricity, then you must organize by customer segment.” They realize that organizational design choices are contextual and strongly driven by their company’s specific historic path.

A topic that often suffers from doctrinal debate relates to the role of the company’s corporate

THE BRIEFING

No degree of change management can make up for essentially flawed design choices

parent (also known as the corporate center or corporate headquarters) versus that of the business entities in the company’s portfolio. That debate may degenerate into a binary, almost ideological choice between “more parent” or “less parent.”

The real question is: “How to get a better parent?”

A nuanced debate would recognize, first, that the role of the corporate parent may depend on the area where it could or should influence the business entities: one would differentiate, for example, between defining standards, approving capital expenditures, providing shared services, and kick-starting new programs. Second, the role of the corporate parent may depend on the type of business in the company’s portfolio. One would differentiate, for example, between a mature legacy business, a growth business, an internal corporate venture, and a joint venture.

Personal engagement from A to Z Effective chief executives engage personally in the organization redesign exercise. They take full ownership from start to finish. They keep their finger on the pulse of the process on an almost daily basis, for four reasons. First, they want to think for themselves about the pros and cons of alternative organization designs, as opposed to simply reviewing and approving the preferred solution developed and presented by a project team. They want to give themselves the opportunity to form their own ideas about a fit-forpurpose design.

Second, effective CEOs want to stay in control of the growing number of explicit or implicit micro-commitments that are made as the process progresses from concept design to detail design. Such micro-commitments can be about future reporting lines, roles, people, and so on.

Effective leaders want to spot improper design ideas early, before they gain momentum, take on a life of their own, and eventually may require painful rectification.

Third, effective chief executives want to be able to communicate the outcomes of the design

The case for organizational design

The potential pitfalls

As executives grapple with issues of purpose, change and leadership, the question of organizational design has been too often overlooked – resulting in wasted time, resources and emotional energy. Effective CEOs can deliver successful organizational redesigns by focusing on three key areas: craftsmanship in the reorganization process, nuanced debate, and personal engagement from start to finish.

Even leaders who are highly engaged in reorganization may still be vulnerable to setbacks. To anticipate and mitigate the potential pitfalls, chief executives should ask themselves a series of questions to test if they believe fully in the initiative under way, are listening to the right people, are prepared to make tough decisions when required, and are in control of all the levers that will be needed.

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exercise credibly and convincingly, particularly in face-to-face meetings with internal audiences. They want to feel comfortable providing unscripted answers to unforeseeable questions. They can do so only if they have immersed themselves personally in the actual design work.

Last but not least, by engaging personally in the organization redesign work, effective CEOs get direct exposure to people outside the company’s top management team with whom they otherwise would not interact. They find out how people in the field think, behave and interact. They develop a better feel for the people-side of the business at large.

Yet, even when a leader gets personally involved in the action, they may still be vulnerable to personal setbacks. To anticipate and mitigate the effects of such potential setbacks, CEOs could ask themselves four introspective questions before the start of the redesign initiative, and take preventive actions where needed.

1

“Do I fully believe in this initiative?”

A chief executive may have personal doubts about the need for a redesign, but still consent to it due to nagging by another member of the executive team or even the board. Unfortunately, an exercise led by a half-hearted CEO is off to a bad start. In such a situation the CEO could demand more clarity about the aspired benefits of the redesign and the design criteria.

2

Eventually, organizational design is all about people

“Will I listen to the right people without letting the process go off track?”

Involving the right people at the right time in the design process is important. But a chief executive can go overboard in trying to appease as many people as possible, thus getting into endless iterations. At some point, they must conclude, decide and freeze the design. A CEO with a bent for appeasing others could force themselves to communicate explicitly about the limits to design freedom, the deadlines, and the strict comply-orexplain rule that will be applied during the detail design.

“Am I in control of all the levers I will need to pull?” Depending on the company’s corporate governance practices, the chief executive’s lead of the redesign exercise may be hamstrung by certain members of the board of directors. For example, an executive chairperson, an ownerdirector or a retired CEO-founder may short-circuit the current chief executive and favor or protect their old favorites. A CEO who feels at risk of being incapacitated could make explicit upfront agreements with the directors about their potential involvement, the distribution of roles, and the communication channels.

