IMD-OWPLIVE22-PostEvent-Report

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06 FOREWORD

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BRACE YOURSELF: WEB3 WILL UNLEASH CREATIVE DESTRUCTION GoutamChallagalla

MORE THAN POETIC DEVICES: THE POWER

KATHARINA LANGE, AFFILIATE PROFESSOR OF LEADERSHIP

OF METAPHORS IN LEADERSHIP Heather Cairns-Lee Albrecht Enders

08 SUSTAINABILTY 44 COMPETITIVE ADVANTAGE IN THE DIGITAL AGE Mohan Subramaniam

COLLECTIVE GENIUS: LEADING INNOVATION Katharina Lange

12 Keynote: COURAGEOUS LEADERSHIP NEEDED TO DECARBONIZE THE GLOBAL ECONOMY Keryn James

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BRING YOUR COMPANY INTO THE STRATOSPHERE: MANAGING CHANGE Jim Pulcrano

STRATEGY

18 LOOK BEYOND

LEADERSHIP

NAVIGATING THE AGE OF ‘PERMACRISIS’ Patrick Reinmoeller

‘CARBON MYOPIA’: SEIZE SUSTAINABILITY AS AN OPPORTUNITY Julia Binder

22 HUMANITY IS HEADED FOR A CLIMATE DISASTER. GET READY FOR CARBON PRICES TO RISE Karl Schmedders

56 Keynote: ‘MOBILIZE THE FIRE WITHIN’: WARTIME LEADERS REQUIRED FOR AN ERA OF UPHEAVAL Michael Watkins

TO IMPROVE RESILIENCE,

FOCUS ON ‘GREY RHINOS’ INSTEAD OF ‘BLACK SWANS’ Michael Wade

26 THE ROLE OF 30 DIGITAL

62 LEADING

TAMING UNCERTAINTY WITH ‘OPEN ENTERPRISE’ BUSINESS MODELS Mark Greeven Patrick Reinmoeller WHAT HELPS COMPANIES ENDURE LONGER THAN OTHERS? Niccolò Pisani

BUSINESS IN THE ‘JUST TRANSITION’ THAT LEAVES NO ONE BEHIND Francisco Szekely

CUSTOMER-CENTRIC TRANSFORMATIONS Frédéric Dalsace Didier Bonnet Katharina Lange

66 STAKEHOLDERS

INCORPORATED: MAKING BETTER BUSINESS DECISIONS Arnaud Chevallier HARNESSING EMOTIONAL INTELLIGENCE TO BOOST LEADERSHIP EFFECTIVENESS Silke Mischke

34 Keynote: ‘CAPITALISM WITHOUT CAPITAL’: MONETIZING DIGITAL TOKENS Arturo Bris

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JUMPSTARTING INNOVATION AND ORGANIZATIONAL CHANGE Louise Muhdi

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172 PARTICIPANTS 40+ COUNTRIES &COMPANIES 32 TEACHING FACULTY

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OWP22 highlights

AN INVALUABLE PARTNER FORYOUR ONGOING LEARNING JOURNEY INA GLOBAL COMMUNITY

Revisit key sessions on business-critical topics to solve your challenges and drive your organization forward.

KATHARINA LANGE Affiliate Professor of Leadership

real-time learning, peer-to-peer sharing, and networking. We hope that all of you grew your network and started to build effective collaborations.

This post-event report, which brings all of IMD’s faculty expertise together, can further help you identify and select inspiring opportunities for you and your organization. We hope you find it an invaluable partner for your ongoing learning journey.

Dear OWP liVe participant, The September 2022 liVe edition of our inspirational signature program, Orchestrating Winning Performance (OWP), was an exemplar of the very creative and differentiated ways that IMD has found to make leadership development more inspiring, more relevant, and more sustainably impactful. It was a stimulating and inspiring week as we explored the theme: “how to reset for sustainable and inclusive growth”. Through the flexibility of the “OWP liVe” virtual delivery, we reached a wide global audience through technology-mediated interactions. We were honored to connect hundreds of international executives across 12 time zones to enjoy thought-provoking sessions,

Professor Michael Watkins’ advice during his keynote address, that leaders need to strike the balance between self-confidence and humility, also resonated deeply with me as we navigate these turbulent times. One of the truly unique advantages of the flexible OWP liVe design is that as a participant, you could take part in interactive virtual sessions and replay recorded sessions in your own time. I encourage you to revisit your key sessions and review your notes in the coming weeks and months. You will see that this helps you to absorb the new business trends, thought leadership, and insights around business topics that are critical for you and your organization.

