2020-11-01 strategy business

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THE VALUE OF EMPATHY • NECESSARY TRADE-OFFS • RACIAL JUSTICE AT WORK

Home base: Meeting consumers where they are

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“I did not know that I would make 10 years’ worth of decisions in 10 weeks,” the CEO of a large tech platform recently told the Wall Street Journal. That’s how things have gone since the COVID-19 pan demic began. The crisis accelerated some existing trends and birthed others, creating a few years of wrenching change in a matter of days. As a result, the future is, in a very real way, happening now.

Nowhere is this more true than in the vast US$2.1 trillion global entertain-ment and media industry, in which consumer behavior shifted rapidly. In our cover story, “Forward to normal,” Dan Bunyan and Vikram Dhaliwal of PwC describe how companies are constructing business models that can meet con-sumers where they are (and where they will be) — namely, at home and focused on experiences (page 68). In a similar vein, Oz Ozturk and Ian Kahn of PwC urge consumer-facing companies to move aggressively to reconfigure their busi-ness models so they can keep pace with shoppers who are increasingly online (“Consumer companies must take leaps, not steps,” page 8). And if your com-pany is focused on the experience of consumers or other groups, it’s vital to realize Il

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the connection between those efforts and enterprise agility, as PwC’s Sujay Saha, Matt Egol, and Matthew Siegel argue (“Agility and experience management work better together,” page 46).

One area in which the sudden arrival of the future has been evident is in work: where we work, how we work effectively, and the tools we deploy to get the work done. In “Creating the office of the future,” PwC’s Deniz Caglar, Edward Faccio, and Erika Ryback offer a compelling strategic guide to how companies can reimagine and reconfigure the workplace (page 96). And their colleagues Nele Van Buggenhout, Soraya Murat, and Tom de Sousa detail five key tactics for “Sustaining productivity virtually” (page 40).

Living life on fast-forward poses a particular set of challenges to leaders of or-ganizations. And, here, too, we’ve got you covered. It’s impossible to be all things to all people. But rather than shying away from the many flummoxing paradoxes in our world, Blair Sheppard and Susannah Anfield of PwC describe how leaders must embrace and grapple with them (“The urgent need for sophisticated lead-ership,” page 54). In this issue’s Thought Leader interview, Stanford psycholo-gist Jamil Zaki makes the case that leaders can and must train themselves to be more empathic (page 176). And Wharton professor Stephanie J. Creary lays out a framework for making progress on diversity, equity, and inclusion in “How lead-ers can promote racial justice in the workplace” (page 14).

Books are one of the slower forms of media. But precisely because authors put so much thought and effort into their manuscripts, we at s+b find that they can be a source of profound insight on how to live today, and how to prepare for tomorrow. This issue includes the 20th edition of our annual Best Business Books package (page 108). In this most unusual year, many of our usual experts — among them Bethany McLean (Narratives, page 132) and contributing editors Sally Helgesen (Talent and Leadership, page 113) and David Lancefield (Strategy, page 122) — stepped up with rewarding recommendations.

To a brighter 2021.

Daniel Gross

Editor-in-Chief

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Consumer companies must take leaps, not stepsOz Ozturk and Ian KahnAs shoppers show how quickly they

can adapt to external shocks, retailers

will need to radically reconfigure their

business models.

How leaders can promote racial justice in the workplaceStephanie J. CrearyEmbrace four principles to turn today’s

diversity, equity, and inclusion initiatives

into sustained progress.

Transforming information into insightAnil Khurana, Roger Wery, and Amy PeirceFocus on six organizational elements

to build a world-class data and

insights capability.

Connecting the dots in an uncertain worldSuvarchala NarayananNYU’s Christian Busch on why

serendipity is a skill — one that can

be developed by those who are open

to seeing opportunities in seemingly

unrelated facts or events.

Businesses can fast-track innovation to help during a crisisChris Foster “Unrealistic” timelines can actually

work. Here’s how.

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leading ideas

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ORGANIZATIONS & PEOPLE

Sustaining productivity virtuallyNele Van Buggenhout, Soraya Murat, and Tom de Sousa Maintaining productivity levels among

remote employees is an enduring

challenge. Here are five ways to help

businesses and employees thrive while

people work at home.

STRATEGY

Agility and experience management work better togetherSujay Saha, Matt Egol, and Matthew SiegelMany companies achieve early wins with

separate transformational efforts, then

stall. But if combined and enhanced

using “return on experience,” or ROX,

measures, these two programs can

unlock each other’s potential.

essays

40 46

LEADERSHIP

The urgent need for sophisticated leadership Blair Sheppard and Susannah AnfieldThe pandemic has highlighted a series of

paradoxes inherent to the work of leaders.

What comes next will depend on how well

leaders face up to them.

CONSUMER & RETAIL

Forward to normal Dan Bunyan and Vikram DhaliwalEntertainment and media companies

are building business models that

are resilient to the enduring changes

in consumer behavior ushered in by

COVID-19.


The road to successful change is lined with trade-offsMaya Townsend and Elizabeth Doty Rather than trying to convince people your

change initiative is the right one, invite

them to talk openly about what it might

take to implement it: the good, the bad,

and the frustrating.


Creating the office of the future Deniz Caglar, Edward Faccio, and Erika RybackIn a remodeled world, it is vital for

companies to reinvent ways of working.

features

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108

113

122

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Issue 101, Winter 2020

The Best Business Books 2020

TALENT & LEADERSHIP

From the outside in

Sally Helgesen

STRATEGY

Strategy with a purpose

David Lancefield

NARRATIVES

Gunning for history

Bethany McLean

MANAGEMENT

Managing in a pandemic year

Theodore Kinni

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ECONOMICS

A master class in conflicts

Ryan Avent

TECH & INNOVATION

Failure and the root of invention

James Surowiecki

MARKETING

Paying attention to humans

Tony Case

Top shelf

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166

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THE THOUGHT LEADER INTERVIEW

Jamil ZakiAmy EmmertThe Stanford psychologist explains

that whether we are dealing with

business, politics, or personal matters,

it’s possible — and advantageous — to

train ourselves to be more empathic.

END PAGE: RECENT RESEARCH

Paying the price when the CEO gets divorcedMatt PalmquistMany top executives who go through a

legal separation become more cautious

with the firm’s investments.

Cover illustration by Andrea D’Aquino

176 192

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EDITORIAL

Editor-in-Chief Daniel Gross

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Managing Editor Elizabeth Johnson

Deputy Managing EditorMichael Guerriero

DesignersLaura EitzenLeigh JagareskiJennifer Thai

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Senior Editor Deborah Unger

Chief Copy EditorVictoria Beliveau

Jeff GariglianoSally HelgesenJon KatzenbachTheodore KinniDavid Lancefield

Senior EditorAmy Emmert

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Blair Sheppard Thomas A. StewartJohn Sviokla Chrisie Wendin

The Outlook in a time of disruptive change

© 2020 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal

entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a

PwC’s new Global Entertainment & Media Outlook 2020–2024. Subscribe today.

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Our latest Outlook, which takes into account the

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Based on all-new advertising and consumer spending

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To subscribe, visit www.pwc.com/outlook

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LeadingIdeas

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N ot long ago, most people went to work at a workplace — not in their basements or bedrooms. Homeschooling was a rarity. And buying groceries online was something relatively few shoppers were comfort-able doing.

What a difference a few months can make. It turns out that people are much more open to change than businesses expected. They’ve rushed online to shop. They are experimenting freely to find what works best for them. And they are proving remarkably adept with technology. “During the pandemic, we’ve seen an unprecedented acceleration of trends that emerged over the past five years,” says Matthew Shay, president and CEO of the National Retail Federation. “Innova-tions are taking place in a matter of just months that would normally take years, in areas like acceleration of e-commerce offerings, blending of digital and in-store experiences, curbside pickup and quicker delivery options, and contact-less delivery and payments.”

Consumers are not going back. “Post-pandemic, many of these changes may be here to stay,” Shay says. One data point: Almost 90 percent of online gro-cery shoppers plan to continue buying online when social distancing is no longer required, according to PwC’s 2020 Global Consumer Insights Survey.

If you’re a consumer and retail business leader, you should be hearing an urgent signal in all of this: You must change at least as rapidly and profoundly as the shoppers you serve. You no longer have the luxury of applying tried-and-true

Consumer companies must take leaps, not stepsAs shoppers show how quickly they can adapt to external shocks, retailers will need to radically reconfigure their business models.

by Oz Ozturk and Ian Kahn

Almost 90 percent of online grocery shoppers plan to continue buying online when social distancing is no longer required.

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transformation techniques. And simply setting up social distancing in the work-place or making tentative digitization moves won’t be enough. It’s time to radi-cally rethink and reconfigure your business model for a perpetually uncertain future — or risk becoming obsolete.

Rethink your business

If you’re part of a consumer-facing company, you’re fortunate to be exposed to a constant stream of fresh insights into shoppers’ behaviors because the sales cycle is so short. But to transform quickly, you must identify and rapidly implement the changes that will provide the best chance of long-term growth. Making sys-temic change will help companies develop the resilience they’ll need to deal with the exogenous shocks that lie ahead, and will build the management muscles that promote agility and nonstop innovation.

Our research points to five ways in which you can begin to do this.• Smooth out price oscillations as much as possible. The pandemic has spiked

prices and played havoc with supply chains. The volatility couldn’t come at a worse time; PwC’s survey finds that 18 percent of consumers polled worldwide have experienced a loss of income and higher household bills. The challenge for you, then, is to use the many supply chain forecasting and price optimization tools at your disposal to minimize the price hikes. Shoppers are likely to recog-nize and trust the businesses that show they’re doing a better job of consistently holding down prices. Not surprisingly, that spells good news for discount retail-ers everywhere.

• Help shoppers feel safe. We’ve seen that customers will select experiences that reinforce safety. For example, prospective guests at hotels and motels will demand to know about cleaning protocols. As a result, many hospitality venues now publicly state how long their rooms are left vacant between occupancies. Multiple retailers, such as Walmart, are requiring their employees and customers to wear masks in-store, even when there is no government regulation dictating it. Similarly, soon after the pandemic hit, Chipotle Mexican Grill partnered with Grubhub to expand its last-mile delivery, adding a seal to each meal package to assure customers it hadn’t been tampered with. Customers can also request con-tact-free delivery.

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Levi Strauss now has curbside pickup at about 80 percent of its 200 or so stores in the United States. Best Buy is one of a number of large companies that have done the same. And Bacardi was quick to partner with U.K. food delivery firm Deliveroo to deliver cocktails at home — a move designed to also support local bars hard-hit by pandemic shutdowns.

• Reinforce shoppers’ embrace of digital. It’s clear that consumers will keep experimenting with newer channels, such as mobile and online grocery. PwC’s consumer survey shows how a steady movement toward e-shopping has sud-denly accelerated. Before the pandemic, only about 9 percent of consumers bought their groceries exclusively online. Now, 35 percent buy food online or by phone, and 63 percent of those consumers are buying more groceries online or by phone than before social distancing. Half of all consumers use social media more and 56 percent watch television more than before social distancing measures were put in place.

With these trends in mind, Freshippo, Alibaba’s supermarket brand, has implemented self-service checkout kiosks, a mobile-first experience, and 30-min-ute product delivery. And since the start of the pandemic, U.S.-based automotive retailer AutoNation has accelerated a host of digital projects to keep up with customers’ needs. Its Store-to-Door offering — which lets buyers find and pur-chase a car online and have it delivered to their home — was scheduled for roll-out in 2021 but launched in April 2020 instead. Meanwhile, behind the scenes, nimble retailers of all sorts are rapidly moving to cloud services to handle the surge in online sales as well as the ups and downs of today’s volatile markets.

Now is the time to accelerate long-anticipated 5G technology rollouts. Broadband networks have proved able to handle the proliferation of video calls, but customers still need and are ready for more bandwidth.

• Do more to blend physical and digital experiences. Consumers still value physical locations for the sensory and social experiences they offer. In PwC’s Global Consumer Insights Survey, 49 percent of shoppers said their in-store shop-ping had increased or stayed the same since the onset of COVID-19. And con-sumers say they are willing to pay higher premiums for emotional connections. Although digital channels now offer the routes of least resistance — especially in times of social distancing and lockdowns — human interaction is still very impor-

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tant, particularly in explaining products or services and finding the right solu-tions. Approaches that some companies had implemented before the pandemic can offer inspiration. Winter clothing manufacturer Canada Goose, for example, opened a concept store in Toronto that mimics Arctic conditions. Customers can try on down coats, but not buy them directly, instead placing an order that arrives as soon as the same day. Alibaba partnered with Guess to offer customers at its Hong Kong concept store “mix and match” clothing recommendations based on their preferences, using a “smart” mirror, artificial intelligence, and other digital technologies. The mirror also suggests other products alongside customers’ selec-tions, using their shopping history on the Taobao or Tmall platform.

Brick-and-mortar stores do face challenges, though. Before the pandemic, in-store visits had long been city dwellers’ primary way to shop. Our latest sur-vey, pre-pandemic, showed that 47 percent of those surveyed shopped in-store at least once per week. That was then. Now, online shopping is increasing and foot traffic is falling. In the U.S., retail e-commerce sales in the second quarter of 2020 grew by more than 44 percent year on year. And evidence of falling foot traffic is stark. For example, in June 2020, consumers shopped in person 50 percent less in Berlin, Hamburg, and Cologne, Germany, and 75 percent less in London’s West End than they did a year ago, according to German and British retailer associations.

• Prioritize what customers say they care about. Companies must transcend price, quality, and availability by prioritizing the intangibles that consumers care deeply about. PwC’s consumer survey confirms that. At no time in our 11 years of research have we seen such uniformity in consumers’ desires for transparency, sustainability, cleanliness, community living, and social consciousness.

Shoppers increasingly expect businesses to make sustainable, ethical choic-es that recognize stakeholders as much as shareholders, and that expectation has only increased since the onset of the pandemic. Before the pandemic, 43 per-cent of shoppers responding to the PwC survey said they expected businesses to be accountable for their environmental impact. In a separate consumer survey of U.S. residents, PwC found that 75 percent thought companies should try to maintain some of the unintended environmental benefits of the U.S. lockdown, such as reduced air pollution and cleaner water.

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We believe that a year from now, the B2C landscape will look dramatically different. Big commerce platforms will have taken more share by leveraging strengths and driving down costs. AI and other emerging technologies will be adding more and more value. And people with disposable income will be paying even bigger premiums for amazing experiences. The trends supercharged by the pandemic are ones that PwC’s Global Consumer Insights Survey has been track-ing for years. Those trends will only accelerate. We now need to plan for drone deliveries, mass personalization, completely cashless payments, and a renewed commitment to sustainability.

The headlines already point ahead: Many retailers are struggling to adapt to the sudden changes in consumer behavior brought about by the pandemic; for some, it will be the final straw. Yet others are acutely sensitive to consumer shifts and are demonstrating that they have the agility to respond swiftly to what they’re seeing. And new, innovative players — still unknown — will emerge to fill the gaps left by the B2C companies that have been unable to keep up.

Consumer-facing businesses just have to imagine what’s possible. Too few still lack the data insights and the supply chain flexibility to change course as quickly as consumers have shown they can. Too many businesses are still talking rather than acting. But the sooner you change, the faster your shareholders will recognize value. +

Oz Ozturk

[email protected] is PwC’s global advisory consumer

markets leader. He specializes

in delivering large-scale, multi-

geography technology programs for

retail and consumer businesses,

across all functions of the busi-

ness. Based in London, he is a

partner with PwC UK.

Ian Kahn

[email protected] a leading practitioner for PwC’s

front-office transformation solu-

tions practice. He has spent two

decades helping brands transform

customer relationship manage-

ment capabilities in order to

unlock new growth opportunities,

enable better customer experi-

ences, and realize productivity im-

provements. Based in New York,

he is a principal with PwC US.

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T he late Georgia congressman John Lewis had a well-earned reputation for being uncannily optimistic, courageous, and values-driven. These characteristics were also core to his identity as a leader. Although Lewis was brutally beaten by police during a 1965 civil rights march in Selma,

Ala., he said, “I have an obligation to continue to do what I can to help because I am here to continue to tell the story.” His final public statement challenged us to get into “good trouble, necessary trouble” by pursuing nonviolent protest and tak-ing a stand against injustice and in favor of unity and peace. He reminded us that rocking, and even capsizing, the boat — not returning to business as usual — is needed to bring about a world that is more racially just than the one we inherited.

In recent months, many company leaders have embraced good trouble in

How leaders can promote racial justice in the workplaceEmbrace four principles to turn today’s diversity, equity, and inclusion initiatives into sustained progress.

by Stephanie J. Creary

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their organization. In response to the killings of Breonna Taylor, Ahmaud Ar-bery, George Floyd, and Rayshard Brooks, and protests over criminal and eco-nomic injustice, countless leaders have spoken out publicly. They have donated millions of dollars toward causes focused on ending the harmful effects of sys-temic racism or sought avenues to provide their company’s goods and services to underserved communities that would benefit from greater economic develop-ment. Many have started auditing the systems and processes that create racial inequity in their organizations, pledging to create more opportunities for people from underrepresented groups. They have sponsored town halls and other fo-rums intended to shine a light on race and racism, and have encouraged manag-ers and employees to keep these conversations going.

To realize the progress being promised, today’s strong momentum needs to be sustained in the months and years ahead. And that could prove challenging. In addition to having to resist the tendency for business priorities to naturally shift to activities more focused on the bottom line, we are in the midst of a pan-demic. As the devastating health and economic realities of the coronavirus con-tinue to sink in, senior leaders will become mired in business contingency plan-ning. With that comes the risk that the spotlight on racial justice will dim and issues of racial inequity will continue to plague their company.

To combat this risk, senior executives need to act now to clearly define their identity as leaders in the fight against injustice, guided by transparent policies, compassionate conversations, bold strategies, and an unwavering commitment. Such action is critical, because the success of any racial equity and inclusion initia-tive starts at the top. Without executive-level buy-in and support, the initiative will likely fail to achieve its intended objectives. These four principles can provide the basis for that ongoing support.

1. Be transparent about policies and progress. Regardless of the company’s approach, leaders need to be transparent in explaining the potential value their initiatives can have for employees, the organization, and society at large, while also acknowledging the difficult road ahead and the organization’s openness to feedback. For example, executives can create public or internal company state-ments that communicate clearly and consistently what they understand but also admit what they do not yet know about racial equity and inclusion. In addition,

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leaders should assign clear roles and responsibilities and determine what should be transparent to whom, and through which mechanisms.

Those setting policy need to be open about results as their programs roll out. They should sponsor efforts to conduct qualitative and quantitative research in order to understand what effect, if any, their company’s initiatives are having on the workforce and other stakeholders. The outcomes of this research should be visible to both internal and external audiences in order to promote further ac-countability and legitimize the work being done. And leaders should consider evolving their approach as new information is gained and new opportunities are sought for creating racial equity and inclusion.

Companies also need to create transparency in employees’ day-to-day experi-ences. For example, leaders can establish diversity councils, working groups, and resource groups that allow employees and managers at all levels to discuss racial

equity and inclusion issues facing em-ployees at the firm. And they can de-velop a repository of resources for em-ployees related to employment policies and legislation in geographies around the world to help them understand their rights and how those might change in different geographic con-

texts. In doing so, leaders should consider how the company might adopt policies for which there is no legal mandate but that might help the company better man-age its workforce and develop its talent.

2. Bring compassion to conversations. Many people feel uncomfortable talk-ing about race in the workplace. They have been conditioned not to mention someone’s race, which has also made the topic virtually taboo at work. However, not talking about race can prevent people from becoming better versions of them-selves and effectively responding to concerns of racism, injustice, and discrimina-tion that are taking a psychological and physiological toll on Black employees in particular. Senior leaders should respond compassionately by developing and sup-porting facilitated safe spaces in which employees can engage in conversations about these issues and their experiences in the company.

Leaders can create company statements that communicate what they understand but also admit what they do not yet know about racial equity and inclusion.

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Town halls open to all employees are a great resource for creating a shared understanding of wide-ranging issues, including race in the workplace. They also provide an opportunity for senior leaders to set an example — to establish that it is OK to talk about injustice and discrimination openly and honestly, and that those who do will be supported. But smaller spaces specifically targeted toward the concerns of Black and brown employees and their allies will allow for more intimate conversations and more direct action planning.

At the same time, it is clear that even those who share a racial background may have different experiences at work. For example, Black women tend to face great-er bias and disparities at work than both Black men and white employees. There-fore, discussions about multiple identities and intersectionality should be incorpo-rated to acknowledge the complex ways that people want to be known and understood and that shape their experiences at work. This also means that it is vital to keep multiple identities and intersectionality in mind when collecting and ana-lyzing qualitative and quantitative data about workforce and talent management.

In addition, although people’s identities are complex and multifaceted, they have different preferences for how they “show up” at work. This means that many people, including leaders, struggle with authenticity. Companies need to recog-nize that authenticity means different things to different people. Some people want to be their “true selves” across contexts and situations, including in the workplace. Others are happy presenting only their work selves in professional set-tings. Leaders should help employees understand the company’s perspective on authenticity at work and make sure that the workplace is not creating situations where the expression (or lack thereof) of some identities and experiences is more valued than the expression of others.

Finally, as senior leaders try to increase racial diversity in their organization, it will be important to question and potentially remove language about “cultural fit” from talent management and performance evaluation processes. Such lan-guage can perpetuate racial bias if there isn’t consensus on what constitutes cul-tural fit or if the criteria used to gauge it are biased (for example, grooming or clothing). Instead, leaders can reinforce the values that they think are important to equity and effectiveness and assess “values alignment.”

3. Adopt bold strategies to fight injustice. Diversity-related work has been

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devalued in many companies, which has made it difficult to address diversity objectives. But senior leaders can engage in bold new actions to shift this dy-namic. For example, leaders can show that this work is valued by making diver-sity, equity, and inclusion (DEI) goals and work actionable, measurable, and evi-dence-based; elevating DEI work internally and externally; requiring leaders and managers to participate in behavior-based DEI trainings; identifying leaders and nonmanagerial employees willing to serve as DEI sponsors; and treating DEI work as core, rather than peripheral, work. The last item could mean including it as part of performance evaluations, so that it can be factored into decisions in-volving compensation and promotion.

When it comes to specific bold actions related to race in the workplace, adopting a growth mindset — believing that abilities can be developed — is critical to advancing racial equity and inclusion. Senior leaders should help one another and their employees see the leadership potential in a diverse talent pool. They should base their selection criteria for leadership positions not solely on a fixed set of characteristics such as education and pedigree, but also on more growth- and strengths-oriented criteria such as potential, capacity, and passion for learning. Companies should also commit to employee retention by creating full-cycle talent management approaches that are linked to diversity and race, specifically. However, solutions should be driven by data and aimed at addressing firm-specific challenges and opportunities regarding race.

Senior leaders should encourage the use of broad and diverse candidate search-es, which will require investing in human resources tools and systems designed to de-bias the talent management process. For example, as senior leaders seek to in-crease racial diversity in their workforce, they can grant diversity leaders more au-thority in developing diversity recruitment programs that attract candidates from historically Black colleges and universities (HBCUs) or groups and professional associations serving underrepresented racial minorities. To do so, senior leaders will need to encourage greater collaboration among diversity leaders and hiring managers; the latter may not understand the rationale for this recruitment strategy.

In terms of the hiring process itself, correcting for bias in job ads, resume screening, and interviewing procedures may be especially helpful for recruiting from a more diverse candidate pool and selecting/hiring a broader variety of em-

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ployees. Writing inclusive job descriptions, doing blind resume reviews, conduct-ing structured interviews, and engaging in data-driven hiring are vital to achiev-ing equitable outcomes.

4. Don’t apologize for making a commitment to equity. The leader who takes the actions above is likely to meet with some resistance. Not everyone will agree with the company’s approach to creating racial equity and inclusion. However, employees and customers are looking to senior leaders to speak with conviction about the company’s zero-tolerance policy for racism and injustice. Leaders should be prepared for criticism and should not apologize for taking a stand. This doesn’t mean acting unilaterally or closing themselves off to others’ perspective, but rather being unwavering on committing to the company’s stat-ed goal even when it becomes challenging to do so, which it often will.

In doubling down on the company’s commitment, senior leaders can grant higher authority, power, and status to the diversity leaders who are charged with spearheading these initiatives. The company will also need to invest in progress. It should devote sufficient resources to creating and sponsoring evidence-based training, courses, and events with external subject matter experts (academics and other thought leaders; consultants) and internal experts (those who specialize in diversity). All leaders — including midlevel managers, who are often charged with implementing company strategy — should also be held accountable for at-tending, organizing, and supporting these events.

Finally, although the company’s perspective on racial equity and inclusion should evolve and become more complex in the global context to account for the needs of different audiences, senior leaders should be careful not to dilute mes-sages related to equity and fairness in the service of messages related to growth opportunities and inclusion. A “both/and” approach can maximize the extent of support for a message that is much more multifaceted, for example: “We are committed to employee and market development that helps employees and orga-nizations learn from racial differences and become more equitable and effective.”

Tell the story

Embracing these four principles will help leaders sustain this moment, when con-fronting racism and injustice is a priority for many organizations. As John Lewis

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wrote in Across That Bridge: A Vision for Change and the Future of America, “We must accept one central truth and responsibility as participants in a democracy: Freedom is not a state; it is an act. It is not some enchanted garden perched high on a distant plateau where we can finally sit down and rest. Freedom is the con-tinuous action we all must take, and each generation must do its part to create an even more fair, more just society.”

For senior executives, the message is clear: Don’t allow the momentum to stop or even slow — continue to tell the story. It may be challenging to consis-tently embrace an identity as an optimistic, courageous, and values-driven leader, but doing so will be critical for advancing any movement toward racial justice in the workplace. +

Stephanie J. Creary

[email protected] assistant professor of manage-

ment at the Wharton School of

the University of Pennsylvania.

She conducts research on the

topics of identity, diversity and

inclusion, and relationships

across differences.

This article is based on a

framework first published in

Wharton magazine.

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Transforming information into insight Focus on six organizational elements to build a world-class data and insights capability.

by Anil Khurana, Roger Wery, and Amy Peirce

A s the coronavirus pandemic unfolded, one leading global engineer-ing and technology services company found itself well positioned to meet unprecedented challenges. The firm had kicked off a digital transformation project in 2019, including investing in a data and

analytics program equipped with advanced tools. For example, it enhanced digi-tal collaboration among engineers using next-generation design software, it auto-mated resource allocation based on skill sets, and it offered business reporting on executives’ mobile devices.

A few weeks into the crisis, it became clear that in several major countries in which the company operated, engineering and construction were likely to be considered essential services. The chief information officer began scenario planning. He determined that supporting remote work would be critical in the weeks and months that followed and asked regional leadership and IT teams to accelerate training programs for remote working and the recently launched dig-ital tools. He also asked for a cybersecurity assessment to highlight vulnerabili-ties and risks, and had his pro curement and telecommunications teams con-tract for additional bandwidth. As a result of these moves, employees were able to seamlessly deliver sophisticated infrastructure and architectural designs to their customers.

Other companies struggled to keep pace with the rate of change. It took the leaders of one global automotive components manufacturer nearly a month to obtain the information and insights needed to make critical staffing changes at various facilities; they later struggled to understand their suppliers’ readiness to restart production. Elsewhere, consumer goods companies lacked the ability to read signals about changing consumer preferences during lockdowns, such as

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increased demand for kitchen tools and home gym equipment. Some automakers had insufficient information about the financial health of their Tier Two and Tier Three suppliers, hindering efforts to accurately assess risk to assembly operations worth billions of dollars.

Although responses to the crisis and the success of those responses have been varied, a common theme has emerged: Business leaders need an effective way to capture, receive, interpret, and act on information, and to add predict-ive power and agility to their organization. By ensuring streamlined data

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avail ability and using advanced analytics in combining new sources of data to develop proprietary insights, leaders can reveal crises before they wreak hav-oc, uncover competitive pressures before they threaten market share, and sur -

face opportunities before they be-come someone else’s advantage. Now is the time for companies to invest in and enhance these data and analyt-ics capabilities as part of their broad digitization efforts.

Many companies have recognized this urgency. For example, in a PwC

study that surveyed more than 1,600 supply chain executives and decision mak-ers in 33 countries between October and November 2019, 63 percent of Digital Champions — companies ahead of the curve in supply chain excellence — re-ported that they had already implemented an AI and advanced analytics plat-form, and another 24 percent said they were piloting such software. (It is worth noting, however, that Digital Champions made up just 9 percent of the overall sample.)

Our own discussions with senior executives at several major companies have revealed that even as they recover from the more immediate effects of the pan-demic, leaders are rethinking their competitive strategies and how they will re-configure their businesses to be more resilient in the future. As they adapt to a new reality and cope with the immense challenges of asymmetry, disruption, age (demographic pressures), polarization, and trust, they will need the ability to manage and draw insights from their information.

At the same time, the advancement and affordability of key technologies has dramatically enhanced the transformative power of information. Consider, for example, the proliferation of connected sensors and infinitely scalable com-puting and storage capabilities at price points that are compelling for a number of new use cases, coupled with the development of increasingly accessible ma-chine learning (ML) and AI tools. The technology is there, and many compa-nies are already using it. For instance, in manufacturing organizations, IoT so-lutions that include facial recognition are being used to eliminate “badge

Business leaders need an effective way to capture, receive, interpret, and act on information, and to add predictive power and agility to their organization.

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swapping,” which puts unapproved people in a tool crib or uncertified operators at the controls of a machine.

Sanjay Ravi, general manager of Microsoft’s automotive industry, observes, “Companies are now getting more real-time signals than ever before from their products, operations, and customers. This real-time information, combined with advanced AI technologies, helps companies gain critical insights to enable more efficient ways of doing business.”

But bringing this vision to life by building a high-caliber data and informa-tion capability can’t be accomplished overnight. In fact, if there is one thing that the coronavirus crisis made clear to many companies, it’s that their information value chain had gaps that could create serious problems during challenging times — gaps not easily overcome. What may not be as clear, then, is how companies should begin their journey to data and ana lytics excellence.

Organizations can think of their data and analytics journey as progressing along a maturity scale. At each stage, companies build their proficiency in six critical organizational elements:

1. Business decisions and analytics: Prioritize analytics insights that fuel the business strategy, not those that just report what’s happening.

2. Data and information: Let the data tell a story through the flexible integra-tion of multiple data types, rather than forcing the data into a predefined model.

3. Technology and infrastructure: Build tools that support the analytics ecosystem, including AI, and democratize insights through analytics-as-a- service (AaaS).

4. Organization and governance: Establish an operating model to empower the use of governed data and analytics.

5. Process and integration: Ensure insights are rapidly integrated into deci-sions through an aligned, agile process.

6. Culture and talent: Instill a data-driven culture that blends business knowl-edge and analytics insights across all levels.

Certain elements will play a more visible role at different points along the maturity scale (see “The information maturity scale”), but ultimately, excellence in all six is required to realize the full value of a data and analytics transformation.

In the first stage, companies generally begin to accumulate significant quan-

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The information maturity scale

With a more sophisticated approach to data and analytics, companies can adapt to change

before it happens.

Source: PwC

Stage 2: Foresight with

limited reachCompany leaders

have the foresight to

respond proactively

to new pressures, but

the information lacks

the reach to lead to

different actions.