It is all about people

3

“Am I prepared to make tough decisions where needed and stick to them?”

If you are an indecisive person, you are unlikely to rise to the corner office. Nevertheless, even a chief executive may succumb to the “over my dead body” threat by a manager who disagrees with a well thought-out decision by the executive team. This and similar forms of indecisiveness are devastating to a leader’s credibility; a CEO with an indecisive bent could force themselves to go public with the design decisions fairly fast, thus raising the hurdle for backtracking.

4

Herman Vantrappen is managing director of Akordeon. Frederic Wirtz leads The Little Group.

They are the authors of The Organization Design Guide: A Pragmatic Framework for Thoughtful, Efficient and Successful Redesigns

Organizational design changes tend to have a more direct and immediate impact than business strategy changes on the daily work of large numbers of people. CEOs must do whatever they can to maximize the chances of success of a redesign initiative, short-term and long-term.

To that effect, it is undeniably necessary to formulate a clear purpose, manage change carefully, and demonstrate exemplary leadership.

But truly effective CEOs go beyond those basics: they also demand craftsmanship in organizational design; they care for nuance in organizational design discussions; and they engage personally in the organizational redesign exercise from A to Z. Eventually, organizational design is all about people.

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NEWS NATION

Republic of Korea Is South Korea losing momentum? The country that gave the world K-Pop, Squid Game and Academy Award-winner Parasite is grappling with an ageing population and the lowest fertility rate in the world – while signs of trouble grow among its giant family-controlled businesses

Fact file Land area 97,230 sq km (37,541 sq mi) Population 51.8m Capital Seoul (pop. 26.1m) GDP US$1,674 billion (2022) Economic record +2.2% (2023) Forecast +2.1% (Central Bank forecast for 2024, Feb. 2024) GNI per capita $51,070 (2022) Currency South Korean won KRW1 = US$0.0007 (April 2024) Unemployment 2.9% Life expectancy Women 88.6 Men 80.6 Official languages Korean

POPULATION PRESSURES

43.4

Korea’s median age in years, versus a global median of 30.3

82%

Korean population living in urban areas

0.72

The average number of babies a South Korean woman is expected to give birth to in her lifetime – the lowest rate in the world

4

Years in a row the birth rate has continued to fall

1,901

Annual hours worked for an employed South Korean

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The Korean economy will face big challenges if we stick to the past growth model Choi Sang-mok, deputy prime minister and minister of economy and finance, April 2024

COMMERCE OR BUST

6.4%

South Korea’s average annual GDP growth from 1970 to 2022

0.6%

The Bank of Korea’s forecast for average annual growth in the 2030s

14.9%

Images Shutterstock

Proportion of the population in relative poverty

It’s time to move away from the old notion that any illegal acts done by chaebols are ‘forgivable’ if they do their jobs Roh Jong-Hwa, of the advocacy group, Solidarity for Economic Reform

There’s a core belief that if Samsung does well, Korea does well. And Koreans have lived with this myth for so many decades, it’s really hard for ordinary citizens to break out of it YoonKyung Lee, interim director, Centre for the Study of Korea, University of Toronto

TROUBLED CHAEBOLS

80%

Proportion of South Korea’s GDP accounted for by the top 10 chaebols, or familycontrolled conglomerates. They include Samsung, LG, Hyundai, Lotte and SK

75%

Koreans in their 20s and 30s hold an unfavorable view of chaebols

$2.1bn

Samsung’s operating profit (in USD) in October-December 2023 – down 35% on the same period the year before

$8m

Bribes reportedly paid by Samsung heir Lee Jae-yong, resulting in a 2017 conviction

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Number of chaebols active in Korea (2023)

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REVIEW INCLUSIVE FUTURES

An investment imperative Duke CE’s latest Lead with Her conference put a spotlight on the need for leaders around the world to redouble their commitment to advancing women in leadership Writing Patrick Woodman

who’s loyal? Is it someone who’s dedicated? Or is it someone who understands the importance of role modeling what balance and work-life balance means?” The challenge for leaders, Mpugwa said, is to be clear about how talent is defined for the future – and about the capabilities required to be considered as talent.

