Private company issues and opportunities: Global ......global markets, taking on new partners...

Private company issues and opportunitiesGlobal considerations for 2019s

Executive summary 4

Disruption 6

Leveraging technology

Analytics 10

Artificialintelligence 14

InternetofThings 18

Improving infrastructure

Automation (RPA) 22

Cybersecurity 26

Finance transformation 30

Future of work 34

Expanding horizons

Globalization 38

Governance 42

M&A 46

Contents

3

Private company issues and opportunities

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Manypeoplethinkofdisruptionassomethingtoavoid.Synonymsforthe

word—disturbance,interruption,distraction,interference—allcarryanegative

connotation.Butintoday’scompetitivebusinessenvironment,disruptioncan

bearealpositive—ifyouareembracingitandcapitalizingontheopportunities

itcreates.

Acrosstheworld,that’stherealityformanyprivatecompanies.Theyare

acknowledgingthatthemarketplaceismorecomplexandfast-pacedthanitwas

justadecadeortwoago.It’snotjusttechnology,talent,orchangingconsumer

behaviorsandexpectationsdrivingthisdisruption—it’stheinterplayofallthree.

Trulyinnovativecompaniesareproactivelycombiningthoseinputstotransform

theirbusinessmodel,pivotquicklyinpursuitofnewopportunities,andmanage

resourcesmoreeffectively.

We undertook this report to provide a perspective for private companies,

drawingontheexperienceofnearlytwodozenDeloittesubjectmatter

specialistsaroundtheworld.Wesoughttouncoveropportunitiesforprivate

companies to succeed in the current environment and drive disruption rather

thanbedisrupted.Whatwefoundisthattheopportunitiesavailabletoprivate

companiesfallintothreemaincategories.

Thefirstisusingtechnologytogetsmarter.Ofcourse,thatmeanssomething

differentforeachcompany.Somearewellpositionedtouseadvanced

analyticstobetterunderstandclients,markets,andtrends.Otherscanemploy

connecteddevicesthroughtheInternetofThingstodrivenewinsights.Still

othersstandtotransformcustomerinteractionswithartificialintelligence.

Executive summary

Mark Whitmore

MennoltBeelen

Global considerations for 2019

5

Mark Whitmore Mennolt BeelenDeloitte Private Global Leader Deloitte Private Global Co-LeaderDeloitte Canada Deloitte Netherlands

Thesecondcategoryofopportunityisrigorousself-improvementwhenit

comestosupportinginfrastructure.Technologyhasahandhere,too,with

innovations such as robotic process automation, which can not only take on

clerical-typetasks,butalsoreshapemajorpartsofbusinessfunctionssuchas

finance.Companiescanalsobemorevigilantaboutcyberriskandsecurityand

buildingculturesaroundstrongercompliance.Theopportunityforconstant

improvementextendstomanagingworkforcesaswell,asnewtalentmodels

providemoreflexibilityandaccesstoin-demandskills.

Finally,manyoftheopportunitiescapturedhereincomefromkeepingthe

bigpictureinmind.Whethercompaniesareexpandingtheirsightstonew

globalmarkets,takingonnewpartnersthroughacquisitionorjointventure,or

adoptingbestpracticesingovernancetorealizethebenefitofindependentand

diverseperspectives,successdependsonsteppingbackfromthedaytoday

andthinkingstrategicallyaboutwhatthecompetitivelandscapeisgoingtolook

likenotjustnextyear,butfivetotenyearsinthefuture.

Inthearticlesthatfollow,wetrackhowthesethreethemesarehelpingprivate

companiespositivelydisruptthestatusquoacrossmanybusinessdimensions.

Wealsopointoutwherecompaniesmightbeabletodobetter.Neverstop

learning.That’swhatwetellourselveseveryday,andit’sclearfromtheprivate

companieswesupporttheworldoverthatit’sarefrainasuniversalastheir

desiretosucceed.


6

Disruption


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“Inmanyways,Ottoisthemanifestationoftheexponentialgrowthoftechnologiesandthedisruptionit’scausingacrosseverysectoroftheeconomy,”saysTerryStuart,ChiefInnovationOfficerforDeloitteCanada.“WherebeforewemighthavebeentalkingaboutinnovationsparkedbyroboticprocessautomationorartificialintelligenceorInternetofThings,nowwe’retalkingaboutallthreeinonepackage.It’sthelayeringofallthesetechnologiesthatisacceleratingthepaceofchange,andit’swhatmakesthistimesoexcitingandalsososcary.”

Technologyisn’ttheonlyforcedisruptingbusinessesinthisenvironment,butithasahandinallofthem.IncreasedglobalizationstemsatleastinpartfromtheInternet-enabledfreeflowofinformationacrossborders.Digitalizationisupendingtalentmodels

acrosswholeindustries,leavingmanyworkersdislocatedandcompaniesstrugglingtofindreplacementswithnewskills.Increasedtransparencyaidedbytechnologyisputtingdownwardpressureonpricingbyempoweringconsumersandbusinessestocomparisonshopandforceconcessions.Socialmediahaspromotedgreatercorporatesocialresponsibility.Andsoon.Andsoon.

The power of the pivotCompaniesthataresucceedinginthisenvironmentnotonlyrecognizetheseforcesarecolliding,butareadaptingtotheemergingbusinesslandscape.“Intoday’seconomy,thosethatarenimbleandcanpivotareultimatelygoingtowintheday,”Stuartsays.

MeetOtto,theautonomous heavy-loadmaterialtransporter.The wheeled machine, which looks like an oversized floating computer scanner,

is capable of moving up to 3,300 pounds around a warehouse without incident.

It takes in its environment and learns, meaning that new obstacle somebody put in

its way is now part of its programming. Otto receives orders, reports on its status,

and notifies human operators of issues in real-time. And it has revolutionized

warehouse management and logistics as we know it in just a decade: Otto’s maker,

privately owned Clearpath Robotics, was founded in 2009 by a group of four

University of Waterloo graduates.1


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Pivotscanresultinbigpayoffs.Slack,theimmenselysuccessfulteammessagingapp,startedoutasavideogame.2 Pinterest was a platform for people to browse and shop theirfavoriteretailersbeforetransitioningintoanaffinityappforhousingpeople’scollectionsoftheirfavoriteitemsandideas.3 Starbucksasweknowittodaymightnotexistifithadn’tshifteditsfocusfromsellingespressomakersandcoffeebeanstoopeningcoffeehouses.4

Thenthere’sthecaseofChina’sPinduoduo.Thecompany’sfounder,ColinHuang,aChinese entrepreneur who started his careerinSiliconValley,workedonearlysearchalgorithmsfore-commerce,andreturned to his native country to start his owncompany.5Hisfirstcompanysoldconsumer electronics and mobile phones, butHuangrealizeditwastoosimilartoothere-commercesites.Eventually,herealized hecouldcombinee-shoppingwithsocial networkingtocreateashoppingappin which users earned discounts on purchases whenfriendsjoinedthem.Pinduoduowas founded in 2015 and recorded more than 100 billion RMB in merchandise sold just twoyearslater.6 The company went public in July2018,raising$1.6billion.7

“PinduoduocaughtthewavebecauseitwasabletousetechnologytotakeadvantageofChina’sslowingeconomyandthetrendofconsumerswantingtospendless,”saysRogerChung,aTechnology,MediaandTelecommunications industry researcher forDeloitteinShanghai.“It’sapowerfulexample of how private companies can quickly capitalize on disruptive forces to leapfrogthecompetitionvirtuallyovernight.”

“You’regoing to see the smaller companies definitelytakingadvantageofawiderrangeof disruptive brainstorming.”

Terry StuartChiefInnovationOfficerforDeloitteCanada

Many private companies have an inherent advantageinoverhaulingtheirbusinessmodel,Stuartsays.Asagroup,theytendtohavemorestreamlinedorganizationswith less bureaucracy and direct access toleadership.AndtheyhavelessbaggageintermsoflegacyITsystemsandotherinfrastructure, which means fewer sunk costsandfewerintegrationissuestoinhibitnewideas.Theyalsocanmaintainalong-termperspectivebecausetheirshareholdersaren’tpressuringthemtomeetrevenueprojectionseachquarter.

“Private companies have some inherent advantagesinbeingabletodealwithanddrivedisruption,”Stuartsays.“Andinalotofcases,theideasfornewgrowthdon’thavetobeallthatnew.”

Stackable innovationPrivatebusinessescaneasilyturntoopen-source tech stack tools to lay the software foundationfortheirnexte-venture.

“Therereallyaren’tthatmany‘aha’moments,”Stuartsaid.“Therealbreakthroughinnovationssuchasthesmartphoneweredecadesinthemaking.Whatcompaniesarefindingoutisthatwhat’smoreimportantaretheprocessesand people you put in place to take advantageofitandgettingouttomarket.”

Whatisdifferentaretheapproachescompaniesaretakingtosolvesuchproblems.Somearehosting“hack-a-thons,”whichbringalargenumberofpeopletogetheroverseveraldaystocollaborateoncomputerprogrammingandscoutnext-generationtalent.Anotherincreasingly


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For more information on this topic:

Roger ChungSeniormanager,[email protected]

Terry StuartChiefInnovationOfficer,[email protected]

populartacticisgamification,aprocessoftakingsomethingthatalreadyexists—awebsite, an enterprise application, an onlinecommunity—andintegratinggamemechanics into it to motivate participation andencouragefreshinsights.Andthenthere are crowdsourced competitions inwhichcompanieschallengeoutsideinnovators to pitch solutions to problems they’refacingforasetamountofmoney.“You’regoingtoseethesmallercompaniesdefinitelytakingadvantageofawiderrangeofdisruptivebrainstorming,”Stuartsays.

Task orchestratorsOnemajorconstraintforanycompanythesedaysistalent—wheretofindit,howtolandit,andhowtoholdontoit.Tightgloballabormarketsareintensifyingthewarontalent, and many smaller private companies don’thavethebrand-nameappealofpublic,multinationalcorporations.Youngerworkersaredoingsomeofthedisruptingbychangingjobsmuchmorefrequentlythanthosefrompreviousgenerations.Andrecenttradedisputesandpolicychangeshaveslowedtheflowofskilledworkersacrosssomeborders.8

Pasttalentmanagementstrategiesreliedontheeducationsystemstructure.Butrecruitersandemployersarediscoveringnowthatthesamesystemisn’tkeeping

upwiththepaceoftechnologicalchange.Artificialintelligenceandblockchainaretwoexampleswhereuniversitiesarestrugglingtocatchup.“Thebesttalentavailableisn’tnecessarilycomingfromthego-toeducationalinstitutionsofold,”Stuartsays.

Talentshortagesareraisingthestakesforretainingtoptalent.Chungsaysaprivatecommercial satellite launch company recently tried to recruit a scientist at a state-ownedenterpriseinChinawitha1millionRMBsalary.Theywererebuffedwhen the enterprise formally complained tothegovernmentthatitwouldn’tbeabletosolvecriticalproblemswithouthim.Few occupations are in such hot demand asthosethatcanfindandextrapolatedata.Forexample,jobpostingsfordatascientistsintheUnitedStatesroseasmuchas75percentbetween2015and2018atsomejob-searchsites,anddatasciencePhDsnowcommandstartingsalariesof$300,000ormore.9

Buteveninthehuntfortalent,technologyisofferingsolutions.Theriseofcontingentworkers means many private companies canscaleupquicklywithouthavingtotakeonalotofoverhead.Thegigeconomyhasinfiltratedalmosteverysectoroftheeconomy,fromhealthcaretomanufacturingtofinance.“Privatecompaniesare

increasinglybecomingtaskorchestratorsratherthanfull-timeemployers,”Stuartsaid.

Preparing for quantum changeEvenwiththerighttalentonboard,private company leaders must work hardertofosteracultureofcollaboration.Businessecosystemsareextendingwellbeyondcompanies’ownworkforces,extendingacrossorganizations,sectors,andgeographies.Buttheresourcesthatmakeupthoseecosystemsdon’tconnectorganically.InhisbookWhere Good Ideas Come From: The Natural History of Innovation, authorStevenJohnsonarguesthatgoodideasgenerallyevolveovertimeas“slowhunches,”andthatit’sonlywhenyouputpeopletogethertosharetheirhunchesthatrealinnovationoccurs.10

Ifthat’strue,thentheincreasingconnectivitythatgovernsbusinessinteractions today is both a source of disruption and an opportunity for companiestodosomedisruptingoftheirown.“TheWorldEconomicForumiscallingthis the Fourth Industrial Revolution,” Stuartsays.“Certainlythiskindofquantumchangedoesn’tcomearoundallthatoften.Every private company out there has to be thinkingabouthowthisexponentialcurvewe’reonisgoingtoaffectthemandhowthey’regoingtoprepareforit.”


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Analytics


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Professional athletes use data analytics for work, even when players are

off the job. Every team in the NBA has data analysts on staff.1 Coaches use

the technology to pick the best new recruits. Some players wear monitors

when they’re asleep to track the effects of fatigue.2 Whether in professional

sports or shipping, analytics has transformed how organizations learn

about their own performance.

Privatecompaniesareembracinganalyticinsightswithenthusiasm:InDeloitte’smostrecentglobalsurveyofprivatecompanies, 62 percent of respondents saidthey’reusingtechnologiessuchaspredictiveanalyticstoincreaseefficiency,while 46 percent of respondents say thetechnologieshelpthemimprovecustomerengagement.3 Yet one of the biggestchallengesforprivatefirmsisfindingtherightpeopletoputdata-relatedtechnologiesintoaction.InaDeloittesurveyofCIOsaboutthetechnicalskillsthatwillbemostdifficulttofilloverthenextthree years, analytics and data science are atthetopofthelist.4 Companies that can attract data scientists will put them to work on projects such as immersive analytics—whichnotonlypinpointsdigitalinformationbutprovidesamixed-realityviewoftheassets—helpingcompaniesfurtherelevatetheirunderstandingofthedatathatsurroundsthem.5

IssuesTheshortageofprofessionalswhoareproficientinanalyticsisapersistentlytoughchallengeforprivatecompaniesastheyconsidertechnologyinvestments.Thetechnologiescanofferamplifiedintelligencethat leads to faster transformation; the solutions are more powerful than those of priorgenerations;and,cloud-basedaccessmakesthemlessexpensivetoacquire.6Butthe competition for data scientists who can managethetechnologyisfierce.JobpostingsfordatascientistsontheUSplatformIndeed.comincreased75percentfrom2015to2018.Meanwhile,annualsalariesfordatascientistsatlargeconsultingfirmscanapproachhundredsofthousandsofUSdollarsforcandidateswithdoctoraldegrees.7

“Eventhoughthetechnologyisgettingcheaper all the time, people who really understandthetechnologyarebecomingmoredifficulttohire,”saysTomDavenport,professoratBabsonCollegeandindependentsenioradvisortoDeloitteAnalytics.“Private companies may have a hard time gettingthosepeopleandevenwhentheycangetthem,they’regoingtohavetopaythem a lot,” says Davenport, who wrote a frequently cited Harvard Business Review articleonthejoboutlookfordatascientists.8

Anotherchallengeisprioritizingthedataonhand.Everyminuteofeveryday,therearemorethan3.8millionGooglesearches,forinstance.9EnricoCianci,seniormanager,DeloitteItaly,saysprivatefirmscan’taffordto overwhelm limited resources if they intendtoboosttheiranalyticscapabilities.