Faculty and industry experts covered the full spectrum of post-pandemic challenges in their sessions, enabling each OWP liVe participant to focus on the challenges and opportunities most relevant to them and their organization. I was touched by the reflection of one of our keynote speakers, Keryn James. She shared that, as leaders, we need to be courageous and focus on the long-term game. At the same time, we need to recognize the need to act with urgency, given the complexity and gravity of the challenges we face.

KATHARINA LANGE Affiliate Professor of Leadership

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KEYNOTE

COURAGEOUS LEADERSHIP NEEDED TO DECARBONIZE THE GLOBAL ECONOMY

Only with leaders focused on long-term and systems-based thinking will we achieve a ‘just transition’ to a green economy.

Keynote highlights

The deadly heatwaves that swept across Europe this summer, breaking record temperatures, underscored how climate change is no longer some abject threat in the future: it is a clear and present danger. The urgency for action is also becoming increasingly evident, with scientists warning that global emissions will need to peak by 2025 and reduce by 43% by 2030 if the world is to avoid a climate catastrophe. Is this dramatic change even possible? Keryn James, former CEO of top sustainability consulting firm ERM, thinks so. In her keynote

OWP address, James told participants, “Human beings are nothing if not ingenious. A lot of the technology we need exists. And a lot of the business commitment is out there.” However, in her dialogue with IMD’s Professor of Strategy and Political Economy David Bach, she expressed some doubt about whether achieving the reductions by 2030 was probable, given the considerable social, economic and policy hurdles to overcome. And she was clear that courageous leadership, focused on long-term and systems-based thinking, would be decisive.

KERYN JAMES Former CEO of ERM

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KEYNOTE

“YOUR PRIMARY RESPONSIBILITY IS TO ACT IN THE BEST LONG- TERM INTEREST OF ALL STAKEHOLDERS, NOT JUST SHAREHOLDERS.”

Leaders also need to think in terms of systems, she added. For instance, there is a great deal of focus on emissions reductions targets, but James urged business leaders to think holistically about their impact on people and planet. A ‘JUST ENERGY TRANSITION’ By way of example, the global executive with 30 years of experience in environmental and sustainability consulting underscored the risks of the green energy transition for developing economies. Responding to one of many questions from the audience on policy, stakeholders and the economic transition, she said these countries missed out on the fossil fuelled industrial revolution of the richer world. And although they have contributed little to the climate crisis, they will be among the worst affected by it. “Millions of people are getting left behind and that reinforces the importance of us thinking about a ‘just energy transition’,” said James, adding that rising energy costs may price out poorer countries, creating social issues. “There is a direct link between rising energy prices, rising food prices, and social unrest.”

Furthermore, in dealing with energy’s climate impact, she said leaders cannot ignore the effects of biodiversity loss, either. “Nature is an extortionary machine and her ability to absorb carbon is phenomenal,” she said, referring to the process of photosynthesis, a nature-based solution to global warming. REGENERATIVE AGRICULTURE: NET POSITIVE agriculture that can actually have a positive environmental impact by reversing climate change through rebuilding biodiversity. “It’s a bit like being not net zero, but net positive,” said James. “It changes what people think is possible.” She is also excited by the concept of regeneration, particularly regenerative

She went on to say that climate change is a double-edged sword, and urged participants to seize the opportunities as well as minimize the risks. “There is a lot of capital out there looking to be deployed. There’s no shortage of investment, but there’s a shortage of projects,” James said, noting that ESG disclosure and reporting requirements were mobilizing investment in green projects. ‘WE NEED EVERY SINGLE WEAPON IN OUR ARSENAL’ One area of innovation that James was especially excited about was hydrogen, because it has an exceptionally high heating volume, which means it can be used in heavy industry and transportation, including shipping. “I am very optimistic that we will start to see some real progress over the next five to 10 years,” she said. Carbon capture, reuse and storage is another area of interest. “We need every single weapon in our arsenal,” she said, an approach the Intergovernmental Panel on Climate Change (IPCC) has called for. “We cannot afford to just rely on one strategy to solve this problem, we’re going to need it all.”