Stage 3: Decisions that

shape outcomesThe integration of

data and advanced

models enables

people throughout

the organization to see

the world differently

and make decisions

that shape the future,

rather than react to

circumstances. Inc

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Increasing maturity and sophistication of data and analytics

Stage 1: Opinions matter mostDesignated experts

within the company

react to situations

with decisions based

primarily on opinion,

rather than data.

tities of data and information, but it is sporadic and requires labor-intensive man-ual processes to stage and validate. Data is siloed and analytics is limited to his-toric performance — the insights don’t help shape future performance. Moreover, the data doesn’t always tell a consistent story across the enterprise (or worse, it tells outright conflicting stories). Companies at this first stage are likely to have developed some of the technology and infrastructure needed to support the ana-lytics ecosystem, but usage is typically limited.

The experiences of the first stage often lead executives to view the road to information maturity as too onerous to travel, and despite having some pockets of data-focused activity, they still rely more on expert opinion to make de cisions. The data and analytics system as a whole is not yet delivering busi-ness insights.

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When companies are able to move to stage two, it is because they are begin-ning to ensure that the insights produced are aligned with their business strategy — there is a clear connection between business decisions and analytics. To sup-port this transition, the need for organization and governance becomes clear. Companies start defining processes that will deliver cleaner data more effectively. By the end of this stage, companies typically have a center of excellence that de-livers enterprise-wide insights to all business stakeholders across a harmonized data infrastructure. Company leaders have gained the foresight to see disruptions or competitive pressures coming, and to make data-driven decisions to prepare for them — but this is happening only at the highest level.

At this point, company leaders ask themselves: Why can’t we make better decisions given everything we’ve done so far? To move the needle, organizations must focus on process and integration, and culture and talent. Doing so leads them to the third stage, in which data and insights are shared transparently across the company, and any questions concerning data ownership are resolved. Leaders view the business as a “knowledge company,” with analytics and insights firmly embedded in decision-making processes. They create a culture that is ready to take advantage of the insights, cultivating talent to support data optimization: Companies need a digitally upskilled workforce prepared to adopt the new tools and technologies.

In addition, when companies have reached peak maturity, many types of data are brought together. This is true for information generated within differ-ent business units — the analysis is cross-functional. But it is also true with regard to data from outside sources, such as market data, supplier health data, and customer behavior data. Moreover, companies at the third stage use a rich variety of algorithms and AI/ML tools to put all this data to work, and extract insights beyond the capacity of the human brain to tell stories that would oth-erwise remain hidden.

In other words, through the three stages, companies move from the “what” (accumulating information that illustrates what happened), to the “so what” (contextualizing insight that explains why it happened), to the “what next” (ask-ing what they should do to rewrite the script, either to capture opportunities that are not yet obvious or to prepare for challenges that have not yet hit). They see

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not just the factors that could impact their performance; they see how to change those factors in ways that shape their market. One of the authors, for example, recently worked with a global conglomerate in the industrial and technology sec-tor to build a dynamic data model that pulls in data from the company’s facility location database, employees’ home addresses, and third-party data on city and regional COVID-19 incidence to provide a daily risk report and mitigation strat-egy to company leaders.

Another example of a mature data and analytics program, says Microsoft’s Ravi, comes from the automotive sector: “This sector generates vast amounts of data. However, many companies aren’t yet set up to turn it into relevant in-

sights.” To bridge this gap, one leading automotive company developed “an underlying data platform that brings in signals from different parts of the business, and now they are building the artificial intelligence layer on top of it to help their employees make ef-fective decisions. Through what we call a digital feedback loop, the entire enterprise is connected with relevant

data — whether pertaining to relationship management with customers and partners, engagement with employees, core product creation, or enterprise op-erations — to drive continuous improvement in products and services.” More-over, Ravi explains, “in the past, a lot of this data would be geographically confined. With this new model, the company can bring initiatives from one part of the world to a number of [other] countries in a fraction of the time that it would have taken in the past.”

The coronavirus pandemic should be a wake-up call for companies that have yet to start their information value chain evolution or that have been idling at an early stage. Anecdotally, we have heard from several companies that COVID-19 has been a catalyst for rapid digital transformation and the adoption of new technologies. Whether leaders thought they could wait, or thought they could get by with less sophisticated capabilities, or were un-

When companies have reached peak information maturity, they see not just the factors that could impact their performance; they see how to change those factors in ways that shape their market.

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Anil Khurana

[email protected] PwC’s global industrial

manufacturing and automotive

leader. He has expertise

working with industrial and

manufacturing companies

on strategy, operations, new

business models, capability

development, and tech-enabled

transformation. Based in Boston,

he is a principal with PwC US.

Roger Wery

[email protected] PwC’s global advisory

technology, media, and

telecommunications industry

leader, with expertise advising

software, electronics, and

communications companies on

growth and innovation strategy;

M&A strategy; and business,

digital, and operating model

transformation. Based in San

Francisco, he is a principal

with PwC US.

Amy Peirce

[email protected] with companies to apply

data and analytics capabilities

to structure, solve, and manage

critical issues facing their

organizations, and developed

PwC’s customer insights

platform to help executives define

customer initiatives that drive new

growth, facilitate better customer

engagement, and support digital

and customer-centric business

transformation. Based in San

Jose, Calif., she is a principal

with PwC US.

sure how and where to start, they now see that transforming information in to insight will be key to reinvention — both during recovery and in the post- crisis world. +

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Connecting the dots in an uncertain worldNYU’s Christian Busch on why serendipity is a skill — one that can be developed by those who are open to seeing opportunities in seemingly unrelated facts or events.

by Suvarchala Narayanan

I n 1945, a U.S. defense contractor employee was working on the magnetron, a microwave-emitting tube used in radar systems to detect Nazi warplanes, when he noticed something unexpected: The bar of chocolate in his coat was melting. Percy Lebaron Spencer hadn’t been the first to observe this ef-

fect of the magnetron, but he was the first to be curious enough to experiment with it. With a prototyped metal box and a high-density electromagnetic field, he investigated its effect on different foods, such as popcorn and eggs. The first mi-crowave was born, with a helping hand from serendipity.

In his new book, The Serendipity Mindset, Christian Busch, director of the global economy program at New York University’s Center for Global Af-fairs, makes the case that serendipity is the result of a sensibility that allows people to spot and act on unexpected, fortuitous connections when others would dismiss them. And he suggests that it’s possible for people to cultivate this mindset and use unpredictability to their advantage. Busch talked to strate-gy+business about the serendipity mind-set, which he says is key for companies in a time of pressing global challenges.P

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S+B: You view serendipity as being within our control. Can you explain?

BUSCH: It is commonly assumed that serendipity is just something that hap-pens to us. But once you look deeper into stories of serendipity and how they unfolded, you see that it’s usually the result of being able to spot potential ser-endipity triggers, or unexpected events that connect to something that is rele-vant or meaningful.

But you can’t stop there. Once you’ve connected the dots, serendipity re-quires the tenacity to follow through with the unexpected discovery. One of the best examples of this is the story of two researchers, one at Cornell and the other at New York University, both of whom observed that the ears of the rabbits they were studying flopped when they were injected with the enzyme papain. Both found it unusual, but only NYU’s Lewis Thomas would follow up on it much later, in the 1950s, and his experiments would lead to the discovery of underlying factors in rheumatoid arthritis.

The reason people miss serendipity is that they don’t notice the unexpected, or they do notice but then don’t connect the dots. But in many cases, it’s the lack of tenacity and the unwillingness to take a chance that account for the loss of serendipitous opportunities. That’s why I’m certain it’s about “smart luck.” It’s not about the kind of luck associated with being born into a good family or hav-ing access to a good education, but about really working for that luck.

S+B: Why is having a serendipity mindset important in today’s circumstances of

extreme uncertainty and multifront challenges?

BUSCH: We live in a world that underestimates the unexpected and prizes lin-ear thinking and the illusion of control. But life, as well as business, is more emergent than that, as the global pandemic and Black Lives Matter protests have shown. We plan things in one way, and something else happens. Some people leverage that sort of change into positive outcomes and others don’t. In my re-search into what makes individuals and organizations fit for the future, one in-sight has come up again and again: It turns out that many of the world’s leading minds have, often unconsciously, developed a capacity to cope with the unex-pected. This ability, which I call a serendipity mindset, allows for the unexpected to be viewed as an opportunity rather than a threat.

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And society is expecting this sort of leadership from the business world. Re-search — including a study with 31 of the world’s leading CEOs that I did with colleagues from the consultancy Leaders on Purpose and Harvard University — shows that the public is increasingly looking to business leaders to play a large role in solving complex societal and environmental problems. This new paradigm requires leaders to combine a sense of meaningful direction, or purpose, with an appreciation of the unexpected, reframing challenges and relating them to core capabilities. That’s what’s happening when breweries turn into hand sanitizer companies and design companies turn into high-end mask producers. The seren-dipity mindset is part of a larger shift that is taking place in the cultures and values of some of the world’s biggest corporations and their leaders. It allows us to use uncertainty and unpredictability as a pathway to innovation, impact, and smart luck by seeing and connecting the dots.

S+B: What can businesses do to help their people develop a serendipity mindset?

BUSCH: Three processes that are easy to implement are cultivating serendipity spotting, de-risking ideas, and developing an environment of trust.

At the heart of serendipity — and eventually, innovation — is bisociation, which is the ability to connect unrelated facts or events. Cultivating serendipity spotting is all about getting our colleagues or employees to pay attention to the unexpected, in the big and the small.

For example, leaders can ask team members in routine meetings if they came across something surprising last week related to work. And if the answer is yes, they can ask if it changes their assumptions — for example, in terms of mar-keting strategy — and if it would be valuable to follow up on it. This alertness can lead to identifying wrong assumptions — and new, surprising solutions or market demands.

For example, if someone on your team has observed farmers unexpectedly using their washing machines to wash potatoes, instead of ignoring it or telling farmers not to do it, your company could build a dirt filter into a washing ma-chine and label it as a potato washing machine, as a Chinese multinational com-pany did. Farmers’ need to wash their potatoes unexpectedly correlated, in this case, to the company’s ability to deliver a product that could help them do that.

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This serendipity-spotting mindset goes hand in hand with de-risking ideas and facilitating an environment of trust. An environment that encourages risk-taking and cross-pollination of ideas increases serendipity.

One example of how to create this environment is by doing “project funer-als,” or postmortems. When a project — for example, a new technology that was brought to market — doesn’t work out, the respective project manager “lays it to rest” in front of colleagues from other divisions and reflects on why it did not work out and what can be learned from it. This is not about celebrating failure — it’s about celebrating the learning from failure. What often happens is that people in the audience “coincidentally” connect it to a project that they are working on, and elements of the project are then unexpectedly repurposed for another use.

In one major health, materials, and nutrition company, for example, a coat-ing for nonreflective picture-frame glass was deemed unviable for the market. At the project funeral, however, one of the attendees outside the original team realized the technology’s utility for solar panels. The unexpected idea was tested and found to have merit, and the company ended up with a strong solar unit. These “lucky” outcomes become more probable if companies put serendipity-friendly processes into place.

S+B: What can leaders do about the fact that many company cultures still prize

certainty over risk-taking?

BUSCH: Our research has shown that effective leaders value a questioning mind, and practice and instill curiosity in their companies. This often allows them to reframe capabilities and problems, especially during times of uncertainty.

Procter & Gamble CEO David Taylor makes the crucial link between creat-ing an environment of learning and being able to make novel connections that spur fresh solutions, explaining to me for the CEO survey I did with Leaders on Purpose and Harvard University that “the idea is to train managers not to be in evaluation mode but in developing mode.” He sees this as necessary to creating environments that place a value on learning over being right.

Leaders who foster this learning culture understand that the future viability of a company is not only about innovation or R&D departments — it’s about everyone across the company constantly seeing and connecting dots. But this re-

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quires a collective openness toward new ideas, too, and it links to the de-risking of ideas. If they don’t feel safe, people will not come up with new ideas or solutions.

Psychologically safe environments make people feel free to speak up about unexpected discoveries, incomplete hypotheses, and seemingly crazy ideas. Har-vard professor Amy Edmondson’s decades-long work in this area places psycho-logical safety at the center of a healthy corporate culture and performance. Her studies show that better-performing teams are ones that talk more about mistakes, whereas in lower-performing teams, mistakes are often swept under the carpet.

Companies such as Pixar have created an environment where leaders like co-founder Ed Catmull acknowledge mistakes. In meetings, the tone for openness is set by admissions such as one he made in his book, Creativity, Inc.: “Early on, all our movies suck.” This practice of talking about mistakes allows team members to safely push back and ask critical questions, but it has the added benefit of recogniz-ing failed efforts quickly, minimizing losses, and learning valuable lessons. +

Suvarchala Narayanan

[email protected]

is a business writer, future of

work researcher, and startup

consultant. She lives in India

and Europe.

READ MORE

Full-length interview online

This is an abridged version of a

longer interview with Christian

Busch. The full-length version

can be found at www.strategy-

business.com/ChristianBusch.

: Meet the next generation of business thought leaders

at strategy-business.com/youngprofs.

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Businesses can fast-track innovation to help during a crisis “Unrealistic” timelines can actually work. Here’s how.

by Chris Foster

B usinesses around the world are looking for ways to help in response to the pandemic, while continuing to sell products and services and keep people employed. From the C-suite to managers to employees at all levels, great ideas are popping up. But how can they be turned into

reality as quickly as possible?I have some experience on this front. When Hurricane Katrina struck the

U.S. Gulf Coast in 2005, I was with the advertising and marketing agency Saat-chi & Saatchi. My team and I were sitting in a bar with the brand team for Tide, one of our biggest clients. We got to talking about how we’d love to create some-thing to help. Pens came out, and together we scribbled on the back of a napkin. Two weeks later, our idea came to fruition: Loads of Hope, trucks filled with working washing machines and dryers. People struggling in the aftermath could drop off their dirty clothes, and we would clean and fold them. These mobile laundromats continue to be deployed to afflicted areas today, and have helped tens of thousands of families.

Early during the COVID-19 pan-demic, a contact in Asia and I got to talking about how kids would need washable masks for school. Within a few weeks, we had Crayola on board, and the SchoolMaskPack program was launched. Families can buy a set of five color-coded kid-sized masks, one for each day of the school week, which can Il

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Designed specifi cally for senior leaders, our part-time programme is taught through week-long modules spread over 22 or 24 months.

To fi nd out more visit:www.sbs.oxford.edu/emba

Oxford Executive MBAWorld-class programme Exceptional global network

be washed and reused. Demand has been so great that the manufacturer recently had to expand operations to multiple countries.

In both these cases, we were able to move very quickly because we had three crucial ingredients for fast-tracking new ideas.

Innovation as a mission

There’s a big difference between supporting innovation and making it an institu-tional imperative. Crossing this divide starts with a mindset that business leaders must instill in their organizations: Innovating is a mission, not just a nice idea. It’s something all employees should be working on, in some way, at all times. As Barry Jaruzelski, Robert Chwalik, and Brad Goehle noted in their 2018 s+b article on top innovators, “Apple’s innovation mind-set is thoroughly integrated in the mission as well as the orga-nization of the company.” CEO Tim Cook describes the company as “a group of people who are trying to change the world for the better.”

An emergency is a great time to walk the walk. Invite everyone to contribute ideas and have their voices heard. This is what happened with Loads of Hope. The group of us at the table in that bar included people at all levels, from an assistant brand manager at Tide to its brand director, and from a junior account executive of our firm to me, the executive vice president. We were all tossing out ideas, regardless of our place in the institutional hierarchy.

As the concept started to take shape, we all helped refine it. We also knew this conversation wasn’t just theoretical, because the brand was serious about its mission.

Unrealistic timelines

“Unrealistic” timelines usually get a bad rap. But in the midst of an emergency, when it comes to stepping up the pace of innovation, they can be useful. Setting seemingly impossible deadlines (and understanding the challenges in meeting them) can unleash positive energy and push people to think in new ways. For Loads of Hope, the Tide team needed to find a partner that could get trucks

There’s a big difference between supporting innovation and making it an imperative.

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outfitted with washers and dryers. The process for selecting a partner, which could take months in any organization, had to happen virtually overnight. For-tunately, the brand’s leadership team was committed and set aside all the usual steps so the project could happen.

With SchoolMaskPack, my partner and I built in a 24-hour work schedule from the outset. Because we had personnel in various time zones, tasks could be handed off in a “follow the sun” business model. Crayola had people available at any hour to instantly approve or weigh in on decisions, preventing delays and red tape.

Compressed time frames can make work even more creative. Researchers Teresa Amabile, Constance Noonan Hadley, and Steven J. Kramer explained in Harvard Business Review that when certain conditions are in place, “people can and do come up with ingenious solutions under desperately short time frames.” These conditions include a sense of focus, in which people concentrate on the activity “for a significant portion of the day”; limited collaboration, with people working more in pairs and less in groups; and a sense of being on a “mission.”

Excessive support

The third crucial ingredient is deep institutional buy-in. Working on unrealistic timelines requires a lot of financial, emotional, and logistical support. Tide was willing to give Loads of Hope all the resources it needed: employee time away from other projects, funds, and more.

With SchoolMaskPack, our manufacturing company, Supara Group, was willing to retrofit all of its operations to begin creating the masks. I contributed time and resources — not just my own time, but also that of my team at Foster-Equity. We had no idea whether the project would succeed. But if it were going to have a shot, we would need to go overboard to give it all the support we could.

And of course, there is a financial cost to this support. Employees who spear-head a rapid-response project might come up with a plan, but note that it would cost US$3 million more than originally planned or would require doubling the size of a team. In such instances, leaders should hear them out, help brainstorm ways to accomplish the same task with fewer resources, and — crucially — go to bat to get them what they need.

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These elements don’t have to be limited to individual projects. They can help businesses transform their entire operations. I recently joined with a group of peers to create the Next Practice, a marketing services and data analytics on-line-only collective that follows a 24-hour model. It would never have been cre-ated before COVID-19, when brick-and-mortar offices were still considered es-sential in our industry. We saw the urgency, rushed into action, and threw our resources into it.

As awful as this pandemic is, it can be an opportunity for innovation to flourish. Making big ideas happen at this time can certainly be exhausting, but the rewards are bigger. And the payoff — in all its forms — can come on a short-ened timeline as well. +

Chris Foster

is global CEO of the Next

Practice and founder and

CEO of FosterEquity.

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Sustaining productivity virtuallyMaintaining productivity levels among remote employees is an enduring challenge. Here are five ways to help businesses and employees thrive while people work at home.

by Nele Van Buggenhout, Soraya Murat, and Tom de Sousa

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H ow was lockdown for your teams? Are they feeling stressed and iso-lated? Or has working from home turned out to be a productive, com-mute-free, work-in-comfy-clothes revelation? One thing seems certain: This global, flexible-working experiment has changed our professional

routines, probably for good. In PwC’s Remote Work Survey, conducted in June, 39 percent of U.S. executives said most of their office employees were working remotely at least one day a week before the pandemic. But during the COVID-19 crisis, almost everyone who could work exclusively from home did so.

Separate research conducted at the start of the lockdown found that three-quarters of executives judged the forced experiment a success, contrary to the expec-tations of many. Data collected at the beginning of the lockdown and through the more recent opening-up phase of the pandemic shows that productivity, despite an initial drop, soon improved during lockdown and got back on track (see chart on page 43). This finding is backed up by our spring surveys of chief financial officers; in March, 63 percent of business leaders were concerned that remote working would result in lost productivity, but by June, this number had fallen to just 26 percent.

The bottom-line results show steady or increased productivity — that’s the solid line in the chart showing an uptick — which on first reading looks like good news, but those results hide a potential problem that appears when you look harder at the data. There is greater variation around mean performance in the weeks after lockdown than before: The blue bands start widening as lockdowns are enforced. This suggests that productivity has been propped up by a cohort of superachievers (around one-third of the total sample), which has disguised a fall in productivity among the rest.

These superachievers have worked harder and longer than before in the ex-ceptional circumstances of the pandemic — perhaps because they have benefited from fewer distractions, or have fed off the adrenaline of the crisis. The rest of the employees found things more difficult; remote working doesn’t suit everyone, for practical or emotional reasons or a combination of the two. This breeds stress and fatigue, which present risks to engagement, performance, and mental health. “I’m feeling Zoomed out” is a familiar lament. The challenge for leaders is to find ways to tackle performance, because they can’t rely on superachievers to keep making up the shortfall for much longer.

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This analysis comes from data collected from 2,200 users in the U.K. and South Africa of Perform Plus, a tool developed by PwC that helps drive daily discussions on team and individual performance. The tool, which also includes an emphasis on well-being, uses gamification and visual dashboards, and also records how people connect with one another and how they are feeling about their work through daily check-ins. This data is collected and analyzed to monitor trends, and the insights can trigger important dialogues with employees. Under-standing what is going on in this way helps leaders develop strategies that fit the needs of their business and their people as they repair, rethink, and reconfigure their workforce to avoid potential pitfalls ahead.

The key question about the productivity data is whether it is sustainable as people start returning to the workplace in the coming months, when businesses will see more of their people working from home as part of a hybrid model when the COVID-19 crisis has largely passed. We don’t think it is, unless leaders take direct steps to address the differences in performance among employees. To do this, they will have to invest in the underlying systems and processes that will help teams work in a productive and engaged manner. Here are five key points for businesses and leaders to bear in mind when developing ways to make re-mote working a success and sustain performance and engagement.

Define the right set of KPIs. Effective performance management of remote workers calls for holistic indicators; key performance indicators (KPIs) aren’t simply a matter of sales calls made or reports filed. Business KPIs that track both productiv-ity (in terms of output) and effectiveness drive focus and accountability within the team, but well-being and collaboration KPIs should be added too. They can help predict productivity, or provide early warnings when people are feeling strained.

These well-being and collaboration metrics could include measures such as the number of touch points between teams, or individuals’ mood levels, or how people are coping with their workload. Well-being and happiness, of course, mean different things to different people, so the data isn’t a definitive measure — but it can open up a discussion for people to explain and explore (if they wish) the reasons they’re not feeling great, and allow for the option of getting support.

Create a connected team. Regular meetings help maintain a connected team and sense of community, even when people are working remotely. In fact, our

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data suggests that remote workers actively seek out opportunities to connect — we observed a rise in collaborative activity of more than 20 percent among Per-form Plus users in the weeks following lockdown.

Frequent touch points create opportunities to discuss performance, well-being, priorities, and any issues at hand, as well as to celebrate successes. In the Perform Plus tool, daily “huddles” of just 15 minutes allow participants to review the key metrics that matter most.

The U.K. workforce of business software provider Sage, which includes around 1,000 customer-facing employees, switched to remote working in March. Sage’s workers had also been using Perform Plus for more than a year, and after the switch, the tool helped teams retain their “community way of working” during lockdown. “They may have been working from home, but there was still a tight connection within the team,” said Jon Cummins, VP of services and cus-tomer success at Sage. The huddles that formed the core of the platform were held virtually. “This meant that ideas could still be shared, and people could ask their colleagues how they were dealing with specific situations. It meant that a sense of isolation didn’t develop and permeate the business,” Cummins said. The results were encouraging. According to Cummins, “Productiv ity increased for customer

Note: Data is from 2,200 users across a range of industries and functions in the U.K. and South Africa on PwC's Perform Plus platform.

Source: PwC

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

Av

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of

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te

am

Week of 2020

Jul 5Jun 21Jun 7May 24May 10Apr 26Apr 12Mar 29Mar 15Mar 1Feb 16Feb 2

Lockdown began Restrictions relaxed

Superachievers’ performance

Average

Dips in performance

Performance during lockdown

Despite an initial drop at the start of lockdown, average performance held up well. But performance variability

increased. Superachievers thrived when working remotely and raised average performance figures, while others

took less well to remote working, and their performance dropped.

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service teams over that time, [according to] the customer satisfaction measures we use, and we saw the mood of the vast majority of our people improve or remain at a strong level.”

Develop the role of leaders. Leading a remote team requires a strong em-phasis on specific leadership skills — such as empathy, the ability to foster a sense of community, and the employment of digital skills that maximize the use of technology — and this should be recognized in leadership training and development. Team leaders may need specific coaching in order to successfully manage underperformers; for example, it’s far more challenging to hold a diffi-cult conversation remotely.

Some leadership skills in a remote environment are more esoteric, but no less important. Remote workers need to feel a sense of empowerment in order to give their best, for instance. Leaders will need to create an environment in which teams take ownership of their work and of their preferred working style when they are away from the office.

Organizations will need to adapt their leadership development strategy in order to create leaders who can bring out the best among their remote teams. This development strategy should also recognize the different demands placed on lead-ers in this new environment; adding recovery time to schedules and monitoring the well-being of high performers will be essential in the months ahead.

Build in positive recognition. Regular recognition not only helps maintain a positive working culture, but is also an important driver of productivity. Recog-nition becomes even more important in a remote environment in which manag-ers don’t have access to the physical and verbal clues they might pick up on in the office, and there are now fewer “watercooler” opportunities to provide on-the-spot acknowledgment. Leaders should identify fresh occasions to express recogni-tion, tailored to individuals in a meaningful and genuine way. Technology can help here through techniques such as gamification: Performance leader boards or competitions with prizes can encourage desired behaviors.

Use structure to deflect distractions. Even before lockdown, our data sug-gested that as much as 30 percent of a team’s time was spent on non-value-adding activities. There is a risk this percentage could increase in a new hybrid work environment as a result of home distractions, child care, and the tendency of

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some to feel burned out after a long day of virtual conference calls. Building clear structure into team schedules — such as short daily catch-ups, focused time for specific activities, and breaks — helps support the focus of a dispersed team.

Technology has given us the opportunity to collect data on well-being and collaboration, and to make a connection between those data points and produc-tivity. But it can do so much more. The data indicates that not everyone found lockdown to be a productive or happy period. That’s actionable information that managers can use to help employees.

The hybrid working model is likely to be the new reality, and people will have to adjust as new working habits emerge. The winners in this virtual world will be those organizations that successfully navigate the specific challenges of managing remote teams. The variation in productivity levels during lockdown suggests that current performance levels are unsustainable because they rely on superachievers pulling up the average, but the five points outlined will help orga-nizations and their leaders maintain and improve productivity and engagement levels for everyone as we move into this new world of work. +

Nele Van Buggenhout

[email protected] in operational excel-

lence and workplace behaviors.

Based in London, she is a director

with PwC UK.

Soraya Murat

[email protected] in the design and

delivery of transformation

programs, with a focus on

performance improvement.

Based in London, she is a

manager with PwC UK.

Tom de Sousa

[email protected] a data scientist, focused on

combining human performance

and process data to bring sta-

tistical insight to the workplace.

Based in London, he is a senior

associate in the AI practice with

PwC UK.

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Agility and experience management work better togetherMany companies achieve early wins with separate transformational efforts, then stall. But if combined and enhanced using “return on experience,” or ROX, measures, these two programs can unlock each other’s potential.

by Sujay Saha, Matt Egol, and Matthew Siegel

STRATEGY STRATEGY

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T he leaders of the financial firm’s business transformation had reason to be proud. They’d been getting good results in their efforts to embed agile methods in the company’s operations. In the credit card contact center, for instance, they’d slashed the trouble ticket backlog by 97

percent in the first year of their initiative and reduced training time for new hires from five days to less than two.

Yet the leaders had found it difficult to scale agile across the entire or-ganization. They struggled to identify, prioritize, and activate the program’s highest-value applications after their initial success. And they were no better at consistently and comprehensively measuring the impact of the opportunities they did pursue.

Enterprise agility was not the only initiative to run aground at the firm. The chief customer officer had been building an experience management (XM) discipline — tracking customer journeys, collecting data from customers and employees worldwide, and compiling findings so leaders could more readily iden-tify, prioritize, and activate continuous improvement opportunities. But the firm struggled to scale XM across functions.

Maturity and value

Return on experience (ROX) strengthens both experience management and enterprise agility

Source: PwC

Enterprise agility

Experience management (XM)

Foundational stage: Separate efforts

Advanced stage: Employee-led movement

Intermediate stage: Customer-focused agility

Integrated business and

technology teams deliver frequent

product releases.

Talent is clear on how to execute

on ideas.

There’s a standardized way to measure CX and EX.

There are basic CX+EX linkages and connections

to outcomes.

BarrierThe organization

hasn’t integrated a customer-focused sensing capability.

Real-time CX data informs agile team priorities…

…and agile teams actively track their

impact on CX and focus on improvement opportunities.

BarrierThe organization hasn’t harnessed

employees to drive widespread

change.

Real-time employee feedback informs priorities.

EX is a key metric used to track

performance…

…and critical employee behaviors are widely adopted

to drive value via strategic priorities.

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Over time, though, executives realized that there was synergy between their enterprise agility and experience management transformations. The two initia-tives had been run like individually spinning gears, quickly turning out some results but lacking torque. Fitted together, they gave each other power and mo-mentum. Insights and practices from experience management improved the lead-ership team’s ability to steer agile efforts, enhancing their impact. And enterprise agility helped leaders act on insights so they could improve experiences and ex-

tract value from their investments in building the XM discipline.

This synergy wasn’t a fluke. Com-panies in various industries are now realizing the reciprocal benefits of XM and agility programs. What’s giving them an extra push is ROX, or return on experience, a concept PwC initiated in 2019 with a framework, system of

metrics, and activation engine. ROX helps companies center both agile and XM efforts on customer and employee experiences, enabling leaders to better direct their efforts and amplify their results.

Breakthroughs are needed

It’s never been more important than it is now to get the agile and XM gears locked together and running smoothly.

Like the financial firm in our example, many large companies have devel-oped solid underpinnings in agile and in XM, and most of them have seen early gains. But, as with the example company, the elation has evaporated and the initiatives have bogged down. As many as two-thirds of firms that have launched agile efforts have struggled to scale them across their organizations, according to PwC research. And in our work with clients, we’ve seen that weaving XM meth-ods into operations proves just as difficult.

But both efforts are now critical. Agile must succeed on a broad scale. In almost every industry, enterprise agility is vital to meeting rapidly changing cus-tomer needs and lowering operational costs, particularly across legacy organiza-

It’s never been more

important to get the

agile and experience

management gears

locked together and

running smoothly.

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Change isno longer optional.Companies capable of thriving in the new world of work are managed with agility, resiliency, and the ability to upskill their workforce at the speed of disruption. How well—and how quickly—can your organization adapt to change?

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tional units, because its practices and technology enable organizations to pivot quickly from old to new priorities and ways of doing things. COVID-19 has made embedding this capability even more urgent than it already was.

XM initiatives can’t be allowed to stall, either. Organizations have more access to information about people than they’ve ever had before, and they must use it to improve experiences — driving continuous product design, technology enhancement, and process improvement — especially as COVID-19 amplifies changes in customers’ expectations and needs. Also, remember that experience extends to employees. Anyone who’s ever encountered an unhelpful customer service representative or surly salesperson should recognize the connection be-tween employee experience (EX) and customer experience (CX). And linked to both is leadership experience (LX), or the way in which organizations develop their leaders’ ability to solve problems and strategize.

Given that enterprise agility is, at its root, concerned with improved ways of working, the challenge for business leaders is how to tie it into those CX, EX, and LX connections, and how to realize value from them.

Two major barriers

Companies are already working on being more agile and improving experiences. So why aren’t we seeing explosions in organizational effectiveness everywhere?

To answer that question, it’s useful to break down the agility and XM disci-plines by maturity level. We have observed three discrete stages — foundational, intermediate, and advanced — on the journey to the point at which the two dis-ciplines become mutually beneficial and inextricable. At the foundational stage, the two initiatives are not yet working together; by the intermediate stage, they’ve been aligned; and at the advanced stage, the gears have been greased and the ma-chine is running smoothly (see the graphic on page 47).

Most organizations run into two major barriers along this path. The first is that they haven’t integrated a customer-focused sensing capability into the agile function to help them identify and prioritize the opportunities that will have the most impact. In such cases, CX might be measured and tracked in this or that customer interaction, but not across the entirety of the customer journey, not fre-quently enough, and not broadly enough. The effect of EX on agile efforts also

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isn’t considered often enough or to the extent needed for leaders to gain insights into how to enable good experiences for customers or measure how well agile methods are catching on. Nor is the effect of EX on good customer experiences measured.