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“Companies have to think about the kinds of data they need to avoid information overload,”Ciancisays.“Ratherthancollectingmoredata,useexistingdatainamorehighlytargetedway.”

Data security is another area that requires prioritization,accordingtoDavenport.Withthe continual threat of cyberattacks, he points out that companies need a response thatincludesanalyticsasafirstlineofdefensebackedwithhumanjudgmenttoattacktheproblem.

“Wedon’treallyhaveanychoicebuttostart to use analytics to predict threats and respondtothem,”Davenportsays.“Andif we have a hack or breach that needs to

beinvestigated,thatstillrequireshumanintervention.There’sreallynochoicebuttostartmovingdownthisroad,giventhenumber of potential threats every company faces.”

OpportunitiesTheopportunitiestoachievestrongerbusinessoutcomesthroughanalyticsarevast.Privateorganizationsareusingreal-timeanalyticsonglobalsupplychainstomanageunpredictability,forecastdemand,andhandlesupplierissues.Companiesareusinganalyticscapabilitiessuchastextrecognitionandmachinelearningtodecipherdatainfinancialrecords.Manufacturingfirmsareusinganalyticstobetter predict when physical assets need servicing.

FrancescoSagrati,amanagerforDeloitte Italy, sees several main areas of opportunity:gatheringinformationaboutmarkets;supportingmarketingresearch;

“Companies need a response that includes analytics as afirstlineof defense backed with human judgmenttoattack the problem.”

Tom DavenportProfessoratBabsonCollegeandindependent senior advisor to Deloitte Analytics

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improvinginternalprocesses;and,productdevelopment.“Analyticshelpsmid-marketcompanies create accurate forecasts, model business scenarios, and reach outcomes morequicklythanbefore,”Sagratisays.

Accuracyandspeedaretwoadvantagesprivatefirmscanseizeastheyinvestinprescriptiveanalytics,accordingtoDavenport.Prescriptiveanalyticstechnologiescanadvisesalesstaffontheoptimalpricetochargeforproductsorservices.Orinamanufacturingsetting,thetechnologycanalertstaffaboutmaintenanceandrepairschedules.10

Questions to consider

• Hasyourcompanyperformedaseriousassessmentofitsreadinessforanalytics?

• Howcanyouassembleateamwiththeappropriatemixoftechnicalandmanagerialskillstobesuccessful?

• Inwhichbusinessfunctionsareyoumostlikelytoimproveoutcomesifyouinvestinanalytics?

• Howcanyourorganizationincorporatepredictiveandprescriptiveanalyticsintoitsoperations?

• Isyourorganizationalignedaroundacommonpurposeandframeworkforanalytics?

• Wouldyoubeabletochangecoursequicklywithanalyticsinvestmentsshouldconditionschange?


Enrico CianciSeniormanager,[email protected]

Tom DavenportProfessoratBabsonCollegeandadvisortoDeloitteAnalyticstom@tomdavenport.com

Francesco SagratiManager,[email protected]

Davenport says another area of opportunity forprivatecompaniesisestablishing“datalakes”thatarerunonopen-sourcesoftware.In comparison to traditional enterprise data structures with information in rows and numbers, the “lakes” house information in unstructuredformats—includingvideos,audio streams, and social media posts—and therebyallowformorediversesetsofdata.11

“Youcanstoreanythinginanyformat,”Davenportsays.Headdsthatwhiledatalakesaresophisticatedundertakingsformany private companies, “there are so many opportunitiesinanalytics.Youdon’thavetobeonthecuttingedgetogetahugeamountofvalue.”


14

Artificialintelligence


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The exponential growth of artificial intelligence (AI) has transformed

customer service departments, enhanced supply chains, and even entered

the realm of fine arts, where the world’s first algorithm-generated portrait

recently sold for more than $400,000 at auction.1 Examples abound that

demonstrate how the broad suite of machine learning capabilities within AI

have disrupted the business world.

Fromimagerecognitiontechnologiesthatcanassessskinirregularitiesforcancer detection, to voice capabilities that layer audio onto video to create mouth movements that mimic real speech, AI has expandedthedefinitionofwhat’spossiblewhen machines learn patterns in the world aroundthem.InDeloitte’s2018globalCIOsurvey,72percentoforganizationsthatareconsidered“digitalvanguards”putAIatthetopoftheirwishlist.2 As private companies decide how to adopt AI or expand their investmentsinthetechnology,theynotonly have to contend with the question of whethermachineintelligencewillcreatevaluefortheorganization.Companiesalsowillneedtograpplewiththeresponsibilitiesthatcomewiththeriseofcognitivetechnologies.

Issues RapidlyexpandinginterestinAIhascreatedanabundanceofresearchonthetopic.AtGoogleforinstance,itisestimatedthatthenumber of internal development projects focusedonAIisdoublingevery18months.3 Yetthepictureismixedamongprivatecompanies,manyofwhicharestillbuildingawarenessaroundthetechnologies,saysPrashanth Kaddi, partner, Information ManagementandAnalytics,DeloitteToucheTohmatsuIndiaLLP.KaddipointsoutthatsomeCEOsatprivatefirmshaveastrongcommand of the issue and are ready to deployAIsolutions.Inothercases,thereareCFOsandotherC-suiteleaderswhoembracethetechnology,buthaven’tbeenabletoassembleteamstobuildmeaningfulAIefforts.Thereisyetanothergroupofprivateorganizations,Kaddisays,thathavebroughtinventurecapitalinvestmentsandarereadytoengagewithexternalpartners to start serious discussions around introducingAIcapabilitieswithintheirfirms.

Tohelpachievethosegoals,privatecompanies need to overcome the competition for talent with experience in mathematics, neuroscience, philosophy, and otherdisciplinesthatareinhighdemandforAIpositions,saysNaserBakhshi,seniormanager,DutchDeloitteConsulting.Privatecompanies also need to enhance their talent retentionanddevelopmentstrategies.

“Acquiringtalentisonething,”Bakhshisays.“Butcompaniesalsoneedtoretaintalent,and make sure this type of talent is also coachedintherightway.”Anotherchallengeformidsizedfirms:movingfromearly-stageconceptstoadvancedAIuse.“Transformingideas from proofs of concept and minimal viableproductstagestorealproductsthatproducevalueisachallenge,”Bakhshiadds.


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BiaswithinmachinelearningprogramsisanotherissuethatorganizationshavetoovercomeastheybuildAIcapabilities.TherehavebeeninstanceswhereAI-basedrecruitmenttoolshavetaughtthemselvesto favor certain types of candidates, but Kaddisaysorganizationscanaddresssomeoftheseissueswithchecksandbalances.“Lookatthemethodology,haveaudittrailstoseehowmodelswerecoded,orhavethird-partyreviews,”Kaddisays.“Havefallbackoptionssoifapatternisemerging,there’samechanismthatcanmonitortheoutcome.”

OpportunitiesThere are private companies that have taken AIfarbeyondtheconceptstage.SomeretailersareusingAIsolutionstomonitorandpredictconsumerbuyingbehavior.Forexample,combininginternalsalesdata with external information, such as customersegmentationandtheweather,companies can now make smarter decisions about when to stock winter coats or other seasonalitems.4

CompaniesarealsousingAItoenhancethehumancapitalfunctionbydevelopingoptimizationmodelsforstaffingpurposes,Bakhshisays.OneexampleislayeringAIontoreal-timetocontinuouslypredictwhen companies will need outsourced staff,asopposedtodependingsolelyonhistoricaldataforscheduling.“Wecanusethatintelligencetofine-tuneplanning,but of course, you combine it with human knowledge,”Bakhshisays.“Whenwetalkaboutartificialintelligence,peopletendtoforgetthatit’salsoabouttacitknowledgewithinthehumanbrainitself.”

The sales function is another area in which AItechnologycangiveprivatecompaniesacompetitiveedge.Kaddiofferstheexampleof a media company whose leadership wantedtoarmsalesstaffwithnumberssothey’dbeabletopricetheirinventorybetter.Separately,anapplianceretailerthatkeepshundredsofdifferentproductsinstockwasabletogivethesupplychainmoreaccurateinformationonwhichitemstokeeponhand.“Acrossseveralgeographiesyoucanforecastas precisely as possible what the sales will be forafutureperiod,”Kaddisays,addingthatthe examples show how AI can help assess demand,informpricing,production,andenhanceemployeeperformance.

“AI is in every layer of society and ourcommercial ecosystem.”

Naser BakhshiSeniorManagerDeloitteNetherlands

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YetanotheruseforAIisdetectingfraudinfinancialservices.E-commercecompaniescanuseAIalgorithmstoflag“repeatoffenders,”asKaddisays,whoabuseonlineretailers’returnpolicies.5“AIcangiveusafairwarningwhetherthispersonislikelytocommitfraud,”hesays.


Naser BakhshiSeniormanager,[email protected]

Prashanth KaddiPartner, Deloitte Touche Tohmatsu India [email protected]

BakhshisaysorganizationsneedtoprepareforuniversaladoptionofAItechnologies.“AI is in every layer of society and our commercialecosystem,”hesays.“It’snotjustforbigtechcompanies.Forprivatecompanies,Iwouldsayidentifypromisingideas and try to embed of that innovation in yourcompany.”


• DoesyourorganizationunderstandAI,itspotential,andhowtobegintheAIjourney?

• HowcanyourorganizationuseAIcapabilitiestoenhancesomeofitsmostroutinefunctions?

• WherearethegapsinexpertiseyouneedtofilltobuildAIcapabilitieswithinyourteam?

• HowmightAIhelpyourorganizationforecastevents?

• IsthereanopportunityforyourcompanytouseAItoenhanceitssupplychain?

• Howwillyoumanageethicalconcerns,privacy,andconcernsaroundbiasthathaveemergedamidtheexpansionofAI?


18

InternetofThings


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Privately held companies depend on a range of technologies to increase

productivity, enhance customer service, and improve outcomes for

employees, whether those teams share a single office or are distributed

across borders.1 Increasingly, firms operating in global settings are

turning to an intricately connected system of devices that connect assets,

information, and commands in a timely manner.

This network of objects, commonly known astheInternetofThings(IoT),comprisesasuiteoftechnologiesthatgeneratedatabetweenlocations.Through2020,theenterprise/industrial sector will account fornearly60percentofIoTspending,withconsumercompaniesandservicesfirmssplittingtheremainingexpendituresinroughlyequalshares,accordingtoaDeloitteanalysis.2Thereal-worldIoTapplicationsarediverse—fromanemergingclassofpersonalhealthmonitoringdevicesconnectingpatientsandproviderstotheexpansion of smart cities, where citizens, devices, and infrastructure exist in a connectedecosystem.3, 4Butconnectivityforconnectivity’ssakedoesn’tnecessarilytranslatetobusinessvalue.Executivesmustcarefully evaluate the inherent complexities withintheinnovations.Thepossibilityofdatasecuritybreaches,thedifficultiesinconnectingdisparatesystems,andtechnicalskillsshortagesareamongthechallengesprivate companies need to confront as they convertIoTinvestmentsintobusinessvalue.

IssuesPrivatecompanieshavefoundthatgapsinpreparednessarestuntingtheirIoTambitions.Aglobalsurveyofmorethan1,800ITandbusinessleadersin2017showedthatnearlythree-quartersofrespondents’IoTprojectswerefailing.5 AmongthemostcommonlycitedchallengesarethetechnicalcomplexityofimplementingIoTsolutions,costprohibitions,andfindingtherightpeoplewiththeskillstoputthetechnologiesintouse.

Anotherfrequentmisstep:neglectingtocarefullydefinehowtousethepotentiallyrichinformationgleanedfromIoTdevices,saysMicheleTarditi,Director,Technology,StrategyandArchitecture,forDeloitteItaly.“Companies tend to look at IoT as a technical issue,thinkingaboutconnectingtheirassetswithoutfullyunderstandingwhattodowiththedata,”Tarditisays.“Somecompaniescollect the data only to then throw it away becausetheydon’tseethevalueinanalyzingandstoringlargequantitiesofdata.”

That missed opportunity speaks to a related issue—establishingclearobjectivesfortheuseofIoTtechnologiesacrossthebusiness.SamSluismans,consultingpartner,MonitorDeloitteinBrussels,sayscompaniesneedtodothegroundworktodevelopafeasibleproof of concepts as they consider IoT technology.Forinstance,acompanythatisdecidingwhethertoconnectitsproductionplants to the cloud should not only be aware oftheopportunitybutalsothechallengesinlaunchingsuchanendeavor.“Manycompaniesstrugglewiththebusinesscase, how it could work for them, what the real business model will be, and what conclusionstheyaregoingtobeabletotakebasedonthetechnology,”hesays.


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Private companies also need to address securitychallenges,whichnumeroussurveyshaveidentifiedasakeyissueinthedeploymentofIoTsolutions.Sluismanssays one way to do this is by what he calls “securitybydesign.”Whetherit’sdoorlocks on a smart home or an industrial settingsuchasawindfarm,companiesneedtoensuretheyaren’tgivinghackerseasyaccesstoIoT-enableddevices.“Youhave to make sure that the sensors are by designalreadyprotectedsothatthedataisencrypted,”Sluismanssays.

OpportunitiesThewiderangeofusecasesforIoTincludesdynamicschedulinginmanufacturingsettingstosmartirrigationonruralfarms.ADeloitteanalysisoffersanumberofexamples that show how IoT solutions canhelporganizationsbecomesmarterplanners, more skillful customer experience agents,andstrongerserviceproviders.6

IoT-enableddevicescanalsohelporganizationsmakecuriousdiscoveries.Oneopportunity that arises as companies use IoT-enableddevicesistheabilitytomonitorhowcustomersareusingproductsandservicesoncetheyaresoldanddistributed.Tarditipointstoamanufacturerofscientificmeasuringdevicesdesignedforthefoodindustry.Whilethecompany’sproductsare used to measure qualities such as nutritional content and test food reaction toheatingandstirring,inthisspecificcase,their product was used by a restaurant chef to stir and heat sauces in an extremely

preciseway.Forprivatelyheldfirmswithoutlarge-scaledistributionnetworks,theIoTcanofferintelligenceonclientsandunexpected information that can potentially leadtonewbusinesslines.

“IoTcanthusopenupnewunimaginedmarketsegments.Intheexample,aproductdesignedforlaboratoriescanbecomeanew appliance for restaurants,” Tarditi says oftheproduct.“IoTgivescompaniestheopportunity to know who their clients are andhowthey’rereallyusingtheirproduct.Thisissomethingcompaniescanonlyfindout if products are connected, customers areprofiled,anddataismonitoredandanalyzed.”