FOCUS ON STAKEHOLDERS, NOT JUST SHAREHOLDERS

“The problems that we face are difficult, they require long-term thinking and therefore that requires courage. And this is very much about leadership,” James said, adding that leaders need the ability to make decisions that trade-off short-term benefit for a long term gain. “Your primary responsibility is to act in the best long-term interest of all stakeholders, not just shareholders,” she told delegates, underscoring not just the risk, but the business case for sustainability, in terms of access to talent, customers and capital. James said: “Companies need to think about ‘double materiality’ — what is my business’s impact on climate change but equally, what is the impact of climate change on my business, and will it be sustainable in the context of that change?”

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In contrast, she thought that renewable power would make up a smaller but still important part of the energy mix of the future. “Not all fuels are fungible – you cannot use renewables for industrial activity, because of the intermittent nature of the energy source,” she said.

Yet the even bigger issue in her view is the lack of energy infrastructure. “This hidden underinvestment in generation and transmission infrastructure is hugely problematic. Unless we put some real effort into that over the next decade, the risk of energy poverty increasing will be significant.”

But although business is stepping up to play an increasingly prominent role in financing and driving the energy transition, James said that public policy would be critical in providing the incentives and support to decarbonize the economy.

“You need policy and regulation to drive the pace of change. Just relying on voluntary action by corporates isn’t going to be sufficient, no matter how many wonderful businesses we have out there trying to move the needle.”

And yet, she warned that a lack of global coordination, geopolitical tensions, and macroeconomic distractions had led to “knee-jerk” policy- making from governments. “The one thing business needs more than anything else is clarity and certainty over the short and medium term – otherwise, it’s very difficult to make investment decisions and allocate capital.”

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LOOK BEYOND ‘CARBON MYOPIA’: SEIZE SUSTAINABILITY AS AN OPPORTUNITY

There is still a slim window of opportunity to change the destructive trajectory of our economies. Beyond carbon offsetting, real transformations are required.

Sustainability is now a key strategic initiative for the vast majority of companies. But while many business leaders have understood the need to act on pressing social and environmental issues, very few have figured out how to do so effectively.

There is a lot of confusion among business leaders around sustainability, and a blinkered focus on reducing carbon emissions. While climate change is a key driver of environmental degradation, there are many more problems unfolding, such as biodiversity loss and water scarcity. Companies need to look beyond “carbon myopia” to tackle such issues.

This matters more than ever because businesses need to come up with imaginative solutions to meet their net- zero pledges. They are under growing pressure to reduce emissions, including those passed down the entire supply chain.

JULIA BINDER Professor of Sustainable Innovation and Business Transformation

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ACTION POINTS

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There is no one-size-fits-all solution for companies. As a business leader, use a materiality assessment to understand which topics your company needs to address. Businesses are increasingly asked to take a stance on touchstone social issues such as LGBT rights or Russia’s invasion of Ukraine. You should have processes in place to determine when and how to speak out. Don’t waste your energy trying to solve every problem out there: instead, focus on an issue you deeply care about, one that you have the power to influence.

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RECOMMENDED READING

Currently, many companies rely heavily on carbon offsetting schemes. Yet this is not enough. Real transformation is required if we want to change the destructive trajectory of our economies. There is still a slim window of opportunity to seize sustainability as an opportunity. It’s time to decide: will you lead, or will you follow?

SKYROCKETING ENERGY COSTS MAKE DECARBONIZATION A BUSINESS IMPERATIVE By Julia Binder (I by IMD, 6 May, 2022) ADOPT AN ENTREPRENEURIAL MINDSET TO TAKE RESPONSIBILITY AND CAPTURE THE OPPORTUNITIES PRESENTED BY THE CLIMATE EMERGENCY By Julia Binder, Knut Haanaes, Anette Mikes, Natalia Olynec, Peter Tufano (I by IMD, 26 October, 2021)

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Business Insights

Humanity is headed for a climate disaster. Based on current policies and actions, the world is on track for an average global temperature rise of 2.7C above pre- industrial times, a level that would be catastrophic for life on earth. Without significant and sustained emissions reductions, the window of opportunity to keep global warming below disastrous levels will be closed permanently. Economic concepts can play an

important role in reducing emissions, with carbon taxes being among the most cost- effective measures. This is because they force companies to internalize the cost of their actions and galvanize climate action. The full implementation of all announced carbon emissions targets would keep the average temperature at 1.8C, within the goal of the Paris Climate Agreement. Carbon taxes can help us achieve this goal.