Representatives from several leadership development programs for women took the stage during spotlight presentations including Ayanda Mafuleka (see interview, page 30). Lisa Gray, global learning and development director, Astellas Pharma Europe, spoke about the impact of the company’s Connect and Lift program, saying: “Our future female leaders have not only been able to network between themselves, but also benefited from the experience of senior leaders who have uplifted, excited, engaged and inspired them.”

Inclusion beyond diversity

“I

nvesting in women is a human rights imperative.” That was the powerful argument advanced by Duke Corporate Education’s chief executive, Sharmla Chetty, as she opened the fourth annual Lead with Her event, under the banner of Inclusive Futures.

“It is the cornerstone for building inclusive societies. Progress for women benefits us all. Let’s build for this better world, the world we’d all like to live in. The world where women can stand shoulder to shoulder with men, enjoying equality of opportunity, equality of access, and equality of reward.” Chetty’s challenge set the tone for a stimulating day of discussion at the London event.

Here are three of the key themes.

Enduring gender stereotypes undermine the effectiveness of women – yet they can carry positive connotations

Invest in the leadership pipeline Panelists and speakers spoke repeatedly about the task of investing in the next generation of leaders, developing talent in an inclusive and equitable way.

“We must focus on appointing representative leaders to board positions,” said Julia Alexander, co-founder and chief product officer, ExecOnline.

“But it’s equally as important that we work to broaden pipelines and increase access so that years from now, we will have more people who are ready to take on those positions.”

Malebogo Mpugwa, executive head of HR, De Beers, pointed out that today’s talent pipeline is likely to look significantly different from the past. “What is talent of the future?” she asked.

“Is it someone who works hard? Is it someone

One of the strongest messages from the Lead with Her conference was that diversity is not enough.

Panelists and speakers pointed out that to retain diverse employees and create equity, leaders must also create inclusivity, by lifting diverse voices and bringing them to the forefront. Women need to be given a seat at the table, in boardrooms as well as other places where decisions are being made in organizations and in society more broadly.

Sarah Boddey, global head of diversity, equity and inclusion (DEI) at Munich Re, told the audience that is essential to push back when people say that DEI is untested and unproven: “We need to challenge the concept that DEI is new. Humanity has been fighting for diversity, equity and inclusion for as long as humanity has existed, particularly the underrepresented groups within humanity.”

Dineo Mathlako, deputy high commissioner of South Africa to the UK, pointed out that times of war in particular have inflicted a high cost on women globally. “People who bear the brunt in any conflict are women – and yet we are never at the forefront of peaceful solutions. If we had more women negotiating peace, maybe we’d have moved 10 steps forward, because for us, it’s urgent.”

Time to reboot Keynote speaker Ashleigh Shelby Rosette, professor at the Fuqua School of Business at Duke University, wrapped up the conference with a powerful call to action. The malfunctioning of an operating system mirrors the breakdown of societal systems plagued by systemic social inequity, she explained.

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Clockwise from top left Keynote speaker Ashleigh Shelby Rosette, Dineo Mathlako, Sharmla Chetty, Malebogo Mpugwa and Sarah Boddey

Advice for young professionals

Images Anthony Hurren Photography

The conference heard rich advice for emerging leaders and women in their early career stages.

“If you’re early in your career, take risks. Build the muscles to be able to deal with stressful situations.”

Eimear Creaven, division president, Western Europe, Mastercard

“Look for board roles while you are still an executive. Choose sectors that are different to your day-to-day job. That pushes you further, you can learn more, and you add more value to both organizations.”

Annabel Tagoe-Bannerman, group general counsel and company secretary at Bakkavor Group

“Grab your first board position opportunity with both hands. Don’t be too picky. Take the first one as soon as you’ve got it. The second, third, fourth and 25th will follow.”