CompaniesaremakingsignificantinvestmentstoensurethatIoTtechnologiesbecome part of the corporate ecosystem; a globalprojectionanticipatescompanieswillspendroughly$15billiononIoTintegrationinthenextthreeyears.7Sluismanspointsto opportunities to use these investments to help companies improve functions such asprocessmonitoring,helpingtoanticipatemaintenance issues, and provide essential dataonequipmentindifficult-to-reachlocations.Sluismanscitesexamplessuchasoffshorewindfarmswheresensorscantrack the condition of underwater concrete foundations,offeringtechniciansreal-timeinformationoncostlyassets.

“IoTgivescompanies theopportunity to know who their clients are and howthey’rereallyusingtheirproduct.”

Michele TarditiDirector,Technology,StrategyandArchitecture, Deloitte Italy

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“This helps maintain infrastructure in the optimalconditionforaslongaspossible,”Sluismanssays.

Tarditisayscompanieslookingtoinitiateorexpand their IoT pursuits should identify afunctionorprocessthatcouldbenefitfrom the use of connected devices and also consider the broader picture of how the technologycancontributetogrowthacrossthebusiness.

“It’scriticaltohaveacomprehensivestrategyfromthebeginning,”Tarditisays.“You have to know where you want to extract value, what the applications should do,whatthebenefitsshouldbe,andhowyoucanbringthosebenefitstothecompany.“


Sam SluismansPartner,MonitorDeloitte,[email protected]

Michele TarditiDirector, Deloitte [email protected]


• HasyourcompanytakenstepstohelpyourteamsbecomefamiliarwithIoTtechnologies?

• Haveyoudevelopedacomprehensivevisionforconnecteddevicesacrossyourfirm?

• Haveyouestablishedaproofofconceptandapathtotesttheconcept?

• HaveyouthoughtaboutwaysyoucanusetheIoTtotrackyourassetsovertime?

• HaveyouconsideredhowIoTmighthelpyougetabettersenseofhowyourproductsarebeingused?

• Haveyouthoughtfullyexaminedyoursecurityprocedures?


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Automation(RPA)


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The suite of technologies that mimic human behavior shows a great

deal of promise in the workplace. A recent Deloitte survey on robotic

process automation (RPA), which sets up software-based rules for certain

repeatable tasks, reveals that more than 80 percent of organizations

that are implementing or scaling RPA projects report having a happier

workforce.1

In addition, more than 90 percent of respondentsintheglobalsurveybelievethatRPA has met or exceeded their expectations on productivity, compliance, and cost to implement.Still,manyorganizationsarestrugglingtotakethesetechnologiestoscale:Theshareoforganizationsabletoachievescaleintheirautomationeffortsinthe previous 12 months before the survey hadonlyrisenby1percent.

As private companies consider how, when, andwheretoautomate,they’llneedtodomorethancreatecodeforrecurringprocesses.Expertswhotracktrendsinautomationsayorganizationsneedtodefinetherightoperatingmodelsfortheirbusinesses, assess the potential risks that come with the deployment of automated tasks, and convince employees that automation can help enhance the value ofwork.

IssuesCompanies may encounter a number of risksassociatedwithautomation,startingwithissuesatthedata-gatheringlevel,whereorganizationstakethefirststepsincreatingthealgorithmsthatgovernrepetitiveprocesses.Developersmighthavedatathat’sincompleteoroutdated.Therecouldbeinsufficientdataorflawedcollectionmethods,creatingamismatchbetween the inputs needed to train algorithmsandthedatathat’sneededtomakebusinessdecisions.Processingerrorscanemergewhenhigh-pacedalgorithmsspringintoaction.Therearealsoissueswiththebots—theautomatedprogramsmakingthese processes possible—which may have beenprogrammedwithbiasinwaysthatcontravene laws or lead to discrimination assomeorganizationshavefoundwithautomatedhiringtechnology.2

Anotherissueprivatecompaniesarefacingistakingautomatedprocessestoscale. InDeloitte’sglobalautomationsurvey, just 4 percent of respondents say they havescaledbeyond50roboticprocesses.

Oneofthemainbarrierstoachievingscaleisfailingtodefinehowteamswillacquirethe skills, capability, and capacity they need to transform processes across an organization.Yetanotherpitfall:failingtograsphowthecomplexityofanautomationdeploymentdiffersfromthatoftraditionalITsystems.Considerascenarioinwhichamedium-complexityroboticprocessimplementation takes up to 24 weeks—atwhichpointaprojectmightbecomeeconomicallyunviable.3

Privateorganizationsalsofacesecuritychallengesastheybuildautomationtools.Softwarebotsfrequentlyrequireaccesstosecurity credentials, users, systems, and existingapplications.MikeSchor,partner,Internal Audit, Deloitte & Touche LLP, says teamsneedtoassesstheirriskmanagementcapabilities as they incorporate automation intotheiroperations.Todoso,hesuggeststhatorganizationsestablishprotocolsthattake risks, users, and the functionality of automated processes into account, and ask toughquestions.


24

“Howisyourorganizationgoingtomonitortherisks?”Schorsays.“Areyouappropriatelytestingsolutionsbeforetheygolive?Whohasuseraccess?Thebenefitsshouldnotjustbeaboutefficiency.Theyshouldalsobeabouteffectiveness.”

OpportunitiesRespondentsinDeloitteUK’sglobalautomation survey ranked productivity, improved customer experience, and increasingautomationasthetopthreeprioritiesfortheirorganizations’automationstrategies.4 Each area presents an opportunity for private companies to improve the value of work and ultimately provideamoremeaningfulexperienceforemployees.

Byreducingtime-consuming,manualactivities,organizationscanfocusonhigher-valueactivitiesandhelppeoplebecomemoreproductivethroughexpandedhorizonswithintheirroles,saysDeloitteUK’sDavidWright,partner,PrivateSectorRoboticProcessAutomationLead,inLondon.In

a similar fashion, private companies can elevatetheircustomerserviceofferings— inindustriessuchasbankingorretail—when workers have the opportunity to carry outpersonalized,public-facingfunctions.

“You reskill people away from some transactional tasks and free them up sotheycanthenstartthinkingabouttransformationwithintheorganization,”Wrightsays.

AccordingtoSchor,privatecompaniescan tap the potential of automation to achievescalethroughactivitiessuchastheprocessingoflargesamplesets.Anotheradvantageforfast-growthprivatecompaniescomparedtotheirlargercounterparts:Theymaynothavetocontendwithlegacysoftwarestructuresandtherefore can put automated solutions into practicewithoutreinventingentiresystems.

“Think of whyyou’reimplementingthis technology.It’snotjust cost reduction.”

David WrightPartner,PrivateSectorRoboticProcess Automation Lead, Deloitte UK

25

“Companiesshouldbebuildingwiththesetechnologiesandconsiderationsinmindupfrontasopposedtobuildingamanualprocessandthentryingtoretrofitthem,”Schorsays.

Wrightsaystheopportunitytobuildautomation solutions from scratch also comeswithresponsibility.

“Thinkofwhyyou’reimplementingthistechnology,”Wrightsays.“It’snotjustcostreduction.It’saboutaccuracyandcontrol,better turnaround times, better customer service,andemployeesatisfaction.Thinkaboutwhatyouwantanddesignyourprogramarounddeliveringthosebenefits.”


Mike SchorPartner,InternalAudit,[email protected]

David WrightPartner, Deloitte [email protected]


• Hasyourcompanyperformedahigh-levelreviewacrosstheorganizationforpotentialopportunitiesforautomation?

• Whatarethesecurityrisksrelatedtoerrors,access,andmonitoringthatcouldaffectyourorganization’sautomationinvestments?

• HowhaveyoupreparedyourteamsforRPAimplementationacrosstheorganization?

• Haveyouidentifiedtasksthatarerepetitiveversusthoseconsistingofcomplexlogicthatrequirehumanjudgment?


26

Cybersecurity


27

A basic rule of emergency preparedness is having a plan to respond to

disasters. Often, the dangers seem abstract until they have a personal impact.

Few people, for instance, would imagine a meteor speeding toward them

from the sky. Yet that’s precisely what happened in central Russia in 2013,

when a meteor blast prompted a massive shockwave that injured around

1,500 people, causing more than $30 million in damage in the process.1

For most private companies, the common risksaren’tcosmicbutrathercyberinnature—seeminglydistantthreatsthatcannonethelessproduceharmfulresults.

In 2017, researchers discovered more than120millionnewmalwareprograms,the equivalent of 231 new strains of malwareperminute.2Andit’shardtofindqualifiedtalenttohelpcompaniesprotectagainstthethreats.Morethan300,000UScybersecurityjobsarecurrentlyunfilled,accordingtooneestimate,alongwithanother350,000inEurope.Aseparatereportforecastsaglobalshortageof1.8millioncybersecurityworkersby2022.3 Theskillsgapcausesincreasedworkloadonexistingstaffandmeansorganizationsspend time on incident response when theycouldotherwisebefocusingonotherstrategicpursuits.Ifprivatecompanieswant to stay ahead of cyber pressures, they’llneedtomovebeyondbasicacknowledgementofthedangersandbuild resources to actively prepare for such threats.

IssuesWhilemidsizedfirmshaveboostedspendingonsecuritysolutionsandhiredor contracted cybersecurity specialists to address risks in recent years,4 only about halfofrespondentsinDeloitte’srecentGlobalCIOsurveysaytheyviewsecurityanddataprivacyasastrategicinvestment.5 Onemanifestationofthischallengeisthelack of a dedicated information security officertotrackcyberthreatsandmitigatethepotentialdamagetotheorganization,says Rocco Galletto, partner, Deloitte Cyber VigilantPracticeinToronto.

Theabsenceofstrategicdirectionfromthetopcancreatecracksthroughoutanorganization.Gallettopointstogapsintrainingandprotocolsthatcanresultinemployeesinadvertentlyclickingonmaliciouslinks,accessingwebsitesaffectedwithviruses,orrespondingtoseeminglyharmlessrequeststhatareactuallyspear-phishingattempts.“Userawarenesstrainingcanbeagoodcountermeasuretoknowwhat’slegitimate,howtoidentifycertainattributes within an email, or whether you shouldopenorclickonalink,”Gallettosays.

PeterWirnsperger,partner,DeloitteCyberRiskServicesinHamburg,Germany,agrees.“Wecanapplyeverytechnologythatwecanwant,butifthehumanfirewallisnotfollowingthe rules, we still have a problem, and even thebesttechnologycan’tprotectus.”

Another concern for private companies in theglobalenvironmentistheenactmentof complex new rules around data security andprivacy.TheEuropeanUnion’sGeneralDataProtectionRegulation(GDPR),whichimposescomprehensivedigitalprivacycontrolsonorganizationsandtheirecosystems,isoneexample.6 The GDPR wentintoeffectinMay2018.Failingtoprotect consumer information carries significantfines—upto20millioneuros,or4percentofannualglobalrevenue,whicheverishigher.7

TheEUregulationpresentsaninterestingdynamic for private companies that may not have been accustomed to some of the compliance-relateddutiesofcompaniesinmoreheavilyregulatedindustriessuchasbanking,Wirnspergersays.


28

A2018DeloittepolltakenshortlyaftertheGDPRwentintoeffectshowedthatonly34.5percentofnearly500professionalssurveyedsaidtheirorganizationscoulddemonstrate compliance with the data privacyrules.8

“In addition, some companies may say that othersecurity-relatedregulationsdon’tapplytothem,”Wirnspergersays.“There’stheneedtobeagoodcorporatecitizenandtheneedtobeagoodmanager,yetcompanieshavebeenworkingwithoutmakingmanyofthesesecurityinvestments.When people actually start to think about regulations,theyrealizethatthey’llhavetoimprovethings.”

OneofthekeyprovisionsofGDPRisaroundthemanagementofcustomerdata,suchastherighttooptoutofonlinetracking,regardlessofwheretheconsumersarefrom.Privacyrulesarealsoestablishingnewparameters for the use of customer data inotherregionssuchasCanada,whereananti-spamlawgenerallyblockscompaniesfromsendingemailpromotionswithoutpriorconsentfromtheintendedrecipient.9

Actions on the consumer side comprise another area of concern for company leaders.Caseinpoint:a2017Deloittesurveyfoundthat91percentofUSconsumersacceptmobileuseragreementswithoutreadingthem,withthefigureclimbingto97percentamong18-to34-year-olds.10 Galletto says private companies need a globalunderstandingofrulesaswellasconsumerbehaviorsandtheireffectsonaborderlessmarketplace.

“It’simportanttohavesomeonewhoatleast understands what information the organizationiscollectingaboutusers,understandingthesensitivityoftheinformationthatthey’reholding,”hesays. OpportunitiesOnewaytoraiseawarenessofcybersecuritythreatsisbybringingreal-time,security-focusedtrainingopportunitiestotheworkplace.Companiescanconductsimulatedphishingcampaignstotrackhowemployees respond to supervised intrusion attempts.“You’reteachinginthemoment,educatingusers,andremindingthemaboutconfidentialinformationversuspubliclyavailableinformation,”Gallettosays.

Companiescanalsoencouragehabitsthatminimizerisks.Cyber-relatededucationtips posted daily on a company Intranet siteremindingusersnottoclickoncertainlinks,orremindersoncluesaboutphishingtechniquessuchasmisspellingsortonethatdoesn’tfitcompanystyleareotherwaystoraiseawareness,Gallettosays.

Inscenarioswherethird-partyvendorshave access to private company data, anotheropportunityisformalizingsecurityproceduresforsuppliers.Justlikequalitycontrolstandardsfororiginalequipmentmanufacturers, providers of services to private companies also need established rulestoassurehowthey’llhandleproprietarydata.

“Ifsomebody’smakingahole,the boat willsink.”

Peter WirnspergerPartner, Deloitte Cyber Risk ServicesinHamburg,Germany

29

“Manyindustrieshavestartedthird-partyinsuranceprograms,”Wirnspergersays.“You have to build trust and ensure that everybodyobeystherules.”Heusesaseaborneexample:“Everybodyisinthesameboat.Ifsomebodyisnotrowing,theboatslowsdown.Ifsomebody’smakingahole,theboatwillsink.”


Rocco GallettoPartner, Deloitte [email protected]

Peter WirnspergerPartner, Deloitte [email protected]

Another consideration for private companiesisincludingmanagedservicesfortheircybersecurityneeds.Thatrequiresan assessment of potential problem areas and a careful examination of a company’soperatingmodeltoseeiftherearestructuralchangesthatcanmaketheorganizationmoresecure.

“Identify the critical assets your business relieson,”Wirnspergersays.“It’simportanttohaveatruthfulassessmenttofindthebest way to protect your assets over the longterm.”


• Hasyourcompanycompletedananalysisofdatasecurityvulnerabilitiesacrossyourbusinessandtakenstepstoaddressthem?

• Doyouhaveaplanofactionintheeventofacyber-relatedincident?