The problem for policymakers is that carbon taxes can be unpopular, and therefore they are often toothless, with some countries exempting entire categories of polluters, and only a very small share of global emissions actually covered by carbon prices. A key yardstick for setting the ‘ideal’ rate for carbon tax is a metric called the social cost of carbon (SCC), which is an attempt to capture the cost to society of an additional ton of carbon dioxide pollution in a single number.

HUMANITY IS HEADED FORACLIMATE DISASTER. GET READY FORCARBONPRICES TORISE

Carbon taxes will play a crucial role in guiding business and government in their efforts to mitigate climate change and adapt to the irreversible damage it may cause.

KARL SCHMEDDERS Professor of Finance

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ACTION POINTS

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Policymakers must impose higher carbon taxes to reduce the likelihood of severe climate disasters in the near-term future.

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Companies must tie bonuses to “green” key performance indicators (KPIs) to make executives accountable for the environmental impact of their actions. Businesses must engage in collaborations with their peers so as to set higher environmental standards in their industries.

RECOMMENDED READING

HOW TO AVOID A CLIMATE DISASTER: THE SOLUTIONS WE HAVE AND THE BREAKTHROUGHS WE NEED By Bill Gates (Penguin Random House, 23 February, 2021) LESS IS MORE: HOWDEGROWTH WILL SAVE THE WORLD By Jason Hickel (Penguin Random House, 13 August, 2020)

Many studies have tried to estimate the SCC using so- called integrated assessment models (IAMs), which integrate climate models with economic models. However, IAMs are a gross simplification of the interdependence between economic activities and climate change. In a forthcoming paper with co-authors, I provide a new methodology for the estimation of the social cost of

carbon — an important figure in the discussion on climate change. Our model strongly suggests that current carbon taxes are much too low. The price of carbon in the EU’s emission trading system has widely fluctuated in recent months because of the turmoil in energy markets since Russia’s invasion of Ukraine. While policy interventions may lead to price declines in the short run, carbon prices

must rise again over longer time periods. Companies should not expect permanently low carbon prices. Instead, they are well advised to begin planning ahead for considerably higher prices in a few years.

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Business Insights

Climate change is a major threat to international peace and security. Rising temperatures are fueling environmental degradation, natural disasters, extreme whether events, food and water insecurity, economic disruption, and conflict. These impacts are a symptom of resource-intensive industrial production in the dominant “dig, burn, dump” economy. Addressing only carbon emissions without challenging the growth-at-all-costs economy doesn’t resolve the

real climate crisis. We need an energy transition to a zero- carbon economy. Many business leaders say they recognize this, but what is needed is concrete action that goes beyond earnest statements of intent. There is a clear incentive for businesses to innovate, reduce and eliminate their climate footprint, transform their organizations to better compete now and in the future, and to better serve the needs of society.

However, this transition to a zero-carbon economy needs to be just and equitable so that none are left behind. This means shifting from an extractive economy to a regenerative economy while protecting those individuals, companies, sectors, and societies that stand to lose out economically. For example, Poland is the only member of the EU refusing to commit to carbon neutrality by 2050 because it generates about 80% of its electricity from coal – a sector that supports 90,000 jobs.

THE ROLE OF BUSINESS IN THE ‘JUST TRANSITION’ THAT LEAVES NO ONE BEHIND

Through their investments in renewable energy, clean technology, and the creation of jobs, businesses can help spread the benefits of a green economy more widely.

FRANCISCO SZEKELY Adjunct Professor of Sustainability Leadership

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ACTION POINTS

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Set long-term, science-based targets to reduce emissions and achieve net-zero.