The second common barrier prevents compa-nies from realizing their full potential even after they have blended their XM and agile initiatives. In these organizations, real-time CX and EX data has started to inform agile team priorities, and agile teams have begun to track CX and EX impact and improvement opportunities. These organizations might have iden-tified most of the “critical few” employee behaviors that matter most to improved experiences. But they’re still far from attaining a pervasive, company-wide agile culture or XM discipline, because they haven’t fully harnessed the power of their employees.

The key to removing barriers

To push through these barriers, it’s crucial to know what lies beyond them. We believe that real maturity in both agile methods and XM will be evident in an employee-led “movement,” when real-time customer and employee experience signals inform agile team priorities, in turn making the XM program more actionable. Real maturity will be evident when EX and the adoption of the right employee behaviors are regularly applied as key metrics for tracking the per-formance of agile teams, and when the behaviors of agile leadership help drive value in strategic priorities such as innovation, safety, and sustainability.

To get to this point, companies will have to un-cover causal relationships among leading indicators,

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value drivers, and outcomes, building a model that shows how shifts in any one of those elements affect the others. ROX, the return on experience approach mentioned above, provides this model through a fast feedback loop enabled by enterprise agility.

Consider the case of an insurer selling auto and home policies. Let’s say analysis of the previous year’s customer experience and relevant operational data shows that speed of response to claims is the factor most likely to encourage holders of auto policies to renew. With that customer insight in hand, the agile

team now knows that building agile approaches into claim operations will help unlock value. Measuring the ex-periences of those agile teams and scal-ing effective employee behaviors, both within the agile team and in employee interactions with customers, will fur-ther amplify the impact of the agile and XM efforts. So, the customer in-

sights get the insurer past the first barrier to maturity by focusing the agile team on the most effective priorities, and then employee experience insights create a behavioral movement that gets the insurer past the second barrier to maturity.

What has to happen now

Companies that are struggling to scale their agile and XM models can take five specific actions now to get themselves on the path to real maturity, when both programs will be able to continuously connect experiences across customers, leaders, and employees.

Foster shared executive ownership of agile and experience management. The leaders of CX, EX, and agile capabilities should come together to build a joint governance and operating model that includes a coherent vision for the enterprise.

Plug any gaps in foundational agile and XM capabilities. The leaders respon-sible for driving enterprise agility and the XM discipline should assess their capa-bility gaps. Addressing those gaps with a well-defined plan will help in evolving and integrating the two initiatives.

Real maturity in agile

methods and XM will be

evident in an employee-led

“movement,” when real-

time CX and EX signals

inform priorities.

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Integrate CX directly into each agile team to inform priorities. The agile transformation leader should build and deploy a customer-focused continuous improvement model by leveraging CX insights to identify, define, and prioritize opportunities.

Measure agile ways of working to enhance EX in agile teams. The leader of EX should deploy mechanisms (e.g., pulse surveys and behavior tracking) that measure the experience of employees in the agile pods, and the agile team leaders should act on those insights to further enhance ways of working.

Drive accountability for experience and operational improvement. The lead-ers of agile and XM should create clear roles within their teams to activate the ex-perience improvement insights generated by combining data from the XM pro-gram (such as customer and employee feedback) with relevant operational data (such as behavioral insights).

The fusion of agile and XM dis-ciplines doesn’t happen overnight in even the best of organizations. It will present even more of a challenge for organizations that are only now developing real capabilities in both areas. But companies must aggressively pursue the organizational and cultural transforma-tions needed to realize the full potential of that fusion. Every week, month, and quarter that a company struggles to scale its agile efforts and put experience at the forefront of its strategy is a week, month, or quarter of lost opportunity — time when a competitor may well be making the necessary moves. +

Sujay Saha

[email protected] with clients to build

capabilities and strategies that

enhance customer and employee

experiences, maximizing share-

holder value while creating more

customer-centered cultures, op-

erating models, and organization-

al structures. He works in PwC’s

customer strategy practice and is

based in San Francisco, where he

is a director with PwC US.

Matt Egol

[email protected] a leading practitioner in

digital strategies for Strategy&,

PwC’s strategy consulting busi-

ness. Based in New York, he is a

principal with PwC US. He works

with B2B and B2C clients to help

them accelerate the development

of new disruptive strategies and

capabilities for customer and

employee experience.

Matthew Siegel

[email protected] an advisor to executives in

people and organization strategies

for Strategy&. Based in New York,

he is a principal with PwC US. He

advises clients on organizational

effectiveness, efficiency, and cul-

ture to improve execution against

strategic priorities.

The fusion of agile and XM

disciplines doesn’t happen

overnight in even the best

of organizations.

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THE URGENT NEED FOR SOPHISTICATED LEADERSHIP

The pandemic has highlighted a series of paradoxes inherent to the work of leaders. What comes next will depend on how well leaders face up to them.

by BLAIR SHEPPARD and SUSANNAH ANFIELD

IN THE 2019 PwC Global Crisis Survey, 69 percent of respondents said they expected a global crisis in the next five years, most likely due to a financial meltdown or technology failure. Little did they know how soon the crisis would come. Just nine months after the survey was released, an entirely different and unexpected medical and public health crisis — COVID-19 — has fundamentally altered the world. If driving change in the uncertain and turbulent environment that existed at the beginning of 2020 was a complex challenge, the degree of difficulty has now been ramped up significantly.

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Blair Sheppard

[email protected] the global leader of strategy and

leadership for the PwC network.

He leads a team that is respon-

sible for articulating PwC’s global

strategy and the development

of current and next-generation

PwC leaders. He is professor

emeritus and dean emeritus of

Duke University’s Fuqua School of

Business, and is based in Durham,

N.C. He is the author of Ten Years

to Midnight: Four Urgent Global Cri-

ses and Their Strategic Solutions.

Susannah Anfield

[email protected] a member of the global strat-

egy and leadership team at PwC.

Based in London, she is a director

with PwC UK.

Alexis Jenkins

and Daria Zarubina,

directors in the PwC global

strategy and leadership team,

also contributed to this article.

As we recently noted in these pages, five global forces — asymmetry of wealth, disruption, age disparities, polarization, and loss of trust — which together we’ve termed ADAPT, were already changing the way millions of people live and work (see “Adapting to a new world,” s+b, May 13, 2020). The pandemic has sharply accelerated these forces. As a result, organizations have even less time than they thought to reconfigure themselves so that they can maintain their viability in a vastly changed world. In our new book, we predict that humanity has “10 years to midnight.” But with events moving so quickly, it seems there may be even less time until the fateful hour. The good news is that by recognizing the challenges confronting society, internalizing the lessons of the pandemic, and deploying the tools and technologies at hand, we can chart a new, more adaptive course. But doing so is going to place a fresh set of demands and intense pressures on leaders.

The six paradoxes of leadershipThere is an urgent need for leaders who can quickly understand, accept, and embrace six apparent contradictions in their work.

Those contradictions are represented in the paradoxical identities below.

Source: PwC

1Humble

Hero

2Strategic

Executor

3Traditional

Innovator

4Technology-savvy

Humanist

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Around the world, leaders, already stretched in all directions, have never faced so many dilemmas to navigate and contradictions to reconcile. Beyond dealing with the familiar aspects of their business, they now have to cope with the most fundamental of issues: health, well-being, safety, and financial viability. And the trade-offs are excruciating. Answers appear to conflict with each other, leading to decisions that have every likelihood of being wrong. Many companies may feel like they must return to business as normal in order for their industries, communities, and economies to survive, but the very act of returning to famil-iar ways of working could inhibit the ability of all these entities to succeed in the future. The speed of decision-making has picked up. Decisive, or seemingly prudent, moves made a month ago — even a week ago — can quickly become redundant, or worse, appear reckless. In a world of endless todays, medium- and

long-term planning feels futile, and the scope of short-term planning is re-duced to a matter of hours. Yet it is ex-actly in such times that people look to leaders to provide stability, hope, and a path forward. Crises like the one we’re experiencing are a crucible from which the true capabilities of leaders emerge and reputations are forged.

As we first noted in 2018, in our analysis of the six paradoxes of leader-

In a world of endless todays, medium- and long-term planning feels futile, and the scope of short-term planning is reduced to a matter of hours.

5Globally-minded

Localist

6High-integrity

Politician

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ship (see Resources, page 67), successful leaders must embody and negotiate a set of apparent contradictions in order to thrive in a rapidly changing world. They must have the confidence to project a clear strategy, and the humility to correct course and recognize the need for change. They must also be as adroit at surveying the landscape from 30,000 feet as they are at making sure opera-tions function well on the ground. They must remain rooted in the traditions that made their organizations successful while continuously embracing innova-tion. They should consider what they need their workforce to achieve, and then effectively use enabling technology to help do it. They have to think globally while acting locally. And they must demonstrate the ability to negotiate differing viewpoints toward a consensus while maintaining their integrity. As the world seeks to systematically repair the collective trauma and damage being suffered due to COVID-19 — and to reconfigure and prepare itself to be resilient in future crises — there is an urgent need for leaders to understand, accept, and embrace these paradoxes.

Repair: The need to act quickly and intelligently

The first step in recovery is to repair what has been broken. In order to react quickly and intelligently, leaders must have the confidence to make decisions and act in an uncertain world, and the humility to consult widely, recognize when they are wrong, and adjust course. They must be Humble Heroes, the first type of paradoxical leadership we’ll discuss.

As COVID-19 spread and community transmission took hold across the world, decisive action was required of global leaders. In China and New Zea-land, Germany and South Africa, and in all corners of the world beyond, enor-mous pressure was placed on national leaders to act in the best interests of their country and every one of their citizens. Each move by government was made under a harsh spotlight, at a time when little was known about how to contain or combat the virus. Leaders had to have courage and self-belief to act decisively

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despite the burden of knowing that there would be a devastating cost if a wrong decision was made. In the pandemic’s early days, decisions needed to be made with a huge amount of empathy and humility, and with a willingness to own the outcome despite the lack of a clear road forward. Through careful consultation with doctors, economists, epidemiologists, technologists, and public health ex-perts, the potential outcomes of any of the options available would become clear-er. In the face of such uncertainty, it is easy for leaders to grow overwhelmed, freeze, and struggle to make clear decisions and communicate them effectively. It is also difficult to make adjustments when conditions change.

As policies were rolled out, it was crucial for leaders to rally people to change their behaviors and take collective action. Relatively soon after the virus’s arrival in the U.S., when only one player had tested positive, Adam Silver, commissioner of the National Basketball Association, consulted with owners, players, and pub-lic health authorities — and moved quickly. The league decided on March 11 to suspend the 2019–20 season. “It was really a moment for us to step back, take a breath, ensure that everyone in the NBA community was safe and healthy and doing everything they needed to do to take care of their families,” Silver said. The move set the tone and precedent for other sport leagues to follow (and appeared increasingly shrewd when the outbreak grew rapidly). Silver remained at all times transparent about the fact that he didn’t know if his decision was right, but that it was the best choice he had in the moment. On July 30, the NBA restarted its truncated season in Florida. The bubble the league constructed lasted intact through mid-October, when the Los Angeles Lakers were crowned champions.

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To limit and repair the damage from COVID-19, leaders had to understand the big picture — the nature of the pandemic, its global implications, the pos-sibility of a range of outcomes — while mastering the granular details of stabiliz-ing company operations, getting supply chains working again, and ensuring that team members were able to work remotely. In other words, they had to be really good Strategic Executors, another category of paradoxical leader.

As COVID-19 caused societies to lock down, the impact on many business-es and sectors was immediate and devastating. CEOs had to balance the effects of their decisions on the immediate safety of their employees with the long-term consequences for the sustainability and relevance of their business. Some acted in a way that has protected their future viability, while others struggled to act quickly and damaged their organization’s reputation in the process. In a time of crisis, it is easy to get stuck in the problems of the day, to focus on preserv-ing existing holdings, and to do the next most obvious task to try to survive. But those who did so missed the opportunity to be agile, to position themselves for the future, or to remain connected to employees and customers who needed inspiration and hope. Equally, those who spent too much time focusing on the long term, trying to predict where the world was going and strategizing without making a move, may have soon found their balance sheet in tatters and supply chains disrupted. Having failed to deal with the crisis at hand, they could now face devastating consequences to their business — even if they have a crystal-clear vision for the future.

At the level of the nation-state, few leaders managed the tensions between strategy and execution as well as Jacinda Ardern, prime minister of New Zea-land. After the country reported its first COVID-19 case on February 28, Ar-dern laid out an ambitious vision in a relatable way, encouraging all 5 mil-lion New Zealanders to be part of the response to the virus. One aspect of her strategic approach included a four-level alert system, which was imple-mented early in the outbreak and comprehensively and competently executed

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throughout its duration. On June 8, New Zealand lifted all restrictions and de-clared itself virus-free. And in the fall, the country successfully stamped out a small outbreak.

The response to the pandemic called for a great deal of improvisation on the fly — whether it was through hospitals devising new treatment protocols or com-panies figuring out how to develop remote adaptations of in-person services. In many instances, companies long known for operational excellence were among those that were best able to quickly develop products and services to meet the new needs. And they were able to do so while maintaining their core purpose — even if their main business shut down. Time and again, we saw these Traditional Innovators rise to the fore.

In Italy, for example, high-end seamstresses facing a sudden drop in de-mand for couture repurposed their capabilities to start making personal pro-tective equipment for local hospitals. They accomplished this improvisational adjustment to meet an acute need at a time when face masks ordered from other countries were getting stuck at the borders. The industry’s pivot was impres-sive, as described by Claudio Marenzi, former president of the Italian textiles umbrella organization Confindustria Moda, in an article in WWD. Similarly, to deal with a sudden nationwide shortage of ventilators in the U.S., General Mo-tors, which has a century-long tradition of engineering innovation but had never made complex medical equipment, came up with a design in a matter of weeks, worked with its supply chain, and trained employees to mass-produce thousands of the lifesaving ventilators.

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These organizations relied on trust that they had already earned. They drew from that trust and, by innovating at speed and remaining true to their core, provided leadership at a time when society needed it. As we continue to grapple with the crisis, it is more important than ever for organizations to be relevant and purposeful. At the beginning of 2019, Pfizer chair and CEO Albert Bourla rolled out a new approach to R&D, which seeks to disrupt the typical ways of testing new drugs while staying focused on the company’s stated pur-pose of finding “breakthroughs that change patients’ lives.” The resulting ability to increase the speed with which new formulations can win FDA approvals has put the firm in a good position to drive the search for a desperately needed vac-cine for COVID-19. Leaders will be able to survive — and help reconfigure the world — only if they are able to innovate in an authentic and organic way.

Rethink: Design the present with the future in mind

As organizations adjusted to new realities, technology played an important role. In many cases, technology platforms that already exerted immense influence on society saw their power, reach, and value grow rapidly. (The stocks of Amazon and Netflix were up more than 60 percent through October 2020, while Zoom’s rose more than sevenfold.) But there are instances in which technology does not contribute equitably to society. When considering how best to leverage technolo-gy for the good of humanity, leaders must be able to bridge the gap between the raw power of tech and the needs of people — and be as fluent with emotional intelligence as they are with artificial intelligence.

Leaders must be able to bridge the gap between the raw power of tech and the needs of people — and be as fluent with emotional intelligence as they are with artificial intelligence.

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Nowhere is society’s need for such Technology-savvy Humanists more obvi-ous than in the vast education complex, which touches the lives of billions of people daily. COVID-19 has forced schools, colleges, and universities to rap-idly and completely shutter their physical infrastructure, requiring that young people be educated from home. We do not yet know the consequences of this abrupt transition, but, in many cases, students have been left without the struc-ture, discipline, and mental and emotional support they need and would oth-erwise find at school. Though it is possible to provide content electronically and conduct assessments virtually to test knowledge, technology alone can’t deliver the full value of an education. Without the opportunity to build relationships, encounter challenges, have robust dialogues, and learn within a pedagogical sys-tem that supports the human needs upon which educational outcomes depend, students lose a great deal. We should take care to ensure these human needs are not subjugated to technology.

Those educational institutions that had already integrated technology into their teaching methods were better able to manage the shift to virtual classrooms while also maintaining student collaboration and supporting continuous con-nection between teachers and students. And many others have stepped up dur-ing the crisis. In a recent blog post, Fiona Cottam, principal at the Hartland International School, in Dubai, described how her teachers were quickly trained on Microsoft Teams to deliver their curriculum through virtual classrooms and became experts in Twitter as a way to access resources from other educators and to establish the very human support networks they needed to deliver the best

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experience for pupils and their families. There has never been a more important time for leaders in education to step up and navigate the path between tech-nology and pedagogy.

Reconfigure: Organizing for the future

As society comes to terms with the immensity of the shared experiences that the pandemic has created, we have an opportunity to shape the world in a new way. As individuals and families, we have had to learn how to be self-sufficient and resilient. Local communities have rallied to protect the vulnerable and support small businesses at risk. At the corporate level, firms have been forced to think about their workforce on a local basis, as individual countries managed the virus in different ways — and on different time lines. The disruption of global sup-ply chains has led many businesses to reconfigure them within national borders. Leaders at all levels have been scrambling to protect their communities. In many instances, the result has been an increase in nationalism, which is accelerating the polarization and asymmetry already present in the global system. More than ever before, we need leaders who understand global forces, market structures, and societal needs, and who are also capable of expressing genuine care for and understanding of their local community. We need Globally-minded Localists.

The most salient lesson from this virus is that it knows no borders and re-quires no invitation to overwhelm a country. Ultimately, nobody will be safe from infection until nearly everyone has been immunized. And the develop-ment, manufacturing, and distribution of therapeutics and vaccines will require

As society comes to terms with the immensity of the shared experiences that the pandemic has created, we have an opportunity to shape the world in a new way.

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unprecedented global cooperation. At the same time, the immense variation of cultures, behaviors, and healthcare systems around the world will require the vi-rus to be fought and defeated at the local level.

We need leaders who can manage the tension between the need to develop solutions and protocols at the global level and the reality that they then must be implemented locally. Jack Ma, the billionaire entrepreneur and founder of the tech giant Alibaba, has been the driving force behind an ambitious operation to ship medical supplies to more than 150 countries. While following China’s dip-lomatic rules and ensuring his country is served first, Jack Ma has through his foundation also made a significant impact on getting essential medical equip-ment to where it is needed.

When the effects of the pandemic begin to settle across the world, the im-perative to redesign organizations that can thrive will also present an opportuni-ty to reconsider how they operate. Achieving a successful organizational redesign requires leaders who are sufficiently savvy to influence a broader set of stakehold-ers while also building essential levels of trust. In order to make changes that are both meaningful and sticky, we need a cadre of High-integrity Politicians.

Climate and sustainability are among the arenas in which ideals and politics come together. The tone of the discussion is being set by many business leaders, including Larry Fink, the CEO of asset manager BlackRock, who is resolutely incorporating climate risk into investing decisions and urging corporate lead-ers to reassess core assumptions about modern finance. In fact, a silver lining to the cloud cast by the coronavirus could be an increasing demand of our leaders to drive society to a more sustainable future. At a time when there is disagree-ment about basic facts and science, forging any sort of different path requires leadership rooted in trust. It also requires a level of inclusivity that has not often been sought in massive systemic change — an inclusivity capable of bringing in diverse and sometimes conflicting viewpoints and navigating through them so that the outcome is better than any individual proposal.

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German chancellor Angela Merkel, a chemist by training, has guided her country through the first stages of the pandemic and kept her reputation intact. She has successfully marshaled her scientific background and highly analytical approach to build powerful levels of trust. As a result, Germany has maintained a comparatively high level of social and economic stability while effectively com-bating the virus. Supported by its highly developed pharmaceutical industry, the country was able to carry out around 500,000 COVID-19 tests a week by early April; at the same time, the U.K. was only managing to test around 7,000 peo-ple. These efforts allowed Merkel to announce the easing of lockdown measures later in the month, far earlier than many other European countries.

The six paradoxes of leadership are a lot for any individual to take on. We already expect a great deal from our leaders. They must have a mastery of busi-ness, understand complex systems, and communicate effectively. And the rec-ognition of these paradoxes adds several layers of complication to the mix. It would be incredibly rare to find someone who embodies all of them. Leaders are human, after all — flawed, complex, and prone to failure and disappointment. But because of their humanity, they are also capable of learning and evolving at great speed.

So, consider your own leadership: Where do your strengths lie? Just as im-portant, what are your weaknesses? Are you already embodying some of these contradictions? Though not all skills are determined and developed by motiva-tion, people tend not to pay as much attention to the areas in which they don’t possess talent, or, worse still, don’t respect those who do. To truly balance para-

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Resources

Christina Farr, “Germany’s coronavirus response is a master class in science communication,” CNBC, July 21, 2020: A look at what made the country’s strategy effective.

Blair Sheppard, “Career advice for a changing world,” s+b, June 30, 2020: A look at employees most at risk from the pandemic’s economic effects.

Blair H. Sheppard, Ten Years to Midnight: Four urgent global crises and their strategic solutions (Berrett-Koehler, 2020): Explores several frameworks — including the ADAPT framework described in this article — that define and describe the challenges leaders face today.

Blair Sheppard, Daria Zarubina, and Alexis Jenkins, “Adapting to a new world,” s+b, May 13, 2020: How to address the challenges of the post– COVID-19 landscape.

PwC, Global Crisis Survey 2019: Covers crisis preparedness as the next competitive advantage.

PwC, Six paradoxes of leadership: Another look, found on www.pwc.com, at the six paradoxical leader archetypes described in this article.

Alessandra Turra, Sandra Salibian, and Martino Carrera, “Italian Fashion, Textile Cos. Convert Production to Fight Coronavirus,” WWD, Mar. 20, 2020: Describes how Italian fashion houses switched to making face masks and hospital gowns during the country’s crisis.

Christopher Vollmer and Daniel Gross, “NBA Commissioner Adam Silver has a game plan,” s+b, Apr. 30, 2018: An interview with the basketball association’s leader.

doxes, leaders need to learn to respect and work successfully with those who care about the things they do not.

When considering these six paradoxes, it is important to note that no single contradiction is more important than the others. In fact, they are most effective when they work in concert, as a system. And just as we may not be able to find all the elements of this kind of leadership in ourselves, we can commit to work-ing on them. It’s important that we do so. For as difficult as COVID-19 has been, it will certainly not be the last crisis we face. +

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FORWARD TO normal

In recent years, the global entertainment and media (E&M) industry had ex-perienced steady growth amid a series of disruptions. Between 2015 and 2019, overall spending on E&M grew at a 5.8 percent compound annual growth rate (CAGR), according to the new PwC Global Entertainment & Media Out-look. With each passing year, consumers, especially those in emerging markets, spent more, propelling impressive investment in burgeoning new segments such as virtual reality, podcasts, and esports. At the same time, ongoing structural shifts spurred digital platforms and distribution models to garner a larger share of overall revenues.

Then came 2020.

Entertainment and media companies are building business models that are resilient to the enduring changes in consumer behavior ushered in by COVID-19.

by DAN BUNYAN and VIKRAM DHALIWAL

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Dan Bunyan

[email protected] advises clients in the technology

and media sectors on growth

strategy and acquisition

opportunities for Strategy&,

PwC’s strategy consulting

group. Based in London, he is

a director with PwC UK.

Vikram Dhaliwal

[email protected] clients in the technology,

media, and consumer goods

industries for Strategy&. Based

in Amsterdam, he is a director

with PwC Netherlands.

A uniquely disruptive phenomenon, COVID-19 hit the E&M industry par-ticularly hard. As the global economy shrinks for the first time since 2009, the Outlook forecasts that the US$2.1 trillion global industry will contract in 2020 by 5.6 percent. The Outlook offers reason for hope, however. Spending is antici-pated to bounce back smartly in 2021, and the industry will post a 2.8 percent CAGR through 2024, roughly equivalent to the long-term trend (see chart, next page). But it’s likely to be a K-shaped recovery, in which some sectors rise and others fall. As consumers and businesses adapt in parallel, the industry is being reshaped before our eyes.

Whether as the result of a vaccine or effective therapeutics and testing, the world will learn to live with coronavirus, learn to suppress it more effectively, or learn to manage the health of those who become infected. But the entertainment and media industry won’t revert to a world that looks anything like 2019 even when the pandemic is past — for two main reasons. First, the industry is in a constant state of evolution, and trends tend to accelerate rather than slow down. Second, and more important, the crisis has wrought changes to consumer be-havior that are likely to stick. In many instances, crises pull the future forward, compressing a few years of projected growth (or shrinkage) into a few months. Here’s one example. As recently as 2015, global cinema box office revenue was three times that of the SVOD (subscription video on demand) sector. In 2019, the two sectors reported equivalent sales. But by 2024, we project SVOD rev-enue will be twice the size of cinema box office revenue.

In other instances, crises can sap the momentum from trends that seem

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Powering aheadGlobal entertainment and media revenues will recover from a 2020 decline and resume their historic growth trend.

2019–2024CAGR2.8%

–8%

8%

4%

0%

–4%

Note: 2019 is the latest available data. 2020–2024 values are forecasts.

Source: PwC Global Entertainment & Media Outlook 2020–2024 (www.pwc.com/outlook), Omdia, World Bank, IMF

Glo

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&M

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)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Projected data

0

2

1

$3

$1.8 $1.9 $2.0 $2.1 $2.0 $2.2 $2.3 $2.4 $2.5

US$1.7trillion

Global E&M revenues Annual global E&M growth Global GDP growth

powerful. Some sectors will notch gains as they claw their way back to where they were before COVID-19. But crises can also create entirely new opportuni-ties or suddenly make business models that lacked traction before the crisis seem more compelling.

Rather than going back to normal, we may be going forward to normal. And that normal will be a state in which recent changes in consumer behavior become entrenched and gain in strength. Consumers of E&M products and services will be more likely to be at home, will engage in different ways, and will expect and demand more of the user experience. The entertainment and media businesses that thrive will be the ones that are resilient to those changes and that have the agility and capabilities to capitalize on emerging opportunities and markets. It used to be conventional wisdom in the E&M industry that pro-prietary content or distribution channels were the main drivers of the ability to win in any given market. Both still matter immensely. But in 2020 and beyond, companies must have the capacity to meet consumers where they are, and to match up their offerings with the personal and emotional consumer needs that are most salient. Now the winning formula is content combined with distribu-

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tion, trustworthiness, the ability to offer new experiences, and the data muscle to manage analytics and recommendation engines.

Lasting changes

It is always dangerous to make predictions, especially when we are still learn-ing about the full impact of COVID-19. But the experience of the first several months of lockdowns leads us to believe the consumer changes brought on by the pandemic, which can be grouped along three main dimensions, will endure. Each of these dimensions has legs going forward, regardless of how the COV-ID-19 response develops, because of the way it speaks to powerful human needs and wants. And each has an important influence on the growth trajectory of E&M sectors (see chart below).

Home is where the revenues areRevenues associated with at-home digital activities will continue their rapid growth, tripling between 2015 and 2024.

202420232022202120192018201720162015 2020

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0

50

100

150

200

250

300

Note: 2019 is the latest available data. 2020–2024 values are forecast projections.

Source: PwC Global Entertainment & Media Outlook 2020–2024 (www.pwc.com/outlook), Omdia

Projected data

Video games Over-the-top platforms

$350

Digital music streaming VR Podcasts Esports

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• How people live. People are spending much more time at home — whether they are at work or at leisure. As the boundaries of the world around consumers continue to shrink, people will invest more closer to home, and they will invest more in themselves. Some of this behavioral change has been thrust upon con-sumers by the pandemic. At many of the largest employers, offices aren’t slated to open until well into 2021. Large public gatherings are not in the offing. And we won’t see a rapid snapback. The more people stay and work close to home, the more services and products adapt to the new situation, and the more compelling those offerings become. Even in the absence of concerns over health, people will access more goods, services, and experiences at home.

• How people discover and engage at home. Craving large amounts of con-tent — for excitement, diversion, information, or immersion — and facing a wider choice than ever, consumers want to navigate and consume content seam-lessly. The challenge of creating that experience is growing more acute. Amid the proliferation of “all-you-can-eat” streaming models, people are often over-whelmed by choice. Companies will have to become more adept at developing recommendation engines fueled by artificial and human intelligence. The nature of engagement will also change, as consumers invest more in personal growth and well-being delivered to the home. At root, consumers spend money in order to meet their needs and wants. Much of that spending was previously directed externally: on clothes, travel, and out-of-home dining and entertainment. Un-able to get away, people are now more likely to invest in engagement. Beyond entertainment, they will seek experiences that offer connection, self-care, and self-improvement.

PwC’s Global Entertainment & Media Outlook 2020–2024

Like the rest of the economy and society, the entertainment and media industry is facing

significant disruption from the COVID-19 outbreak. Find out where consumers and advertisers are

spending their time and money in the PwC Global Entertainment & Media Outlook 2020–2024.

www.pwc.com/outlook

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• The experiences they seek. As consumers’ expectations for depth and qual-ity in home-based entertainment rise, experiences will have to become more compelling, social, and trustworthy. Consumers will seek experiences that aren’t mere substitutes for live experiences, but improvements on them. Consumers will be open to exploring new realities, and will spend time in new, immersive content. And as they do, they will privilege (and be willing to pay for) content and channels they can identify with.

Resilient responses

These changing consumer behaviors will require some business models to pivot. But they also open up new opportunities for capturing growth. Across the board, companies will have to meet consumers at home, online, at their convenience, and in a way that engages their need for new experiences.

Convenience and accessibility. Consumers have sought entertainment and media content that is easy to access and easy to use at home. And frequently that means that events happen on the schedule of the consumer, not the pro-vider. This is one of the reasons that usage of over-the-top (OTT) platforms, video games, and streaming accelerated during the lockdown. Consider the daily workout. In the past, a person might have booked a class at SoulCycle (given once at a fixed time), and then traveled to the studio for the 45-minute ses-sion. By contrast, users of Peloton can dial up any of thousands of spinning, cycling, running, or yoga classes — and engage with fellow members — from their home whenever they want. Peloton Interactive reported a massive surge in sales of its fitness equipment and subscriptions during the pandemic. Subscribers more than doubled between August 2019 and August 2020, to nearly 1.1 mil-lion, and the number of workouts initiated more than quadrupled.

Similarly, people may not be able to attend academic classes in person, but they are logging on to online educational experiences. Between March 15 and April 15, 2020, course enrollments on Coursera, a provider of online open cours-

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es, rose to 10 million, up more than 600 percent from the same period in the year before. The launch of the Disney+ streaming service in late 2019 could hardly have been better timed. It brought a vast library of content beloved by kids and adults into the homes of subscribers, to be watched whenever they wanted. And it quickly became a platform for the types of experiences consumers could not easily access otherwise. On the weekend of July 4, it aired a filmed performance of the Broadway smash hit Hamilton, which for years had been the hardest ticket to get. Having projected getting between 60 million and 90 million paying sub-scribers by 2024, Disney+ reached 60.5 million in early August 2020.

New digital content propositions. There has been a rapid evolution in expec-tations. Consumers don’t simply want content; they also want the experience surrounding content. Instead of just reading books on a tablet, they want to read a book and then participate in an interactive book club. Companies can focus on unmet demands by exposing consumers to new types of digital content propo-sitions that offer ancillary experiences in compelling formats. In just this way, many of the digital platforms that we identified last year as being novel plat-forms for advertising are evolving into platforms for performance, e-commerce, and convening (see “Making connections with the new digital consumer,” s+b, May 6, 2019). Consumers are also investing more time in new and rediscovered hobbies such as fitness, crafts, and baking. E&M businesses that can create rel-evant digital content will realize additional revenue streams. Zwift is an example of a fitness player that has created innovative digital content propositions. The app aimed at home-based cyclists gamifies the sport with the use of avatars and friendly competition, and has created its own virtual racing league. In Septem-ber 2020, the company raised $450 million in Series C funding, earning it uni-corn status.