• Howcanyoumanagethetalentshortagetorecruit,build,andretainateamwithsecurityexpertise?

• Howmightamanagedsecurityservicesmodelhelpmeetsomeofyourdatasecurityneeds?

• What processes do you have in place to promote employee awareness of how to access proprietary information and customer data,aswellasrestrictionsonsharingthisinformation?

• Isyourcompanywellpreparedtocomplywithbothdomesticregulationsandglobalinformationsecurityandprivacyrulesthatmightaffectyourbusiness?


30

Finance transformation


31

Today, private company CFOs need 360-degree awareness. They’re

charged with keeping pace with the financial implications of the blistering

rate of change affecting virtually every industry, while at the same time

diverting a good part of their attention to considering a future that could

look drastically different than the present.

Fortunately,digitaltechnologiessuchascloudcomputingandroboticprocessautomation(RPA)arehelpingwiththefirstpart.Butthedisruptionisfarfromover—infact,it’sprobablyjustbegun—andmanyprivatecompanyfinancechiefsarestrugglingtofindtherightmixoftechnologyand talent that will position them as strategicpartnerstoownershipandtheirC-suitecounterparts.

IssuesBusinessesexpectmorethaneverfromtheirfinancedepartments,bothintermsofreportingandstrategicinput,butmanyarecomingupshortwhenitcomestodeliveringreal-timeinsightstohelpthestrategicplanningprocess.

Today,newdigitalplatformsandapplicationsareenablingleadingfirmstoautomatemanyaccountingprocessesthatonceprovedtime-consumingandcostly.Butmanyprivatecompaniesarehesitant to adopt such solutions because oftheup-frontcostsinvolved,eventhoughtheircurrentprocessesmightnotbesupportingthebusinessinthewaysnowrequired.Inothercases,theremaybealackofunderstandingoftransformativesolutions enabled by innovations such as

roboticprocessautomationandblockchain.Companiescanendupplayinganendlessgameofcatch-upratherthansettingpriorities.

“Thecostofthetraditionalfinancefunctionisstillquiteheavy,andspendingismostlyreactive,”saysDamienBones,apartnerinDeloittePrivate’scommercialadvisorypracticeinSydney.“Financeneedsnotonlytostreamline,butalsostartviewingoperationalchallengesthroughaforward-focusedlens.”

Thenthere’stherolethatfinancehastypicallyplayedwithinprivateorganizations,andhowit’sevolvinginresponsetorapidchangesinthebusinessenvironment.SteadyeconomicgrowthandthepaceoftechnologicalchangehaspromptedbusinessownersandCEOstoincreasinglylooktotheirfinancechiefsforguidancewithmajordecisions.

Inthis,financechiefsarenowbeingaskedtowear“fourfaces.”1 They still need to serve the two traditional roles of steward, protectingtheassetsoftheorganizationbyminimizingriskandmanagingthecompany’sfinancials,andoperator,runningatightfinanceoperationthatisefficientand

effective.ButnowprivatecompanyownersandothersintheCsuiteareincreasinglyrelyingonthemasstrategists,helpingtoshapeoverallstrategyanddirection,andcatalysts,instillingafinancialapproachandmindsetthroughouttheorganizationtohelpotherpartsofthebusinessperformbetter.

That,inturn,isforcingarethinkofthetypesof skills that are now required within the function.Butlaborandskillsshortagescontinuetoplaguemanyfinanceleaders,asevidencedbyDeloitte’squarterlyCFOSignalssurveysconductedaroundtheglobe.Laborshortagestopthelistofdomesticconcernsamong67percentofJapanesefinancechiefs,andUSCFOscalltheissuetheirtopinternalrisk.Meanwhile,44percentofCFOsintheUnitedKingdomreportthatrecruitmentdifficultiesorskillsshortageshaveincreased.2

“Alotofprivatecompaniesareaskingthemselves:Howdowesupporttheneedsofthebusinesswithoutnecessarilygoingforatraditionalfinance-oraccounting-relatedperson?”Bonessays.“Becausethatdoesn’tquitemakesenseanylonger,fromeitherasupplyordemandperspective.”


32

OpportunitiesRatherthanupgradetoanexpensive,all-in-onetechnologysolution,privatebusinessesshouldconsiderproductsthatfittheirscale,saysBones.Cost-effectivebutpowerfulcloud-basedfinancesoftwareoptionsareavailabletocompanieswithlessthan$25millioninannualrevenue.Thesesolutionscanautomatetraditionalaccountingservices,suchastime-consumingmonth-endrelatedactivities.Companieswithmultiplebusinessunits can spread the rewards from an initial investmentevenfurther.

To be sure, some more advanced technologysolutionsmaybeworththeextraexpenditure,particularlywhenfinanceisbeingaskedtodeliverdeeperinsightsintotheperformanceofthebusiness.Cognitivetools are now available that can analyze dozensofcomplexfinancialmodelsinafewminutes.Theycanspotasinglevarianceinabilliontransactions.Andtheycanbeusedin audits to eliminate risks associated with sampling.Thisisanareaundergoingrapiddevelopment,butmanyfinancechiefsatprivatecompaniesarecaughtupinday-to-daychallengesandhaven’thadthetimetoexploretheefficienciesacognitivefuturecoulddeliver.3 In a recent CFO Signals survey, only 42 percent of those polled said their teamsarefamiliarwithcognitivesolutions,but 2019 will likely see that number continue torise.4

Blockchainisanothertechnologythatmay not be well understood by private companies.Manystillareunabletodistinguishbetweenblockchainandthecryptocurrenciesthatrelyontheshared-ledgertechnology.Theydon’tunderstandhowashared-ledgerplatformenabledby blockchain could eradicate errors, strengthentransparencyandtrust,andredefinehowtheyengagewiththeircustomersandsuppliers.Throughtheblockchain, for instance, a livestock company couldproducea“digitaltwin”ofeveryheadof cattle sold, complete with information onitsgeneticdata,itsveterinarianhistory,andthequalityoffeedstockitwasfed.This increases the depth and breadth of data that can be collated to increase transparency,complywithever-changingregulation,oraddvaluetofinishedgoods.

“The potential of blockchain is enormous,” saysAnthonyDay,chiefoperatingofficeroftheDeloitteEMEABlockchainLabinDublin,Ireland.“We’retalkingaboutcreatingimmutablerecordsthatcan’tbetamperedwithandwhichcandigitizeandincreaseautomation for nearly every transaction performedbyfinancetoday.Thiscouldrevolutionizealotofindustries.”

Day says the key for private companies lookingtounpackblockchainistoconsidertheproblemsthey’retryingtosolvewithit.Blockchainisprimarilyaplatformtechnology,andtheplatformneeds tobebuilt,whichcanbeexpensive.

“This could revolutionize a lot of industries.”

Anthony DayChiefoperatingofficeroftheDeloitteEMEABlockchainLabinDublin, Ireland

33

Insomecases,anexistingplatformmayalready exist, or several companies in the same industry may be interested injoiningforcestocreateone.Inothercases, private companies may not have the scale or business imperative to make it worth such an investment at this time, Day says.Blockchainisasmuchatechnologyfor multiple companies, even traditional competitors, to work with as much as it is for individual companies to enhance their own technologyinfrastructure.

TherearequestionsprivatecompanyCFOsneedtobeaskingthemselvesinvirtuallyeveryaspectoftheirrole:“Whatisourwinningaspiration?Wherewillweplay,andhowwillwewin?”Becausesoonerrather

thanlaterthey’regoingtobeaskedbyothers,Bonessays.“PrivatecompaniestendtohavelesscrowdedCsuites,sotheCFObecomesthego-topersonforthebusinessownerorCEOwhenitcomestoconsideringanybusinessmovethat’scriticaltothebusiness.”

Thatwillmeanplacingtherightpeoplearound them—think analysts instead of data entryclerks,aswellasdevelopingacoreofthose with “soft skills” who can communicate with internal and external stakeholders aswellastheycrunchthenumbers.“Thefinancestaffersoftomorrowaretheoneswhocangetalongwithandpartnerwiththerestofthebusiness,”Bonessays.


Damien BonesPartner, Deloitte [email protected]

Anthony DayDirector, Deloitte [email protected]


• Hasyourcompanydoneallitcantoautomatetraditionalaccountingtasks,soyoucanfocusonaddinggreatervaluetothebusiness?

• Isyourfinanceorganizationoperatingasapartnerwithyourbusinessunitsandprovidinginsightstodrivedecisionmaking?

• Haveyouconsidereddigitalfinancesolutionsthatalignwithyourcompany’sscaleandambitions?

• Haveyouevaluatedhowblockchainmighttransformyourindustryandthewaysinwhichyoumighttakeadvantageofit?

• Doyouhavetherightmixoftalenttoaccommodatenewtechnologiesandstartdeliveringforward-lookinginsights?


34

Future of work


35

The robots aren’t just coming—they’re already here. Walk into one bank’s branch

on Fifth Avenue in New York City, and you will be greeted by a humanoid

robot named Pepper, who at various turns will offer you a credit card, help

you compete an application, and even take a selfie with you.1 As machines

increasingly take on tasks once performed by humans, many private companies

are grappling with what it will mean for their workforces going forward.

Automationandartificialintelligenceareamongthepotentialshiftsthatcouldchangethe nature of work in every sector of the economy.Mostseeafuture—possiblyaverynear future—in which robots and humans areworkingsidebyside.It’sanevolutionlikelytobedrivenbytech-savvymillennials,whoarealreadyshapingnewconsumptionbehaviors.Andit’sonethatwilllikelyalterhistorical expectations about the nature of work,withtheemerginggigeconomyasoneprominentexample.Talentdevelopmentand workforce diversity also will likely take onmoreurgency,aswillfindingtherightworkspacestoaccommodatethesechanges.

IssuesAround the world, many who want to work aren’thavinganydifficultyfindingjobs.Decades-lowunemploymentinmanydevelopedmarketsisachallengeforemployerstryingtokeeppacewithdemandfortheirproductsandservices.InaDeloittePrivateglobalsurveyof1,900executivesfrom private companies, the ability to hire and retain employees was listed as one of thetopriskstotheircompany’sgrowth.2

Yet,withthespeedofchangeandtheamountoftechnology-drivendisruption

companiesarefacingthesedays,theyriskhiringworkerswithskillsetstheymightnotneedforlong.NewresearchbytheOrganisationforEconomicCooperationandDevelopment(OECD)suggeststhatoneoutof every seven jobs across its 32 member countriesisathighriskofbeingautomated,but one out of three may experience significantchangesinhowtheyarecarriedout.3 For its part, the World Economic Forum projects that robots will eliminate 75 million jobsoverthenextfiveyears,butcreate133millionnewones.4

Organizationsrecognizethatiftheyaddthewrongkindoftalent,theymightmeetnear-termneedsbutwillfindthemselvesback in the same position in the future, saysPhilippeBurger,leaderofDeloitte’sHumanCapitalpracticeinFrance.Notonlyare such decisions costly, but there are alsosignificantreputationalramificationsinvolvedwithbeingperceivedasa“job-destroyingcompany,”Burgersays.“Companiesthatdon’teffectivelymanagethe interaction between workers and machines and the social impact of any workforcechangescouldverywellfaceasignificantbacklash.”

It’snotjustcustomersthatprivatecompaniesneedtoimpressinthatrespect.Millennials, who are forecast to make up almost50percentoftheglobalworkforceby 2020, are keenly attuned to corporate social responsibility and are more interested inworkingforthosewhosharetheirvalues.5 Theyalsotendtoseekdiversecolleagues,flexibleworkarrangements,andongoingopportunitiestolearnnewskills,accordingtothe2018DeloitteMillennialSurveyofmore than 10,000 millennials across 36 countries.6Asthegenerationthatchangesjobmostfrequentlyandisoptingoutofthetraditionalworkforcebyparticipatinginthegigeconomy,manymillennialsdon’tstaywiththesameemployerforlongerthanafewyears,Burgersays.7

Private companies can have a hard time competingforyounger,skilledtalent,inpartbecausemanyarefamily-ownedbusinessesthatputapremiumonheritageandloyalty.Manyalsolackthebrand-namerecognitionoflarge,multinationalcorporations.Burgeraddsthatit’seasierthaneverforjobcandidates to research potential employers intheprivatesphere,includingwhethertheyhave diverse workforces and are considered goodcorporatecitizens.


36

“There is much more transparency now thaninthepast,”Burgersays.“Peoplecanseewhat’shappeninginsideandoutsideanorganization.It’sverydifficulttobehavedifferentlywithinanorganizationthanwhatyouclaimontheoutside.Now,morethanever,ithastobeconsistent.”

Finally,asthenatureofworkchanges,soare the physical spaces where that work is performed.Theofficeenvironmentcouldbeinforsomebigchangesthatgobeyondthelikely contraction of space required as more processes are automated and more people workremotely.8Internet-enableddevicesandIoTtechnologyaregivingrisetoanewwaveofsmartbuildingsthathelpcompaniesbettermanagetheirenergyusageandalleviatesecurityconcerns.9 In addition, as companies become more aware of the relationship between workers and work, there is an increased focus on areas such as wellbeing,sustainability,andproductivity.Manycompaniesareaddressingfootprintoptimizationstrategies,alongwithworkplacedesign,astoolstoleveragetheir real estate and workplace investment toward the employee value proposition in thewarfortalent.

“Already,technologiessuchasthecloudareenablingemployeestoworkanywhereatanytime,”saysSheilaBotting,NationalRealEstateLeaderforDeloitteCanada.“Withinthefutureofwork,emergingtechnologiesaregoingtopushthatfurtherbyfundamentallychangingthephysicalenvironmentforbusinesses.Asaresult,tryingtogetaheadofthosetrendsand‘futureproofing’realestatedecisionsareamongthebigchallengescompaniesarefacing.”

OpportunitiesOnewaytohuntfortherelevantandtransferable skills is to keep track of which

onesareindemand.Burger’sgrouprecentlyanalyzed15millionjobpostingsoverthepastyear,tofindoutwhichskillswereinthegreatestdemandandwhichoneswerefading.“Withtheavailabilityofdatathesedays, you can track the trend lines on skills fallinginandoutoffavor,”hesays.“Youcanalsostarttobuildthebridgesbetweenonecompetencyandanother.”

OneFrenchcompanyneedingworkerstobuild power transmission towers recently turned to an unlikely place when they ranintoanacuteshortageofwelders:thedomesticlaceindustry.Oneofthecasualtiesofglobalization,lacemakersinFrancehavenearlyallgoneoutofbusinessduetocompetitionfromemergingmarketcountrieswithcheaperlabor.10 “Lace manufacturingandweldingarebothhigh-precisionjobs,”Burgersays.“Insteadoftryingtofindwelders,theystartedhiringlaceworkersandtrainingthemtodothework.Alotofprivatecompaniescouldbenefitfromthinkingabouthowexistingskillsmightapplyinthefuture.”