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Make investments in cleaner forms of energy such as wind and solar. Focus financial investments on the energy needs of less developed areas and assist them to transit to the cleaner energy economy. Focus on job creation, skills development and retraining to support the green transition.

RECOMMENDED READING

Managing these impacts is at the heart of the just transition. It will requiremeasures such as long timelines that are clearly communicated and allowpeople and industries to adjust to active labor market policies, skills development and retraining, public sector policies for job creation, industrial policies for economic diversification, and support for community renewal. Businesses will have an important role to play in achieving a just transition. The first step is to

On top of this, businesses can provide jobs to support the just energy transition, given that employment in sectors such as coal is at risk. But the role of business is not only creating new jobs in the energy sector but also about moving people from regions dependent on fossil fuels, to areas where they have better renewable energy opportunities within the private sector.

increase the commitment of business to embrace the energy transition and promote the zero carbon economy. Beyond this, business innovation can help provide clean energy for all. Cleaner energymust be available to affluent and less economically developed sectors of society, such as by increasing the affordability and use of solar energy. The financial sector will play an important role in financing clean energy projects. In addition, fund managers and asset owners are

being pushed by regulators to embed sustainability throughout their businesses and consider the full spectrumof environmental, social, and governance (ESG) factors whenmaking investment decisions. Suchmeasures are particularly important in supporting the energy transition needs of less developed economies by financing regional and local climate policies and the purchase of cleaner technologies.

SOUTH AFRICA’S JUST ENERGY TRANSITION PARTNERSHIP: A MODEL FOR CLIMATE FINANCING FOR AFRICA? (Carnegie Endowment for International Peace, September 2022) JUST TRANSITION FOR ALL: THE WORLD BANK GROUP’S SUPPORT TO COUNTRIES TRANSITIONING AWAY FROM COAL (World Bank)

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KEYNOTE

‘CAPITALISMWITHOUT CAPITAL’: MONETIZING DIGITAL TOKENS

Despite market woes, digital assets have the potential to transform traditional business models, facilitate different forms of financing, and monetize physical and intellectual capital.

Keynote highlights

These were the key takeaways from Tuesday’s keynote address delivered by Arturo Bris, Professor of Finance and Director of IMD World Competitiveness Center. The move to a tokenized economy has already spawned new business models. Brave is an opt-in advertising platform that rewards users for putting up with marketing. In exchange for paying attention, they earn 70% of the ad revenue that Brave makes, in the form of Basic Attention Tokens. Users can withdraw their BAT in cash.

The value of cryptocurrencies may have slumped in what has been dubbed the “crypto winter”, but corporations can still make good use of the potential applications of digital assets. Digital tokens that represent virtual and physical assets can facilitate access to capital for issuers, spur digital business model innovation, and enable individuals and businesses to monetize their own physical and intellectual capital.

ARTURO BRIS Professor of Finance and Director of IMD World Competitiveness Center

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KEYNOTE

“THIS MARKS A PROFOUND TRANSFORMATION OF OUR FINANCIAL SYSTEM, AS COMPANIES CAN SEEK TOTALLY DIFFERENT FORMS OF FINANCING.”

This turns the traditional advertising model, as deployed by Google with its Chrome browser, on its head. “This is very important, as businesses will traditionally obtain data from browsing history and sell the data to vendors,” said Bris. “It’s also very interesting as Brave is using the same business model as Google, but [the user] is monetizing their own attention.” He said this would have important implications for the labor market and the structure of modern economies. “This represents jobs of the future — not necessarily a physical task that is productive — but a way of using technology to monetize your own attention.” As another example, he cited Lympo, which enables people to exchange their fitness and wellness data, stored on a blockchain, for tokens. “What blockchain technology is doing is enabling you to earn a decent living on top of [your] traditional job,” he said.

Utility tokens differ from payment tokens: digital certificates such as cryptocurrencies that represent a means of payment or can be sold on a platform like Kraken in exchange for fiat (government-issued) currency. They also differ from asset tokens, which represent digital or physical assets, such as debt or equity, artworks or real estate. Last year, for instance, the digital asset bank Sygnum, and Artemundi, an art fund manager, tokenized Picasso’s Fillette au béret painting, thereby enabling investors to purchase and trade “shares” in the CHF 4m artwork, in the form of Art Security Tokens (ASTs). Holders of these ASTs have ownership rights in the Picasso recognized under Swiss law. However, Bris said digital tokens differ from traditional securities like shares. This is because tokens usually grant no rights or control over the underlying asset, whereas shares generally confer only voting rights and dividend rights (aside from a few Silicon Valley tech companies).