New forms of content proposition are evident in the rising number of mash-ups between, for example, e-commerce and social media companies. In China, rising usage of e-commerce via live streaming emerged as a trend in the lockdown

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period. Tencent-backed Kuaishou blends social influencing and e-commerce, with celebrities appearing in videos in which users can click through to buy fea-tured goods. Gaming platforms have integrated e-commerce and performance into their offerings. The Epic Games Fortnite game world, which boasts 350 mil-lion users (a number greater than the population of the United States), can now be credibly described as the world’s largest event space, capable of hosting major live music, cinematic, and other spectacles in a socially distanced setting. In April 2020, rapper Travis Scott performed a gig inside the game world. More than 12 million players watched his debut set, and 27 million watched at least a portion of his five sets. A performance from DJ Diplo followed in May 2020.

The personalization imperative. It’s not enough simply to make content and experiences available. Many of the largest platforms have already cut the nec-essary deals so that they can offer a value proposition that rests on seemingly endless choice and all-you-can-consume subscriptions: Think of Netflix for film or Spotify for podcasts and music. In theory, players can now custom-ize offerings to appeal to millions of different individuals. But platforms are in danger of becoming like food courts with 100 different stalls; people can become paralyzed by choice and are not quite sure how to find something they like. Some 80 percent of Netflix viewing is driven by algorithm recommenda-tions. But consumers often question whether algorithms reflect what the service wants to promote, rather than what viewers will like. Amid a surfeit of choice, it will be vital for companies to harness the power of personal and computer- generated recommendations.

Amid a surfeit of choice, it will be vital for companies to harness the power of personal and computer-generated recommendations.

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There are two dimensions to personalization: human and machine. Com-panies that can use data and analytics to understand what users might like, and develop algorithms and recommendation engines to suggest choices, will benefit. As more companies amass larger numbers of subscribers and users, they will have to develop efficient and cost-effective tools similar to those that YouTube, Netflix, and Spotify have used to such great effect. But they can’t overlook the power of the second dimension, human influence. For decades, Oprah Winfrey has been the ultimate influencer in the E&M world; every time she chose a book for one of her book clubs, it became an immediate bestseller. Marketers are gain-ing in their understanding of how to work through influencers — the mostly young people who have millions of followers on TikTok, Instagram, or Twitter. And marketers are latching on to the power of trusted recommendations. One of the unsung elements of the New York Times’s successful digital transformation was its acquisition and subsequent development of the Wirecutter, a tech prod-uct recommendation website that reaps affiliate revenues from online sales. As people looked for products such as cleaning supplies in the midst of COVID-19, the site experienced a surge in growth.

Direct consumer connections. Even before the pandemic, the notion of rely-ing on advertising as the exclusive — or main — support for content and con-sumer experiences was growing more challenging. COVID-19 caused a sharp decline in ad spending, pushing it down an estimated 13 percent in 2020, ac-cording to the Outlook; ad spending isn’t expected to reach its 2019 level again until 2022. To be resilient in the face of this shift, and resilient to consumers’

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changing habits, companies will have to double down on forming personal di-rect relationships with users. Although the pool of money available for subscrip-tions is growing, there is likely to be intense competition for it. This dynamic calls for innovation in business models.

We have seen success for outfits that offer focused and proprietary content — such as the Financial Times or the New York Times. The New York Times now has more than 5.5 million digital subscriptions, and in its most recent quarter reported digital subscription revenues that were more than three times digital advertising revenues. One of the standouts of the past year has been Substack, a newsletter platform that manages subscription, publishing, and advertising op-erations for tens of thousands of newsletter operators — who can then focus on building up their audience. In July 2020, News24, a South African online news operation owned by Naspers, launched a subscription for 75R (US$4.63) per month, which includes access to all news content plus access to magazines such as City Press, You, and True Love.

In other arenas, companies have to develop the capacity to reprice regular products in order to capture the full elasticity of demand. In slack economic times, people are willing to pay for products and services that provide value, and there is a higher appreciation for all-you-can-eat business models. E&M busi-nesses with a greater subscription revenue mix or re-optimized pricing models will emerge more resilient. Amazon Prime is one model, offering video, gaming, and other content wrapped into a larger “subscription” that provides other ser-vices — in Amazon’s case, free shipping. But this one-size-fits-all strategy doesn’t

Although the pool of money available for subscriptions is growing, there is likely to be intense competition for it. This dynamic calls for innovation in business models.

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necessarily work in all economic circumstances. In India, some OTT players aimed at local village audiences charge as little as one rupee (US1.4 cents) a day for access to content. Disney+, which is offered in India via Hotstar, Disney’s lo-cal subsidiary, offers a range of pricing levels from premium (1,499 rupees [about US$20] per year, with no restrictions) to the more economical VIP plan (which doesn’t offer access to U.S. shows and costs 399 rupees [about US$5] per year).

Engendering trust. The major shifts occurring — consumers spending more time at home and focusing on a more personal relationship to content and ex-periences — have the effect of highlighting the importance of trust. As con-sumers invite more entertainment and media into intimate spaces, they have to feel comfortable. COVID-19 has afforded many players in the E&M sector the opportunity to step up and deliver on their potential. Newspapers and news or-ganizations took down paywalls for their pandemic coverage. Recognizing the financial challenges faced by customers, some telecom operators and streaming services reduced fees. Television networks hosted fundraisers to help people af-fected by COVID-19. The pandemic also increased the pressure on platforms to clamp down on disinformation. In recent months, Facebook and Twitter have grappled with how to label misleading content on the pandemic, and on elec-

for improvement opportunities and

gaps, and diversify content sourc-

ing and production strategies. As an

example, some visual effects and

gaming studios have been able to

work remotely and flexibly by using

cloud-based platforms to undertake

the design and editing of products,

with less dependency on on-premises

software and hardware. When Gen-

eral Mills and its advertising agency

EP+Co created advertising spots and

films for the Yoplait yogurt brand,

The pandemic has created a

global scarcity of production

capacity, which is likely to persist long

into the future. To protect against

this scarcity, players need to act fast

to mitigate increasing content costs,

review midterm content programs

they staged live-action shots with

one actor per shoot, and the nine-

person production crew worked

remotely. Spotify’s podcast creation

platform, Anchor, rolled out functions

in 2020 that transform audio captured

from online video chats into audio

that is appropriate for quality pod-

casting. Companies that learn how

to produce high-quality content

remotely will thrive as we emerge

from this disruption.

Optimized content development and sourcing

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tions. Operations that can define themselves as arbiters of socially useful facts and information are finding audiences and funding. The 19th — a woman-owned and -managed news outlet that defines its mission as providing women and people of color with the information and resources to be equal participants in U.S. politics — launched in January 2020, backed by a mix of donations, sponsorships, and memberships.

New arrangements and alliances. In order to meet consumer demand and keep up with changing habits, resilient organizations may have to strike new types of alliances or connections. There might be potential for new asset combi-nations, with at-home content owners taking center stage. In France, the public and private broadcasters France TV, M6, and TF1 have partnered to develop and drive the streaming platform Salto, which aims to compete with Netflix. In September 2020, DPG Media announced the launch of a streaming service called Streamz in a joint venture with Telenet of Belgium. This brings togeth-er a service putting together titles from DPG, SBS, and VRT, combining local language programming with international titles. Microsoft bought video games company ZeniMax/Bethesda for $7.5 billion, and will integrate it with its Xbox unit. The deal is aimed at guaranteeing a new, exclusive roster of high-quality content to bring to Xbox’s loyal audience base.

For decades, through a range of disruptive economic and technological cy-cles, the entertainment and media industry has proven highly agile. The transi-tions over the past century have been powerful — from newspapers to telegram and then radio, into the age of television, and then into cable television, mobile communications, the internet, and social media. Through recession and expan-sion, consumer demand for content and experience has risen continually, even though the fortunes of individual companies and sectors have risen and fallen — sometimes dramatically.

The coming decade is likely to usher in another series of coincident transi-tions, as E&M becomes more home-based, more personal, and more experien-

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Resources

Olaf Acker, “Redefining customer experience: Connecting in the time of COVID-19,” s+b, Apr. 20, 2020: Why it’s important for businesses to infuse virtual experiences with a human touch.

Dan Bunyan and Karim Sarkis, “Making connections with the new digital consumer,” s+b, May 6, 2019: To thrive in a world of apps, platforms, and privacy concerns, marketers have to become multitaskers.

David Lancefield and Daniel Gross, “The clear Sky strategy,” s+b, July 15, 2020: This interview with Jeremy Darroch, the CEO of the global television company Sky, offers insight into staying relevant in the age of streaming.

PwC, Perspectives from the Global Entertainment & Media Outlook, 2020–2024, Oct. 2020: How the E&M industry is reconfiguring amid recovery.

PwC, The consumer transformed: Global Consumer Insights Survey 2020, July 2020: Analysis of data from before COVID-19 hit and after lockdowns were in place offers insights into changing consumer behaviors that will endure beyond the pandemic.

tial. And we have already seen an ability by the industry to adjust to new struc-tures and changing patterns of behavior. But taking advantage of the coming waves of opportunity will require more than just agility and short-term respon-siveness. The future has been brought forward in many cases. Leaders have a sense of urgency — and a mandate — to experiment and test new methods and arrangements. The task is to meet consumers where they are now and develop the strategies that will enable them to meet consumers where they will be in the near future. +

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At one Fortune 500 insurance company, the IT team had noticed an uptick in quality issues, delays, and dissatisfaction among project sponsors. In response to these unsettling trends, the chief information officer (CIO) decided to adopt a standard software development methodology and replicable project management practices. The intended benefits of this shift — higher quality and reliability — were attractive, but the trade-offs were daunting. Because they would no longer have the license to customize process and standards, project managers would need to give up independence and creativity. Coders would have to make similar sacrifices, as well as face increased oversight through peer reviews.

Rather than trying to convince people your change initiative is the right one, invite them to talk openly about what it might take to implement it: the good, the bad, and the frustrating.

BY MAYA TOWNSEND AND ELIZABETH DOTY

The road tosuccessful changeis lined withtrade-offs fe

atu

re org

an

iza

tion

s &

pe

op

le

Maya Townsend

[email protected] founder of Partnering

Resources, a consulting firm

that specializes in strategy

within complex ecosystems and

collaboration in human networks.

She is coeditor of the Handbook

for Strategic HR and author of

numerous articles.

Elizabeth Doty

[email protected] a former lab fellow of Harvard

University’s Edmond J. Safra

Center for Ethics and founder

of Leadership Momentum, a

consultancy that helps leaders

develop cultures of collaboration,

commitment, and action.

She is a contributing editor of

strategy+business.

To address these concerns, the CIO asked a cross-functional group to con-sider two questions: If the division adopted the new framework, what would the organization gain? And equally important, what would it lose? Participants were invited to weigh the proposed change for themselves and to consider it from every angle — including the reasons the initiative might not work. They brainstormed solutions to potential project roadblocks. These discussions helped build support and diminish the likelihood that people would retrench when challenged by the inevitable costs, frustrations, and hard work of change. In the end, the new methodology and practices were adopted in half the time recom-mended to achieve the goal, embedded in the company’s culture, and recognized for their contributions to customer satisfaction and project quality.

These were not your typical “socializing” conversations, intended to make people feel included in decisions that have already been made. Instead, these dia-logues reflected a departure from many of the current norms for change man-agement. Traditionally, leaders have started with the belief that the change they have launched is patently right. Its merits are not in question, they believe; at most, it might need minor tweaks. With this stance, the work of change be-comes convincing people and overcoming their resistance, and all too often, box-checking exercises take the place of frank discussion.

Yet we have found that the most enduring change initiatives — those that drive real results — are based on leaders’ assumption that they are seeing only part of the picture and thus need to learn more. These leaders ask hard questions and engage in trade-offs as early as possible, talking with those who raise con-

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cerns not to gain their compliance, but to improve, refine, and pressure test the proposed change.

No easy answers

We are living in a historic moment, one in which trade-offs are central to many of our discussions: Leaders in the public and private sector are weighing the potential costs (economic, medical, and psychological) of opening institutions while COVID-19 is still spreading against the potential costs of staying closed. For many of the hard questions these leaders are asking, there are no good an-swers. But decisions still need to be made.

When leaders launch an initiative, their ability to achieve “both/and” is not yet proven. By both/and, we mean identifying a solution that moves beyond the historical limits of an either/or trade-off, an idea advanced by the polarity man-agement methodology of management thinker and author Barry Johnson. For instance, companies used to choose either slow, costly, data-driven decisions or fast, intuitive judgment calls. But the use of advanced analytics now allows com-panies to make real-time decisions that are data-driven.

Yet when leaders assume their answer is the answer, they tend to approach change as they would a political campaign — heavy on slogans and focused on numerical targets akin to contributions and votes. The process can feel forced; people are engaged solely to be converted to the leader’s “side,” rather than to participate in a dialogue about the potential implications of the plan. Leaders speak, but don’t listen. Or they assume that a lack of feedback reflects agreement and acceptance among their constituents.

Success under this approach is typically measured by increases in compliance (“40 percent of staff have logged on to the new ERP system”) and decreases in resistance (“the number of employees indicating the new ERP system will help make their work more effective has increased by 30 percent since last quarter”). Leaders reward those who quickly conform, not realizing that these conversions

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often represent superficial commitments, not true allegiance or even an accu-rate understanding of the new way. And because hard questions are minimized, teams may comply with a change that won’t work once it gets underway.

For employees, the pressure to change without truly understanding or com-mitting to the initiative is an unfortunate fact of organizational life. People be-come used to the expectation that they will limit independent thinking and sus-pend disbelief, regardless of the lessons of their prior experience. If employees have a few questions, that is usually acceptable, but more can invite censure or ridicule, or, in the worst cases, can be career damaging, even if such questions represent legitimate critiques or sound ideas for improvement.

Consider the case of a leader of an accounting services business who created a consolidated national office to replace a collection of smaller state units. Al-though the new structure would save on overhead, the company’s services were heavily influenced by state regulations. Employees with the expertise needed to work in their state office could now be assigned to a case anywhere in the coun-try. Many would lack the knowledge needed to do their job effectively — a con-cern immediately raised by employees when the plan was announced. But the leader was dismissive, instead telling people to stop “harping on the negative.” Those who raised the issue again could tell they were at risk of being branded as resisters. One even remarked that “it was like a cult”; she felt forced to conform or face social and professional isolation.

In the end, the new national structure struggled to deliver for customers in states where employees were not well-versed in local regulations, in ways the re-

For employees, the pressure to change without truly understanding or committing to the initiative is an unfortunate fact of organizational life.

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sisters had predicted and hoped to avoid. Imagine if the leader had asked, “How might we consolidate into a national structure, but still ensure customers benefit from the regulatory knowledge each of you has developed over time?” Instead of resisting, his team would have been brainstorming how to make the idea work. And instead of failing to meet expectations, they could have been delivering ex-cellent service at scale.

Avoid the temptation to rush in

Leaders should borrow an important concept from the project management world: Go slow to go fast. There is often a rush to dive in at the beginning of a project, to start getting things done quickly and to feel a sense of accomplish-ment. This desire backfires when stakeholders are overlooked, plans are not vali-dated, and critical conversations are ignored. Instead, project managers are ad-vised to go slow — to do the work needed up front to develop momentum and gain speed later in the project.

The same idea helps reframe notions about how to lead organizational change successfully. Instead of doing the conceptual work quickly and alone, leaders must slow down the initial planning stages, resist the temptation and endorphin rush of being a “heroic” leader solving the problem, and engage people in frank conversations about the trade-offs involved in change. This does not have to take long — even just a few days or weeks. The key is to build the capacity to think together and to get underlying assumptions out in the open.

Leaders must do more than just get the conversation started. They also need

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to keep it going, often in the face of significant challenges. For example, one of the authors once worked with a division of a Fortune 50 high-tech firm that was going through a period of turbulence. During one nine-month period, the unit was reorganized six times, and each time, another internal technical function was added to the group. The problem was that no one could explain the logic of all the additions. The division began calling itself the “Island of Misfit Toys” — where all the odd, hard-to-place functions were collected.

After first trying the political campaign approach with her team — doing presentations about the burning platform and targeting those who needed to have their concerns assuaged — and getting nowhere, the unit’s leader decided to change course. Over a team dinner one evening, she asked point-blank wheth-er they should give up on making sense of the mergers. The question stunned her colleagues, but also ultimately united them. As they went around the table, they committed to finding a shared purpose, and they were also able to discern a common thread behind the mergers. Each of the added groups had a similar competence they had brought to a range of projects, a similarity that hadn’t been obvious before. The team refocused on that competence, then began seeking new teams to merge into their function.

The leader started the conversation with a challenging question, and this is critical. The questions need to be a little risky, and the context needs to invite people to talk safely about difficult issues. Change champions need to draw out others’ opinions about the reasons their hunch won’t work as a starting point for problem-solving and design. By treating the potential downsides and limitations of an idea as legitimate, rational concerns, people can work together to design solutions that both achieve intended goals and preserve what the organization wishes to safeguard while building commitment to implementation. Leaders may ask, for example: Is this a distraction or something that can truly make a difference? What will we have to do to make this work? What might be the un-intended consequences if we succeed?

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Engage with the “other side”

So-called resisters have a point. Opposing views often have clear, important messages that leaders would do well to heed. The people who hold these views may be the ones who most vividly see the potential losses or risks associated with the initiative.

Organizational change expert Rick Maurer explains, “There [aren’t] ‘resisters’ out there just waiting to ruin our otherwise perfect intervention. People resist in response to something. The people resisting probably don’t see it as resistance; they see it as survival.” Critical voices are important and ultimately essential in breaking through superficiality and developing the thinking needed to wrestle with trade-offs successfully. Many times, in side conversations, people have told us stories about speaking up out of a sense of accountability, realism, or integrity.

When change leaders gloss over unintended consequences and contradic-tory perspectives, they lose the opportunity to capitalize on the tension be-tween views that can lead to unexpected and valuable insights. They sacrifice the chance to achieve real commitment from the people whose job it will be to implement the change.

Methods such as skillful dialogue encourage groups to slow down conversa-tions and truly listen. The Lewis Deep Democracy approach takes it further. Developed in South Africa to help corporations recover from the effects of apart-heid, dismantle embedded racist systems, and model the new, democratic na-tion, Deep Democracy works with what can be called a strict, no-interrupting, one-side-at-a-time policy.

So-called resisters have a point. Opposing views often have clear, important messages that leaders would do well to heed.

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This technique helped one behavioral health organization decide how to change its approach to diversity, equity, and inclusion (DEI). A choice had emerged among the senior team. They could make diversity a top-level prior-ity or they could embed it into everyone’s day-to-day work. Both approaches addressed the underlying imperative to improve, but each also came with trade-offs and potential drawbacks.

Rather than alternating arguments, the team dove into each side in depth. Some members of the senior team believed that DEI should be part of the stra-tegic agenda. The discussion started with supporters articulating their perspec-tive that the organization’s commitment to diversity should be shared with the world as a top-level priority, in order to signal the seriousness of the issue. They expressed a fear that if diversity wasn’t prioritized in this way, it would eventually be neglected or pushed aside by other priorities. All participants were encouraged to discover what parts of this position rang true for them, even if they initially held another perspective. This is a central tenet of the method: It is often pos-sible to find something that the opposing side can empathize with, and slowly the confrontational stance begins to soften.

The next step was to hear from the other side. These members of the senior team turned the group’s attention to the reasons that DEI should be embedded into everything the organization did, so that it became every person’s responsi-bility. This group shared stories of other companies in which diversity became a public relations gimmick that was ignored by staff and rolled out only when ex-pedient. A similar process was followed as the whole group explored that position.

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When participating in this method, people begin to experience fluidity in their stance. This fluidity is also the core of Johnson’s polarity management method: By engaging multiple perspectives and asking questions, people start to recognize both the benefits and the risks of their preferred side of either/or and tap into the creativity needed to craft an effective both/and solution.

The company in our example found that using the Deep Democracy ap-proach allowed them to come to an agreement and develop plans that avoided the pitfalls feared by the other side. The solution was elegant. The company embedded DEI into the fabric of the organization, but did so by writing it spe-cifically into the scope of each high-level strategic priority. For example, leaders responsible for financial health, customer experience, technological innovation, and so on were expected to explore the DEI implications of their work. No strat-egy would be considered successful unless it demonstrated how these issues had been woven into the work.

The leader’s task is to create an environment in which different perspectives can be fully explored consciously and collectively. The conversation should not take the tone of a debate or competition. Instead, people “think together,” ex-ploring best- and worst-case scenarios, grappling with challenges, and imagining how their innovation could ensure success.

Model vulnerability and lack of omniscience

Initially, people may struggle to open up; after all, most have experienced situa-tions in which they were permitted to ask only a few questions or in which fol-low-up questions were perceived as disruptive. To overcome the negative effects of people’s past experiences, leaders must model openness, clearly invite people to speak candidly, welcome questions and critiques, and listen with a willingness to be influenced.

One global leader of an agricultural company crossed six continents to visit almost every outpost in her division and to listen to staff express their hesitations

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about adopting a more interconnected approach among the regional offices. At each location, her message was clear: We need to become more connected and collaborative. But her approach was humble. “Would you tell me,” she asked, “how things work here? What worries you about becoming more interconnect-ed? What do you fear you might have to give up?” Her questions and her clear commitment to listening to her staff instilled trust and confidence.

Her employees shared their concerns. They feared that if the regions were more connected, they would have to comply with what headquarters told them, even when they knew it was wrong for their local market. As things stood at the time, these workers often superficially agreed to headquarters’ mandates and then did as they wished, knowing they could fly under the radar. In theory, the proposed organizational change would free staff from being beholden to a strict hierarchy. In practice, they admitted, becoming more interconnected would lim-it their autonomy.

It would have been easy for the agricultural leader to present strong, rational arguments to prove to the regional staff that their perspectives were wrong. In-stead, she did something radical that increased trust dramatically. She affirmed their concerns. She agreed with their belief that there would be losses. She asked the group to delve into their worries, explore them, question what responsibilities and freedoms they hoped to maintain, and then strategize how to protect those boundaries. The method was successful: After a year, a network map revealed a greater level of communication and coordination among regions, and a retro-spective showed the organization had responded more quickly and with more coherence to several important global challenges.

When leaders take actions like these, they create change by inviting people to think for themselves and to find their own answers to tough questions. These leaders are willing to be influenced and acknowledge that there are elements of the change that still need to be figured out. This strategy, rather than requiring the leader to balance and address everyone’s concerns, allows people to share the

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responsibility for change by publicly wrestling with the trade-offs, collectively coming to a resolution, and then committing to the plan’s execution.

Engage both peers and top leaders

In our experience in working with organizational change leaders, it is often executives at the next level up or peers in other functions who undo promising new initiatives. The idea may sound good at first, and, amid the flurry of com-peting priorities, these people may not examine the new idea too closely. Then, as the organization begins to experience the costs and hard work of change, support wanes.

Peers in other functions may be most concerned about trade-offs that affect them. Will marketing bear the cost of new purchasing guidelines? Will cus-tomer service suffer from reduced product functionality? Eventually, these other functional leaders may decide that the costs outweigh the benefits and will roll back the work that has been done. Or they may unwittingly dismantle a larg-er effort by overriding key components of it — sometimes because they lack a shared understanding of the context.

For example, amid rising demand, one factory was tasked with drastically improving output and reducing defects. The team of frontline employees and supervisors assigned to develop a solution found that performing more frequent machine maintenance and building new jigs to speed up changeovers between production runs were the keys to achieving higher productivity and quality while lowering overall costs.

Unfortunately, shortly after the new system was up and running, the team’s peers in accounting approached the division leader with concerns that main-tenance costs were above historical levels. Those added costs were more than covered by the benefits to output and quality, but because the factory team had not engaged the senior executive to explain their plan and prepare him for the increased cost, the leader responded to it as an isolated issue and ordered the

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team to bring their maintenance costs back in line. They complied, but forfeited the gains they had made.

To prevent a positive change from being overridden in this way, it is wise to connect with a wide range of people when discussing the potential costs and trade-offs in a project. Change almost always occurs in a complex ecosystem with many cause-and-effect relationships; no one has the full picture, and in-vestments made in one area may pay off in another. Senior leaders generally have a more global view of the situation and the factors driving change. Frontline folks tend to have a richer sense of the particulars. When leaders engage with hard questions and listen to different perspectives, they enable everyone to see more of the ecosystem they are trying to influence.

To help with this approach, leaders can run scenarios: What if X happens? How will we handle Y? Is it worth giving up A to get B? Through those con-versations, executives and peers have space to express their concerns and hesita-tions, assess whether the effort is truly worth its costs, and prepare for strategic investments that might otherwise have raised red flags. This shared understand-ing helps them avoid unintended consequences, generates greater alignment and commitment, and provides the context needed for individuals to make effective judgment calls as conditions evolve.

The trade-offs of engaging trade-offs

Even as the world continues to grapple with the coronavirus pandemic, it is clear that other critical issues — climate change, racial injustice, political in-stability, income inequality — will challenge organizations in the future, forc-ing them to continuously adapt. In this context, the change management tools designed for more stable, predictable environments will not work. When it’s unclear what will happen next month, leaders cannot “manage by objectives” or create three-year plans.

Despite this fast pace of change, leaders should not default to an aggressive

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timeline and succumb to short-term pressure to roll out change initiatives and push them through to the finish. Instead, the approach we propose will force people to go slower than they are accustomed to at the start. It requires the in-volvement of people who have been labeled as troublemakers, resisters, or annoy-ances. It challenges leaders’ ideas about the need for change being self-evident and indisputable. And it invites leaders to be vulnerable — something many executives shy away from in favor of being perceived as powerful.

When they take this approach, leaders are able to identify and invest in the highest-value areas that are ripe for reinvention, then invite others to participate in the design. Employees in this scenario are not just implementers but rather in-novators, figuring out ways to break through historical limits and difficult reali-ties. This all may seem daunting, but it’s well worth the effort. The work of en-gaging trade-offs and hard questions creates a stronger, longer-lasting change. +

When it’s unclear what will happen next month, leaders cannot “manage by objectives” or create three-year plans.

Resources

Barry Johnson, Polarity Management: Identifying and Managing Unsolvable Problems (HRD Press, 1992): A groundbreaking book that shows how ignoring or denying trade-offs leads to resistance and poor results.

Robert Kegan and Lisa Laskow Lahey, Immunity to Change: How to Overcome It and Unlock the Potential in Yourself and Your Organization (Harvard Business Press, 2009): An investigation of organizational resistance through the lens of competing commitments.

Myrna Lewis, with Jennifer Woodhull, Inside the NO: Five Steps to Decisions That Last (Deep Democracy, 2018): A user’s guide to navigating conflict using a unique method grounded in the philosophy that every voice can hold wisdom.

Rick Maurer, Beyond the Wall of Resistance: Why 70% of All Changes Still Fail — and What You Can Do About It (Bard Press, 1995): A highly influen-tial, practical guide to why resistance occurs and how to address it.

Gillian Tett, The Silo Effect: The Peril of Expertise and the Promise of Breaking Down Barriers (Simon & Schuster, 2015): An anthropologist’s analysis of the organizational barriers that prevent companies from recognizing and addressing trade-offs as “one company.”

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The corporate office is on the brink of a major renovation. The lockdowns that began in the U.S. in mid-March in response to the novel coronavirus created an extraordinary migration as em-ployees across the country began working at home. People patched together ways to keep going when the lights went off in office build-ings, and, for the most part, it has worked: In the June 2020 PwC US Remote Work Survey, three out of four employers called work from home (WFH) a success.

It’s no surprise, then, to find widespread interest in maintaining some form of WFH once the pan-demic recedes. Everybody benefits. Employees avoid lengthy commutes and spend more time with their family. Employers have access to talent regardless of location, improve resiliency through a distributed workforce, and reduce expenses by optimizing their real estate footprint. Even the environment gets a break, thanks to fewer people com-muting, reduced business travel, and less heating and cooling of office space. The Remote Work Survey shows that 73 percent of employees would like to work remotely at least two days a week, even once COVID-19 is no longer a concern. Similarly, 55 percent of executives are prepared to expand options for employees to work outside the office.

CREATING THE OFFICE OF THE FUTUREIn a remodeled world, it is vital for companies to reinvent ways of working.

BY DENIZ CAGLAR, EDWARD FACCIO,

AND ERIKA RYBACK

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Deniz Caglar

[email protected] an advisor to executives on

strategic cost and organizational

transformation for Strategy&,

PwC’s strategy consulting busi-

ness. Based in Chicago, he is a

principal with PwC US. He is a

leader in the PwC US organization

strategy practice and coauthor,

with Vinay Couto and John Plan-

sky, of Fit for Growth: A Guide to

Strategic Cost Cutting, Restructur-

ing, and Renewal.

Edward Faccio

[email protected] organizations on cor-

porate real estate strategy and

transformation, and helps leader-

ship teams align their business

operations with new ways of

working. Based in New York, he is

a partner with PwC US.

Erika Ryback

[email protected] organizations on cor-

porate real estate strategy and

transformation. She works with

businesses to execute real estate

strategies using enabling technol-

ogy. Based in New York, she is a

director with PwC US.

This turnabout in perspectives is striking. The prevailing view just a year ago held up the office as a strategic asset to appeal to a new generation of workers located in urban areas, with open-space designs and room to play. Today, skepti-cal executives who believed employees could not be productive away from the office have come around, or at least have softened their views, and see that work-ing from home can be effective. Now many large companies from a variety of industries have announced their intent to let employees work from home at least part of the time going forward.

As a flexible WFH model appears likely to become the norm, the role of the corporate office and its physical footprint are coming under scrutiny. For much of 2020, almost all office workers have been working remotely. Will we see the same level of collaboration and productivity when some are in the office and others at home? We’re all leveraging relationships that we have built in the office through the years; how do we build new networks when veteran employees leave and new employees are hired?

The pandemic has shown that the real prize in remote work is not reduc-ing real estate costs — it’s fostering a stronger sense of resiliency. In the future, remote work will also allow greater access to a diverse pool of talent, regardless of where it is located. Our surveys show a small percentage of employees prefer to work remotely all the time, so it’s important to assess what flexibility means for them. Meanwhile, other employees will want to socialize with team members and feel that they are part of the organization. How many people will need a place to collaborate with colleagues in person, and how often?

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The answers to these questions will determine both the success of a business and the extent of the physical remodeling that companies will need to do. As leaders think about the role of their corporate offices once the pandemic recedes, they must clearly define the reasons for employees to return to the office.

Four actions that will help companies transition to the office

of the future

No solution works for every company. Executives will need to figure out their own path, given the scale of potential changes. But these four steps will help.

1. REDEFINE THE ROLE OF THE OFFICE

Start by defining the purpose of the office in your organization. Go through a careful evaluation of what happens in your spaces. Which activities are valuable enough to keep your people coming in? A significant number of companies out-side the manufacturing sector have shown they can work from home effectively, so pinpoint the reasons people need to come back to the office. Indeed, the office may be evolving from a default location where employees go to get their work done to a destination employees visit for specific purposes.

Consider the work that people do. We call this exercise the Six Cs. Each C can be mapped to give employers an idea of physical and productivity space needs.