Iftheyaren’talreadydoingso,privatecompaniesalsoneedtostartgettingaheadofdemographictrendsthatwillreshapetheworkforceintheyearstocome.IntheUnitedStates,forinstance,currentcensusprojections predict that women may well be thedominantsourceofeconomicgrowthinthefuture.11Peoplearealsolivingalotlonger,promptingmanyworkerstoputoffretirementandstayattheirjobs.12

These trends represent opportunities to generatenewinsightsandaidthetransferofinformationfromonegenerationtothenext, particularly at private companies whosemanagementteamsmaynothavechangedmuchovertheyears,Burgersays.“Insteadofconsideringemployeesbyage,

“A lot of private companies couldbenefitfromthinkingabout how existingskillsmightapplyinthefuture.”

Philippe BurgerLeaderofDeloitte’sHumanCapital practice in France


37

tenure,orgeography,we’reencouragingthecompanies we work with to see them as a collectionofskillsandknowledgethatwhenbroughttogethercangeneratenewideas.”

Thatalsomeanstreatingworkersfairlywhenitcomestocompensationandpromotions.Humancapitaldepartmentsarebecomingmore sophisticated in their use of employee datatoidentifypatternsofgenderandracial bias, disparities in compensation and rewards,andbiasinhiringandpromotion.13 Othersarestrengtheningtheirsocialimpactbyrequiringthattheirsuppliersandotherbusiness partners provide metrics for diversitywithintheirorganizations.

Whentryingtomanagetherealestatefootprint,Bottingsayscompaniesneed

toprioritizescalability.Shebelievesmany private companies can learn from the example of banks and retailers that havescaledtheirofficefootprinttowardavailability and technical capability and workforcerequirements.14 “Private companiesmayenjoyarealadvantagehere,asthey’retypicallynimbleandcanchangecourse pretty quickly as their needs evolve,” Bottingsays.

Coworkingspace,alsoknownas“SpaceasaService,”mightbeanotherattractiveoption.Evenlargercompaniesareturningtocoworkingsolutionstomaintainflexibility,keep their costs down, and make use of anexpandingpoolofon-demandworkersinthegigeconomy.Manyarediscoveringotherbenefitstosuchfacilities,including


Sheila BottingPartner, Deloitte [email protected]

Philippe BurgerPartner, Deloitte [email protected]

opportunitiestoconnectwithstart-upsandgrowingbusinessesthatcouldbegoodcandidatesforbusinesspartnering,aswellasidentifyjobcandidates.Theyarealsolearningtowatchoutforpotentialissueswithextendingtheirenterprisesintothesespaces,includingprivacyandcyberrisksfromusingsharednetworks.15

“Managingthelong-termfootprintofthebusinessisincreasinglyimportant,”saysBotting,whobelieveseveryprivatecompanyshould work in close concert with a chief innovationofficerinprojectingfuturerealestateneeds.“Privatecompanies,whicharen’tupagainstquarterlydemandstohittheir numbers, should have more time to managethischallengeandgetaheadofsomeoftheseworkplace-disruptingtrends.”

Questions to consider • Hasyourcompanyallocatedenoughtimeinthestrategicplanningprocesstoassesshowemergingtechnologieswillreshapeyourworkforceneeds?

• Doyouhaveacollectionofskillsinyourworkforcethatcanadaptastechnologyreshapesthenatureofwork?

• Haveyouconsiderednonconventionalcandidateswithsimilarskills(e.g.,onshore,offshore,part-time,contract)tostaffjobopeningschallengedbylaborshortages?

• Whataretheimplicationsofthesechangesforyourorganizationalmodels?

• Whatisyourcompanydoingtoensurethatyourworkforceandfutureleadersarerepresentativeofyourcustomerbaseandthepopulationatlarge?

• Howcandiverseandinclusiveworkforceteamshelptosolvebusinesschallenges?

• Haveyouconsideredthesocialimpactsoftheseupcomingchangesandthebestwaytotransitiontothefutureofwork?


38

Globalization


39

Despite a year in which trade conflicts have dominated the headlines,

globalization is still marching ahead, but on a slightly different path.

Before, globalization was trade-based and led by Western powers. Now,

globalization is being driven by digital technology and is increasingly led by

emerging economies in Asia.1

As a result, private companies are participatingintheglobaleconomymorethaneverandlearningtoaddressthemyriadissuesthatcomefromoperatingwithextendedrange,suchasgeopoliticalpressures,localandregionalregulations,andwidelydiverselaborpools.

IssuesForallitsbenefits—accesstonew,fast-growingmarketsandlowercostsoftenchiefamongthem—globalizationhasmadeprivate companies more vulnerable to the domesticpoliciesofothercountries.TheescalationoftradetariffsbetweentheUnitedStatesandChinaisacaseinpoint.EvensmallandmidsizedAmericancompaniesthathaveshiftedmanufacturingbacktoUSfactoriesreportbeinghurtbythelatestroundoftariffs,asthesupplyofcomponentsmadeelsewhereisbeingputatriskbynewtradebarriers.2 Then there’sGreatBritain’sdecisiontoleavetheEuropeanUnion;“Brexit”hascreatedalotof uncertainty around how trade will be conducted in the future between the UK and othermembersoftheeconomicbloc.

Butthespeedofchangedrivenbytechnologymeanscompaniesfocusedonlyontheirdomesticmarketmightnotlastlong.Competitioncancomefromanywhereand at any time, and what looks like an establishedcompetitiveadvantagetodaycouldbeerasedtomorrow.

“Everythingissointerconnectedthesedaysduetoglobalization,”saysWilloRenehan,atax partner for the Deloitte private markets teaminLondon.“Thereisjustsomuchuncertaintyandthereisarealriskofbeingleftbehindifcompaniesletitparalyzethem.Thelevelofdisruptionisfastandgettingfaster.Ifyouhaveagoodidea,youneedtogetouttherequicklyandgetyourmarkersinthegroundtofendoffcompetitionthatisincreasinglycomingoutofnowhere.”

Notalloverseasambitionsarebeingdrivenbyinternalconversations.Inalotofcasestheyarebeingpromptedbycustomerdemands.Onesoftware-as-a-servicecompany in Melbourne, Australia, was approachedbyoneofitsbiggestcorporateclientsaboutprovidingthesameserviceinEuropeandAsia.“Thecustomerisliterallydraggingthemintotheglobalconstruct,”says Mark Allsop, a partner at Deloitte PrivateinMelbourne.

Thatdoesn’tmeanthatenteringtheglobalmarketplacewillbeeasy,Allsopsays.Alotof smaller, private companies he works with lack the experience and internal capabilities tomanageanoverseasexpansion.Therearemanydecisionstobemade,includingwheretogo,whethertoexpandacrossbordersorganicallyorthroughacquisitionor partnership, and what kind of operation willbeneededonthegroundtogetupandrunning.Privatecompaniesmightalsolackthebrandrecognitiontoattractlocallysourcedtalent.

Thentherearetheregulatoryhurdles,whichaddanotherlayerofcomplexity.“Privatecompanies may not have the systems and structures in place, or the balance sheet strength,todoeverythingtheircustomersareaskingthemto,”Allsopsays.“Theyhavetomakesomedifficultchoicesaroundwhatthey’reabletodoandtheyhavetosay‘no’to,andthatcanbeabitofarisk.”


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Anotherissueislackoftrust.Inthepast,private companies could take their time buildingrelationshipswiththeirsuppliersandotherpartners,initiallygivingthemalittle business to see how they handle it beforeexpandingtherelationship.Buttofully exploit the opportunities presented by globalization,privatecompaniesneedtoextend their trust more quickly—and maybe beforethey’recompletelyreadytodoso.“It’satrickybusiness,”Allsopsays.“Wehearthehorrorstoriesofthethingsthathavegonewrong,butit’shardertofindthestoriesofwhenthingshavegonereallywell.”

OpportunitiesDespite the recent run of protectionist trade policies,globalizationremainsaliveandwell.Thedigitalizationoftheglobaleconomyandadvancesincloudcomputinginparticular,have made it far easier for even small and growingcompaniestolearnaboutothermarkets and access them at a fraction of thecost.

ConsideranAustralianfast-movingconsumergoodsmakerwhowasableto quickly transition from the domestic markettoservingothermarketsinAsia.ItsproductsaredesignedinSingapore,manufactured in various parts of Asia throughthehelpofanoutsidecontractor,andsupportedbyalargepoolofcontingentemployeesworkingoutofacoworkingspaceinMelbourne.Thatinterconnectednessmakesscalingupmucheasiertomanagethanitusedtobe.

In some ways, new barriers to trade are creatingnewopportunitiesforprivatecompanieslookingtomaketheleapintoglobalmarkets.TheUS-ChinatradeconflictisopeningdoorstosuppliersinAustralialookingtoentertheChinesemarketatatime when the value of the Australian dollar isquitelow,Allsopsays.RenehansaysmanybusinessesintheUnitedKingdomarenowlookingtosetupofficesinothercountriesamidsttheuncertaintycausedbytheBrexitnegotiations.

“PeoplearetalkingaboutAmsterdam,Paris,andFrankfurt,”Renehansays.“They’relookingtogetpeopleonthegroundinthosemarkets,justthebareminimumtostart.Likewise,we’restartingtoseecompaniesbasedelsewhereintheEUhavingtoestablishintheUnitedKingdombecauseotherwisetheywouldn’tbeabletooperatehere.Globalizationisdefinitelycontinuing,and in some ways, the latest trade disputes aredrivingtheglobalagenda.We’reseeingaspikeininvestments.”

Ofcourse,choosingtherightlocationiscritical.Privatecompaniesneedtothinkthroughmanydimensionsinvolved,fromthetaxandlegalenvironment,tothelocalandregionaleconomies,andevenpoliticalstability.3Securingandmanagingtalentinforeignmarketsisalsopivotaltosuccessfulforays.Jobprofilesandhiringcriterianeedtosatisfybothglobalstandardsandlocalrealities.Employeesinforeignjurisdictionsmightalsohavedifferentperspectivesonhowtobeeffectiveandwhattherightcompensationandincentiveslooklike.4

“Globalization isdefinitelycontinuing,and in some ways, the latest trade disputes aredrivingtheglobalagenda.”

Willo RenehanPartner, Deloitte UK


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In this, private companies need to apply thesamedata-drivenfocustheyapplytomanagingvariablessuchaslaborcosts.Rather than conquer a new territory under theirownbanner,itmightmakemoresensein some cases to line up a channel partner in thetargetmarket.Thesekindsofdecisionsneed to be approached in a calculated way,byfirstdefiningtheinvestment,thenchoosingthestructureitshouldtake,andthenevaluatingwhatotheroptionsmightormightnotbeavailableinthefutureifconditionschange.5

Thesearegoodquestionstoaskevenforestablished businesses in international markets.Aswe’veseen,supplychainscanbeputatriskatonlyamoment’snoticeinthecurrentenvironment.Privatecompanies need to understand where their raw materials, parts, tools, fuel, and other inputsarecomingfrom,andhowreliabletheirsupplyislikelytoremain.Globalizationmeansthatbusinessescan’toverlookthatvaluechain.6


Mark Allsop Partner, Deloitte [email protected]

Willo RenehanPartner, Deloitte [email protected]


• Howmightglobaltradedisputesimpactyourbusinessinthecomingyearandwhatwillyoudoaboutit?

• Doesyourcompanyhavetheexpertisein-housetounderstandtheregulatory,legal,andothercomplexitiesinvolvedwithenteringanewinternationalmarket?

• Areanycustomerslikelytoaskyourcompanytosupporttheminnewinternationalmarketsinthecomingyear,andwillyoubeready?

• Haveyouconsideredexpandinginternationallywiththehelpofachannelpartner?

• Whatareyoudoingtosourcetalentfromothercountries,anddoyouunderstandallthedimensionsyou’llneedtomastertomanagethemeffectively?

The lack of corporate bureaucracy at many private companies can tend to be an advantageinworkingoutissuesthatariseacrossthesedimensions.Large,publiccompanies that are subject to shareholders andrisk-aversecorporateboardstendtobelesswillingtomakeinvestmentsduringtimesofheighteneduncertainty.

“Private companies typically can be more nimble, can spot issues and work around themmorequickly,”Renehansays.“There’sgreaterappetiteforrisk-takingandanoverallsensethatifaninvestmentdoesn’tworkout,they’lljusttweakittoseeiftheycanmakesomethingoutofit.”


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Governance


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Private companies have always had to manage increasing complexity as

they grow, but the pace of change today means they need to be more

sophisticated in terms of corporate governance. Some of this is being

driven by increasing regulatory requirements across the globe, as well as

risks being introduced by technology and the sharing of information.

Butatabroaderlevel,withnewrisks,whetherregulatory,geopolitical,competitive, or marketplace to name a few, boardsmayneedtobemoreengagedinthebusinessthaninthepast.Withthisincreasingneedforadditionalperspectiveaboutstrategicchoicesandrelateddisruptive risks, some private companies are bringinginoutsideperspectives,adoptingamoreholisticviewofstrategicrisksfacingthebusiness,andengaginginregulardiscussions about disruption and how they plantodriveoratleastgetaheadoflargecompetitiveshiftsinthefuture.

IssuesGovernance at private companies runs a widespectrum.Atoneextremeareprivateequity-backedbusinesseswithoversightandmorestringentreportingrequirementsand accountability imposed by the owner investors; while at the other extreme, there aresmaller,start-upbusinessesthatmaynothaveaformalgoverningbody.Butnomattertheirgovernanceorientation,mostprivatecompaniesaredealingwithnewchallengesrelatedtotechnologydisruptionandcompetitivethreatstotheirbusinessmodels.

“Privatecompaniesarebeingchallengedbytherapidadvanceoftechnologyandhowit’sdisruptingbusinessasweknowit,”saysMaureenBujno,amanagingdirectorwithDeloitteLLP’sCenterforBoardEffectiveness.“So,whenitcomestomanagingstrategicrisks,technologyisnearthetopofeveryone’slistsrightnow.”

Technologyalsoincreasinglyrepresentsacompliancerisk.InEurope,theGeneralDataProtectionRegulation(GDPR)tookeffectinMay2018,mandatingthatanycompanythat does business in the European Union and the European Economic Area have appropriatetechnicalandorganizationalmeasures to protect personal data and privacy.1TheChinesegovernmentrecentlywentastepfurther.Newnationalstandardsinclude more onerous requirements for how personal data is collected, stored, and shared.And,ifenacted,newlegislationproposedintheUnitedStatescouldresultin prison terms up to 20 years for executives who violate privacy and cybersecurity standards.2

SvetlanaGandjova,apartnerwithDeloitte’sfinancialadvisorypracticeinVienna,saysthethreat of reputational harm posed by such lawsispromptingprivatecompanyboardstostrengthentheircompliancecapabilitiesandthinkmorestrategicallyaboutmanagingrisks.“InEurope,privatecompanygovernancestructuresaredrivenmostlybylaws,”Gandjovasays.“Thepressureisoftencomingfromlargecorporationsthataretheirclients or suppliers and require more robust complianceprograms(e.g.,anticorruptionandantitrustcommitments,fightagainstchildlabor,environmentalcompliance).It’smotivatingcompaniestoimplementstrongergovernanceprocesses.Theysimplycan’triskthereputationaldamageattachedtobeingnoncompliant.”