Stevie Spring CBE, chairman, PRS for Music

“Develop your brand outside of your corporate brand. Your title will disappear when you change careers, and people have to know what your personal brand is.”

Peju Adebajo, non-executive director, Ibstock

in society. By disrupting the status quo, individuals and groups can initiate processes of reflection, reconciliation and reform to address social inequity.

Three critical issues need to be addressed, explained Rosette. The first is biased preferences.

In 2008, Rosette published research on the white standard of leadership, demonstrating that there exists a prototype of leadership such that leaders

are expected to be white. Fifteen years later, she and her colleague showed that while the bias for white leaders had gone away at an explicit level, it still existed implicitly. When biases and preferences that promote exclusivity and attempt to minimize inclusivity persist – even without awareness – organizations should reboot by designing incentives that align with the desired outcomes.

Second, enduring gender stereotypes undermine the effectiveness of women – yet they can carry positive connotations, as in the case of certain types of negotiations. Rosette’s research found women are less likely to reach an impasse or walk away with no deal: while women may negotiate differently to men, they are more likely to make a deal in the end.

Thirdly, said Rosette, when opposition to DEI initiatives occurs, it can be an effective strategy to help people with decision-making power to recall their own disadvantages in life. This can help them better understand the disadvantages faced by marginalized communities. In Rosette’s research, those who had experienced disadvantages were more likely to recognize privilege – and thus more likely to stand behind DEI initiatives.

Recordings from the Lead with Her 2024 conference are available at info.dukece.com/leadwithher#recordings

Patrick Woodman is editor of Dialogue

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BIG IDEAS PERRY TIMMS

Aligning aspirations As leaders strive to steer companies towards success, Hoshin Kanri can be the compass that guides them

Execution is the essence of strategy Strategy without execution is merely wishful thinking. Hoshin Kanri bridges the gap between vision and reality, transforming abstract goals into tangible results through disciplined execution. By fostering a culture of accountability and continuous improvement, organizations can turn strategic intent into measurable outcomes, driving sustainable growth and competitive advantage.

I

n strategic management, there is a fair degree of truth in the old saying that there is nothing new under the sun. One such approach stands out.

It is often overlooked as a tool for strategy exercises, yet it excels in the way that it creates clarity and supports efficacy: it is ‘Hoshin Kanri’, or Hoshin Planning.

Rooted in Japanese management philosophy, Hoshin Kanri became popular in the post-war period. Through a seven-step process, it offers a systematic framework for tackling the complexities of modern enterprise with true precision and purpose. As leaders strive to steer companies towards success in an everuncertain landscape, Hoshin Kanri can become the compass that guides them.

At its core, Hoshin Kanri embodies the principle of alignment – aligning strategic objectives with day-to-day operations, and aligning aspirations with tangible results. This alignment cannot be merely superficial; it should run deep, permeating every facet of an organization and supporting a culture of cohesion and collaboration.

Central to the Hoshin Kanri methodology is the concept of True North – a metaphorical beacon that illuminates the path forward. True North represents the ultimate destination, the lofty goals that inspire and motivate teams to reach beyond their perceived limits. By defining clear and compelling strategic objectives, organizations set the course for success, providing a sense of purpose that transcends the mundane and ignites passion in every employee.

However, clarity alone is not enough; execution is paramount. Hoshin Kanri

Clarity breeds confidence In a world of ambiguity and uncertainty, clarity is a rare commodity. By articulating clear and concise strategic objectives, leaders provide a sense of direction that empowers employees to act decisively and confidently. Clarity breeds alignment, aligning efforts toward a common purpose and propelling the organization toward its True North.

is strong in translating strategic intent into pragmatic actions, ensuring that any aspirations are grounded in practical realities. Through clearly defined objectives and initiatives, the framework can help leaders to align the efforts of individuals and departments, creating a unified front poised for progress.