A FUNDAMENTAL REVOLUTION Beyond the individual, there are important use cases for businesses as well. Bris urged delegates to abandon any skepticism. “We may think it’s only for a bunch of techies or kids that devote their time to playing games, but that’s not true,” he said. “It’s a true, fundamental revolution.” He pointed to fan tokens, a type of cryptocurrency issued by sports clubs that can be traded on exchanges and used to buy tickets and merchandise. They are a source of new revenue for sports clubs as well because they can appreciate in value when the team is performing well. Bris said: “This type of digital asset is transforming football fans into shareholders who invest their capital and the value of their investment depends on the performance of the team. Doesn’t this sound similar to buying Tesla shares?” The Qatari-owned French soccer club Paris St Germain’s token has a market capitalization of about $26.8 million, enabling the club to bypass traditional capital markets to raise funds in innovative ways.

CAPITALISMWITHOUT CAPITAL “We are replicating capitalism without capital, or without capitalist institutions,” said Bris. “The privately held club does not need to go to the stock market to raise capital. This marks a profound transformation of our financial system, as companies can seek totally different forms of financing.” These digital assets were given further legitimacy when Switzerland last year gave tokens traded on a blockchain the same legal standing as traditional assets. Bris saw utility tokens, which help in the capitalization of corporate projects and can then be used to buy goods or services from the issuer, as having the greatest commercial use case. “These tokens represent a massive [opportunity] for digital business model innovation as they result in total transformation of traditional business models,” he stated.

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“WE NEED TO DISTINGUISH NFTS FOR BUSINESS MODELS AND NFTS FOR IDIOTS.”

The greatest potential he saw for NFTs was to enable the transactions that drive the metaverse, an immersive virtual world facilitated by use of virtual and augmented reality that is being billed as the next evolution of the internet. “The metaverse is going to be the next big revolution,” Bris said. Already, brands are launching virtual cars, museums, travel and real estate in the metaverse. This

virtual world also enables brands with physical stores to engage their customers in new, immersive ways. “Companies can create a lot of value out of it by increasing customer loyalty,” said Bris.

NFTS FOR BUSINESS MODELS

While Bris sees a good deal of value in asset tokens, he drew a distinction between those with genuine utility and those with no underlying value beyond their uniqueness. “We need to distinguish NFTs for business models and NFTs for idiots,” he said, referring to non-fungible tokens, which are associated with a particular digital “asset”, even a Tweet.

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Business Insights

Businesses that conquered the 20th century economy owned the means of production. In the digital era, the dominant business models are those which create connections. Some of the most valuable companies today are platform businesses, such as Google, Apple, Amazon, and Uber, which link consumers with producers to facilitate the exchange of goods, services, and information.

In fact, platform companies have become so enormously powerful that they’re taking huge commissions from their suppliers, squeezing their profit margins. And this is eroding trust in platform businesses. Uber and Lyft have been sued by their drivers for engaging in anticompetitive practices, setting prices customers pay and denying them employment benefits. Because of this problem, these modern monopolies are particularly vulnerable to disruption by a new wave of companies that are putting trust

at the center of their business models. ‘Web3’ companies are revamping how the internet works, using blockchain (distributed ledger) technology and digital tokens to mediate interactions between parties. And because users are in control, there are no digital gatekeepers to set the rules and reap most of the profits. New models of trust are built, with the spoils shared by all parties. This means Web3 firms could disintermediate platform businesses.

BRACE YOURSELF: WEB3WILL UNLEASHCREATIVE DESTRUCTION

The next iteration of the internet is coming, with trust at its core. Companies will need to rethink their business models and build new capabilities to see off the threat.