Talentrepresentsanotherarearequiringboardattention.Workforceneedsarechangingdramaticallyasnewtechnologiestakeroot,andprivatecompaniesthataren’tthinkingstrategicallyaboutwhatskillsthey will require in the future could limit theirgrowthpotential.Inaddition,privatecompaniesincreasinglyneedbusinessleaderswhoareknowledgeableaboutinternational business practices and customs ascompaniescontinuetoexpandglobally.


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Whenitcomestoimprovinggovernancemodels,family-ownedbusinessescanprove particularly slow to evolve because of family members who remain invested in thebusinessbutmaynolongerbeactivelyinvolved.Thismakesitdifficultnotonlytogetaheadofforcesshapingthecompetitiveenvironment, but also to cultivate the next generationofleaders.

OpportunitiesAtatimeofsuchtransformationalchange,anybusinesscanbetheonedrivingdisruptioninacertainindustry.Butthatdoesn’tjusthappenorganically,Bujnosays.Private company leaders should carve out timetoidentifybigshiftsintheirmarketsandrole-playdifferentscenariosinwhichanunexpected source of competition, or other risk,upendsacorebusiness.Theyalsoshouldconfirmthatanynewtechnology-fueledinitiativeshaveanexplicitgoalinmind,suchassolvingacurrentproblemortargetinganewmarketsegment.

“OneofthekeythingsI’veseenisashiftaroundstrategyandanawarenessthatprivatecompanyboardsneedtobeengagedintermsofdealingwiththeheightenedpotentialfordisruption,”Bujnosays.Bujnosaysengagedprivatecompanyboardsexhibitseveralkeyattributes.Boardmembershaveagoodunderstandingofthebusiness and a practical mix of skills and experiences, which may require a need for independentboardmembers.Thislastpointis especially critical today due to the pace ofchange.Independentboardmemberscanbringknowledge,expertise,andskillsthatCEOsandseniormanagementmaynothave.Theymayalsohavefirsthandexperiencefromworkingwithotherorganizationsfacingdifficultchallenges.

“Private company boards need tobeengagedin terms of dealingwiththeheightenedpotential for disruption.”

Maureen BujnoManagingdirectorwithDeloitteLLP’sCenterforBoardEffectiveness

And they are far more likely to constructively challengetheviewsofotherdirectors.

“Independent board members often provide objectiveandvaluableinsightsaboutwhatthey’veseenhappeninginotherindustries,andthoseinsightscanhelpbusinessesdecidewhethertheywanttobedrivingdisruptionorstayingaheadofit,”Bujnosays.“Havinganoutsideperspectivemaybeparticularly important to controlled entities wheretheyjusthaveinsidersinchargeandcertain skills and experiences may not be resident.”

Riskmanagementisoneareainwhichprivatecompanieshavehistoricallylaggedbutaremakingstridestoclosethegap.In the past, risks were independently managedbyeachbusinessunitandthis decentralization lent itself to an organizationallackofawarenessandsharingofinformation.Today,topstrategicrisksareregularlycommunicatedtotheboardatregularintervals.Privatecompaniesarealsoincorporatingriskmonitoring,measuring,andreportingatanenterprise-widelevel.

Privatecompanyboardsareseeingthebenefitsofincreasedfocusonmanagingrisksandimplementingcomplianceprograms.Ononesidethereislessregulatoryexposurefortheboardsandontheothersideisstrengtheningbrandandreputationofthecompanies.Asrecentlyasfiveyearsago,manycompaniesmighthavehadjustonepersonfromthelegaldepartmentcoveringsomecomplianceaspects.“Nowtherearededicatedteamsfocused solely on compliance,” says Gandjova,addingthatsomeofthechangeisbeingdrivenbygenerationaltransfersatfamily-ownedcompanies.

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Effectivesuccessionplanningcanhelpensurethattheculturechangecreatedbysucheffortsaren’twastedinthefuture.Successionplanningremainsagovernancechallengeformanyprivatecompaniesandparticularlyforfamilybusinesses.ButBujnosayssuccessionplanningisincreasinglyimportant because it forces company leaderstoagreeonasharedvisionforthefutureofthebusiness.

“Successionplanningneedstobeontheboardagenda,andnotjustfortheroleofCEObutforthebroadertalentneedsoftheorganization,”Bujnosays.Shesaidsuccession discussions often leave out key individualsthatcouldcreateleadershipgapsiftheysuddenlydeparted.Sherecommendsprivate company boards review their organizationalchartsatleastonceayearto consider such key posts, understand the currentdevelopmentprograms,andidentifythose who could step in to certain roles internally,ifneedbe.


Maureen BujnoManagingdirector,[email protected]

Svetlana GandjovaPartner, Deloitte [email protected]


• Doesyourcompanyhaveaformalboardinplaceoratleastadedicatedteamtoconsiderstrategicriskstoyourbusiness?

• Doesyourboardorgovernanceteamhaveaccesstoindependentperspectivesonthebiggestchallengesyourbusinessisfacing?

• Areyoustillmanagingriskfromthestandpointofindividualbusinessunitsorareyoutakingamoreholistic,enterprise-wideapproach?

• Whatisyourworkforcegoingtolooklikeinthefutureandhowisthatgoingtoimpactyourbusiness?

• Isyourboardinvolvedinplanningtoaddressdisruption?


46

M&A


47

Global M&A transactions set a new record in the first nine months of

2018, recording a 37 percent increase over the same period of 2017.1

Companies seem to be rushing to reinvent themselves in an environment

of disruptive technological change, and private companies are increasingly

being targeted for their value, prompting big corporate buyers to focus on

smaller takeovers.

Manyprivatecompanyownersarecashingoutoratleastconsideringit,buttheyfaceorganizationalhurdlesingettingdealsdone.Atthesametime,buyersareputtinggreateremphasisonmergerintegration,withsomeevennowturningto“digitaldiligence”topredicthowacquiredtechnologieswillinfluencetheirreturns.

IssuesOneoftheissuespromptingprivatebusiness owners to think about a sale isalackofpotentialsuccessors.Justafewdecadesago,manyfamily-ownedbusinesses enjoyed a natural transition in whichsomeonefromthenextgenerationwouldtakeover,allowingforyearsofpreparationtogroomthemandgetthemready.

Butthesedaysyoungerfamilymembershave“amazinglearningopportunities,”saysTaraHill,NationalDeloittePrivateDeals&PrivateEquityLeaderinSydney.“They’vebeensenttogreatlearninginstitutions.They’vestartedcareersoftheirownandsuddenlytheyaren’tinterestedintakingoverthefamilybusiness.Andthat’swhenthegenerationthatownsandrunsthebusinessrealizesitdoesn’thaveanexitstrategy.”

What they do have, she says, is a lot of moneywrappedupinthebusiness.Increasingly,they’relookingtostrategicorfinancialbuyerstohelpprovidethemwithliquidity.Butmanyaren’treadyforthedemands that will be placed on them in an outrightsaleorprivateequityinvestmentinthebusiness.Preparingthedocumentationrequired to support a transaction can take weeksforafullystaffedfinanceteam,butmany private companies run lean operations inthisareaandriskseeingabuyerlowertheirpriceorsimplywalkawayiftheycan’tmovefastenough.

“Timeistheenemyofanycompanythat’sforsale because it implies they have to continue toputupsolidfinancialresultsformonthafter month,” says Jamie Lewin, a principal for Deloitte Corporate Finance LLC in Dallas, Texas.“Oneofthemostimportantthingsthat you do when you select an investor or someone to acquire the business, is to beabletomoveexpeditiouslytoaclosing.Thekeytodoingthatisfacilitatingtheduediligence,andtheinabilitytodosoisalmostalwayspredicatedonalackoforganizedfinancialstatements.”


48

Beingfocusedontheneartermisanadditiveforcompaniesbeingacquiredbutit can prove costly to buyers if they lose sightoftheirlong-termobjectives.Foracquisitive private companies, one major shortcomingisnotviewingeveryM&Atransactionasbeingpartofalifecycleofduediligence,execution,andintegration.Thesameexecutiveschargedwithexecutingtheacquisitionmaynothavetherequisiteexperiencetohandlepost-closecomplexitiessuchascapturingpromisedcostsynergies;makingtherightinvestmentstosupportthegrowthobjectivesofthecombinedend-state;andintegratinglegacysupply chains with minimal impacts to customers,partners,andemployees.

OpportunitiesCashhasbeenpilingupatbothstrategicandfinancialbuyersinrecentyears.Uncommittedcapitalatglobalprivateequityfirms,forinstance,isnowlistedat$1.8trillion.2Yettheflurryofmergeractivityin recent years has seen deals completed withmanyobvioustargets,andsurgingtransaction prices have prompted buyers to focusonsmaller,privatelyheldenterprises.

“We’retalkingaboutahugesupply-and-demand imbalance that is currently benefitingprivatecompanies,”Lewinsays.“Youcandoreallywellsellingyourbusinessinthisenvironment.Goingpublicisagreatwaytofinancegrowthgoingforward,butnotnearlyasgoodforprovidingliquiditytoentrepreneurs.”

For acquirers, the cost of debt is still historicallycheapacrossmuchoftheglobedespitetherecentuptickininterestrates.Combinedwithstrategicinvestmentsbyprivateequityfirms,cheapcapitalisgivingacquisitive private companies plenty of ammunitionforbolt-ondealsortobuyoutcompetitors.

Whetherthey’reonthebuysideorthesellside, private companies need to consider whoisgoingtomanagetheprocess,Hillsays.“OneofthefirstquestionsItendto ask of private companies involved inatransactionis:‘Haveyougotyourteam?’”Companiesthathavebeenaroundfor decades tend to have been run by executiveswhoseskillsmaynotbeagoodmatchfortoday’sM&Aenvironment.Insome cases, they may need to make a changeintheCsuitetoaddindividualswithtransactionexperience.

“We’retalkingaboutahugesupply-and-demand imbalance.”

Jamie LewinPrincipal for Deloitte Corporate Finance LLC in Dallas, Texas

DeloitteCorporateFinanceLLC,anSECregisteredbroker-dealerandmemberofFINRAandSIPC,isanindirectwholly-ownedsubsidiaryofDeloitteFinancialAdvisoryServicesLLPandaffiliateofDeloitteTransactionsandBusinessAnalyticsLLP.InvestmentbankingproductsandserviceswithintheUnitedStatesareofferedexclusivelythroughDeloitteCorporateFinanceLLC.Formoreinformation,visitwww.investmentbanking.deloitte.com.Pleaseseewww.deloitte.com/us/aboutforadetaileddescriptionofourlegalstructure.Certainservicesmaynotbeavailabletoattestclientsundertherulesandregulationsofpublicaccounting.

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“Inbig,publiccompanies,thereisusuallyalotmorerigoraroundwhositsinthoseroles,”Hillsays.Insomecases,atransactionmaybejustthethingownershipneedstomakechangesthatwerealongtimecoming,shesays.

With speed at such a premium, many companiesarestartingtodeploydigitaltoolstoensureaquickclosingandsmoothintegration.Manyfinancechiefs,forexample,areusingvirtualdataroomsthatcan provide a secure online environment in which team members who are not colocated canreviewlargeamountsofdataassociated


Tara HillPartner, Deloitte [email protected]

Jamie LewinPrincipal,[email protected]

withtransactions.Naturallanguageprocessingishelpingdealteamsanalyzevast numbers of contracts and other documentsinahighlyautomatedfashion.Datavisualizationishelpingtellthestoriesbehindthosenumbers.3

InDeloitte’s2018M&Atrendsreport,63percentoftheUS-headquarteredcompanies surveyed said they use tools other than spreadsheets to address a varietyofM&A-relatedtasks,includingstreamliningintegrationandreducingcosts.Andofthosewhoaren’t,62percenthaveplanstodoso.4


• Isapotentialsalesomethingyourcompanyisconsideringinthenextfiveto10years?Ifso,woulditmakesensetoacceleratethoseplanstotakeadvantageofastrongM&Amarketforprivatecompanies?

• Ifyou’reacquisitive,doyoumaintainanactivepipelineofopportunitiesbothwithinyourdomesticmarketandoutsideofit?

• Isyourmanagementteamreadyforapotentialtransaction?Doyouhavetherightpeopleinyourorganizationwhoknowwhattoexpectandhowtodeliver?

• Haveyouconsideredwhatasalemightmeanforseniorleadersofyourmanagementteam?

• Doyouhavetheoutsiderelationshipsinplace(e.g.,legal,financing,tax)tosupportanacquisitionduringallstagesofthetransaction?

• Haveyoupursueddigitaltoolstosupportduediligenceandgettoclosingquicker?


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Endnotes

Disruption

1 MarioThomas,“Whystartupsneedtostartputtingcustomersfirst,”The Globe and Mail,May9,2018,https://www.theglobeandmail.com/report-on-business/small-business/startups/why-startups-need-to-start-putting-customers-first/article5721857/?arc404=true.

2 JasonDeMers,“5bigbrandsthathadmassivelysuccessfulpivots,”Entrepreneur.com,Feb.15,2018,https://www.entrepreneur.com/article/308975.

3 JasonNazar,“14famousbusinesspivots,”Forbes.com,Oct.8,2013,https://www.forbes.com/sites/jasonnazar/2013/10/08/14-famous-business-pivots/#1e8ea82b5797.

4 HazelDavis,“Fivebusinessesthatsuccessfullypivoted,”virgin.com,Jan.3,2017,https://www.virgin.com/entrepreneur/five-businesses-successfully-pivoted.

5 PeterElstromandDavidRamli,“Ex-Googleengineerbuilds$1.5billionstartupin21months,”Bloomberg.com,April27,2017,https://www.bloomberg.com/news/articles/2017-04-27/meet-the-google-alum-who-created-china-s-facebook-groupon-mashup.

6 ThomasGraziani,“Pinduoduo:Acloselookatthefastestgrowinge-commerceappinChina,”walkthechat.com,Aug.27,2018,https://walkthechat.com/pinduoduo-close-look-fastest-growing-app-china/.

7 BrianDeagon,“PinduoduoIPOpopsonfirstdayoftradingforChinae-commercecompany,” Investor’s Business Daily,July26,2018,https://www.investors.com/news/technology/pinduoduo-ipo-initial-public-offering/.

8 NelsonD.SchwartzandSteveLohr,“CompaniessayTrumpishurtingbusinessbylimitinglegalimmigration,”New York Times,Sept.2,2018,https://www.nytimes.com/2018/09/02/business/trump-legal-immigration-h1b-visas.html.

9 MichaelSasso,“ThisisAmerica’shottestjob,”Bloomberg.com,May18,2018,https://www.bloomberg.com/news/articles/2018-05-18/-sexiest-job-ignites-talent-wars-as-demand-for-data-geeks-soars.