Creating work products: analyzing data, doing research, processing orders, and writing documents. These “heads-down” tasks are often performed indi-vidually, and largely can be done independent of an office location as long as

Also contributing to this article

were Bhushan Sethi, a principal

with PwC US and joint global

leader of PwC’s people and orga-

nization practice; Vinay Couto, a

principal with PwC US and leading

practitioner in people and organi-

zation strategy; PwC US director

Sid Bhatia of the Workforce of

the Future team; Ashish Jain

and Augusto Giacoman, both

principals with PwC US; and

PwC’s US real estate practice

leader Byron Carlock.

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the employee does not require specific equipment or physical documents tied to the office.

Collaborating: brainstorming ideas, developing plans, and solving prob-lems with colleagues. Collaborating with colleagues was one of the top reasons many employees went to the office, according to PwC’s Remote Work Survey. Working from home during the pandemic has highlighted forms of collabo-ration that can still be effective when participants are not together in person. When does being “in person” make a measurable difference?

Communicating: sharing information, giving status updates, asking for or providing feedback, and answering or following up with clients. Many commu-nications can (and now do) take place over video, email, chat apps, or the phone. Again, when does communicating in person make a difference?

Coaching: developing employees and providing feedback. Prior to the pan-demic, coaching was often done face-to-face. However, because it’s largely a one-on-one exercise, most coaching could be virtual.

Committing: making decisions and committing to actions. Commitments are often determined in formal settings, such as steering committee meetings, and sometimes in discussions among peers or between a manager and an em-ployee. How and when do commitments happen in a given organization?

Community building, or corporate culture: forming relationships through daily interactions. Some of these interactions are strictly about work, but not all. Social activities help colleagues get to know one another as individuals and form relationships that benefit the work environment.

Although 2020 has shown that almost all of these activities can happen vir-tually at least some of the time, in the longer term, a portion of them will also take place in the office. So how will the split evolve? Once leaders have mapped what their workforce does, how much time they take to do it, and where being physically present adds value and boosts results, they can plan not only the size but the layout of their offices.

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The creation of work products, as defined above, can largely move away from the office — and so can communicating, via virtual conference calls or team updates. Much of coaching can be handled virtually, too. Collaborating, committing, and community building, however, are team engagements at their core. Although much of that engagement can be virtual, in-person engagement is most valuable for these activities.

2. DEFINE WORK-FROM-HOME GUIDELINES

Our Remote Work Survey anticipates a flexible WFH model in which employees work in the office a few days per week once COVID-19 is no longer a concern. This generality, however, will apply to employees differently depending on their specific roles, with tailored approaches for greater workweek flexibility. When planning, it can help to create specific employee personas and map their activities, requirements, and propensities for home or office working based on the Six Cs.

Here we’ve divided these employees into four groups: collaborators, connec-tors, residents, and rovers, and have estimated the target time they would spend in an office.

Collaborators work in teams, but not necessarily in an office space. Think of research scientists, project managers, engineers, or designers. They may need powerful computers or access to specific equipment. And there are times when being together in person is more productive, such as during a creative visioning session. Yet as routine meetings and status checkups increasingly take place vir-tually, their need for time on premises could decrease significantly.

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Connectors are typically the corporate support staff, including IT developers, marketing and public relations professionals, accountants, and human resources specialists. They have varying working patterns and can work in multiple areas within a company location. They work at their desks and in conference rooms. Target times for them to be on premises could decline by as much as two-thirds with enhanced remote working tools.

Residents are the traders, engineers, loan processors, and designers who need specific equipment, customized terminals, or powerful computers in the of-fice to do their job. They work alone frequently but may require a specific space and specific tools. Mobility for this group will be more limited.

Rovers — the client-side consultants or sales executives — also work alone frequently, but they can work anywhere. Reducing expectations for their need for office time to as little as 10 percent is not unreasonable — that would mean two days a month in the office. This is likely to have been close to normal for some rovers even before COVID-19.

3. REMODEL THE OFFICE

According to the analysis above, the office of the future is primarily a space for collaboration and community building, though some tasks do require individual work spaces. Few floor plans are ready for this new primary function now, and given the pandemic hiatus, the remodeling that is currently going on is working in the other direction: Executives at many companies are retrofitting their of-fices with a “safety first” mindset, putting up social-distancing barriers to shield

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people from one another and reducing the office capacity to half or even less of what it was before the pandemic.

For the office to serve its new and more specific future purpose of enabling collaboration and community building, a different kind of major remodeling is ahead. We anticipate that assigned offices and desks — that is, spaces reserved for individual work — will shrink significantly and be converted into unassigned seating arrangements for short-term, temporary use (known as “hoteling”) with less square footage per seat than is the case today. In return, space for socializing and collaborating will increase. Huddle rooms will prompt ad hoc collaboration of two to four people; larger conference rooms will host decision-making meet-ings; hubs will enable project teams to work together. These collaboration spaces will be equipped with tools and technology to enhance the experience. For ex-ample, team hub rooms will be configured with “white walls” for brainstorming and powerful videoconferencing technology for seamlessly patching in remote team members.

Once a business maps its groups, it will have a better sense of what is needed in a physical office. Suppose your rovers need to be in the office 10 percent of their time or one day every two weeks: If you have 1,000 rovers, that translates into 100 seats. Now factor in density, or the total space needed for a group. Different groups will use the office space differently and thus will need different types of spaces. Many companies will need significant renovation and an investment in hoteling and basic space reservation systems, as well as phone routing systems.

One final consideration: As a result of the pandemic, some companies are

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questioning whether to diversify from a single, large office in a major urban cen-ter to a hub-and-spoke model, with one or two offices in urban locations and a handful of outposts in the suburbs. The outposts may shorten commutes for suburban workers while still enabling collaboration and enhancing business con-tinuity. In addition to owning or leasing dedicated offices, companies may con-sider coworking spaces in order to increase flexibility and access for their much more mobile workers.

4. UPDATE YOUR WAYS OF WORKING

Companies that want to make an office-wide shift to flexible remote work will fail if they do not define how ways of working will change in this new model. Before the pandemic, policies, processes, and the implicit and routine ways of working were defined with an assumption that most of the workers were in the office most of the time. Now that a large number of corporate employees are working from home, those assumptions have already gone out the window, and legacy ways of working have become insufficient or even obsolete.

Office-centric ways of working institutionalized how employees engaged with one another, and collaboration and innovation would often occur organi-cally in hallways or over coffee. (Bell Labs figured that out in the 1950s and de-signed corridors that were long, to force people bump into one another, and wide so they had room to stop and talk.) Only a third of U.S. workers in PwC’s June 2020 Workforce Pulse Survey rated the tools and resources for collaboration and communication in their organization as “very effective.”

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Yet the flexible work arrangements everyone has been using to cope with the pandemic are redefining these norms. As a result, you will need to deliberately es-tablish ways of working that allow for serendipity but don’t risk teams settling into recently improvised ways of working that can create confusion and frustration. These new ways of working benefit the employees not only in the short term but also in the longer term as they develop new skills and enhance their own employ-ability. To define these new ways of working, the following elements are needed.

Standards and guidelines. Establish the parameters of work for regular ac-tivities. Set standards for when people are available and how key performance indicators are reported and measured. Outline what a successful meeting looks like and how action points are allocated and reported.

How much time will these employees spend in the office?

Source: PwC

StaticRequires equipment or technology in the office;

critical in-office customer interaction; much

more productive in the office

MobileFrequently on the go;

does not require fixed space

Connectors(e.g., HR generalists, marketers)

Target time spent in office: 30–60%

Rovers(e.g., relationship managers, credit

analysts, general accountants)


Collaborators(e.g., product managers, strategy

developers, special projects managers)


Residents(e.g., traders, loan processors,

payment processors)

Target time spent in office: 90–100%Individual

worker

Team worker

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Routines. Remote working requires specific routines, depending on what people do. Some teams need daily huddles, others weekly catch-ups. Social events can also be programmed.

Tools and technology. The infrastructure of remote collaboration was cob-bled together for the pandemic. Some companies had protocols in place and ro-bust file-sharing capabilities. Others did not. These technologies will now have to be standard, secure, and straightforward to use.

Risk and controls. Data protection is always top of mind, but in a remote working environment, the cracks are all too evident. If the company email sys-tem fails or a file transfer system crashes, work-arounds using personal email accounts can severely compromise corporate data. And considering how many people are accessing systems and trying hard to do their jobs, keeping tabs on these activities is not easy. Companies are scrambling to keep up. Given that cybersecurity and data protection will remain a top priority, getting this right should be an urgent concern.

For example, consider how a manager coaches an employee in a mobile world. The manager will need new standards and guidelines that outline what good coaching and feedback look like. He or she may define new routines that call for daily check-ins and feedback on the quality of the work product; month-ly 30-minute one-on-ones to focus on the employee’s performance and career development; and a midyear check-in for a more comprehensive progress review.

The office and ways of working as we have known them are gone. In their place, we have a rare opportunity to redesign where and how we will work. The

The office and ways of working as we have known them are gone. In their place, we have a rare opportunity to redesign where and how we will work.

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Resources

Deniz Caglar and Carrie Duarte, “10 principles of workforce transformation,” s+b, Sept. 25, 2019: How to raise the skills of your employees to meet your digital challenges.

Justin Harper, “Coronavirus: Flexible working will be a new normal after virus,” BBC News, May 22, 2020: Companies large and small are consider-ing big changes to work arrangements.

Bhushan Sethi and Jean-François Marti, “Redefining employee experience: How to create a ‘new normal,’” s+b, July 10, 2020: Key actions for company leaders to consider.

PwC, Workforce of the future: The competing forces shaping 2030, 2018: A close look at the transformation in the way we work, already in motion before the pandemic hit.

view will be worth the climb: On the other side, we can provide employees with better experiences and help them acquire skills they can take with them through their career. We can reconfigure our spaces to ensure collaboration, innovation, and productivity, and reduce operating expenses. We can build in more diversity and inclusion and increase environmental sustainability. The lead time is long — it could take two to three years to plan for the new footprint, find new sites, remodel the offices for the company’s needs, and transition. So the time to start planning is now. Let the remodeling begin. +

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THEBEST BUSINESSS

BOOKS2020

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CERTAINLY BEEN A YEAR. In 2020, many people reported losing a sense of the passage of time, as so many of the usual markers and milestones (vacations, graduations, sporting events) were

postponed, canceled, or driven online. At the same time, the pandemic has had the effect of accelerating existing trends and pulling tipping points that previ-ously loomed far in the future up to the present day. Keeping track of time ac-curately has been made all the more difficult because it has been so hard to con-centrate amid the miasma of uncertainty and constant barrage of news. “There

I N T R O D U C T I O N

It’s

In the 20th edition of

strategy+business’s Best Business Books section,

our writers identify the three most compelling

reads in seven genres.

B Y D A N I E L G R O S S

STORY TIME

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OUTSIDE IN

B Y S A L LY H E L G E S E N

P A G E 113

STRATEGY WITH

A PURPOSE

B Y D A V I D L A N C E F I E L D

P A G E 12 2

GUNNING

FOR HISTORY

B Y B E T H A N Y M C L E A N

P A G E 13 2

MANAGING IN

A PANDEMIC YEAR

B Y T H E O D O R E K I N N I

P A G E 141

N A R R AT I V E S M A N A G E M E N TTALENT & LE ADERSHIP S T R AT E G Y

are weeks where decades happen,” as Vladimir Ilyich Lenin, who lived through a revolution right around the time of the 1918 flu pandemic, put it.

Which highlights a strange dichotomy. As people are glued to their phones and computers, sales of books — the form of media whose consumption re-quires long-term concentration and the ability to tune out the world — have actually risen for much of 2020.

If you think it’s challenging to read a book, consider the fortitude it takes to write one in this environment. Ideas gestate for years, and manuscripts move slowly through the cogs of publishing. The long lead times mean authors can catch a wave perfectly, or miss it entirely — and the margin between those two outcomes is razor-thin. The books that stand out in this, our 20th annual Best Business Books collection, land in all types of environments. They reflect periods of calm and periods of angst, years where nothing much happens, and months in which several years seem to take place.

The best books on talent and leadership, as documented by Sally Helgesen, a longtime s+b contributing editor and coauthor of How Women Rise, are all quite timely. They include a comprehensive guide for rebuilding organizations, a research-driven volume on the well-intentioned behaviors that undermine ef-forts to build inclusive cultures, and a narrative that documents the excruciat-ing ineffectiveness of organizations’ efforts to address racial inequality. Another s+b contributing editor, David Lancefield, found that this year’s best strategy books prod readers to step back from the concerns of getting through the day and focus on the long term — by consciously acting differently tomorrow, by blowing up bureaucracy to release the power of people, and by harnessing the power of artificial intelligence. One way to make sure a book is timed to thrive

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P A G E 174A MASTER CLASS

IN CONFLICTS

B Y R Y A N A V E N T

P A G E 149

FAILURE AND THE

ROOT OF INVENTION

B Y J A M E S S U R O W I E C K I

P A G E 15 7

PAYING ATTENTION

TO HUMANS

B Y T O N Y C A S E

P A G E 16 6

T O P S H E L FE C O N O M I C S T E C H & I N N O VAT I O N M A R K E T I N G

in a range of news cycles is to focus on the past. This year, Bethany McLean, a Vanity Fair contributor and narrative nonfiction ace, chose to focus on histories of industries and companies, and the subjects of her picks include banking dy-nasties in Shanghai, the progenitor of a legendary 19th-century revolver, and a largely forgotten 1950s-era data analytics company. By contrast, s+b contribut-ing editor Theodore Kinni finds that this year’s best management volumes can help managers identify and cope with pandemic-related challenges. In a world of seismic and massive changes, Kinni concludes that a book that focuses on small changes as a way to create positive behaviors and alter negative ones of-fers the year’s most compelling practical advice. Economics is often called “the dismal science.” And perhaps appropriately for our moment, Ryan Avent, a col-umnist at the Economist, notes that this year’s best books on the subject focus on the downside of economic cycles. Those include a short take on the social origins of trade wars, a treatise on the troubling impacts of the opioid crisis on U.S. life expectancy, and a biography of the economist whose ideas gained salience in the Great Depression. Tech and innovation can usually be counted on to provide an optimistic look at the future. Even this year was no exception. James Surowiecki, author of The Wisdom of Crowds, trained his eye on the wis-dom embedded in books that celebrate the messiness and uncertainty inherent in the process of discovering breakthroughs and bringing them to market. And although data increasingly predominates in business affairs, veteran journalist Tony Case argues that this year’s best books on marketing focus on the human element of how products and services are sold. In so doing, they provide a use-ful corrective to the dominance of information technology. It turns out that the companies that build the most successful customer- and user-focused oper-ations are figuring out how to marry technology and humanity.

As we look ahead to the coming year, the notion that technology and inno-vation can be fueled by empathy and understanding should offer us some hope for a better future — next year, and in the next decade.

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I N T R O D U C T I O N

THE YEAR 2020 turned out to be a watershed in leadership, as many execu-tives were suddenly challenged to rethink their business, their future, their peo-ple, and their place in the world. The aftermath of the year’s disruptions and the lessons that have been jarringly forced upon leaders will continue to influence how organizations are led for decades to come.

One theme emerging from the crisis has been an erosion between what is public and what is private, between what is properly the concern of the social sector and what responsibility is held by business. A second and related theme is the recognition among the most perceptive leaders that injustice cannot be effec-tively addressed without their active learning and participation.

This year’s three best business books on leadership are highly relevant, even essential, for leaders who are seeking to answer the most salient question of the moment: What comes next? In the most compelling of this year’s crop, Think Outside the Building, Rosabeth Moss Kanter, professor at Harvard Busi-ness School, provides a comprehensive guide for the systemic rebuilding and

FROM THE OUTSIDE IN

B Y S A L LY H E L G E S E N

Rosabeth Moss Kanter, Think

Outside the Building: How

Advanced Leaders Can Change

the World One Smart Innovation

at a Time (Public Affairs, 2020)

A TOP SHELF PICK

Stefanie K. Johnson,

Inclusify: The Power of

Uniqueness and Belonging

to Build Innovative Teams

(HarperBusiness, 2020)

Pamela Newkirk, Diversity,

Inc.: The Failed Promise of a

Billion-Dollar Business

(Bold Type Books, 2019)

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TA L E N T & L E A D E R S H I P

reimagining that will be required as leaders attempt to negotiate a new future. In Inclusify, Stefanie K. Johnson, professor of management at the University of Colorado, Boulder, Leeds School of Business, draws on a wealth of research to explore the behaviors most likely to undermine efforts to build inclusive cul-tures. And in Diversity, Inc., Pamela Newkirk, a journalist and professor of journalism at New York University, details the excruciating ineffectiveness of organizations’ efforts to address racial inequality, while offering insights that light a path forward.

What is an advanced leader?

Rosabeth Moss Kanter defines an advanced leader (AL) as someone who has had a successful career in one sector and then commits to tackling big, intracta-ble problems in the social, environmental, or medical realm: Think Bill Gates’s global health initiatives after his retirement from Microsoft. But ALs can also start quite young. Wendy Kopp was just 22 when she founded Teach For Ameri-ca, a nonprofit that enlists college graduates to teach in public schools. Advanced leadership, in Kanter’s words, is really “less a stage of life than a mode of action,” distinguished by the breadth of its scope and a willingness to work across bound-aries and silos, outside established structures.

Kanter’s insights about what inspires such leaders, how they leverage con-nections and harness resources, how they exercise influence without formal au-thority, and how they address unforeseen and inevitable setbacks are drawn from her experience with the Harvard Advanced Leadership Initiative (ALI), a kind of

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leadership laboratory she cofounded in 2009. ALI fellows from around the world spend a year at Harvard, primarily upon retiring from high-profile leadership positions within major institutions.

While in Cambridge, they build the skills, the networks, and — perhaps most important — the capacity for deep reflection that will enable them to transmute the glimmer of an ambitious dream into something that makes a tan-gible difference in the world. Over the last decade, ALI fellows have founded more than 100 new entities, products, or services and have been instrumental in transforming existing organizations focused on social change. John Dubinsky, a bank CEO in St. Louis, founded the Contractor Loan Fund to provide capital to minority construction companies in his city. Richard Fahey, a corporate lawyer

from Columbus, Ohio, was inspired by his pre–law school work with the Peace Corps to create the Liberian Energy Network; it brings alternative energy to rural areas in that country so that children living in villages can do their home-work at night. Think Outside the Building: How Advanced Leaders Can Change the World One Smart Innovation at a Time tells the story of these and many other ventures, providing a rich and engaging account of lessons learned by those who turned inspiration into reality.

Kanter’s lessons are distinguished by their detail and specificity, which makes her insights useful as well as thought-provoking. It’s rare that a book manages to be both magisterial and accessible. Think Outside the Building offers a trove of real-life stories that illustrate each point with precision and zest. Changing high-ly resistant, complex systems is a weighty topic, but this book feels light — not in the sense of being insubstantial, but in being practical and human.

Kanter’s lessons are distinguished by their detail and specificity, which makes her insights

useful as well as thought-provoking.

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Making the transition from helming an established organization to step-ping into the moonshot world of social innovation requires that leaders rein-vent themselves. Entrepreneurial skills — rare in an institutional setting — are paramount in this undertaking, as are humility and the willingness to hustle. Leaders also need to learn how to function without the bubble pack that typi-cally keeps those at the top insulated from open disagreement and encourages even the best of them to assume certain rights and privileges as their due. And they need to shed the kind of conformity that being part of a high-status peer group typically instills.

To ease the transition, Kanter notes that leaders require scaffolding, a tem-porary superstructure of support. Drawing on her ALI experience, she identifies the key elements in the scaffolding needed to prepare former establishment play-ers to “attack the castle” — to take on institutional structures that have become ossified or entrenched in self-protection.

One of these elements is bridges, which can include volunteer efforts or ser-vice positions that challenge people’s accustomed ways of operating. Boards serve as useful sources of cross-sector connections and provide a chance to exercise new skills. Garrett Moran, former senior managing partner and chief operat-ing officer at the Blackstone Group, became active on the board of Year Up, a nonprofit that provides training and internships to inner-city youth. The board enabled Moran to move from inhabiting the rarefied precincts of high finance to engaging often-shattered communities in the painful work of renewal. Other types of scaffolding include new clubs that provide peer support, a fresh referent group, and the kind of social ties that strengthen commitment and normalize a passion for change.

Kanter’s practicality is highlighted in her chapters about building the kind of “large cross-sector multi stakeholder coalitions” required to support institu-tional change. She breaks down this effort by detailing specific techniques for engaging three essential groups: allies, opponents, and undecideds. Her stories about former Trader Joe’s president Doug Rauch, who founded Daily Table, a nonprofit community grocer in Boston that provides fresh, healthy food to un-derserved communities, vividly demonstrate the effectiveness of this approach.

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Rauch’s masterful handling of a local cop who, in defense of free food, had brandished his gun in the face of an obdurate health inspector exemplifies flex-ibility under duress.

Think Outside the Building also identifies the specific hurdles that typical-ly hinder ambitious and well-intended undertakings — at the start of the ven-ture, in the middle, and when it is poised to grow. Transformational leadership has become a buzzword. But Kanter brings extraordinary resources to breaking down what ex actly is required of individuals seeking to bring positive change to the world.

The quest for inclusion

Diversity is not a “goal,” as many organizations would have it. Rather, it is simply the nature of the global talent pool. Inclusion is the means by which this diverse pool is effectively engaged. The organizations most likely to reap benefits from their workforce are those in which inclusive practices become the norm.

In Inclusify: The Power of Uniqueness and Belonging to Build Innovative Teams, Stefanie K. Johnson takes on the tough task of identifying the chief be-havior patterns that undermine well-intentioned efforts to create inclusive cul-tures. Because her descriptions are detailed, specific, and illustrated with stories drawn from real life, the book should serve as an invaluable resource for leaders seeking to instill inclusive practices throughout their organizations by encourag-ing behavioral self-awareness.

Johnson notes that the chief challenge of inclusion lies in balancing the nat-ural tension between two deeply felt human needs: the need to feel authentic and the need to belong. Inclusion efforts fail when they do not reconcile this tension, either by sending the message that people need to conform in order to be recog-nized as part of the team, or by failing to make people with outside-the-main-stream biographies or unorthodox qualifications feel as if they belong.

Johnson wisely observes that most people in most organizations do not experience inclusion as a result of a stated commitment from senior leadership. They experience it — or don’t — in the actions of their supervisor, their im-mediate manager, or their team leader. This point is vital and often missed.

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Perhaps the most common reason inclusion efforts fail is that they put insuf-ficient focus on engaging midlevel managers, who may mouth CEO commit-ment statements but then frustrate them with behaviors that contradict the of-ficial message. As Johnson points out, even in organizations in which the CEO has made inclusion a benchmark of success, fewer than 40 percent of employ-ees believe their direct managers share this value. “Inclusifyers,” in Johnson’s description, are people at every level who are skilled at productively engaging diverse teams.

The heart of her book is devoted to examining the myths and mistakes that derail leaders’ efforts to create inclusive cultures. Johnson’s analysis iden-tifies archetypes and then draws on real-life stories to illustrate the pitfalls of each. Archetypes include the Meritocracy Manager, who assumes that the best

credentials always predict the highest performance; the Culture Crusader, who overvalues team homogeneity; the Team Player, usually a woman or person of color who has worked hard to assimilate and is reluctant to identify with others in his or her group; the White Knight, who holds women or people of color to a different standard in the belief that doing so will help them; the Shepherd, usually a woman or person of color who offers only in-group support and stereo-types those assumed to be more privileged; and the Optimist, who believes that gender or racial divisions tend to get better over time and so supports the status quo through inertia.

As this brief listing makes clear, non-inclusive behaviors and attitudes ap-pear in groups beyond white males. Anyone can make assumptions that under-mine their ability to demonstrate inclusion. I would bet that virtually all readers

Inclusion efforts fail when they do not reconcile the tension between the need to

feel authentic and the need to belong.

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will see some aspect of themselves reflected in the detailed descriptions Johnson provides. But Inclusify does not simply chronicle the kinds of behavior that derail inclusion efforts. It also examines and recommends specific inclusifying actions that individuals and organizations can undertake to rectify damage that may al-ready have been done. Meritocracy Managers can be more specific in describing what they hire for (international experience rather than “the best person”); Cul-ture Crusaders can expand the range of bonding activities instead of remaining wedded to those that send an exclusively in-group message; White Knights can seek out reciprocal mentoring.

Though the categorizations set forth in this book can at times feel like un-necessary typology, Johnson’s work offers an unprecedented range of tools for leaders intent on building inclusive cultures. Inclusify is also enriched by reve-lations and observations drawn from Johnson’s own journey from humble be-ginnings as a self-described “poor Mexican-American child” to the heights of academic achievement. She is particularly good at describing how her own as-sumptions about the objective nature of meritocracy have been challenged by both her research and her experiences.

Why diversity initiatives fail

Simple demographics, along with several decades’ worth of hefty discrimination settlements, have created a sense of urgency about addressing unequal outcomes in workplaces large and small. The result has been an upsurge in diversity initia-tives, training programs, and various kinds of awareness workshops, leading to what Pamela Newkirk calls Diversity, Inc.: The Failed Promise of a Billion-Dollar Business. The author, a Black journalist, demonstrates courage, lucidity, and in-sight in examining what this investment has mostly wrought. As she recounts the comprehensive and influential efforts to address diversity undertaken by gi-ants like Coca-Cola (in the wake of a historic lawsuit), Xerox, and IBM, she also surveys the broader landscape and finds even those programs designed with the best intentions are troubled, inadequate, and in some cases harmful.

Newkirk notes three potential outcomes that research suggests are not un-common. First, the “D&I” (diversity and inclusion) investment may simply

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fail to pay off, making no discernible difference in the culture or the numbers. This can stir cynicism and damage the commitment to addressing inequality. Second, and more troubling, the efforts can have an adverse impact, with the proportion of women and minorities on staff actually declining in their wake. Newkirk notes that this kind of decline usually occurs when training is man-dated or focused on sharing academic models and constructs. Third, these ef-forts, especially when focused on surfacing bias, can create backlash and deep-en divisions by alienating and even shaming those assumed to be privileged. One study she cites concluded, “many [of the participants] interpreted the key learning as having to walk on eggshells around women and minorities.” In ad-dition, asking people to focus on differences can lead inevitably to questions such as “but aren’t we all different?” Such discussions quickly become theoreti-cal and divorced from real life.

The book isn’t simply a critique. Newkirk also examines what successful initiatives, especially those intended to increase representation of minorities at senior levels, have in common. The answer lies not in training or prejudice-re-duction programs, but in robust efforts to hire and recruit accompanied by the creation of long-running task forces with the power to hold institutions account-able for quantifiable progress. These approaches, deployed in combination, can yield 30 percent increases in the representation of women and minorities in se-nior roles over the course of five years.

Newkirk examines how open various sectors have been to seeing the poten-tial of a diverse talent pool and how effective their efforts to engage its challenges have been. The corporate sector comes off best, academia and entertainment are well behind, and the sports sector is wildly uneven. In entertainment, nepotism, elitism, and amateurish practices help shape the culture, whereas in higher ed, the divide between faculty and administration, along with the fear of alienating prosperous parents, makes comprehensive strategies a challenge.

When it comes to the corporate sector, Newkirk echoes Johnson in citing how the blunt belief in the existence of a meritocracy can undermine an organi-zation’s ability to imagine the benefits of skills that don’t show up on test scores — such as resilience and commitment. A more subtle approach to assessing who

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Sally Helgesen

[email protected] the author of seven books on

leadership, most recently How

Women Rise: Break the 12 Habits

Holding You Back from Your Next

Raise, Promotion, or Job, coau-

thored with Marshall Goldsmith.

She delivers workshops and key-

note addresses around the world

and has been a contributor to s+b

since 2005.

benefits from a range of advantages is therefore in order. Here Newkirk is highly pragmatic, noting that interest in and commitment to racial justice in particular has always been prompted by crisis, which creates a fertile climate for addressing change. Yet every step toward progress has historically been met by resistance, fueling “an ongoing dance of advance and retreat.” Progress, she therefore notes, is usually ephemeral, requiring continual monitoring, constant vigilance, and ongoing assessment of what works and what does not. +

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IF THERE WAS ever a year for strategy to do its job well, it’s 2020. The COVID-19 pandemic has forced many leaders to reconsider their strategies. They are refreshing or reimagining what they are there to do, for whom, how to best do it — and, in a world of great uncertainty, volatility, and fragility, they are asking themselves to what end. Many, during the crisis, will look on in awe at the success of platform companies that are powered by artificial intelligence (AI) — Amazon, Google, and Alibaba — and wonder how they can break through their own inertia.

Each of this year’s best business books on strategy offers a passionate and persuasive articulation of how strategy should be developed and executed in this context. These demanding reads dig deep into the intricacies of the issues and challenge the reader to act differently. In Uncharted, entrepreneur and au-thor Margaret Heffernan sets out a compelling case for why and how we should think differently about the future. In the best among the books, Humanocracy, management thinkers Gary Hamel and Michele Zanini articulate a vivid man-

STRATEGY WITH

A PURPOSEB Y D AV I D L A N C E F I E L D

Margaret Heffernan, Uncharted:

How to Navigate the Future

(Simon & Schuster, 2020)

Gary Hamel and Michele

Zanini, Humanocracy: Creating

Organizations as Amazing as the

People Inside Them (Harvard

Business Review Press, 2020)

A TOP SHELF PICK

Marco Iansiti and Karim R.

Lakhani, Competing in the Age

of AI: Strategy and Leadership

When Algorithms and Networks

Run the World (Harvard


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S T R AT E G Y

ifesto and provide a prescriptive manual to bust bureaucracy in order to release the power of people in organizations. And in Competing in the Age of AI, Har-vard professors Marco Iansiti and Karim R. Lakhani argue persuasively why, and how, companies should put AI at the center of what they do.

Rethinking our future

The timing of Uncharted: How to Navigate the Future could not have been any better. Heffernan argues that we have “come to expect the future to be minute-ly and perfectly predictable.” We are seduced by the outcome of an algorithm or the prediction of a confident economist, work that is often “ideological and self-interested.” However, we then think less, become more anxious, and lose some of our creativity and imagination. We become passive and gullible, relying on simplifications or false determinism. And we face some tough ethical ques-tions — especially when technology promises to help us maximize the lifelong potential of our children, change our genes, or extend our life span.

The central premise of the book is that we must get comfortable with un-certainty and ambiguity about the future, especially when facing complexity. And we need to be prepared to experiment, explore, and question; we should resist the temptation to use the typical “forecast, plan, execute” approach devel-oped by efficiency aficionados looking to eliminate uncertainty.

Encouraging participation in the process is critical, and it should be an-chored by a clear recognition that the status quo doesn’t work. At the Dell Medi-cal School at the University of Texas, patients were put in charge of their destiny,

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with doctors acting as guides, which resulted in a 19 percent increase in patient adherence to therapies and improved outcomes. In Northern Ireland, citizen as-semblies were structured to debate the sensitive topic of abortion, which ulti-mately led to an outcome that mirrored the vote of the assembly. In Mexico, criminals, religious figures, and indigenous farmers, among others, came togeth-er to develop scenarios for their country in 2030.

Elsewhere, the quest for a drug to allow AIDS sufferers to lead a normal life brought together activists, scientists, bureaucrats, radicals, the healthy, and the sick, bound by a passionate faith in a better future. Contrary to what some text-books might tell you, success didn’t come down to “one thing. No one action. No one plan. No one organization. No one leader. Not even one drug. It had taken everything and everyone.” Two aspects were critical: shaming (to get the atten-tion of the medical establishment), and expertise (to maintain their attention).