GOUTAM CHALLAGALLA Professor of Strategy and Marketing

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ACTION POINTS

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Companies need to keep their eyes on the new business models that are emerging and could disrupt them. This is becoming increasingly likely given the rapid pace of digital evolution. If you can’t beat them, join them. Platform businesses facing disintermediation from Web3 firms can strike up partnerships with these digital upstarts and capture new opportunities. Trust and digital tokens will be the foundation of the new economy. Intermediaries are in for a hard time if they are not careful.

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And this potential is reflected in the huge sums being poured into Web3 startups. Venture capital firm Andreessen Horowitz (a16z) this year launched a new $4.5 billion Web3 fund to invest in Web3 games, decentralized social media, and NFT (non-fungible token) communities.

For platform businesses and other firms, the lesson is that no company is impervious to disruption, no matter how powerful they are. There will always be creative disruption, meaning that companies will need to rethink their business models and build new capabilities in the face of the digital revolution.

RECOMMENDED READING

TOKEN ECONOMY: HOW THE WEB3 REINVENTS THE INTERNET By Shermin Voshmgir (BlockchainHub Berlin, 5 June, 2020)

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COMPETITIVE ADVANTAGE IN THE DIGITAL AGE A firm’s continued focus on products, value chains, and industry structure for finding competitive advantage leaves them short-sighted and unable to benefit from the full value that modern digital technologies provide. Q&A →Digital WHAT IS YOUR HOT TOPIC? In the modern economy, a new model for competitive strategy is emerging - one rooted in data and digital ecosystems. Once, legacy firms focused their competitive strategy on products and industries but this approach is now becoming obsolete. WHY DOES THIS MATTER NOW?

Legacy firms must embrace a new paradigm for competitive strategy - or risk obsolescence.

MOHAN SUBRAMANIAM Professor of Strategy and Digital Transformation

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ACTION POINTS

LEGACY FIRMS NEED TO CONSIDER THREE CRITICAL QUESTIONS:

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What is new about modern data?

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How should you think of digital ecosystems that are tailored to your business needs?

What does a shift of focus from products and industries to data and digital ecosystems mean for your competitive strategy?

RECOMMENDED READING

to pilots to fly in ways that improve fuel efficiencies. Consumption ecosystems, on the other hand, are digital networks built from connected and complementary entities that expand the ways in which a firm’s products are consumed. Imagine smart toothbrushes connected to a network of dentists that track users’ dental health to predict and prevent cavities. Or smart mattresses that shut off lights, music, or televisions just when a user falls asleep.

Production ecosystems are digital networks built using a firm’s value chain infrastructure. Consider the construction- equipment manufacturer Caterpillar. The company tracks data on the wear and tear of its equipment to predict likely component failures and offers predictive maintenance services for new revenue streams. Another example is General Electric, the US conglomerate, which offers “smart value chains” that track sensor data from its jet engines to generate new data-driven services such as providing real-time guidance

Together, production and consumption ecosystems give a legacy firm a range of choices for turning data into a revenue- generating asset.

WHAT IS YOUR SOLUTION? Firms can leverage their existing assets, infrastructure, and traditional strengths to harness the new and explosive power of data and digital ecosystems. Doing so can not only increase operational efficiencies and transform traditional products into digital platforms, but help create entirely new data-driven services. To do so, legacy firms must visualize their digital ecosystems as a combination of production and consumption ecosystems.

THE FUTURE OF COMPETITIVE STRATEGY UNLEASHING THE POWER OF DATA AND

DIGITAL ECOSYSTEMS By Mohan Subramaniam (MIT Press, 16 August, 2022) THE 4 TIERS OF DIGITAL TRANSFORMATION By Mohan Subramaniam (Harvard Business Review, 21 September, 2021) IS YOUR COMPANY SQUANDERING DIGITAL OPPORTUNITIES? By Mohan Subramaniam (Harvard Business Review, 8 August, 2022)

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WHAT IS YOUR HOT TOPIC? Q&A →Digital

Even after you have taken the firm through the transformation, and business is going well, you may not be content with an incrementally growing business. Are you willing to risk what you’ve built so far, bringing the company to “cruising altitude”, and go for scale, bringing the company into the stratosphere? Change may be terrifying, but it is also ubiquitous. Companies and markets are being transformed by global events such as the COVID-19 pandemic and Russia’s invasion of Ukraine, WHY DOES THIS MATTER NOW?

which has only accelerated change and deepened uncertainty. Workplaces are also being transformed by technological development and issues of equality and race. Such changes can feel overwhelming for leaders of organizations. When you have worked hard to rise up to a leadership position, taking a risk can be terrifying. Psychologically, it is easier to take a risk when you are just a regular employee in the business because you’re at the bottom of the social ladder, so there is nowhere to go but up.