10 StevenJohnson,Where Good Ideas Come From: The Natural History of Innovation,(PenguinRandomHouse,2011).

Analytics

1 “NBAteamsthathaveanalyticsdepartment,”NBAStuffer.comwebsite,https://www.nbastuffer.com/analytics101/nba-teams-that-have-analytics-department/.

2 MarcTracy,“Technologyusedtotrackplayers’stepsnowchartstheirsleep,too,” New York Times, Sept.22,2017,https://www.nytimes.com/2017/09/22/sports/ncaafootball/clemson-alabama-wearable-technology.html.

3 Global perspectives for private companies: Plans, priorities and expectations, DeloitteInsights,December2017,https://www2.deloitte.com/content/dam/insights/us/articles/4276_Deloitte-Private-Survey/Deloitte%20Private_Global%20perspectives%202017.pdf.

4 BillBriggs,KristiLamar,KhalidKark,andAnjaliShaikh,“Manifestinglegacy:Lookingbeyondthedigitalera,”Tech Trends 2018: The symphonic enterprise, Deloitte,2018,https://www2.deloitte.com/content/dam/insights/us/articles/4774_CIO-survey/DI_CIO-survey-2018.pdf.

5 AllanV.Cook,RyanJones,AshRaghavan,IrfanSaif,“Digitalreality:Thefocusshiftsfromtechnologytoopportunity,”Tech Trends 2018: The symphonic enterprise,Deloitte,2018,https://www2.deloitte.com/insights/us/en/focus/tech-trends/2018/immersive-technologies-digital-reality.html.

6 ThomasH.Davenport,“Howanalyticshaschangedinthelast10years(andhowit’sstayedthesame),”Harvard Business Review, June22,2017,https://hbr.org/2017/06/how-analytics-has-changed-in-the-last-10-years-and-how-its-stayed-the-same.

7 “’Sexiest’jobignitestalentwarsasdemandfordatascientistsgrows,”Bloomberg.com,May18,2018,http://fortune.com/2018/05/18/best-tech-jobs-data-scientist.

8 ThomasH.DavenportandD.J.Patil,“Datascientist:thesexiestjobofthe21stcentury,” Harvard Business Review,October2012,https://hbr.org/2012/10/data-scientist-the-sexiest-job-of-the-21st-century.

9 RoseLeadum,“Theinsaneamountsofdatawe’reusingeveryminute(infographic),”Entrepreneur.com,June10,2018,https://www.entrepreneur.com/article/314672.

10 GregKihlstrom,“Descriptiveversusprescriptiveanalyticsandthecustomerjourney,”Forbes.com,Oct.10,2018,https://www.forbes.com/sites/forbesagencycouncil/2018/10/23/descriptive-versus-prescriptive-analytics-and-the-customer-journey/#21f76a0f3c8c.

11 BarryLevine,“MarTechlandscape:What’sthedifferencebetweenadatawarehouseandadatalake?”MarTechToday.com,Oct.31,2018,https://martechtoday.com/martech-landscape-whats-the-difference-between-a-data-warehouse-and-a-data-lake-227253.

Artificial intelligence

1 GabeCohn,“AIartatChristie’ssellsfor$432,500,”New York Times,Oct.25,2018,https://www.nytimes.com/2018/10/25/arts/design/ai-art-sold-christies.html.

2 BillBriggs,KristiLamar,KhalidKark,andAnjaliShaikh,Manifesting legacy: Looking beyond the digital era,figure24,DeloitteInsights,2018,https://www2.deloitte.com/content/dam/insights/us/articles/4774_CIO-survey/DI_CIO-survey-2018.pdf.

3 TiernanRay,“Googlesays‘exponential’growthofAIischangingnatureofcompute,”ZDNetwebsite,Nov.2,2018,https://www.zdnet.com/article/google-says-exponential-growth-of-ai-is-changing-nature-of-compute/.

4 MichaelKlein,“HowsmartretailersareleveragingAI,”RetailTouchPoints.com,Nov.7,2018,https://www.retailtouchpoints.com/features/executive-viewpoints/how-smart-retailers-are-leveraging-ai.

5 MarciaKaplan,“Retailers(includingAmazon)crackdownonreturnfraud,”PracticalEcommercewebsite,June6,2018,https://www.practicalecommerce.com/retailers-including-amazon-crack-return-fraud.

Internet of Things

1 EricaVolini,“3waysprivatecompaniescantackletalentchallenges,”Human Resource Executive,Oct.25,2018,http://hrexecutive.com/3-things-private-companies-can-do-to-tackle-todays-talent-challenges/.

2 “TheInternetofThings:Atechnicalprimer,”DeloitteInsights,2018,https://www2.deloitte.com/insights/us/en/focus/internet-of-things/technical-primer.html.

3 RobertHolly,“BestBuy’sGreatCallteamsupwithinsurertoprovideremotepatientmonitoring,”Home Health Care News,Oct.17,2018,https://homehealthcarenews.com/2018/10/best-buys-greatcall-teams-up-with-insurer-to-provide-remote-patient-monitoring/.

4 WilliamEggersandMarkSkowron,“Forcesofchange:Smartcities,”DeloitteInsights,March22,2018,https://www2.deloitte.com/insights/us/en/focus/smart-city/overview.html.

5 “ThejourneytoIoTvalue,”CiscoBusinessInsightsSlideShare,May2017,https://www.slideshare.net/CiscoBusinessInsights/journey-to-iot-value-76163389.

6 DavidSchatsky,JonathanCamhi,andSourabhBumb,“FivevectorsofprogressintheInternetofThings,”DeloitteInsights,2018,https://www2.deloitte.com/insights/us/en/focus/signals-for-strategists/enterprise-iot-applications-five-vectors-of-progress.html.

7 DavidSchatsky,JonathanCamhi,andSourabhBumb,“FivevectorsofprogressintheInternetofThings.”

https://www.entrepreneur.com/article/308975


https://www.virgin.com/entrepreneur/five-businesses-successfully-pivoted

https://www.virgin.com/entrepreneur/five-businesses-successfully-pivoted

https://www.bloomberg.com/news/articles/2017-04-27/meet-the-google-alum-who-created-china-s-facebook-groupon-mashup

https://www.bloomberg.com/news/articles/2017-04-27/meet-the-google-alum-who-created-china-s-facebook-groupon-mashup

https://www.investors.com/news/technology/pinduoduo-ipo-initial-public-offering

https://www.investors.com/news/technology/pinduoduo-ipo-initial-public-offering

https://www.nytimes.com/2018/09/02/business/trump-legal-immigration-h1b-visas.html



https://www.nbastuffer.com/analytics101/nba-teams-that-have-analytics-department

https://www.nbastuffer.com/analytics101/nba-teams-that-have-analytics-department

https://www.nytimes.com/2017/09/22/sports/ncaafootball/clemson-alabama-wearable-technology.html.

https://www.nytimes.com/2017/09/22/sports/ncaafootball/clemson-alabama-wearable-technology.html.

https://www2.deloitte.com/content/dam/insights/us/articles/4276_Deloitte-Private-Survey/Deloitte%20Private_Global%20perspectives%202017.pdf

https://www2.deloitte.com/content/dam/insights/us/articles/4276_Deloitte-Private-Survey/Deloitte%20Private_Global%20perspectives%202017.pdf

https://www2.deloitte.com/content/dam/insights/us/articles/4774_CIO-survey/DI_CIO-survey-2018.pdf


https://www2.deloitte.com/insights/us/en/focus/tech-trends/2018/immersive-technologies-digital-reality.html

https://www2.deloitte.com/insights/us/en/focus/tech-trends/2018/immersive-technologies-digital-reality.html

https://hbr.org/2017/06/how-analytics-has-changed-in-the-last-10-years-and-how-its-stayed-the-same



https://hbr.org/2012/10/data-scientist-the-sexiest-job-of-the-21st-century

https://hbr.org/2012/10/data-scientist-the-sexiest-job-of-the-21st-century



https://www.forbes.com/sites/forbesagencycouncil/2018/10/23/descriptive-versus-prescriptive-analytics-and-the-customer-journey/#21f76a0f3c8c

https://www.forbes.com/sites/forbesagencycouncil/2018/10/23/descriptive-versus-prescriptive-analytics-and-the-customer-journey/#21f76a0f3c8c

https://www.nytimes.com/2018/10/25/arts/design/ai-art-sold-christies.html

https://www.nytimes.com/2018/10/25/arts/design/ai-art-sold-christies.html




https://www.zdnet.com/article/google-says-exponential-growth-of-ai-is-changing-nature-of-compute

https://www.zdnet.com/article/google-says-exponential-growth-of-ai-is-changing-nature-of-compute

https://www.practicalecommerce.com/retailers-including-amazon-crack-return-fraud

https://www.practicalecommerce.com/retailers-including-amazon-crack-return-fraud

https://www2.deloitte.com/insights/us/en/focus/internet-of-things/technical-primer.html



https://www2.deloitte.com/insights/us/en/focus/smart-city/overview.html

https://www2.deloitte.com/insights/us/en/focus/smart-city/overview.html

https://www2.deloitte.com/insights/us/en/focus/signals-for-strategists/enterprise-iot-applications-five-vectors-of-progress.html

https://www2.deloitte.com/insights/us/en/focus/signals-for-strategists/enterprise-iot-applications-five-vectors-of-progress.html


51

Future of work

1 EmilyPrice,“PeppertheRobothasanewjobatHSBCBank,”Fortune.com,June27,2018,http://fortune.com/2018/06/27/pepper-the-robot-hsbc-job/.

2 Global perspectives for private companies: Plans, priorities, andexpectations,DeloitteInsights,December2017,https://www2.deloitte.com/hu/en/pages/about-deloitte/articles/global-private-report-2018.html.

3 OECDpolicybrief,“Puttingfacestothejobsatriskofautomation,”March2018,https://www.oecd.org/employment/Automation-policy-brief-2018.pdf.

4 “Thefutureofjobsreport2018,”WorldEconomicForum,Sept.17,2018,https://www.weforum.org/reports/the-future-of-jobs-report-2018.

5 “TheDeloitteMillennialSurvey2018,”Deloitte,March2018,https://www2.deloitte.com/global/en/pages/about-deloitte/articles/millennialsurvey.html.

6 Ibid.

7 SarahLandrum,“Millennialsaren’tafraidtochangejobs,andhere’swhy,”Forbes.com,Nov.10,2017,https://www.forbes.com/sites/sarahlandrum/2017/11/10/millennials-arent-afraid-to-change-jobs-and-heres-why/#2dd8303119a5.

8 “Thefutureofcommercialrealestate:RealEstatePredictions2018,”Deloitte,2018,https://www2.deloitte.com/global/en/pages/real-estate/articles/future-commercial-real-estate-europe.html.

9 “Smartbuildings:HowIoTtechnologyaimstoaddvalueforrealestatecompanies,”DeloitteInsights,2017,https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/real-estate/deloitte-nl-fsi-real-estate-smart-buildings-how-iot-technology-aims-to-add-value-for-real-estate-companies.pdf.

10 LizAlderman,“Only300workersleftinFrenchlacecapital,”TheRecord.com,May2,2017,https://www.therecord.com/news-story/7273568-only-300-workers-left-in-french-lace-capital/.

11 GregPellegrino,SallyD’Amato,andAnneWeisberg,“Thegenderdividend:Thebusinesscaseforinvestinginwomen,”Deloitte,2011,https://www2.deloitte.com/global/en/pages/public-sector/articles/the-gender-dividend.html.

12 “Thelongevitydividend:Workinaneraof100-yearlives,”DeloitteInsights,March28,2018,https://www2.deloitte.com/insights/us/en/focus/human-capital-trends/2018/advantages-implications-of-aging-workforce.html.

13 “Diversityandinclusion:Therealitygap,”DeloitteInsights,Feb.28,2017,https://www2.deloitte.com/insights/us/en/focus/human-capital-trends/2017/diversity-and-inclusion-at-the-workplace.html.

14 BarbraThau,“Targetdoublesdownonretail’s‘MiniMe’moment,linesupmoresmall-formatstores,”Forbes.com,May31,2018,https://www.forbes.com/sites/barbarathau/2018/05/31/target-solidifies-bet-on-higher-sales-generating-small-stores-amid-retails-mini-me-push/#50eabb434f03.

15 “Theriseofco-workingspaceandtheneedforsmartbuildings:Realestatepredictions2018,”Deloitte,2018,https://www2.deloitte.com/global/en/pages/real-estate/articles/rise-co-working-space-need-smart-buildings.html.

Automation (RPA)

1 JustinWatsonandDavidWright,“Therobotsarewaiting,”Deloitte,2018,https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/consultancy/deloitte-uk-the-robots-are-waiting.pdf.

2 “Auditingtherisksofdisruptivetechnologies,”Deloitte,2017,https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Risk/gx-risk-digitization-banking.pdf.

3 WatsonandWright,“Therobotsarewaiting.”

4 WatsonandWright,“Therobotsarewaiting,”p.5,Figure1.

Cybersecurity

1 Andrey Kuzmin, “Meteorite explodes over Russia, more than 1,000 injured,” Reuters.com,Feb.14,2013,https://www.reuters.com/article/us-russia-meteorite-idUSBRE91E05Z20130215.

2 AdamJanofsky,“HowAICanHelpStopCyberattacks,”Wall Street Journal, Sept.18,2018,https://www.wsj.com/articles/how-ai-can-help-stop-cyberattacks-1537322940.

3 JanakiChadha,“Threeideasforsolvingthecybersecurityskillsgap,”Wall Street Journal,Sept.18,2018,https://www.wsj.com/articles/three-ideas-for-solving-the-cybersecurity-skills-gap-1537322520.

4 Appendix, Technology trends in the mid-market: Embracing disruption, Deloitte, September2018,https://www2.deloitte.com/content/dam/Deloitte/us/Documents/deloitte-private/us-private-tech-appendix-2018.pdf.

5 BillBriggs,KristiLamar,KhalidKark,andAnjaliShaikh,“Manifestinglegacy:Lookingbeyondthedigitalera,”DeloitteInsights,2018,https://www2.deloitte.com/content/dam/insights/us/articles/4774_CIO-survey/DI_CIO-survey-2018.pdf.

6 “GeneralDataProtectionRegulation(GDPR)Contractmanagementframework,”Deloitte,2018,https://www2.deloitte.com/us/en/pages/advisory/solutions/gdpr-contract-management-framework.html.

7 “GDPREnforcementandPenalties,”itgovernance.com,https://www.itgovernance.co.uk/dpa-and-gdpr-penalties.

8 “EUgeneraldataprotectionregulation,”DeloitteSlideSharepresentation,Aug.6,2018,https://www.slideshare.net/DeloitteUS/eu-general-data-protection-regulation-practical-steps-for-compliance-third-party-contract-management?qid=af876c9d-a64e-4847-b883-370532670869&v=&b=&from_search=1.