When it comes to strategy, Heffernan asks: “Have decades of strategic plan-ning left companies paralyzed, unable to explore without a map, incontrovertible data, rock-solid guarantees?” Maybe. But the book outlines a clear set of actions leaders can take to overcome this challenge. Avoid relying too heavily on analo-gies or historical precedents without careful interrogation and translation. Ques-tion the assumptions and limitations of models, and debate the implications. Become more curious about what’s happening — look for gaps, anomalies, and paradoxes through careful scanning and collecting of information. Avoid latch-ing on to predetermined views of the future. Use scenarios to “capture ways of seeing the future that are recognizable to everyone.”

When leaders are coalescing groups of people who are diverse in their ex-pertise and backgrounds to explore new solutions, they should play the role of diplomats and translators. And they must get more comfortable with a messy process; after all, some of the finest discoveries in arts, counterintelligence, and science came from people “wandering,” keeping an open mind for new ideas and insights. Even if the process comes across as a little wasteful, clarity will emerge at some point.

Heffernan’s is a very thoughtful, well-researched, encyclopedic management book, written at times in the style of a novel. The breadth and depth of its stories

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is remarkable, covering the arts, science, the environment, epidemics, healthcare, relationships, counterterrorism, military conflict, and business.

Ultimately, Heffernan is optimistic about the power of our minds and spirits to shape better futures for ourselves and the coming generations. But to do so will require leaders to have a backbone — to care — and to have the courage to experiment, not rely slavishly on lessons from the past or promises for the future.

Busting bureaucracy

In complex environments, Heffernan argues that a focus on efficiency is a haz-ard, not a help. Gary Hamel and Michele Zanini pick up on this theme in Hu-manocracy: Creating Organizations as Amazing as the People Inside Them. Bu-reaucracy, characterized by “authoritarian power structures, suffocating rules, and toxic politicking,” is in rude health, especially in large organizations. Alas, the attributes that define bureaucracy — discipline, reliability, conformity, and efficiency — are hardly what is required to create more purpose-driven organiza-tions. Bureaucracies are better for “exploiting” than “exploring” activities. After all, the authors write, “deep change in a bureaucracy is usually belated and con-vulsive. Bureaucracies are also innovation-phobic…congenitally risk averse, and offer few incentives to those inclined to challenge the status quo.”

Hamel and Zanini want to replace bureaucracy with something far better: humanocracy, a concept based on maximizing the contribution, rather than the compliance, of humans. The economic spoils are significant — the au-thors estimate a US$10 trillion productivity dividend across the Organisation for Economic Co-operation and Development countries over 10 years. Also significant is the moral imperative: There are substantial benefits to employees, many of whom leave their true selves at home given how disengaged and dulled they are at work.

How can leaders give humans primacy over structures? After undergoing a bureaucracy “detox,” the authors say, leaders need to give power away, slim down management layers, introduce market-based mechanisms to allocate resources, give their people more information, set up lots of experiments to test new ideas,

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S T R AT E G Y

and then find and nurture the “hacktivists” in their organizations — those who can inspire and deliver change. The agenda Hamel and Zanini lay out is certain-ly demanding. Leaders have to be radical in their ambition, and pragmatic in the transition, given how entrenched bureaucracy is. Strategy has to take on a differ-ent role, too. The authors advocate a strategy process that is open to customers, employees, and external partners so it can generate more radical and ambitious ideas, and encourage more commitment to delivering it.

Hamel and Zanini argue convincingly that bureaucracy doesn’t have to go hand in hand with growth: “You can build organizations that are big and fast, disciplined and empowering, efficient and entrepreneurial, and bold and pru-

dent.” Indeed, large companies are well equipped to encourage entrepreneurship if they tap into their comparative advantages: capital, employee base, customer data, and powerful brands.

The new pioneers are doing just this, and delivering strong performances. Even undertakings as complex as CERN’s ATLAS Project (a giant particle de-tector) can deliver on time and on budget without bureaucracy. Its systems are not free-for-alls; they’re anchored in transparency and accountability. In the case of global appliance maker Haier, a leadership election is called if a microenter-prise misses its targets for three months.

Training also plays a crucial role in building new capabilities and devel-oping new mindsets. Buurtzorg, a Dutch healthcare organization, trains every employee in group decision-making, active listening, and conflict resolution, all with the aim of greater empowerment; this organization of 15,000 people is led by two directors and 100 administrative personnel.

To replace bureaucracy, leaders have to be radical in their ambition,

and pragmatic in the transition.

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The case study of an innovative steelmaking company is particularly com-pelling in showing how humanocracy can work. The corporate center is minus-cule, setting strategy, reviewing major capital requests, and establishing a few basic rules and minimum performance standards. The leadership encourages re-verse accountability (i.e., team members are directly involved in the selection of supervisors and managers), “ridiculous” amounts of empowerment among front-line employees, strong learning networks, regular customer interaction, and bet-ter interviewing of new hires (focusing on testing the candidates’ resourcefulness and self-management).

Humanocracy is an extensively researched, compellingly argued, and beau-tifully written book. It’s hard to put down. The case studies are detailed, draw-ing out the most relevant aspects of the system for readers to learn from and act upon. And the authors emphasize that the learning comes from the belief sys-tems rather than the practices, which will always be unique to the organization. This is the rare strategy book with a moral, spiritual, and philosophical compass. The authors believe in people’s ability to do better: “When ‘ordinary’ employees are given the chance to learn, grow, and contribute, they’ll achieve extraordinary results,” they write. And yet they don’t have their heads in the clouds. Humano-cracy is refreshingly prescriptive in where to start. The book asks leaders at the outset to score their organizations in seven dimensions: goals, risk-taking, speed, creativity, autonomy, commitment, and nonconformity. It is relentless in posing challenging questions, and includes a bureaucratic mass index (BMI) to help measure the extent of an organization’s bureaucracy. The case for change is the most compelling I’ve read in a field that has been well covered in recent years. It also works as literature. The authors have a gift for memorable phrases (“our or-ganizations are incapacitated by their inhumanity”), threading alliteration, met-aphors, and analogies throughout the work. It leaves the reader with as much emotional resonance as analytical firepower.

Putting AI first

Bureaucracy needs to step aside not just for humans to flourish but for arti-ficial intelligence to live up to its potential. In the eyes of Marco Iansiti and

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Karim R. Lakhani in Competing in the Age of AI: Strategy and Leadership When Algorithms and Networks Run the World, “the emergence of the age of AI has possibly created the greatest entrepreneurial opportunity in the history of civi-lization.” That’s a bold statement. But most of the world’s most valuable com-panies — Amazon, Google, and Microsoft among them — have put AI, along

with software and analytics, at the center of their operating model. This, the authors argue, gives them three distinct advantages over their traditional coun-terparts: (1) scalability — the ability to deliver value to as many customers as possible at the lowest cost; (2) an increase in scope of service — it becomes easier to add on services, as Amazon has done as it has expanded across indus-try boundaries; and (3) dynamic learning — data fine-tunes algorithms for suggestions and pricing.

Most traditional organizations are still at the stage of early experimentation, setting up AI initiatives or specialist digital units. Transforming (or more accu-rately, modernizing) to take full advantage of AI is a tall order. It requires a single strategy; architectural clarity; an agile, product-focused operating model; capabil-ity-building in analytics, software, and decision science; and strong, multidisci-plinary governance.

At the heart of this organization is an “AI factory” — a scalable decision engine that powers the digital operating model. It is based on four components: (1) the AI algorithms that make predictions and influence decisions; (2) the data pipeline that feeds them; (3) the software, connectivity, and infrastructure that powers them; and (4) experimentation platforms that test the features of new products and services. Google runs more than 100,000 experiments each year, LinkedIn about 40,000.

Transforming to take full advantage of AI is a tall order. It requires a single strategy.

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In an AI-first organization, strategy is focused on creating shared value in ecosystems and networks, leveraging data where possible. Competitive advan-tage is based on the application of capabilities in data sourcing, processing, ana-lytics, and algorithm development: “Gone are the days when competitive advan-tage could be based on unique, static assets and capabilities, often going decades without disruption,” the authors write.

Fundamental changes in the management system are also required, espe-cially in the roles employees perform: “Management as supervision, especially of employees performing routine tasks, is finally over. In an AI-powered operating model, managers are designers, shaping, improving and (hopefully) controlling the digital systems that sense customer needs and respond by delivering value,” write the authors. So, the algorithms are powerful, but they don’t quite run the world — yet.

These organizations believe in continual reinvention. Microsoft, Amazon, Google, and Netflix have all undergone multiple transformation efforts. Their leaders understand the algorithms, platforms, and ecosystems they are creating, and appreciate their limitations (whether in ethics or market concentration). They cast a wide net for talent. And yet, the authors argue, these powerful com-panies are not cooperating sufficiently on matters of mutual interest. The au-thors believe the big social media platforms would be better off (as would the rest of us) if their leaders worked together to tackle issues of untruth and bias.

AI is one of the most misunderstood areas of business. This book should serve as the go-to resource for upskilling leaders in understanding how to com-pete, manage, and operate in the age of AI. It delves deep into how familiar companies have created great value from AI. The diagrams capture the systems, processes, and frameworks in an accessible, visually appealing way. Case studies of digital unicorns such as Peloton and the online supermarket Ocado illuminate the full power of business models and operating models powered by AI. The description of Netflix goes far beyond many others by describing its AI factory in granular detail. And particularly distinctive is the section on strategy, which outlines concepts, frameworks (e.g., strategic network analysis), and questions that will be new to many executives.

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David Lancefield

[email protected] a strategist and coach who has

advised more than 35 CEOs, has

led 15 digital transformations,

and was a partner with PwC UK,

working with Strategy&, PwC’s

strategy consulting business.

He is a contributing editor of

strategy+business.

If the shock of the coronavirus hasn’t been enough, these books should serve as another wake-up call to leaders, especially those in traditional organizations. They have a critical responsibility and opportunity to make the right strategic choices to best prepare for a number of possible futures, and to dismantle bu-reaucracy in order to tap into the full potential of both people and AI. Together, these books give leaders the stimulus, encouragement, and practical steps to do so with confidence and clarity. +

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GUNNING FOR HISTORY

B Y B E T H A N Y M C L E A N

“THE ONLY THING that matters is the future. I don’t even know why we study history…what already happened doesn’t really matter.” So said Antho-ny Levandowski, an engineer designing self-driving cars who’d played key roles at Google and Uber, back when Silicon Valley was taking over the world. In her new book, If Then: How the Simulmatics Corporation Invented the Future, Harvard historian and New Yorker writer Jill Lepore quotes Levandowski, not because she agrees with him, but because she doesn’t. Lepore knows that the past is always present, which is something she shares with Jonathan Kaufman and Jim Rasenberger, the authors, respectively, of this year’s other best business books in the form of historical narratives, The Last Kings of Shanghai: The Rival Jewish Dynasties That Helped Create Modern China and Revolver: Sam Colt and the Six-Shooter That Changed America.

The revelatory The Last Kings tells the story of two Jewish dynasties that were rooted in Baghdad, the Kadoories and the Sassoons, and the role they played in building Shanghai. The issues they faced still resonate today. “Long before Mark Zuckerberg, Steve Jobs, Microsoft, and Google grappled with how

Jonathan Kaufman,

The Last Kings of Shanghai:

The Rival Jewish Dynasties That

Helped Create Modern China

(Viking, 2020)

Jill Lepore, If Then: How

the Simulmatics Corporation

Invented the Future

(Liveright, 2020)

Jim Rasenberger, Revolver:

Sam Colt and the Six-Shooter

That Changed America

(Scribner, 2020)

A TOP SHELF PICK

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N A R R AT I V E S

to deal with China and political pressures in the United States, the Sassoons and the Kadoories, with their offices in Shanghai, Hong Kong, Bombay, and Lon-don, mastered the global economy and struggled with the moral and political dilemmas of working with China,” Kaufman writes.

The fascinating narrative laid out by Kaufman, who reported from China for the Boston Globe and the Wall Street Journal and now directs Northeastern University’s journalism program, is one of imperialism. After their victory in the first Opium War, in 1842, the British (who were complicit in the addiction of millions of Chinese to opium) effectively annexed Shanghai by using the as-tounding doctrine of extraterritoriality, which meant that non-Chinese citizens and businesses weren’t subject to Chinese law. No wonder that, Kaufman notes, “In elementary school classrooms across China there is a poster that declares WU WANG GUO CHI — NEVER FORGET NATIONAL HUMILIATION.”

In time, the immense anger stirred up by foreign interference and dramatic inequality unseated the Qing dynasty and eventually led to communism. But for a long time, even as China convulsed, Shanghai rose. Between the World Wars, it was the most cosmopolitan city in the world: glamorous, alive with economic opportunity, and richly multicultural. “There never was and never will be another city like Shanghai between the two wars,” Lawrence Kadoorie would recall years later.

The Kadoories and the Sassoons were at the center of it all. The Kadoories built the lavish Marble Hall. Modeled on Versailles, it was the city’s largest man sion, with a dining room that could seat 50 and a garage that held several

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Rolls-Royces. They also built a hotel on the famous Bund waterfront along the Huangpu River called the Majestic, which became a destination for celebrities the world over. The Sassoons countered with their own splashy hotel, the Ca-thay, which had the very latest in the prosaic (indoor plumbing) and the glam-orous (an arcade with shops selling au courant luxury items from Paris). Noel Coward wrote a draft of Private Lives in a suite at the Cathay.

The Sassoons arrived in China first. The family, often referred to as “the Rothschilds of the East,” rose to prominence and wealth in Baghdad in the 1800s as traders and financiers, so much so that patriarch David Sassoon start-ed a system under which Sassoon schools trained young Jews to become em-ployees in the family firm. When Baghdad became inhospitable to Jews, the Sassoons followed the British Empire east — reestablishing themselves first in Bombay, in the 1830s, and then in Shanghai, in the 1840s. They prospered by trading in opium, and then cotton and textiles. Of course, there was family chaos, but out of it came Victor Sassoon (1881–1961) — a bon vivant who was considered by even his own employees to be a “dilettante figurehead.” When Fortune, in 1935, published a lavish feature on the Shanghai boom, the maga-zine gave all the credit to Victor Sassoon: “Victor gave Shanghai its glamour, its frisson, its mystery.”

The founder of the Kadoorie dynasty, Elly Kadoorie, actually got his start at the Sassoon schools in Bombay, and first arrived in Shanghai as a Sassoon employee. Family legend has it that he quit amid much furor after using a disin-fectant without the permission of his superiors to rid a building of the fleas and rats that were spreading bubonic plague.

Whatever their sins in furthering imperialism, both families were rehabil-itated into saviors in the 20th century. By the late 1930s, Jewish refugees were pouring out of Nazi-controlled Europe. Country after country refused to take them in, but Shanghai welcomed them. With substantial money and support from the Kadoories and Sassoons, thousands of Jews rode out the war in a Shanghai ghetto — among them artist Peter Max and Harvard Law professor Laurence Tribe, who was born in the city. Thanks in part to the influence of the families, the Jewish community was protected even after Japan joined the

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Axis and took over Shanghai. (His mansion confiscated, Elly Kadoorie ultimate-ly died in the Shanghai ghetto in 1944.)

Victor Sassoon “saw himself as the consummate political insider” and cer-tainly had moments of astounding prescience. “The West will never be able to keep furnishing the Orient with industrial manufactures if it does not also pro-vide some means to increase the buying power of the people the machine-made goods are intended for,” he wrote in 1932. But in the 1940s, he allied himself with China’s Nationalists, failing to see that the forces remaking the country would ultimately affect his fortune, and not comprehending the role his family played in stoking the mounting fervor. When the Communists triumphed in 1949, the Sassoons lost almost everything.

An embittered Sassoon decamped to the Bahamas and never rebuilt. The Sassoon money quickly dissipated. The Kadoories, on the other hand, who owned a controlling stake in China Light and Power, became Hong Kong’s first billionaire family. Operating in what remained a fragile British colony, Elly’s sons Lawrence and Horace understood that they needed the support of the res-idents, and so they advocated for policies that more closely resembled the New Deal than the free-for-all imperialism of the past. “Horace and Lawrence Ka-doorie, declared an Australian publisher after meeting them, were the two most effective anti-Communists Asia had produced,” Kaufman writes.

They seem to have gleaned some wisdom from their family’s remarkable history. Lawrence Kadoorie, who died in 1993, always kept a tattered brown-and-white Humpty Dumpty doll on the leather chair behind his vast oval desk. He did so, he said, “to remind me that Humpty Dumpty took a great fall.” In 1970, a journalist asked Lawrence if it was true that he owned a giant computer that could forecast when China would take back Hong Kong. “I fear you have been misinformed about my powers and those of a computer,” he replied. “Nei-ther of us tell fortunes.”

Artificial intelligence?

By the time Lawrence Kadoorie uttered those words, Simulmatics, which was founded in 1959 on the premise that a computer could not only tell but also in-

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fluence the future, had already gone bankrupt. The name of the company was a contraction of the words simulation and automatic, and its founders, who were trying to build something they called the “people machine,” believed that, as Jill Lepore writes in If Then, “if they could collect enough data about enough people and feed it into a machine, everything, one day, might be predictable, and every-one, every human mind, simulated, each act anticipated, automatically, and even driven and directed, by targeted messages as unerring as missiles.”

In this way, Simulmatics was the forgotten precursor to Amazon, Facebook, and Google. (A 1964 novel called Simulacron-3, which was based on Simulmat-ics, was a forerunner to The Matrix.) And Lepore, whose most recent books were

the sweeping narrative history These Truths: A History of the United States, and This America: The Case for the Nation, focuses her lens on this forgotten compa-ny to unearth enduring lessons. The idea that machines could master the ancient art of prophecy was in vogue in the 1950s — simultaneously popular in the business world, universities, government, and politics. (Sound familiar?) If the computer could figure out what voters wanted, then politicians who sought to be elected should take positions to address those wants, not because they were right, but because they represented the path to victory. Indeed, Simulmatics, which claimed credit for getting John F. Kennedy elected as the 35th president of the U.S., was, Lepore writes, simply a forerunner to Cambridge Analytica, which influenced the 2016 election.

Simulmatics is also woven into the sorry history of both the Vietnam War and race relations, with the key connecting idea being that a computer could

Simulmatics was the forgotten precursor to Amazon, Facebook, and Google. The idea that

machines could master the ancient art of prophecy was in vogue in the 1950s.

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figure out how to influence people and predict their responses. “The best minds of my generation are thinking about how to make people click ads,” a Facebook executive said in 2011. Lepore writes, “The best minds of another generation had tried to simulate the human mind to sell shampoo and dog food and to win the hearts and minds of rice farmers in Vietnam.”

The characters in Lepore’s story are every bit as fascinating as the Sassoons and the Kadoories. Simulmatics was founded by Ed Greenfield, an early public relations guru whom Lepore describes as an “all-around huckster.” Then there was Bill McPhee, who conceived the idea for the company after his wife com-mitted him to Bellevue Hospital; technologist Ithiel de Sola Pool; and Eugene Burdick, who eventually wrote a not-very-flattering book about Simulmatics.

These men could be shockingly insightful. Pool, for instance, predicted that modern technology would destroy our common cultural base in his 1983 book, Technologies of Freedom. But their collective wisdom couldn’t save the company. Simulmatics not only crashed and burned (it filed for bankruptcy in 1970), but it seems many of the lives it touched met similarly abrupt, tragic ends. In 1969, Ed Greenfield’s ex-wife, Patty, fell off a balcony. Eugene Burdick died at 46 of a heart attack. In 1998, the year Google was founded, Bill McPhee shot himself in the head. As for Greenfield, he also died of a heart attack, in 1983, when he was only 56. At the time, he was plotting a new company called the Mood Corporation, which would “collect so much data about so many things that he’d be able to tell how people were feeling, and then sell that information to other companies.”

Somehow, we forgot all this, and the computer revolution was rebranded as something that “could be homegrown and emancipatory, a tool for person-al liberation and collective transformation,” Lepore writes. A half century later, we’re still wrestling with the questions and concerns first raised by Simulmatics’s inventions. Can a computer capture and control the mass human psyche, and if it can, is it ethical for it to do so?

A long shot

Long before Simulmatics’s tragic arc, when the Sassoons were first conquering the East, lived Sam Colt, who helped Americans conquer the West. The great

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gift of Jim Rasenberger’s book Revolver is that this story about a man who in-vented a gun is also a story about entrepreneurship, how America came to be, the dark side of innovation, and of course, why history matters. “The broad thesis of this book is that we cannot make sense of the U.S. in the 19th century, or the 21st for that matter, without taking into account Colt and his revolver,” he writes.

Essentially, before Colt’s inventions in the 1830s and 1840s, guns had to be painstakingly reloaded between shots, rendering them less effective against highly skilled Native American warriors armed with arrows. The Colt revolv-er changed the game, both in America’s westward expansion and in its an-nexation of Texas. “The West would have been settled sooner or later, but how it was settled and when it was settled owed a great deal to Colt’s gun,” writes Rasenberger.

At least at the time, some recognized that more efficient arms weren’t an unalloyed good. Colt revolvers were likely to revolutionize military tactics “as completely as the original discovery of gunpowder,” wrote the Times of London. This was meant as a public warning, and it flew in the face of the rationale employed by Colt then (and by his spiritual heirs now) that “better weapons promoted peace by making violence too costly, too horrifying, to contemplate.” More than likely, the opposite was true. The Colt revolver, Rasenberger writes, “gave targets no time to flee and shooters no time to second-guess themselves or consult their conscience before pulling the trigger.”

Colt’s revolver had an equally profound, although perhaps more appealing, effect on manufacturing. Because gun manufacturing at scale had to use ma-chines to make parts that were interchangeable, Rasenberger writes that Colt “was a pioneer of the technological revolution of the 1850s that had nearly as much impact on the world as the American political revolution of the 1770s.” In an interesting aside, Rasenberger notes that this was effectively government policy in action. Only the government had “both the need and the means to or-der hundreds, even thousands, of the same product,” and the government chose to invest in preparing for war, rather than, say, making sewing machines. A key moment came in 1847 when Colt got an order for 1,000 revolvers from the Texas Rangers.

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Like Simulmatics’s Greenfield, and maybe like visionaries everywhere, Colt was part fraudster, part huckster, part genius — and all arrogance. He got his start as a traveling showman selling hits of nitrous oxide. Early investors in his revolver lost all their money, in part because Colt didn’t disclose a flaw in his gun that could lead to a misfire. At 19, Colt “had stunning confidence, if not im-pudence, for his age. He was right, others were wrong,” Rasenberger writes. “For the rest of his life he would encounter the world on these terms. This would be one of his greatest assets as he pushed his way through seemingly insurmount-able challenges, but also one of his most costly flaws.”

Colt also did not seem to let moral qualms get in the way of business suc-cess. In the run-up to the Civil War, for instance, he essentially played the role

of an arms dealer to the Confederacy, so much so that in 1861, the New York Times called him out as a traitor (albeit not by name). All those years ago, long before the advent of computers, Colt, “a gifted merchant, combining his natural flair for persuasion with a prescient grasp of mass marketing,” figured out how best to influence people in a way that the brilliant men at Simulmatics never quite grasped.

Rasenberger notes that because Colt guns became a “staple of American newspaper coverage, featured almost daily in gripping stories of murders, sui-cides, adulterous affairs, robberies, and duels,” and because Sam’s brother, John Colt, committed an infamous murder, Colt “was a household name by the mid-1840s.” He died of gout in 1862 at the age of 47. Ah, America.

Colt’s revolver had a profound effect on manufacturing. Because gun manufacturing at scale

had to use machines to make interchangeable arts, Colt “was a pioneer of the technological

revolution of the 1850s.”

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Bethany McLean

[email protected] the coauthor of The Smart-

est Guys in the Room. Her most

recent book is Saudi America: The

Truth about Fracking and How It’s

Changing America. A contributing

editor at Vanity Fair, she hosts the

podcast Making a Killing.

The history described in these books is very much with us, in ways large and small. The Peninsula Shanghai hotel, which opened on the Bund in 2009, features Sir Elly’s bar. “History in China is fungible,” writes Kaufman. But as these books demonstrate, history is fungible everywhere, and the choice to ex-punge or forget always makes the world a less rich place. +

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MANAGING IN

A PANDEMIC YEAR

THIS YEAR, COVID-19 upended management-as-usual. Sure, managing is still a matter of getting things done in organizations — divvying up objec-tives into tasks, ensuring employees have the resources and skills to complete the tasks, overseeing their progress, and helping them when they get bogged down. But where and how people work has changed — radically and overnight in many companies and, in some, maybe permanently.

These developments have given rise to new needs and stresses that affect the people you are responsible for managing — needs such as going to work (or going back to work) safely, and stresses such as working while surrounded by kids instead of colleagues — and thus, they’ve also affected your performance as a manager.

B Y T H E O D O R E K I N N I

B.J. Fogg, Tiny Habits: The

Small Changes That Change

Everything (Houghton Mifflin

Harcourt, 2020)

A TOP SHELF PICK

Deborah Gruenfeld,

Acting with Power: Why We Are

More Powerful Than We Believe

(Currency, 2020)

Kate Murphy, You’re Not

Listening: What You’re Missing

and Why It Matters (Celadon

Books, 2020)

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M A N A G E M E N T

None of this year’s best business books on management were written for managers per se. But each focuses on capabilities that can help managers identi-fy and cope with pandemic-related challenges.

In the year’s best business book on management, Tiny Habits, Stanford University professor B.J. Fogg shows how to change your behavior and help oth-ers change theirs, too — an essential skill at a time when we are all being called upon to develop new habits. In Acting with Power, Deborah Gruenfeld, also at Stanford, explains how an unconventional view of power can enable you to sup-port people in ways that far exceed the limits of your positional authority. And in You’re Not Listening, journalist Kate Murphy offers an uncommonly insight-ful exploration of how to actually meet the dictates of an exhortation we’ve all heard before: “Listen!”

A lesson from Instagram

Back in the mid-1990s, B.J. Fogg coined the term captology to describe the per-suasive power of computers and then taught his students at Stanford how to use that power. One of them was Mike Krieger, who, with Kevin Systrom, used Fogg’s insights to remake a failed project into a simple photo-sharing app. They launched Instagram on the iPhone App Store in 2010 and, less than two years later, sold it to Facebook for a breathtaking US$1 billion in cash and stock. As it turned out, Facebook CEO Mark Zuckerberg got it cheap — in 2018, Bloomberg estimated Instagram’s value at $100 billion.

But Fogg was playing a bigger game. He didn’t care as much about comput-ers as he did about people — in fact, he was warning us about the ethical pitfalls of digital persuasion early on. In his work, he was trying to figure out how to make behavior change as easy as using Instagram (or whichever app steals an in-ordinate amount of your time these days). Fogg reveals what he discovered in his new self-help book, Tiny Habits: The Small Changes That Change Everything — written with all the infomercial-like brightness the genre implies — and it could have a transformative effect on your managerial performance.

Underlying Fogg’s pitch is a model with three variables: B = MAP. “A be-havior happens,” he explains, “when the three elements of MAP — Motivation,

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Ability, and Prompt — come together at the same moment.” Motivation is the desire to exhibit the behavior. Ability is the capacity to exhibit it. Prompt is the cue to exhibit it. According to the equation, if you want to craft a positive be-havior or troubleshoot a negative one in others, you need to analyze the three elements, but in reverse order.

Don’t start with motivational responses such as imposing a penalty or giv-ing tardy attendees dirty looks, says Fogg. Instead, confirm there are prompts in place that encourage people to get to the meeting on time. Then, make sure the tardy attendees are able to get to the meeting on time. Turn to motivation only if the first two elements aren’t causing the desired behavior. “In many cases, you’ll find your lack of doing a behavior is not a motivation issue at all,” he explains. “You can solve a behavior by finding a good prompt or by making the behavior easier to do.”

This low-key approach to behavior change typifies the advice in Tiny Hab-its. Fogg argues that we make change hard on ourselves and others by hewing to admonitions like “go big or go home.” When the effort fails, we blame ourselves or others. (I’m thinking about every New Year’s resolution, ever.) Instead, stop judging. Break your aspirations into tiny behaviors. Embrace mistakes as discov-eries, and use them to move ahead. “Tiny is mighty. At least when it comes to change,” Fogg declares in the first two sentences of the book.

The Tiny Habits methodology is a three-step process that harks back to Fogg’s behavior model. First, choose an anchor moment — an existing routine or event in your day that prompts the new thing you want to do. In trying this method for myself, I discovered that you must have a solid, regular prompt — like pouring your morning cup of coffee — or you’ll forget to do whatever it is you want to do.

Second, attach a tiny behavior to it. When Fogg wanted to make flossing his teeth an ingrained behavior, he started with one tooth. When Sarika, a proj-ect manager in a Fortune 500 company, wanted to start getting healthier by making herself breakfast every morning, her tiny behavior was turning on the stove — that’s it, just turning it on.

Third, take a moment to celebrate as soon as you complete the new behav-

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ior. Why celebrate turning on the stove? “Emotions create habits. Not repetition. Not frequency. Not fairy dust. Emotions,” writes Fogg.

A tiny habit — like flossing one tooth — may seem inconsequential. But Fogg maintains that it’s the only consistent, sustainable way to undertake big changes. “One tiny action, one small bite, might feel insignificant at first, but it allows you to gain the momentum you need to ramp up to bigger challenges and faster progress,” he writes.

Fogg’s work stands apart from the self-help author crowd, which frequently devolves into infomercial sloganeering. He founded Stanford’s Behavior Design

Lab and he has taught behavioral change to more than 40,000 people. And the methodology described in Tiny Habits is a tool that any manager can use to im-prove performance — his or her own, or that of a team — which is why it’s my pick for the year’s best business book on management.

Power plays

Speaking of tiny habits, Deborah Gruenfeld, a social psychologist and the Jo-seph McDonald Professor at the Stanford Graduate School of Business, describes one about three-quarters of the way through her book, Acting with Power: Why We Are More Powerful Than We Believe. After realizing that she was routinely obsessing about negative student reactions and that the habit was coloring her attitude toward teaching, Gruenfeld began spending a few minutes before each class thinking about positive student reactions.

“It was a turning point in my life as an educator,” she explains. “It may not always come naturally, even to this day, but it is foolproof, and it is not hard to

A tiny habit may seem inconsequential. But Fogg maintains that it’s the only consistent,

sustainable way to undertake big changes.

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do.” For Gruenfeld, this is not so much a tiny habit as it is an example of choos-ing love over fear — a technique that actors (and managers) can use to “show warmth and caring in a powerful role.”

Many managers are uncomfortable with power. Perhaps it is because they occupy a middle ground in which they have power over employees and yet are still subordinate to the power of executives. Acting with Power offers a means of reframing how we understand power and tapping into a wellspring of influence that is available to all of us.

If you’re a manager, though, Gruenfeld’s view of power, which she has been teaching to Stanford MBA students and executives for more than a decade, should have particular resonance. “Power is a part you play in someone else’s story,” she writes. “What makes someone powerful — what makes others willing to comply with their wishes — is the degree to which they are needed…. Power lives and dies in relationships, in goals and objectives, in settings, and in social roles.”

This idea of power as a role that you can assume, as an actor would a part, is particularly freeing (as well as a refreshing alternative to the current authenticity fad). It enables you to follow Dame Judi Dench’s wonderful advice, “The trick is to take the work seriously, but not take yourself seriously at all,” and avoid the dysfunctions that afflict power-hungry and power-mad people. And it allows you to free yourself from the constraints of positional power and make full use of what Gruenfeld calls “the two faces of power.”

“Power has two faces, no matter who you are,” she explains. “You can play it up, show it off, and remind others who has the upper hand. And you can play

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it down, minimize it, and remind others how important they are…. To use power well, you will want to get comfortable showing both [faces].”