Going beyond any sense of idealism, successfully using Hoshin Kanri demands discipline, perseverance, and a willingness to embrace change. Leaders must confront the status quo, question entrenched norms, and adapt swiftly to emerging trends. Yet it is precisely this adaptability that sets Hoshin Kanri apart; as a tool, it has the ability to evolve and iterate in response to shifting dynamics, ensuring relevance and resilience in the face of adversity. (We might even call that agility or anti-fragility.)

Three key practical takeaways emerge, each offering valuable insights for leaders navigating the complexities of strategic management.

Autonomy fuels engagement The true strength of Hoshin Kanri lies not in top-down directives, but in participatory activism. By involving people at every level of the organization in the strategic planning process, leaders harness their teams’ collective intelligence and creativity, fostering a sense of ownership and commitment that transcends hierarchy.

Autonomy fuels engagement, enabling people to contribute meaningfully to the organization’s success and creating a culture of collaboration and innovation.

Hoshin Kanri offers a compelling framework for achieving organizational excellence in today’s complex business environment. Through the core principles of clarity, execution and empowerment, leaders can set a roadmap toward sustainable growth and aligned performance. No, it isn’t groundbreaking and new. But as a methodology for building alignment, Hoshin Kanri should no longer be overlooked.

Perry Timms is founder and chief energy officer of PTHR, a consultancy aiming to create better business for a better world. He is a TEDx speaker, top-selling author, and a member of HR Magazine’s Most Influential Hall of Fame

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PIERS CAIN ON BOOKS

Bad to worse Why do bad leaders flourish – and how can they be stopped?

T

here are countless studies and theories of good leadership. They have fed the global industry in leadership education. But business schools pay scant attention to bad leadership – or so, at least, argues Barbara Kellerman. Her book, Leadership from Bad to Worse: What Happens When Bad Festers, attempts to fill that gap.

Kellerman is a professor of public leadership at Harvard with a background in political science. In line with her training, she regards politics and business as intimately interconnected: bad politicians enable bad business leaders,

Traditionally, a bad leader is considered ineffective, or oppressive, or both

and vice versa. In both spheres, she argues, bad leaders follow a common trajectory: her thesis is that it is possible to identify four developmental stages that all bad leaders go through.

At the beginning, the leader has a vision of a new future, hugely appealing in the specific context it is being shared – but impossible to achieve. Only the leader has the skills and personality required to achieve the vision. In the second stage, followers join in, buying into the vision. Many of the core followers will be potential ‘bad actors’. In the next phase, the leader and followers embark on a course that is in some way bad. Fourth, they slide from bad to worse. Frustrated by obstacles, the leader and followers extend and expand their commitment to being bad.

Everything hinges, of course, on what one considers bad. Kellerman points out that, traditionally, a bad leader is considered ineffective, or oppressive, or both. There appears to be little disagreement over how to identify an ineffective leader, but Kellerman struggles to come up with a universal definition of what constitutes a morally reprehensible one. The nearest she gets is to argue that within the society in which the leader operates, a bad leader would be considered oppressive. It is easier to find agreement on what constitutes bad behavior in business than in politics.

Wrongdoing such as theft, fraud and corruption – the typical crimes of business leaders – are considered immoral in all societies.

The book is written from an American liberal political position, which contributes to an important limitation –

an assumption that societal and business change in America is replicated (or soon will be) in the rest of the world.

Kellerman writes about the increasing willingness in the West of subordinates to challenge their leaders as an entirely new development, which might surprise a Briton who lived through the Winter of Discontent and the miners’ strikes of the 1970s and 1980s. Likewise, someone brought up within the Confucian tradition is likely to take a very different view of what a good leader or follower ought to be. And context matters – because as Kellerman emphasizes, bad leaders do not emerge in a vacuum.

They operate in a unique and specific context, which creates the opportunities that they exploit.

Kellerman emphasizes that followers are critical to the success of any leader: bad followers make it possible for bad leaders to be bad. Interestingly, there are few penalties for being a bad follower, even if the bad leader is deposed, but many advantages in terms of career, money and prestige. Followers of bad business leaders are rarely penalized, except perhaps one or two low-level scapegoats.