9 Canada’sAnti-SpamLegislation,GovernmentofCanadawebsite,http://fightspam.gc.ca/eic/site/030.nsf/eng/h_00039.html.

10 “2017Globalmobileconsumersurvey,”Deloitte,2017,https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology-media-telecommunications/us-tmt-2017-global-mobile-consumer-survey-executive-summary.pdf.


1 “FourfacesoftheCFO,”Deloitte,2016,https://www2.deloitte.com/us/en/pages/finance/articles/gx-cfo-role-responsibilities-organization-steward-operator-catalyst-strategist.html.

2 “2018Q2GlobalCFOSignals,”Deloitte,July2018,https://www2.deloitte.com/us/en/pages/finance/articles/global-cfo-signals.html.

3 “CrunchtimeIII:TheCFO’sguidetocognitivetechnology,“Deloitte,2017,https://www2.deloitte.com/content/dam/Deloitte/us/Documents/finance-transformation/us-ft-crunch-time-cfos-guide-cognitive-technology.pdf.

4 “CFOSignals,”Deloitte,October2017,https://www2.deloitte.com/content/dam/Deloitte/us/Documents/finance/us-cfo-signals-3q17-high-level-report.pdf.

https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/consultancy/deloitte-uk-the-robots-are-waiting.pdf

https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/consultancy/deloitte-uk-the-robots-are-waiting.pdf

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/deloitte-private/us-private-tech-appendix-2018.pdf

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/deloitte-private/us-private-tech-appendix-2018.pdf




https://www2.deloitte.com/us/en/pages/advisory/solutions/gdpr-contract-management-framework.html

https://www2.deloitte.com/us/en/pages/advisory/solutions/gdpr-contract-management-framework.html

https://www.itgovernance.co.uk/dpa-and-gdpr-penalties

https://www.itgovernance.co.uk/dpa-and-gdpr-penalties

https://www.slideshare.net/DeloitteUS/eu-general-data-protection-regulation-practical-steps-for-compliance-third-party-contract-management?qid=af876c9d-a64e-4847-b883-370532670869&v=&b=&from_search=1

https://www.slideshare.net/DeloitteUS/eu-general-data-protection-regulation-practical-steps-for-compliance-third-party-contract-management?qid=af876c9d-a64e-4847-b883-370532670869&v=&b=&from_search=1

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology-media-telecommunications/us-tmt-2017-global-mobile-consumer-survey-executive-summary.pdf



https://www2.deloitte.com/us/en/pages/finance/articles/gx-cfo-role-responsibilities-organization-steward-operator-catalyst-strategist.html

https://www2.deloitte.com/us/en/pages/finance/articles/gx-cfo-role-responsibilities-organization-steward-operator-catalyst-strategist.html

https://www2.deloitte.com/us/en/pages/finance/articles/global-cfo-signals.html

https://www2.deloitte.com/us/en/pages/finance/articles/global-cfo-signals.html

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/finance/us-cfo-signals-3q17-high-level-report.pdf



https://www2.deloitte.com/hu/en/pages/about-deloitte/articles/global-private-report-2018.html

https://www2.deloitte.com/hu/en/pages/about-deloitte/articles/global-private-report-2018.html

https://www2.deloitte.com/global/en/pages/about-deloitte/articles/millennialsurvey.html

https://www2.deloitte.com/global/en/pages/about-deloitte/articles/millennialsurvey.html

https://www.forbes.com/sites/sarahlandrum/2017/11/10/millennials-arent-afraid-to-change-jobs-and-heres-why/#2dd8303119a5

https://www.forbes.com/sites/sarahlandrum/2017/11/10/millennials-arent-afraid-to-change-jobs-and-heres-why/#2dd8303119a5

https://www2.deloitte.com/global/en/pages/real-estate/articles/future-commercial-real-estate-europe.html

https://www2.deloitte.com/global/en/pages/real-estate/articles/future-commercial-real-estate-europe.html

https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/real-estate/deloitte-nl-fsi-real-estate-smart-buildings-how-iot-technology-aims-to-add-value-for-real-estate-companies.pdf



https://www2.deloitte.com/global/en/pages/public-sector/articles/the-gender-dividend.html



https://www2.deloitte.com/insights/us/en/focus/human-capital-trends/2017/diversity-and-inclusion-at-the-workplace.html

https://www2.deloitte.com/insights/us/en/focus/human-capital-trends/2017/diversity-and-inclusion-at-the-workplace.html

https://www.forbes.com/sites/barbarathau/2018/05/31/target-solidifies-bet-on-higher-sales-generating-small-stores-amid-retails-mini-me-push/#50eabb434f03

https://www.forbes.com/sites/barbarathau/2018/05/31/target-solidifies-bet-on-higher-sales-generating-small-stores-amid-retails-mini-me-push/#50eabb434f03

https://www2.deloitte.com/global/en/pages/real-estate/articles/rise-co-working-space-need-smart-buildings.html

https://www2.deloitte.com/global/en/pages/real-estate/articles/rise-co-working-space-need-smart-buildings.html


52

Globalization

1 SusanLundandLauraTyson,“Globalizationisnotinretreat,”Foreign Affairs,May/June2018issue,https://www.foreignaffairs.com/articles/world/2018-04-16/globalization-not-retreat.

2 RuthSimon,“TariffshitthoseTrumpwantstohelp:U.S.factories,”Wall Street Journal, Oct.14,2018,https://www.wsj.com/articles/tariffs-hit-those-trump-wants-to-help-u-s-factories-1539518400.

3 “Findingyourfit:Locationselection,”Deloitte,2015,https://www2.deloitte.com/us/en/pages/deloitte-private/articles/finding-your-fit-location-selection.html.

4 “Castandcrew:Securingandmanagingtalent,”Deloitte,2016,https://www2.deloitte.com/us/en/pages/deloitte-private/articles/cast-and-crew-securing-and-managing-talent.html.

5 “Formandfunction:Definingtheinvestment,”Deloitte,2015,https://www2.deloitte.com/us/en/pages/deloitte-private/articles/form-and-function-defining-the-investment.html.

6 “You’vehitthegroundrunning.Nowwhat?”Deloitte,2017,https://www2.deloitte.com/us/en/pages/deloitte-private/articles/hit-the-ground-running-international-expansion.html.

Governance

1 “ProposalforaregulationoftheEuropeanParliamentandoftheCouncilontheprotectionofindividualswithregardtotheprocessingofpersonaldata and on the free movement of such data (General Data Protection Regulation),”CounciloftheEuropeanUnion,June1,2015,http://data.consilium.europa.eu/doc/document/ST-9565-2015-INIT/en/pdf.

2 DavidShepardson,“Prisontime,heftyfinesfordataprivacyviolations:DraftU.S.Senatebill,”Technology Times,Nov.1,2018,https://www.reuters.com/article/us-usa-internet-privacy/prison-time-hefty-fines-for-data-privacy-violations-draft-u-s-senate-bill-idUSKCN1N65U2.

M&A

1 “Globaldealsintelligence,”ThomsonReuters,Mergers & Acquisition Review, October2018,http://dmi.thomsonreuters.com/Content/Files/3Q2018_MA_Legal_Advisor_Review.pdf.

2 ArleenJacobius,“Drypowderholdingsat$1.8trillion–Preqin,”Pensions & Investments,July6,2018,https://www.pionline.com/article/20180706/ONLINE/180709906/dry-powder-holdings-at-18-trillion-8211-preqin.

3 SusanDettmar,MarkGaray,LukasHoebarth,NnamdiLowrie,JohnPowers,CarinaRuiz-Singh,andRussellThomson,“Howdigitaltoolsarehelpingunlock M&A value,” Wall Street Journal Risk & Compliance Journal,Aug.31,2018,https://deloitte.wsj.com/riskandcompliance/2018/08/31/how-digital-tools-are-helping-unlock-ma-value-2/.

4 The state of the deal: M&A trends 2018,Deloitte,December2017,https://www2.deloitte.com/content/dam/Deloitte/us/Documents/mergers-acqisitions/us-mergers-acquisitions-2018-trends-report.pdf.

PerspectivesThisreportisjustoneexampleofDeloitteresearchontopicsofinteresttoprivatelyheldandmid-marketcompanies.PresentedbyDeloittePrivate,Perspectivesisamultifacetedprogramthatutilizesliveevents,signaturereports,researchpublications,webcasts,newsletters,andothervehiclestodelivertailoredandrelevantinsightsinanintegratedfashion.

PleasevisitourPerspectiveslibraryontheDeloittePrivatewebsite(http://www.deloitte.com/us/private)toviewadditionalmaterialonissuesfacingprivateandmid-marketcompanies.

https://www.foreignaffairs.com/articles/world/2018-04-16/globalization-not-retreat

https://www.foreignaffairs.com/articles/world/2018-04-16/globalization-not-retreat

https://www2.deloitte.com/us/en/pages/deloitte-private/articles/finding-your-fit-location-selection.html



https://www2.deloitte.com/us/en/pages/deloitte-private/articles/cast-and-crew-securing-and-managing-talent.html



https://www2.deloitte.com/us/en/pages/deloitte-private/articles/form-and-function-defining-the-investment.html



https://www2.deloitte.com/us/en/pages/deloitte-private/articles/hit-the-ground-running-international-expansion.html



http://data.consilium.europa.eu/doc/document/ST-9565-2015-INIT/en/pdf

http://data.consilium.europa.eu/doc/document/ST-9565-2015-INIT/en/pdf

https://www.reuters.com/article/us-usa-internet-privacy/prison-time-hefty-fines-for-data-privacy-violations-draft-u-s-senate-bill-idUSKCN1N65U2

https://www.reuters.com/article/us-usa-internet-privacy/prison-time-hefty-fines-for-data-privacy-violations-draft-u-s-senate-bill-idUSKCN1N65U2

http://dmi.thomsonreuters.com/Content/Files/3Q2018_MA_Legal_Advisor_Review.pdf

http://dmi.thomsonreuters.com/Content/Files/3Q2018_MA_Legal_Advisor_Review.pdf

https://www.pionline.com/article/20180706/ONLINE/180709906/dry-powder-holdings-at-18-trillion-8211-preqin

https://www.pionline.com/article/20180706/ONLINE/180709906/dry-powder-holdings-at-18-trillion-8211-preqin

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/mergers-acqisitions/us-mergers-acquisitions-2018-trends-report.pdf




53

Contacts

Mark WhitmoreDeloitte Private Global Leader PartnerDeloitte [email protected]

Mennolt BeelenDeloittePrivateGlobalCo-Leader PartnerDeloitteNetherlands [email protected]

Executive editorBob RosoneManagingDirectorDeloitte [email protected]

Research and editorial lead Janet HastieSeniorMarketingManager [email protected]

ReportdesignIsaac Brynjegard-Bialik SeniorManagerDeloitte [email protected]

Analytics

Enrico CianciSeniorManagerDeloitte [email protected]

Tom DavenportIndependentSeniorAdvisortoDeloitteAnalyticsDeloitteConsultingLLPtom@tomdavenport.com

Francesco SagratiManagerDeloitte [email protected]

Artificial intelligence

Naser [email protected]

Prashanth KaddiPartnerDeloitte Touche Tohmatsu India [email protected]

Automation

Mike SchorPartnerDeloitte & Touche [email protected]

David WrightPartnerPrivateSectorRoboticProcessAutomationLeadDeloitte [email protected]

Cyber security

Rocco GallettoPartnerDeloitte [email protected]

Peter WirnspergerPartnerDeloitte [email protected]

Disruption

Terry StuartChiefInnovationOfficerDeloitte [email protected]

Roger [email protected]


Damien BonesPartnerDeloitte [email protected]

Anthony DayCOO,DeloitteEMEABlockchainLabDeloitte [email protected]


54

Future of work

Sheila BottingPartnerNationalRealEstateLeaderDeloitte [email protected]

Philippe BurgerPartnerHumanCapitalPracticeLeaderDeloitte [email protected]

Globalization

Mark AllsopPartnerDeloitte [email protected]

Willo RenehanTax PartnerDeloitte [email protected]

Governance

Maureen BujnoManagingDirectorCenterforBoardEffectivenessDeloitte [email protected]

Svetlana GandjovaPartnerDeloitte [email protected]

Internet of Things

Michele TarditiDirectorDeloitte [email protected]

Sam SluismansPartner, Monitor [email protected]

Acknowledgments

WewouldliketothankallofourDeloittesubjectmatterspecialistsfortheirtimeandtheinsightstheysharedforthisreport.

M&A

Tara HillNationalDeloittePrivateDeals&PrivateEquity LeaderDeloitte [email protected]

Jamie LewinPrincipalDeloitte Corporate Finance [email protected]


55

AmericasBrazilRonaldoFragosoPartnerDeloitteBrazilrfragoso@deloitte.com

CanadaMichael RuniaPartnerDeloitte [email protected]

ChilePabloHerreraPartnerDeloitte Chile [email protected]

MexicoAlberto MirandaPartnerDeloitte Mexico [email protected]

United StatesJasonDowningPartnerDeloitte LLP [email protected]

EMEAAfricaMabelKasenteNdawula DirectorDeloitteSouthAfrica [email protected]

AustriaAlexanderHohendanner PartnerDeloitte Austria [email protected]

BelgiumNikolaasTahonPartnerDeloitteBelgium [email protected]

Central EuropeMarcin DiakonowiczPartnerDeloitte [email protected]

Commonwealth of Independent States (CIS)SvetlanaBorisovaPartnerDeloitte [email protected]

DenmarkJoern JepsenPartnerDeloitte [email protected]

FranceEmmanuel GadretPartnerDeloitte [email protected]

GermanyLutz MeyerPartnerDeloitte [email protected]

IrelandDan MurrayPartnerDeloitte [email protected]

IsraelMosheSchwartzPartnerDeloitte [email protected]

ItalyErnesto LanzilloPartnerDeloitte [email protected]

DeloittePrivategeographyleaders

LuxembourgPierre-JeanEstageriePartnerDeloitteLuxembourgpjestagerie@deloitte.lu

Middle EastHerveBallantyneSeniorExecutiveDirectorDeloitte United Arab [email protected]

NetherlandsTon van [email protected]

NordicRichard [email protected]

[email protected]

SpainMarcelino Alonso [email protected]

SwitzerlandKarineSzegediPartnerDeloitteSwitzerlandkszegedi@deloitte.ch

TurkeyAli CicekliPartnerDeloitte [email protected]

United KingdomKirstyNewmanPartnerDeloitteUnitedKingdomknewman@deloitte.co.uk

Asia Paci icAsia-Paci ic LeaderMikeHornePartnerDeloitteNewZealand [email protected]

AustraliaAndrew CulleyPartnerDeloitte [email protected]

ChinaWilliam ChouPartnerDeloitte [email protected]

IndiaNitanShingalaPartnerDeloitte [email protected]

JapanAtsushi NumataPartnerDeloitte [email protected]

New ZealandRoss MilneChairmanDeloitteNewZealand [email protected]

South East AsiaRichard [email protected]

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Private company issues and opportunities: Global ......global markets, taking on new partners...

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