Pulling rank, poking fun, interrupting, and saying no are all ways of play-ing power up. It sounds hostile, but, says Gruenfeld, “the thing to keep in mind is that in many group situations, playing power up is the most generous thing you can do.” Groups need managers to play power up when they lack direction or when situations become chaotic.

Backing off, using self-deprecating humor, and asking for help are all ways of playing power down. Playing down can be seen as a way to appease others or shirk responsibility, but Gruenfeld explains, “it can also be a way of showing re-spect, building trust, and making others feel safe.”

It is Gruenfeld’s application of these ideas that transforms Acting with Power from an intriguing read to a best business book for managers. No matter which way you are playing power, like any actor, you need to embrace the role. Gru-enfeld offers several techniques for doing so and explains that the core challenge revolves around integrity: “Acting with power is striving for integrity by doing whatever it takes to get into a mindset that makes it possible to do the responsi-ble thing.” She also explains how to be more effective in a supporting role (one that managers are always called upon to play), how to overcome performance anxiety, and how to stop power abusers, including bullies, megalomaniacs, and sexual harassers.

If you feel like you are hamstrung in the effort to cope with the disruptions in this pandemic year, Acting with Power will help you stretch your muscles.

Listen up

Remember when Mark Zuckerberg walked off to look for America? In 2017, he spent a year traveling the country to “talk to more people about how they’re liv-ing, working, and thinking about the future.” He brought along an entourage, including a photographer who took pictures of him listening.

“What Zuckerberg got right was listening is a challenge,” writes Kate Mur-phy, a journalist who contributes frequently to the New York Times, and the au-thor of You’re Not Listening: What You’re Missing and Why It Matters. “What he

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got wrong — and [what] made him the object of considerable mockery online and in the press — was thinking contrived listening was the same as actual listening.”

You’re Not Listening is a postgraduate course in an art and a craft that is essential to good management and yet woefully scarce. “Listening is the ne-glected stepchild of communication research, pushed aside by investigation into effective elocution, rhetoric, argumentation, persuasion, and propaganda,” reports Murphy. “Browse the three-volume, 2,048-page International Encyclo-pedia of Interpersonal Communication and you’ll only find one entry specific to listening. And you won’t even find listening in the index of The Sage Handbook of Interpersonal Communication.”

Murphy does a fine job of remedying this oversight in an engaging, Mal-colm Gladwell–esque approach that’s got a broad scope. One topic she lights on is the shortcomings of big data and analytics, which have replaced more ex-pensive qualitative research, such as focus groups, in marketing. The problem is that a survey or analysis of social media data isn’t going to yield the granular insights that lead to products like the Swiffer. The germ of that idea arrived when a woman in a focus group composed of “super-cleaners” explained that she saved lightly used paper towels and reused them to wipe the floor with her foot at the end of the day. Procter & Gamble listened — and built a half-bil-lion-dollar brand.

In passages more pertinent to the needs of managers, Murphy provides practical and nuanced advice for becoming a better listener. For instance, she explains the difference between shift and support responses (first described by sociologist Charles Derber) — and why the latter are so important to good lis-

One topic Murphy lights on is the shortcomings of big data and analytics, which have replaced qualitative

research, such as focus groups, in marketing.

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teners. Shift responses direct attention away from the speaker and toward the listener; support responses encourage the speaker to elaborate.

Effective support responses, Murphy says, seek “to understand the speaker’s point of view, not to sway it.” Open-ended and fill-in-the-blank questions work well in this regard, as long as they are truly curious and don’t contain hidden as-sumptions or attempts to subvert the conversation. “Good questions don’t begin with: ‘Don’t you think…?’ ‘Isn’t it true…?’ ‘Wouldn’t you agree…?’ And good questions definitely don’t end with ‘right?’” she explains.

Where you listen is as important as how you listen. A secluded, soundproof space will seldom be available, but, says Murphy, “you can wave someone into your office and put your computer to sleep. You can choose quiet restaurants and silence your phone and keep it out of sight. You can find a park bench, take a walk on a quiet street, or just duck into a doorway away from the stream of pedestrians to have a word.” Consciously choosing a setting sends a signal about your willingness to listen.

I found Murphy’s advice on silences particularly apropos, because I’m al-ways too quick to fill them. “As a journalist, it took me too long to realize that I didn’t have to say anything to keep the conversation going,” she writes. “Some of the most interesting and valuable bits of information have come not from my questioning but from keeping my mouth shut.”

And with that in mind, I’ll shut mine and give You’re Not Listening the final word: “When you engage with someone, your behavior does two things: (1) it helps or hinders your understanding, and (2) [it] strengthens or weakens the re-lationship. Listening is your best bet on both counts.” +

Theodore Kinni

[email protected] a contributing editor of strategy+

business. He blogs at Reading,

Writing re: Management and is

@tedkinni on Twitter.

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AS WILD AS current economic events have been, as challenging to conventional wisdom and orthodox thinking as they have proved, the COVID-19 pandemic and its associated hardships have left the world grasping anew for understanding. This bracing experience will have a powerful intellectual legacy: more profound, one supposes, than even that of the global financial crisis. Stuck inside, with hours available to read, we can take some small comfort in the fact that the still-boiling economic arguments of the past decade continue to provide us with new books, including some with quite a lot to say about our present circumstances. This year’s three best business books on economics revolve around the ways in which econom-ic developments have led to social, trade, and political clashes. They are: a treatise that plumbs the depths of the U.S. opioid crisis, a sharp and brief argument about how inequality leads to trade wars, and, the best of the group, a fantastic biography

A MASTER CLASS IN

CONFLICTSB Y R YA N AV E N T

Anne Case and Angus Deaton,

Deaths of Despair and the

Future of Capitalism (Princeton

University Press, 2020)

Matthew C. Klein and Michael

Pettis, Trade Wars Are Class

Wars: How Rising Inequality

Distorts the Global Economy and

Threatens International Peace

(Yale University Press, 2020)

Zachary D. Carter, The Price of

Peace: Money, Democracy, and

the Life of John Maynard Keynes

(Random House, 2020)

A TOP SHELF PICK

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of the 20th century’s most well-known economist, John Maynard Keynes.In 2015, two eminent economists, Anne Case and Nobel Prize winner An-

gus Deaton (who are married), began presenting joint research on what they would eventually dub “deaths of despair”: those caused by suicide, drug overdos-es, and alcohol abuse. Their book on the topic, Deaths of Despair and the Future of Capitalism, is a meticulous forensic analysis of several deeply disconcerting trends in U.S. mortality. In 2017, they write, 158,000 Americans died from the causes they study. It is a staggering figure — or it would be, if COVID-19 had not already claimed the lives of roughly 200,000 people in the United States by September 2020. Yet the book feels no less urgent. Case and Deaton connect deaths of despair to a variety of social pathologies. Those same pathologies have helped make 2020 the tragic and distressing year it has become.

A stark finding lies at the heart of their thesis. The number of expected years of life at birth has risen in the U.S. more or less constantly since records have been kept, thanks to rising incomes, medical advances, and broader improvements in public health. Yet between 2014 and 2017, life expectancy across the U.S. popula tion as a whole declined. Only once before, as far as records indicate, had that happened — during the late 1910s, when war and pandemic influenza made their lethal mark.

The toll has not been distributed evenly. Middle-aged, non-Hispanic whites, especially those without a college degree, have borne the brunt of the hardship in the United States. The country’s opioid epidemic deserves a large share of the immediate blame. It initially battered blue-collar towns and rural areas. As measures were taken to choke off the flow of prescription drugs, addicts increas-

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ingly turned to illegal substitutes such as heroin and fentanyl, and use and abuse became more widespread. But deaths attributable to alcohol and other drugs showed a meaningful increase as well, as did suicides.

As the authors demonstrate, there is no simple connection between deaths of despair and poverty, inequality, or the hardship associated with the global financial crisis. Instead, they argue provocatively but compellingly, the phenom-enon is best understood as being rooted in a social breakdown. One clue is the diverging experiences of those with and without college degrees. Middle-income jobs in factories and offices have been destroyed by automation and trade. Wag-es, adjusted for inflation, have grown pitifully slowly for such people, while rates of labor-force participation have declined. These trends seem to have taken a particular psychological toll on white non-Hispanics.

But deaths of despair reflect more than mere economic hardship, say Case and Deaton. Lost jobs often translate into declining communities, and worsen-ing social prospects for those living in such communities. Marriage rates among the hardest-hit demographic groups have fallen, as have attendance at religious services and involvement in community activities. Meanwhile, the authors ar-gue, those left behind by economic and social change have been preyed upon by profit-hungry corporations in uncompetitive industries that (protected by patent rights, friendly regulation, and lax antitrust rules) have lined the pockets of their executives and white-collar staff while ignoring the collateral damage inflicted on individuals and communities.

These same social pathologies have also undermined the nation’s effort to control COVID-19, and to hold together as a society while suffering through it. But the policy proposals the authors offer toward the book’s end — investments in education, efforts to make markets more competitive, and higher minimum wages — feel like weak tea after the damning portrait they have painted of a so-ciety content to let communities collapse and citizens die of their misery.

Exporting conflict

The subject of Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace is far broader than that of

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Deaths of Despair, taking in the whole of the global economy. Matthew C. Klein, an economics writer for Barron’s (and a former colleague of this reviewer) and Michael Pettis, a professor of finance at Peking University in Beijing, pack into just a few hundred pages a sweeping and powerful account of the interconnec-tions between cutthroat politics and global economic imbalances.

The world, both before the pandemic and now, was divided by battles over trade — most notably the intensifying conflict between the U.S. and China. Differences between feuding countries, in their political and value systems, for instance, explain some of this sparring. Klein and Pettis demonstrate, though, that political fights within countries are a more fundamental cause of many trade battles. The world’s monetary system transforms domestic class wars into trade conflicts, and as it does, it moves the world closer to financial breakdown and geopolitical hostility.

The book, at 288 pages, covers a remarkable amount of material in what is essentially an afternoon read. Klein and Pettis quickly but effectively guide their audience through several hundred years of history as they demonstrate the short-comings of many conventional ways of thinking about trade and global finance. Classical economists such as Adam Smith and David Ricardo viewed trade as being determined by countries’ comparative advantages. Most global financial flows, in turn, were associated with the direct finance of exchanges of goods and services, and were correspondingly quite small relative to the size of the global economy. In 1855, Klein and Pettis estimate, the total value of all cross-border financial claims was only about 16 percent of global annual GDP. Global com-merce today looks very different, and is less clearly a social good. Cross-border financial claims now amount to about 400 percent of global GDP. Financial flows occur as investors chase returns around the world, and trade imbalances are formed under the pressure of these torrents of money. Domestic politicians struggle to correct economic imbalances rooted within their country.

The headaches all begin with the distribution of income. The richer a house-hold is, the more of its income it is able to save. Places with relatively flat income distributions can therefore support plenty of domestic consumption, bolstering the sales volume of domestic firms and encouraging them to invest more. In

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unequal countries, on the other hand, the savings of the rich pile up. Domestic investment slumps, because cash-strapped consumers make for an unappealing growth market. In an open economy, the rich can look abroad for places to in-vest, and the domestic productive capacity that might otherwise fill the homes of thriving workers is instead used to make goods for export markets. And so, the result of unresolved domestic class conflict is a trade surplus. Other coun-tries, then, are left to import the political disharmony in the form of a flood of unmanageable capital that may trigger bubbles and subsequent crashes and a deluge of imports that threaten domestic livelihoods.

Germany in the early 2000s sought to address problems of chronically high unemployment by slashing workers’ wages and weakening the social safety net. German officials argue that this restored firms’ competitiveness, turning them

into export juggernauts and engines of job creation. Klein and Pettis tell a dif-ferent story: The squeeze on workers both dented domestic consumption and raised corporate profits, putting more money in the hands of wealthy Germans. Excess production flowed abroad, adding to the surplus. The savings of the rich departed, too, pouring money into southern Europe and helping inflate massive financial bubbles. The authors argue that had Germany done more to boost spending at home — by investing in badly needed infrastructure, for example — German workers would have fared substantially better and the euro-area cri-sis might have been far less devastating.

The authors tell a similar story about China. There, incompatible political aims and the government’s inability to tackle rising inequality resulted in a large and persistent trade surplus, and lots of angry trade partners.

In unequal countries, the savings of the rich pile up. Domestic investment slumps, because cash-strapped

consumers make for an unappealing market.

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The United States, though, is an anomaly. The global role of the greenback places intense pressure on other countries to accumulate dollars and dollar-de-nominated assets. As a consequence, the U.S. becomes a dumping ground for other countries’ excess goods as well as their excess savings, despite its yawning inequalities. The strains these developments place on the U.S. economy and on U.S. politics have become all too obvious over the past 15 years. If governments cannot find ways to reform the global monetary system and to distribute the gains from growth more equitably, today’s financial crises and trade spats may be only a precursor of a more profound breakdown to come.

Trade Wars Are Class Wars is a bracingly clarifying read for those seeking to understand recent geopolitical developments. It works, in part, because the authors are willing to follow their reasoning to places other economists might avoid, such as when they point out that modern trade need not be welfare-en-hancing in the way economists typically assume open trade to be. And it works, too, because it roots what often looks like purely economic or regulatory prob-lems in their appropriate political context.

The Keynes factor

No modern thinker has understood these sorts of interactions as completely as John Maynard Keynes, the great British intellectual and father of macroeconom-ics. It is entirely appropriate that the year’s most exceptional economics book is a biography of the man. Keynes is among the most written about figures in all of economics and already the subject of several brilliant biographical and historical works. But a new take on his life and work, The Price of Peace: Money, Democ-racy, and the Life of John Maynard Keynes, by Zachary D. Carter, a journalist at HuffPost, is a joy to read even for those already familiar with Keynes. What’s more, it very much feels like a book for this moment.

That so much is written about Keynes reflects in part the fact that Keynes is such a rich character to write about. He was a central figure in the circle of intel-lectuals and artists known as the Bloomsbury group, which included novelists Vir-ginia Woolf and E.M. Forster, among many others. Members were known for their radical free thinking, enthusiastic socializing, and sexual experimentation. When

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not engaging with his artist friends, Keynes busied himself constructing an extraor-dinary career as an economist and public servant. In government, he helped Britain manage its finances during the First and Second World Wars, and was a key figure in the construction of the postwar Bretton Woods system. Outside government, he was a vicious and prescient critic of economic orthodoxy and the political bumbling that led the world from one tragedy to another. Carter captures these biographi-cal details beautifully. He brings the central characters to life, expertly detailing the nuances of their personalities and the complications of their relationships.

Interwoven with this lovely personal narrative is an outstanding history of Keynesian thought. Carter ably shows how Keynes’s experiences living through the troubling political and economic events of the early 20th century contrib-uted to the writing of his seminal pieces. The book pinpoints the origin of the

concepts that would eventually find their way into Keynes’s masterwork, The General Theory of Employment, Interest and Money (1936), and from there into the flowering of postwar macroeconomic thought built on Keynes’s contribu-tions. The writing gives readers a very clear sense of how the real-world failures of prevailing ideas inspired new thinking that accumulated into a better, more powerful framework for understanding business cycles.

Carter also depicts in Keynes a figure with the rare ability to change his views dramatically in response to evidence. (“When the facts change, I change my mind,” he purportedly said.) Keynes began his adult life as a liberal, intellec-tually and politically, who favored “free trade and free thought.” But he didn’t al-low himself to be encumbered by ideas that the world around him showed to be flawed. He horrified liberal friends by arguing in 1931 that if Britain was deter-mined to hamstring its exporters by maintaining sterling’s peg to gold, then the

The Keynesian ideas embedded in current economic orthodoxy are a pale version of the original.

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least-bad option to reduce economic hardship was to introduce a tariff. When Keynes concluded that deficit spending by governments was essential to ending the Depression, he didn’t allow himself to dismiss the notion out of worry that the establishment would consider it an outlandish, unserious idea.

As thoroughly as Keynesian principles have penetrated modern thinking, Carter makes clear that the Keynesian ideas embedded in current economic or-thodoxy are a pale version of the original. Keynes saw economic phenomena as being inextricably linked with matters of politics and sociology. It was daft to treat markets as some pure and natural sphere of human interaction that govern-ment interference could only sully. Governments made markets possible. There was simply no way to analyze the one without the other, and no sense in trying to describe how markets would work in some ideal state. What we understand to be Keynesian economics today strips away huge, invaluable chunks of his philos-ophy. He wasn’t simply looking for the most straightforward way to end reces-sions. Rather, Keynes was building a broader economic and political world view to help guide humanity toward prosperity and happiness.

It is hard not to see Carter’s book as a commentary on contemporary elites. In his day, Keynes waged war against unnecessary economic pain. But his biggest battles were against intellectual rigidity and an unwillingness to use radical but sensible measures to make the world a better place. Keynes’s best ideas were forged in frustration and beaten into shape against an unyielding wall of error erected by financiers, businesspeople, and politicians. Reading The Price of Peace, one cannot help but feel relief at the fact that we have Keynes’s work to guide our thinking as we navigate our present challenging circumstances. But one is also left with a sense of bitter disappointment at the world’s apparent determination to relearn Keynes-ian lessons the hard way, by repeating one historical mistake after another. +

Ryan Avent

[email protected] economics columnist at the

Economist. He is the author of The

Wealth of Humans: Work, Power,

and Status in the 21st Century.

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STORIES OF TECHNOLOGICAL innovation often focus on singular, he-roic visionaries — the Steve Jobses and Elon Musks of the world — who come up with brilliant, fully formed ideas and then shepherd them into reality, nev-er wavering in their quest for perfection. But more often than not, the true story of technology and innovation is messy, rather than clean, a story of fail-ures that only eventually lead to success. “Failure and invention are insepara-ble twins,” Amazon CEO Jeff Bezos has said. This year’s best business books about technology and innovation describe, and even celebrate, the messiness and uncertainty. In so doing, they offer up important lessons about what real change requires.

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FAILURE AND

THE ROOT OF

INVENTIONB Y J A M E S S U R O W I E C K I

Anthony M. Townsend, Ghost

Road: Beyond the Driverless

Car (Norton, 2020)

Reed Hastings and Erin Meyer,

No Rules Rules: Netflix

and the Culture of Reinvention

(Penguin Press, 2020)

Stefan H. Thomke,

Experimentation Works: The

Surprising Power of Business

Experiments (Harvard Business

Review Press, 2020)

A TOP SHELF PICK

T E C H & I N N O VAT I O N

In Anthony M. Townsend’s Ghost Road: Beyond the Driverless Car, the inno-vation in question is autonomous driving, and the stakes, as Townsend sees them, could not be higher. Autonomous vehicles (AVs), he argues, will eventually rep-resent “our most intense and intimate encounter with artificial intelligence in the physical world.” Townsend, urbanist-in-residence at Cornell Tech and an expert on smart cities, suggests that by 2050 “most human-driven cars will be gone.” This is open to question. Even as huge amounts of capital are being poured into AV research — US$80 billion just in 2017 and 2018 — there are fewer than 1 million self-driving vehicles of any kind on the road right now. The installed base of human-driven cars is immense (280 million in the U.S. alone), and still grow-ing. But when self-driving cars reach a critical mass, “There is no area of social and economic life that will escape the AV’s disruptions,” Townsend writes.

Townsend is not another in a long line of hype merchants who have spent the past decade promising that self-driving vehicles were just around the corner. Ghost Road offers up an exhilarating picture of the ways in which autonomous vehicles might transform our lives for the better, saving time and lives, reshaping cities, and helping combat climate change. But the author is also keenly aware of the risks and costs such a future could bring, and of the possibility that AVs will instead usher in a bleaker, more dystopian tomorrow. Townsend notes that the choices that businesspeople, engineers, politicians, and ordinary citizens make — deliberately or unconsciously — will determine that future.

What will tomorrow’s vehicles look like? The most common expectation is that they will look a lot like the cars we have today, and we’ll use them in much

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the same way. We’ll live in “self-driving suburbs,” and travel to work alone (as three out of four Americans did before the pandemic). But the work of driving will be outsourced to AI. Highways will be full of pods of self-driving cars, each carrying an individual cocooned comfortably inside, the AVs communicating with one another to keep traffic flowing.

Townsend hopes this future doesn’t materialize, largely because it wouldn’t take advantage of the really transformative aspects of autonomous driving, which he calls specialization and (somewhat oddly) materialization. Specializa-tion means that instead of just self-driving cars, we’re going to see an explosion in the number and kind of AVs: small “conveyors” that can navigate crowd-

ed sidewalks to make local deliveries; bigger “mules” that can park themselves on street corners to hold packages for pickup and accept returns; AV shuttles; and self-driving taxis, bicycles, and motorcycles. AVs won’t, in other words, just change the way we get to work or the store — they’ll remake the fabric of everyday life.

Townsend argues that AVs’ greatest impact won’t be moving people — it will be moving stuff. (This is what he calls materialization.) AVs will make shipping and delivery much cheaper and more efficient, as autonomous vehicles, big and small, silently traverse the streets day and night. They will accelerate the death of traditional retail, diminish the advantage of giant companies like Walmart, and transform even the food business. (Why bother to cook at home if you can get a hot meal delivered in minutes from a ghost kitchen around the corner?)

What’s not to like? Well, AVs will rely on, and generate, enormous amounts of data about how we live, where we go, and what we buy. Determining who

Autonomous vehicles won’t just change the way we get to work or the store — they’ll remake

the fabric of everyday life.

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will own this “data exhaust” — and who will be able to monetize it — will have enormous consequences for the economy. Simply leaving the answer up to the market, Townsend argues, won’t suffice. And there’s a meaningful risk that an AV future will end up with what Townsend calls “robot-powered transportation monopolies.” Right now, a small number of companies exercise enormous power over our journeys online precisely because of their ability to capture our data ex-haust. Readers will finish Ghost Road wondering how to prevent the same thing from happening with our travels through the physical world.

Leaders in the stream

If Ghost Road is a book about managing the social consequences of innovation, No Rules Rules: Netflix and the Culture of Reinvention is a book about managing — or, perhaps, enabling — innovation, period. Coauthored by Netflix CEO Reed Hastings and INSEAD business professor Erin Meyer, it is the rare book by a corporate executive that is both engaging and insightful. Perhaps that’s be-cause it is structured as a kind of back-and-forth between the two authors, with Hastings laying out a management principle, explaining its origins and its logic, and then Meyer analyzing and sometimes critiquing the idea and looking at how it actually plays out at Netflix.

In No Rules Rules, it becomes clear that Netflix has figured out how to construct a corporate culture that fosters risk-taking and pushes responsibility downward in the organization, thus encouraging innovation. When Hastings talks about that culture, he places an enormous amount of importance on tal-ent, and what he sees as Netflix’s insistence on hiring only the best of the best. But although the book’s discussion of the top strategies for finding and keeping high performers is interesting, its most valuable lessons about innovation lie else-where, in the strategy that Hastings calls “freedom with responsibility.”

The tension inherent in this phrase captures something important about how Netflix does business. Most of its employees actually are, by corporate stan-dards, free. The company famously has no vacation policy — employees can, in theory, take vacations whenever they want. The expense policy: Employees are simply advised to treat the company’s money as if it were their own. Those who

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abuse the freedom (like the person who ran up $100,000 in vacation trips on the company’s dime) are relieved of their responsibilities.

By freeing employees from having to fret about such things as receipts and vacation days, Hastings argues, the company makes it easier for them to devote their brainpower to thinking about the stuff executives really want them think-ing about. Similarly, Netflix pushes a lot of decision-making responsibility down the corporate hierarchy; even low-level executives can sign sizable deals without having to get their higher-ups to sign off. In principle, that lets people focus on whether they think something is a good idea, rather than whether their boss will think it’s a good idea. Hastings puts it this way: “If you hope for more innova-tion on your team, teach employees to seek ways to move the business forward, not ways to please their bosses.”

Netflix’s offer of freedom and responsibility works, Hastings argues, only because people are subject to constant feedback from those around them. In Netflix’s culture, people routinely face open, direct criticism of their ideas, pre-sentations, and performance — from their boss, yes, but also from peers and subordinates. (One person Meyer interviewed recalls an email she sent Hast-ings after one meeting, criticizing the way he had spoken dismissively to anoth-er executive. He wrote back, agreeing.) Indeed, when Meyer was giving presen-tations and doing interviews inside the company, people would regularly offer up public criticisms of things they thought she could be doing better. (“I start-ed to get queasy,” Meyer writes of the time she was called out in the middle of a presentation.)

Although Netflix strives to ensure that people deliver their criticism con-structively and respectfully, it all makes for a stressful workplace. Hastings ar-gues that the benefits outweigh the costs. Diverse perspectives improve deci-sion-making. But there’s also a more subtle benefit: Regular feedback makes employees recognize that work is rarely perfect and that it can often be im-proved. This feedback instills an ethos of continuous improvement and a cer-tain tolerance of failure.

The company prides itself on being willing to let people go when it decides they’re no longer at the top of their game. But making a bet that goes wrong is

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not one of the things that will get them fired. When employees make bad bets, in fact, they typically “sunshine” them rather than bury them, writing pub-lic memos explaining what happened and what lessons they learned. Hastings explains, “It’s critical that your employees are continually hearing about the failed bets of others, so that they are encouraged to take bets (that of course might fail) themselves.” In fact, some of the most interesting moments in No Rules Rules have to do with employees talking openly, and surprisingly honest-ly, about their mistakes.

As Hastings acknowledges, this strategy of embracing failure isn’t a great idea for every business — if you’re running a nuclear power plant, or a hospital operat-ing room, you want people obsessed with making sure everything works perfectly. But in a business that depends on a constant flow of new ideas, comfort with fail-ure is essential. No Rules Rules provides an intriguing template for how to get there.

Try, try again

There’s a meaningful overlap between No Rules Rules and the best business book of the year on technology and innovation, Stefan H. Thomke’s Experimenta-tion Works: The Surprising Power of Business Experiments. Thomke, a professor at Harvard Business School, was one of the pioneers in studying how compa-nies could use controlled experiments to improve their decisions, and in 2003 he wrote a book titled Experimentation Matters. In Experimentation Works, he offers a rigorous and engaging look not just at why experiments matter, but at “the systems, tools, organizing principles, values, and behaviors” businesses need to make experiments genuinely useful.

Even though the cost of running experiments, both online and offline, has dropped sharply, wide-scale experimentation is still relatively unusual as a tactic. The biggest tech companies — Microsoft, Amazon, Facebook, and Google — all run more than 10,000 online experiments a year, involving tens of millions of users. And online travel behemoth Booking.com, which Thomke examines in detail in the book, has basically built its entire business around experiments, performing what Thomke estimates is more than 25,000 of them a year. More traditional companies — Nike, Walmart, State Farm — have embraced experi-

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mentation, albeit on a much smaller scale. But lots of companies are still barely dipping their toes into the experimentation pool, unconvinced of the value and leery of the perceived risks.

The skepticism is easy to understand. Experimentation is often seen as just throwing stuff at the wall and seeing what sticks. It’s radically different from tra-ditional management, in which information is channeled to decision-makers at the top who then hand down their wisdom. Experimentation requires humility, because running thousands of experiments a year is an admission that there’s a lot you don’t know about your business. And it requires a willingness to fail, as, according to Thomke, between 80 and 90 percent of experiments fail to find any positive effect.

Embracing experimentation also demands that companies rethink what innovation means. Businesses hunger for disruptive, nonlinear innovations that introduce entirely new technologies, transform product categories, or shake up business models. But most innovations are actually humble, small improvements in user experience or workflow or the way a website looks. These are the kinds of innovations that experiments are great at testing. And Thomke convincingly ar-gues that such high-velocity incrementalism is tremendously valuable. He writes, “Most progress is achieved by implementing hundreds or thousands of minor improvements that can have a big cumulative impact.”

In the simplest sense, Thomke says, companies need to embrace the scien-tific method, and what can be called an Edisonian approach to innovation: for-mulating hypotheses based on observation, designing experiments to test those

Experimentation requires humility, because running thousands of experiments a

year is an admission that there’s a lot you don’t know about your business.

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hypotheses, and analyzing the results to see whether they’re statistically mean-ingful. Most of the time, they won’t be. But even a negative result is informative. When Edison himself was asked why so many of his experiments didn’t result in anything, he responded: “Results? Why, man, I have gotten lots of results! I know several thousand [ideas] that won’t work.”

In order to employ the scientific method, though, leaders need to be will-ing to embrace uncertainty, and they must recognize that good ideas can come from anywhere in the organization. At Booking.com, for instance, pretty much anyone can run an experiment. Thomke suggests that as a general rule, the best ideas for incremental innovations come from people closer to the front line. A Microsoft employee suggested in 2012 that increasing the size of ad headlines on Bing might be beneficial, a seemingly trivial change that boosted revenue by 12 percent annually.

Although Experimentation Works is academic in tone, and sometimes dry, it’s replete with interesting examples of small changes that, when tested, had big impacts (and vice versa). Those changes, Thomke argues, are often counterintu-itive — if you don’t run the experiments, you’ll likely never think about imple-menting them.

If there’s a problem with experimentation as an ethos, it’s not that it’s ineffi-cient, but rather that it may not be inefficient enough. Experimentation is some-thing of a grind — a commitment to it will mean trying lots of small changes. That’s great for incremental innovation. But disruptive innovation is more likely to come from what Jeff Bezos calls “wandering,” when employees have the time and mental space to just let their minds roam free. Thomke recognizes this di-lemma. Companies, he says, have to be “ambidextrous” in their approach to in-novation. The question for innovative companies, then, remains how to use both of their innovation hands at once. +

James Surowiecki

[email protected] the author of The Wisdom of

Crowds: Why the Many Are Smarter

Than the Few and How Collective

Wisdom Shapes Business, Econo-

mies, Societies, and Nations.

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PAYING ATTENTION

TO HUMANSB Y T O N Y C A S E

HUMAN BEINGS — perhaps you remember them? Those carbon-based mem-bers of the species Homo sapiens that ruled earth before machines and data took charge, who created entire civilizations along with the enterprises, inventions, and innovations that kept them humming? In the information age, countless studies, books, and magazine articles have attempted to put the focus back on the human factor. Their authors argue that data and machines are not the be-all and end-all, do not always know best, and often fail — sometimes spectacularly — to represent reality.

People happen to play a key role in the year’s three best business books about marketing, and are the central players in the best of them, Restoring the Soul of

Rishad Tobaccowala, Restoring

the Soul of Business: Staying

Human in the Age of Data

(HarperCollins Leadership, 2020)

A TOP SHELF PICK

Micah Solomon, Ignore Your

Customers (and They’ll Go

Away): The Simple Playbook

for Delivering the Ultimate

Customer Service Experience

(HarperCollins Leadership, 2020)

Neal Schaffer, The Age

of Influence: The Power

of Influencers to Elevate

Your Brand (HarperCollins

Leadership, 2020)

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Business: Staying Human in the Age of Data, by Rishad Tobaccowala. Tobaccow-ala, the longtime chief growth officer of the global advertising and communica-tions company Publicis Groupe, is one of the most trusted authorities on digital media. And he makes as thoroughly documented a case as I have come across for why the businesses that thrive are those whose leaders know that what made them great is their human resources. Tobaccowala singles out mighty custom-er- and user-focused corporations — Walmart, Starbucks, Domino’s, Google — that have “successfully reoriented their thinking on how to fuse technology and

humanity,” while he warns of “data-blinded companies” that stumble when they do not correct such matters as “stifled employees [who are] not encouraged to contribute ideas or insights” and “poor customer service due to automated, ro-botic processes that cause frustration and hurt the brand.”