Despite its limitations, Kellerman’s book is a thought-provoking one for anyone concerned about the quality of leadership in business or politics. Her conclusion, though, is a worrying one.

She argues that the four developmental stages of bad leaders have a ratchet effect – it is nearly impossible for a leader to revert from being a bad leader to a slightly better one. Instead, they become increasingly powerful and oppressive.

The best way to prevent the rise of a bad leader is to stop them early.

Piers Cain is a management consultant

Leadership from Bad to Worse: What Happens When Bad Festers Barbara Kellerman (Oxford University Press)

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THE LAST WORD SANYIN SIANG

Good leaders keep good company We are judged by the company we keep.

More importantly, we are shaped by it

W

hat role do friendships play in good leadership? For her recent milestone birthday, a dear friend gathered amazing women from different parts of her life and asked us to share wisdom. One of the pieces of advice offered was: “To become your best self, be around people who want to help you flourish.”

In that room were moms who home-school their children, single women who devoted their lives to the community, executives, and professors.

They shared the importance of being quality people who express compassion and authenticity, who show up for both the best and the toughest moments, and who act in service of the greater good.

Our tastes, aspirations, hopes and fears reflect those around us. Our character and priorities are shaped by those we spend time with. We are braver around brave people. And our values slip around those whose own values are weaker. In my advisory practice, I create programs for CEOs, C-suite executives and family business leaders, designed to accelerate their contextual learning, create a peer group for problem solving, and hone their superpowers. One key to success is that I curate based on their humility and relational prowess.

If true productivity is less about doing more, and more about a commitment to becoming our best selves, then we need to be more appreciative of character virtues, not solely status or power.

The theologian L Gregory Jones once reminded me of the Aristotelian virtue of friendship. The company we keep can hold us accountable for our hopes, as well as for our vices. In organizations, the norms of a group make up its culture. It is a two-way relationship. Communities or organizations play a role in shaping the character of their individual members, and those individual members are in turn responsible for shaping the shared culture – the underlying value system of the organization. What does this mean for the pursuit of good leadership? Three lessons stand out.

The company we keep can hold us accountable for our hopes

We do not operate alone Leadership, as is often said, is a team sport. The understanding that it is about building on each other’s expertise is commonplace, but I argue we should also consider how we foster the good in each other’s character.

We should surround ourselves with the best people in terms of both expertise and character, and broaden our networks to those mentors who help build our character and values.

Think beyond visible fit Next time you consider joining a team, organization or board, think beyond the ‘visible fit’ and consider the cultural fit as well. Explore culture and values, not just prestige or technical fit. Look for people who embody the qualities you want – wisdom, curiosity, compassion – not just roles you aspire to. And apply the same logic when hiring: do you consistently look beyond candidates’ technical contributions and consider their contribution to a positive culture?

Focus on culture as a priority What type of values do you want to uphold? Which are most important? How much do you let your culture and stated values guide decisions? A good culture attracts and retains good leaders and good talent.

An organization with a good culture can advance innovation, steward responsible values, and generate decisions with positive societal outcomes.

It’s certainly true that we are judged by the company we keep. Perhaps more importantly, we are shaped by it.

Sanyin Siang is a Pratt School of Engineering professor and leads the Fuqua/ Coach K Center on Leadership & Ethics at Duke University

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THE HUMAN QUALITIES ESSENTIAL TO LEADERSHIP EXCELLENCE

HOW LEADERS AND EXECUTIVES CAN IMPROVE THEIR TEAM/ GROUP DYNAMICS

DR MARIA KATSAROU-MAKIN is the founder of the Leadership Psychology Institute and has over 20 years of experience in organizational development and executive coaching. She is a Chartered Psychologist and has done extensive work and research in team dynamics.

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PhD, Distinguished University Professor, Case Western Reserve University, and co-author of bestselling Primal Leadership Available through all good book retailers

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LL SMOAOKS: B

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Connective intelligence Developing leaders for the AI era

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The New Business Context for Leaders

Where we work The evolution of hybrid working

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The nature revolution

The nature revolution Business’s new relationship with the natural world

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24/04/2024 10:15