Human good, machine bad. Such arguments have been presented before. But what makes Tobaccowala’s book so compelling (aside from his natural flair for language and obvious storytelling talents) is that he is no Luddite long-ing for the days of analog. In fact, he is as data oriented as they come, having played a major role in the founding of some of the very first digital marketing agencies. “I am obviously someone who believes in digital change,” he writes. “Not so obviously, I also believe in the power of people to make transformation work. As much as I value data, devices, and software, I value empathy, innova-tion, and relationships.”

There is no escaping the fact that data dominates much of the thinking and decision-making in brand marketing now and will continue to do so. In 2020, companies are projected to invest US$203 billion in data analytics, up from

Tobaccowala makes a case for why the businesses that thrive are those whose leaders know that what made

them great is their human resources.

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$130 billion in 2016. But, the author argues, statistics mean precious little with-out people. “We must recognize that human judgment and intuition are often necessary to perceive data’s true significance,” he writes. Or, as he suggests in so many words elsewhere in the book: Kill the spreadsheet mentality.

Restoring the Soul of Business, I kept thinking as I read it, is part Ken Auletta (the New Yorker media critic who, as it happens, authored the foreword), part Deepak Chopra. As detailed and all-business as Tobaccowala is, and as soberly and expertly as he makes his case here, it would be unimaginable to ruminate, at book length no less, on a subject like the importance of humanity without sounding at times like something out of the Up with People program. (One chapter is titled “How to Lead with Soul.”)

Aside from its numerous how-to lists, the book is filled with helpful case studies of companies that have mastered the fusion of data-based marketing and business management with human relationships. Netflix, for instance, empow-ered its employees to use common sense and the human desire to do the right thing when it came to managing paperwork, instead of relying on tradition-al, data-based actions. For example, the company instituted an honor system that allowed individual employees to manage their own vacation time and to file business travel expenses in a less onerous way. Employees were given a sim-ple guide: “Act in Netflix’s best interests.” Tobaccowala writes: “Freed from the reporting requirements and strict parameters that most employees resent, they relish their cultures and find more meaning in them.”

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A smart and worldly man, Tobaccowala has produced a deeply informed book about brand marketing, data science, and humanity that is a remarkably lively read. Name another book about business (or any other subject) that in one breath urges the reader to acknowledge “the turd on the table” in the boardroom and references François Truffaut’s The 400 Blows and Joan Didion in the next.

At your service

In an age of algorithms and impersonal transactions, customer service often seems like a quaint feature of commerce, gone the way of the gourmet in-flight meal, the department store gift-wrap stand, and full-service filling stations. Mi-cah Solomon, a leading expert on company culture and the customer experience, heartily disagrees with this trend. In his book Ignore Your Customers (and They’ ll Go Away): The Simple Playbook for Delivering the Ultimate Customer Service Ex-perience, Solomon convincingly argues that delivering world-class customer ser-vice is not only possible for businesses today, but essential.

Solomon provides a steady clip of success stories via brands including Zap-pos, Olive Garden, JetBlue, Tumi, Starbucks, Safelite, Nordstrom, Ritz-Carlton, Warby Parker, Whole Foods, and the Cleveland Clinic. Some of the stories are already legend — like the one about the Zappos call center agent who stayed on the phone for more than 10 hours with a customer seeking a pair of Ugg boots. Naturally, most of us could never expect that level of service from a company to-day. But the extremes are not the point. As Solomon explains: “Although talking with a customer for ten straight hours is indefensible by traditional call center logic (where a call is supposed to only take five to eight minutes), it makes busi-ness sense if you think of the ten-hour phone call as a flag that Zappos has hoisted high in the air to illustrate to its employees just how far they should be ready to go to make an emotional connection with a customer.” And that flag was seen far beyond Zappos’s own ranks. Late-night host Jimmy Fallon did a sketch based on it. This admittedly unusual customer interaction wound up delivering media at-tention and marketing benefits worth many times the cost of one epic phone call.

Solomon defines exemplary customer service as that which employs the “wow” factor. “Anytime someone tells you that wow customer service is too ex-

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pensive, ask them how much they paid on their marketing and sales efforts last year,” Solomon writes. “Creating an emotional connection with your customers is the most direct route to getting your customers to do your marketing for you.” To work, however, it must be employed at every level of an organization. Again, it’s the perceived investment that turns so many bosses off. But as Solomon con-tends, “The reality is that winning and retaining customers this way is one of the only true bargains around, because of the word of mouth it inspires.” He es-timates that 93 percent of consumers base their decisions in whole or in part on word-of-mouth recommendations — a staggering but altogether plausible figure in a social media–fixated world. It is, after all, the same environment in which businesses have become equally enthralled with Net Promoter Scores, a basic measurement of customer sentiment that quantifies word-of-mouth recommen-dations — the cheapest, most effective form of marketing. (Fortune reported in 2020 that two-thirds of the Fortune 1000 now use the measurement.)

The author spends a lot of time on Ritz-Carlton when discussing the wow factor, and yet, he stresses, the standard is as sensible and as employable at the corner shop as at a luxury hotel chain. Examples of “wow” at the hotel chain range from the practical (a special menu prepared by the kitchen each day for a chronically allergic child) to the fantastical (a hobbit-themed birthday party for a Tolkien-obsessed guest). Such “wow” stories are disseminated every week throughout the company “to inspire other employees to find ways to do some-thing similarly memorable for their own guests,” Solomon writes.

Aside from its many case studies, this impeccably organized book is rich with how-to lists sporting irresistible titles such as “How to Build Automatic Positivity,” “How to Find the Right People, and How to Stop Finding the Wrong Ones,” and

It’s the perceived investment in exemplary customer service that turns so many bosses off.

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“Five Steps Toward Creating a Customer Service Culture.” Each of the 10 chapters — which include “Building a Backbone to Support the Smiles” and, my favorite, “Stepford Customer Service” — ends with a helpful, bullet-pointed recap and a series of questions for discussion groups. An example, from chapter 5, “The Expe-rience Means Everything”: “One way to think of the customer experience is as a movie put on for the benefit of customers. Whether or not we use this metaphor in our organization, do we pay sufficient attention to pacing, staging, lighting, and other soft, dramatic details of the customer experience? Would there be value for us in doing so?” What a powerful exercise, I thought, for a company looking to up its game — whether the group happens to meet in person or via Zoom.

The influence agenda

When it comes to consumerism, there are two kinds of people in the world today: those who influence and those who are being influenced. It has become nearly im-possible in a social media–centric culture to escape the all-powerful social media influencers — those celebrities, fashionistas, foodies, makeup artists, and other enthusiasts who populate our favorite feeds. They have become a marketer’s best friend and not-so-secret weapon. From boldface names such as Selena Gomez and Cristiano Ronaldo to Internet personalities such as filmmaker Zach King and foodie Mariam “Cookin’ with Mima” Ezzeddine, influencers are the advertising pitchmen and pitchwomen of our time. Influencer marketing is the hottest cate-gory for businesses seeking to achieve maximum brand impact at optimal ROI.

The influencer market is on track to reach $15 billion by 2022, up from $8 billion in 2019, according to an analysis by Business Insider; about four in five brands now employ Instagram and nearly half utilize Facebook for influencer campaigns. So move over, Maytag repairman and Flo from Progressive — it’s Kylie Jenner’s game now.

In The Age of Influence: The Power of Influencers to Elevate Your Brand, social media expert Neal Schaffer has produced a definitive guide for businesses large and small seeking to tap those influencers best positioned to boost their com-pany’s visibility, customer affinity, and sales. In this thorough volume, Schaffer describes how influencer marketing has become a global phenomenon, noting

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that in China, revenues generated from influencers are 30 times greater than in Europe, and half of the top 10 fashion brands on the leading shopping site Tao-bao were launched by influencers. And he reveals the best practices for creating successful, on-brand, long-term collaborations with seasoned spokespeople. (“It’s a marriage, not a one-night stand,” Schaffer explains.)

The author stipulates up front that this book is not about developing an individual brand but, rather, “engaging the voices of influencers — ‘leveraging

the other’ as I call it — to spread your message.… It is about returning to the original premise of engaging in social media: Inciting word-of-mouth conversa-tions about your brand.” And though influencers may specialize in short-form, evanescent content, The Age of Influence is a rigorously sourced guide for any business that has yet to get its arms around the often intimidating beast that is influencer marketing.

Before describing how to design a solid influencer strategy from the ground up, Schaffer explains how we arrived at the age of the influencer, a trend inextri-cably linked to consumers’ growing interaction with and dependence on social media. He goes on to meticulously lay out the “new rules” of organic social me-dia marketing, the methods and tools by which a business can grow its social media presence at scale, and how to confront the almighty algorithm.

Schaffer details the emergence of the “visual voice” in social campaigns, the struggle that brands often have finding theirs, and creative solutions marketers can employ by partnering with influencers. The author pithily notes: “People tell stories that brands can’t.” The numerous case studies include Nordstrom, Target,

When it comes to influencers, bigger isn’t always better, as social media accounts with smaller

followings often have a more engaged audience than larger ones.

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the Hawaii Tourism Bureau, and the Salvation Army. He notes how some com-panies have even tapped their own employees as influencers, with winning results. Cathay Pacific Airways came to realize that its team members, being the most ex-pert travelers around, were perfectly aligned with the company’s brand values and its marketing mission. In another example, nutrition brand GNC engaged with targets who were new to health and fitness and who were turned off by the jargon of the “gym rat” by enlisting influencers to speak in more welcoming language.

Schaffer expertly dissects the influencer landscape, explaining the differ-ent types and levels of brand emissaries — from celebrities with their built-in legions of followers to nano-influencers with a relative handful of fans. Bigger isn’t always better, as social media accounts with smaller followings often have a more engaged audience than larger ones.

Another chapter, “16 Different Ways to Collaborate with Influencers,” ad-dresses affiliate marketing, content creation and sourcing, event coverage, sweep-stakes, and more. With an eye on the future, Schaffer explains how artificial in-telligence is poised to revolutionize the influencer marketing space.

Despite the power and ubiquity of technology, it’s clear that the influencer game, though often shallow, is a profoundly human one, for it revolves around the idea that people listen to and value the opinions of other people. And per-haps that’s the biggest takeaway from this trio of books. Whether it is in urging a restoration of soul to business or making a plea to recognize that customer ser-vice entails understanding and meeting human needs, today’s smart marketers grasp that great business ideas start with people and work through technology. +

Tony Case

[email protected]

is a journalist who has written

extensively about media and brand

marketing for more than two de-

cades. His work has been featured

in publications including Ad Age,

Adweek, and Variety, and he has

appeared as a marketing expert

on programs such as ABC’s Good

Morning America, CBS This Morn-

ing, and CNBC’s Squawk Box.

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S+B’sSELECTBUSINESSS

BOOKS2020


Rosabeth Moss Kanter, Think

Outside the Building: How

Advanced Leaders Can Change

the World One Smart Innovation

at a Time (Public Affairs, 2020)

S T R AT E G YGary Hamel and Michele Zanini,

Humanocracy: Creating

Organizations as Amazing as the

People Inside Them (Harvard


N A R R AT I V E SJim Rasenberger, Revolver:

Sam Colt and the Six-Shooter

That Changed America

(Scribner, 2020)

M A N A G E M E N TB.J. Fogg, Tiny Habits: The

Small Changes That Change

Everything (Houghton Mifflin

Harcourt, 2020)

E C O N O M I C SZachary D. Carter, The Price of

Peace: Money, Democracy, and

the Life of John Maynard Keynes

(Random House, 2020)

T E C H & I N N O VAT I O NStefan H. Thomke,

Experimentation Works: The

Surprising Power of Business

Experiments (Harvard Business

Review Press, 2020)

M A R K E T I N GRishad Tobaccowala,

Restoring the Soul of Business:

Staying Human in the Age

of Data (HarperCollins

Leadership, 2020)

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THOUGHT LEADER

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The Thought Leader Interview: Jamil ZakiThe Stanford psychologist explains that whether we are dealing with business, politics, or personal matters, it’s possible — and advantageous — to train ourselves to be more empathic.

BY AMY EMMERT

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Jamil Zaki’s The War for Kindness wasn’t always a war. When the Stan-ford University psychology professor started writing his acclaimed book, which asserts that empathy is a skill that can be built, it was called Choosing Empathy. But then something happened that made the

choice seem much more difficult than simply reaching for the top shelf of avail-able emotional capacities.

In 2016, when Donald Trump stunned the world by winning the U.S. pres-idential election, he exposed deep, acrimonious, and seemingly unbridgeable chasms among people. The election was, at the time, the culmination of a series of such divisive events around the world. By 2016, the Syrian refugee crisis was at its height, with nations arguing over whether to tighten borders. The U.K. had voted to leave the European Union in 2016. And tens of thousands had perished in hate- and terror-driven attacks around the world, including in France; at the Pulse nightclub in Orlando, Fla.; and in Pakistan.

Forces in the world that were tearing everyone apart appeared to be at a pow-erful climax. People were not only angry, but seething. And they seemed to be actively embracing anger and rejecting empathy. In this environment, choosing empathy had become a radical act — a bold play for peace in a time of literal and figurative war.

Zaki’s interest in empathy sprang from a war of sorts in his own life. His parents divorced when he was a young boy, and their bitterness toward each other tugged at him. As they shuttled him from house to house in their suburban Massachusetts hometown and sometimes tried to get him to pick sides, he made a choice to instead try to understand their distinct perspectives. And as he worked at this, he realized that two seemingly oppositional realities could be true.

From this early life, Zaki went on to earn his bachelor’s degree in cognitive neuroscience from Boston University and his doctorate in psychology from Co-lumbia University. He did a postdoctoral fellowship at Harvard University, and he became a husband and a father himself. In the psychology courses he teaches

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now at Stanford, including one called Becoming Kinder, and in his work as the director of the Stanford Social Neuroscience Lab, he points out that as he did with his parents, we can all train ourselves to be empathic.

And there’s good reason to do so, Zaki says. Our world is full of daily bat-tles in which we’ve consciously or subconsciously sorted ourselves into “us” and “them” camps. Empathy creates links between camps, giving us collective power to accomplish more together than we ever could apart. These aren’t just feel-good ideas. Several academic studies show that empathic individuals excel profes-sionally and experience greater subjective well-being. Research also reveals that the most successful workplace teams are those in which employees report high levels of psychological safety and interpersonal sensitivity. In this interview with strategy+business, Zaki shared more about his work and the strategies he recom-mends for building empathy.

S+B: Would you explain the differences between empathy, kindness,

and niceness?

ZAKI: Empathy is, as psychologists understand it, an umbrella term that captures at least three ways that we connect with one another’s emotions. One is emo-tional empathy, which is vicariously catching somebody else’s feelings. Maybe someone stubs her toe, and you feel a little jolt of pain yourself; that would be emotional empathy. Cognitive empathy is your attempt to understand what someone else is feeling and why. And then empathic concern or compassion is your motivation to improve others’ well-being.

Amy Emmert

emmert_amy@ strategy-business.comis senior editor of

strategy+business.

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Kindness is an action that we pursue, and it’s split into two types. If I help you, but in a way that also helps me, that’s cooperation. If I help you in a way that doesn’t help me, or even involves me sacrificing something, that’s altruism.

Niceness, or politeness, is the avoidance of other people’s discomfort. Kind-ness and niceness can be the same, but they’re not always. For instance, in the workplace, it can feel uncomfortable to give difficult feedback to someone. But if you want the person to improve, the best thing that you can do is to say that dif-ficult thing. This creates a direct conflict between niceness and kindness. Giving polite feedback, in that case, is actually unkind, because it deprives the person of an opportunity for growth.

S+B: The War for Kindness was published a little over a year ago, before

COVID-19 and before the killing of George Floyd. Do you think we’re living in

a more or less empathic world now than when you wrote the book?

ZAKI: Our most difficult moments force us to contend with our vulnerability and our mortality, and we realize how much we need each other. We’ve seen this during the pandemic and the continued struggle for racial justice. There has been an enormous amount of suffering but also an intense desire to come together, and a lot of mutual aid and support. This painful moment has produced a lot of prog-ress and clarity around our values.

Yet modern life, especially in these pandemic times, makes it harder than ever to connect with each other, and this disconnectedness can erode our empa-thy. But we can fight back. We can work to empathize more effectively.

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The pandemic, the economic collapse associated with it, and the fight for ra-cial justice have increased all sorts of feelings, including empathy, anger, intolerance, fear, and stress. A big question for the next two to five years is which tide will prevail.

S+B: How do you think the fractiousness and disconnectedness that we see in

these current political situations and social crises are replicated in workplaces?

ZAKI: I work with a lot of leaders and organizations, and I see three main prob-lems. The first is in how people think. There’s this notion, symbolized most fa-mously by the character Gordon Gekko in the movie Wall Street, that kindness and empathy are somehow fundamentally at odds with success. This mindset holds that in a world of ruthless competition, focusing on ourselves is the only way to get ahead, and sacrificing for others is bad for business.

Another problem is that there’s tribalism within organizations, especially larger organizations and those that are trying to put different groups of people with different goals under a single tent. For instance, I’ve worked with companies that include both scientists and people who are trying to market the scientists’ work. These two groups have the same overarching goal, but they often feel like they have totally different goals, and it’s often easier for them to see their differ-ences than what they have in common. This sense of disconnectedness can create antipathy rather than empathy.

And third, there’s a paradox within management. People who are empathic tend to be nominated by their peers as natural leaders and tend to rise. But as they gain more power, they often shed their empathy.

S+B: Do you think that change emanates from within the individual, or do you

think cultural forces and attitudes cause this to happen?

ZAKI: I think that they’re wound up together, but they can be separable. In ex-periments, the psychologist Michael Kraus at Yale has found that making people think of themselves as having high status decreases their ability to read other

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people’s emotions. And another study by Adam Galinsky at Northwestern dem-onstrates that giving a person even a temporary position of power will make that person temporarily worse at seeing other perspectives. So, even just thinking of yourself as powerful focuses you inward.

But there are also these broken but sticky theories that leadership requires a hard-nosed, unemotional approach. This thinking is almost entire ly back-ward. Empathic leadership and transformative leadership are en or mous keys to organizational success.

S+B: Can you talk a little bit more about how empathy is key to

organizational success?

ZAKI: Starting in 2012, Google ran an internal analysis called Project Aristotle. The company was looking at what makes collaborative teams succeed. They thought it would be talent, but in fact, it was the psychological safety among the group and their interpersonal sensitivity, or ability to read each other.

It’s also the case that when employees perceive their organization or their boss as empathic, they are more creative, more productive, have greater morale and loyalty, and are even willing to work longer hours. There’s also a lot of evidence that when feedback, even difficult feedback, is delivered empathi-cally, the people who receive it are better able to use it to develop and grow, because they don’t feel attacked. And there are connections between measures of organizational empathy and bottom-line success, including profits that a company draws.

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A point here is that a business is like a crew team. In order to be competitive as a unit, it’s critical that everyone be rowing together. That togetherness is an absolute key to success.

S+B: What about in an academic setting, like the one you work in and that

millions of students, teachers, professors, and parents are reinventing because

of COVID-19? How do you keep everyone rowing together?

ZAKI: When the pandemic started, I was teaching a large introductory psychol-ogy class. My students, most of whom were first-year students, had just been asked to return home. They were under enormous stress, and they were lonely.

So what my teaching team tried to do was to send a clear message that a classroom is not just a place to learn, it’s also a place to feel community. We re-shuffled our assignments and lectures to allow students to have more of a voice in the classroom. I cut down the percentage of lectures that were just me yammering on, and I invited much more discussion. We also changed our assignments from one-person assignments to group assignments to give students a chance to con-nect and work together.

S+B: Is there a connection, then, between empathy and innovation? You talk in

your book about the role of imagination in helping people build empathy. Does

that ability to imagine another perspective also enable innovation?

ZAKI: Absolutely. For instance, in many design firms, the first step employees take when they want to create something new and useful is to put themselves in

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the body and mind of the end-user. Through that simulation, they’re better able to innovate. This is called empathic design.

And there’s another way organizational empathy can foster innovation, which is by creating a feeling of safety. According to a study by researchers at Texas A&M University, when people feel that their leaders and managers are empathic, they spend more of their time taking risks. They feel safer trying out new ideas because they know that even if they stray off the path, they aren’t going to be scolded or shut down. And as a result, they are more productive and innovative.

S+B: But, to take Gordon Gekko’s side for a moment, can there be such a

thing as too much empathy? Many managers “disconnect” to handle layoffs

or performance issues among their staff. If a manager is naturally very

empathic or works on developing empathy, can that emotional connection

with employees get in the way of good business decisions?

ZAKI: Empathy is a skill that we can tune. In the workplace, when we’re in the position of doing something that causes harm, it can make us experience a lot of distress and guilt. We often respond to this by disconnecting. We try to turn off our emotions entirely. But this can leave others feeling enormously alienated. In fact, one study found that people who were laid off and felt that they were laid off without compassion were more like-ly to file wrongful termination claims.

But the other option doesn’t have to be that you feel overwhelmed by emotion. People in leadership positions need to make sure they’re not draining themselves by taking on other people’s pain. You can’t pour out of an empty cup.

This is where tuning empathy comes into play. There are ways to give bad news compassionately, and it turns out that it makes a difference. People can actu-

“When people feel that

their leaders are empathic,

they...feel safer trying out

new ideas.”

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ally feel grateful to somebody who lays them off if it’s done with procedural justice and with an eye toward really creating opportunities for them in the future.

S+B: I was intrigued by the story you told in your book about using a mental

health app to safely share with an anonymous stranger your anxieties about

finishing up your book. Do you think there’s a way to create safe, stigma-free

spaces at work for people to release their feelings, or is it best to keep those

conversations out of the workplace?

ZAKI: Well, first of all, I think we need [those conversations] now more than ever. People at work have a unique connection to each other’s experience and a unique shared understanding, because they have shared circumstances.

Now, it can be dangerous if this venting turns into a ring of gossip, and that’s what happens when we don’t systematize peer support. If people don’t have a system and support for talking to each other, they’ll do it at happy hours and in hallways. A more productive idea is to create networks — spaces and time for people to support one another and share their experiences.

One example that I read about was at Johns Hopkins, where the hospital’s management asked employees, “Who among your colleagues do you find really supportive?” They found these “glue people” in the organization, gave them some training, and then — this is crucial — dedicated paid time for them to offer sup-port to their colleagues.

S+B: You talk about the importance of getting to know those we think of as

“other” in order to build empathy and bridge gaps. How does this translate to

the workplace?

ZAKI: I’ve developed a set of kindness challenges, these little empathy-building exercises based on my book, and I call one of them “disagreeing better.” The idea is to move beyond the source of difference and to try to find some common ground. And the way that I encourage people to do this is by telling stories.

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There’s evidence from political science and the practice of “deep canvassing” that storytelling is a powerful way to bridge differences.

Deep canvassing is an approach that’s been pioneered in the past couple of years, where you go door-to-door talking about an issue, and instead of spewing statistics or implying that anyone who disagrees with you is a bad person, you ask people to share some of their experiences. For instance, in canvassing for trans rights, you might ask, “Have you ever felt like you were left out? Have you ever felt like you couldn’t express yourself?” You listen to the person’s story and then share some of your story, too. And you end up finding a point of common ground and then using that point of common ground almost like an Archimedean point or fulcrum.

Going back to the example of scientists and marketing people in a company who are working on the same product but feel at odds with each other, let’s say that the product they’re making is a medication or technology that helps people in some way. Enthusiasm for that prosocial benefit, that mission of helping oth-ers, might be something that the two groups share, and they can come to see that by telling each other stories about their motivations. Finding that commonality and hold ing onto it, as opposed to just staying on the surface, can be a deep way to bridge differences.

S+B: And how do you get people to engage in telling these stories that move

them to this point of understanding?

ZAKI: Psychologists have designed ways to get conversations to deepen system-

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atically. There’s this paradigm that Art Aron created in the 1990s called the Fast Friends paradigm. It’s a list of 36 questions that go deeper and deeper.

It starts out with a question like, “Who would you want to have dinner with if you could choose anyone living or dead?” Then it gets all the way to a question like, “What do you value most in life? What do you fear most?” It takes 30 to 60 minutes to have the conversation, and it basically creates friend-ship out of nowhere, because it gets people to talk about what really matters to them quite quickly.

This is what deep canvassing is about. It gets you right into the guts of what makes all of us similar, which is hope and fear, our feelings.

S+B: When it comes to empathy in the workplace, how would you go about

identifying the potential empathic influencers who can be role models?

ZAKI: Some organizations have mapped their communities of helpers. They’ve asked their people to identify others within the company who’ve helped them in the past couple of weeks with anything at work, and also to say whom they’ve helped. By doing this, they’ve been able to identify those glue people, the natural support providers within their organizations.

We can use a similar approach to ask, “Who has made you feel cared for and understood? Who’s made you feel heard recently?”

S+B: How do you make systems and practices like these stick — not only

encouraging empathy, but making it an expectation?

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ZAKI: One way to encourage empathy is through reward. I often think that the loudest voices in our culture tend not to be the kindest and most empathic. So I often encourage leaders to make empathy loud. If they see someone or if they learn about someone helping others, they can talk about it and recognize that person in an all-hands meeting.

Another way to do it is when thinking about promotions and bonuses and other material rewards. Factor in not just an individual’s output but also the way they have facilitated other people’s output.

S+B: COVID-19 has forced workers to step out from behind a figurative curtain,

revealing themselves in their personal settings. And in seeing these realities,

employers have had to exercise some compassion. But do you think compas-

sion fatigue will set in or already has? How can managers actively combat it?

ZAKI: Leaders need to settle in for another long season of prioritizing the human-ity of the people who work with and for them. Employees are going to remember

for years how their leaders and manag-ers showed up or did not show up for them. There are some organizations whose cultures are going to crumble through a lack of connection during this time, and there are others whose organizational cultures will be renewed and strengthened.

To combat compassion fatigue, leaders need to first care for themselves. Empathy starts at home. It’s critical that people in leadership positions make sure they’re not draining themselves, because that’s actually not setting an example for employees to follow.

The second thing leaders need to do is to acknowledge the ways that their struggles overlap with their employees’ struggles. My kids have been running

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around during a lot of my Zoom meetings, and at first I was trying to keep them out of the picture, doing the BBC Dad thing. But we’re all BBC Dad or Mom now. And I think we just have to let the lines between work and home blur a little. It’s kind of nice that my colleagues have met my kids and I’ve met theirs and that we know a little bit more about each other’s lives and can talk about that.

It’s important to make that space. If you need to talk shop with colleagues for 30 minutes, book 40, because it’s important to start every conversation these days by checking in and giving people room to assert their humanity and tell us about what they’re going through.

I think this also needs to come in the form of flexibility as a standard policy. It’s not enough to check in for 10 minutes at the top of a weekly meeting and then expect the exact same thing from your employees that you would otherwise. If someone’s caring for a sick relative or caring for children, make room for that. The compassion you give might be repaid 10-fold in loyalty, morale, connection, and a sense of identification and togetherness.

S+B: You write in your book that technology “can make it harder for us to see

one another. But used differently, it can do just the opposite.” How have you seen

this come true in these pandemic times?

ZAKI: One thing that’s been really humanizing about videoconferencing is not just using it to have face-to-face conversations, but using it to replicate the side-by-side experiences that we sometimes have, like watching movies together, cook-ing dinner, or just having a glass of wine. Hanging out on video can be more powerful than just having a conversation, because when you’re together with your friends and colleagues, you’re not just constantly talking. There are lulls, and those lulls are the space in which togetherness occurs.

Let me also say, though, that my feeling about digital togetherness was a lot more optimistic in months one and two of the pandemic. I think a lot of us now have a lot of Zoom fatigue. So I think it’s important to be flexible and to ask our-

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selves which digital connections are working for us, with different people, in dif-ferent settings. Is it a phone call? Is it a text? Is it a video chat? When is each ap-propriate? Fifty hours a week of Zoom meetings is not healthy for anybody. We need to be mindful about when digital technologies are bringing us together and when they’re stressing us out.

S+B: How optimistic are you about the potential for people to become more

empathic and for this to change our world and our businesses for the better?

ZAKI: Imagine sending the front page of the New York Times from today to your-self a year ago. We’re living in the strangest time I can recall in my adult life, so of course that’s changed my outlook about a lot of things, including empathy.

I’m experiencing an intensification of what I felt when the book published, which was neither optimistic nor pessimistic. I don’t know what the future holds. I really do see big, powerful cultural trends that are continuing toward extrem-ism: intolerance, division, isolation, alien ation, and anxiety.

I’ve also seen enormous effort and enormous progress toward humanizing diverse voices and toward affirming our desire for connection. The loneliness of this time has highlighted how much we desperately need each other.

How things turn out is up to us more than we know it is. If I have anything to say to those reading this interview, it’s just to remember that you are part of creating this future. Your decisions, and mine, and ours will create it.

Maybe business will lead the way. I’ve never been asked by so many leaders in so many different organizations for concrete help injecting the science of empathy into the way that they work. If we can reform and build more con-nected work cultures, that momentum can spread beyond work and into our culture at large. +

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During the COVID-19 lockdowns, married couples have found them-selves unexpectedly becoming office mates. Working from home has its charms, but conducting too many Zoom meetings in spare bed-rooms can test the work–life balance of any marriage. The inevitable

interpersonal tension has prompted attorneys to predict a surge in divorce cases.It stands to reason that CEOs will not be immune from the expected uptick

in divorce proceedings, and that should be cause for concern to shareholders and boards of directors, according to a new study (which was written before the CO-VID-19 outbreak). That’s because after CEOs get divorced, the study finds, they typically curb their business ambition and, at the same time, get a hefty pay raise.

Combining data on executive compensation, stock prices, and firms’ ac-counting returns, the author analyzed a sample of 80 divorce cases involving CEOs at S&P 1000 firms (primarily from the United States and all quoted on U.S. stock exchanges) over a 16-year period. Information on CEO divorces came from a variety of sources, including personal and corporate websites, media re-ports, and public records databases.

The author found that CEOs going through a divorce are significantly less likely to take investment risks at their firm — which could cause them to miss out on fast-changing market opportunities that might be useful if the firm needs to consolidate its financial position. This risk aversion is manifested in several ways: Il

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Paying the price when the CEO gets divorced

Many top executives who go through a legal separation become more cautious with the firm’s investments.

BY MATT PALMQUIST

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In the year of a CEO divorce, firms have less volatile cash flow and expenses, lower equity risk, and fewer abnormal accruals on their accounting ledger.

To incentivize their CEO to take risks again, firms seem willing to increase their leader’s compensation so they can re-diversify their personal portfolios in the year after a divorce. From the year preceding a divorce to the year after, the author found, the average CEO in the study received an increase in salary of US$150,000; bonuses of $260,000; restricted stock grants of $450,000; and op-tion grants of more than $1.2 million. It adds up to more than $2 million in ad-ditional compensation per divorced CEO. And that’s after the author controlled for a variety of factors that could otherwise account for this substantial raise — including firm size, growth, cash constraints, and CEO age and gender. The author also compared the firms with divorced CEOs to a matched set of peer firms with non-divorced CEOs, and found no similar spikes in compensation. “These results highlight the importance of [a CEO’s] personal wealth and, more generally, personal and family life on corporate risk policy,” the author writes.

Divorce is a uniquely personal (and painful) experience; inquiring about the health of a prospective CEO’s marriage is usually not allowed during the inter-view process. Some things are out of a board’s control, the author notes, but that doesn’t mean directors shouldn’t be prepared for what’s coming: in this case, a likely hike in their CEO’s paycheck, if he or she gets divorced, to realign their risk-taking incentives. +

Source: “Love or Money: The Effect of CEO Divorce on Firm Risk and Com-pensation,” Jordan Neyland (George Mason University), Journal of Corporate Finance, Feb. 2020, vol. 60

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2020-11-01 strategy business

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