Change is confusing and makes us anxious. Even if changes are positive, they can force people to take risks. This can be terrifying. Leaders of organizations are having to manage and prepare for change on an individual level, but also at a company level. Many businesses are going through transformations. So how do you sell change to your team and manage the change process?

BRINGYOUR COMPANY INTO THE STRATOSPHERE: MANAGINGCHANGE

Change is confusing and makes us anxious, but it is ubiquitous. To navigate this terrifying process, leaders of organizations will need to understand why they want to make a change.

JIM PULCRANO Adjunct Professor of Entrepreneurship and Management

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ACTION POINTS

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Don’t just think about it, write it down. It’s often said that writing can show us the messiness of our thoughts. And if you’re confused about what’s important to you, change is going to be even more terrifying.

WHAT IS YOUR SOLUTION? Understand your comfort with risk and ambiguity, and, even more so, understand why you want to make a change. What do you value, personally and professionally? This may seem pedantic, but take the time to think deeply about what you want from a job, and what do you want to bring to your company and your customers. Are you creating value? If not, what can you change to assure that you create value on some scale every day?

RECOMMENDED READING

WHO MOVED MY CHEESE: AN AMAZINGWAY TO DEAL WITH CHANGE IN YOURWORK AND IN YOUR LIFE By Spencer Johnson (Vermilion, 4 March, 1999) MAN’S SEARCH FOR MEANING: THE CLASSIC TRIBUTE TO HOPE FROM THE HOLOCAUST By Viktor Frankl (Rider, 6 May, 2004)

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Leader- ship

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KEYNOTE

‘MOBILIZE THE FIRE WITHIN’: WARTIME LEADERS REQUIRED FOR AN ERA OF UPHEAVAL

Balancing ‘leadership polarities’ is key to navigating an increasingly uncertain world.

Keynote highlights

The effects of soaring inflation, financial market turmoil and the war in Ukraine have thrust the world into an era of fresh turmoil. To overcome these mounting challenges, it’s clear that strong leadership is going to be critical in increasingly turbulent times. In his keynote OWP session, Michael Watkins, Professor of Leadership and Organizational Change, said: “If we’re going to avoid a future of famine, fragmentation, and futility, the best hope we have is to develop the right kinds of leaders – and lots of them.”

Referencing climate change, he added: “We must undertake this work for not just the survival of our societies but perhaps in the longer run our species.” In navigating this volatile environment, he said that leaders needed to challenge complacency: “There is a view that history cycles through good and bad times, through golden ages and dark ages, and an associated belief that this too shall pass,” Watkins said.

MICHAEL WATKINS Professor of Leadership and Organizational Change

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KEYNOTE

“WE MAY BE FACING A COMING OF THE WORST OF TIMES – NOT A SMOOTH SLIDE BUT A CATASTROPHIC RUPTURE THAT REALLY CHANGES EVERYTHING. WE NEED TO PREPARE OURSELVES AND CONFRONT THAT REALITY.”

“This is a dangerous belief today because we may be facing a coming of the worst of times – not a smooth slide but a catastrophic rupture that really changes everything,” he added. “We need to prepare ourselves and confront that reality.” A popular school of thought is that hard times create strong leaders - think of Ukraine’s president Volodymyr Zelenskyy, who has been hailed as a powerful leader and communicator. “Without Russia’s invasion of Ukraine, his leadership would have been a footnote in history,” said Watkins. “ Instead, his example of great leadership will ring down the ages.” But there’s also no guarantee that the present era of upheaval will generate the strong leaders that business and society so desperately need. “We cannot wait for that to happen. We need to mobilize, to rapidly develop a ready reserve of leaders who are prepared to deal with the crises to come,” said Watkins. He therefore issued a “call to arms” to focus on developing young leaders with certain inherent qualities, shaped by experience, that will get their organizations through the hard times ahead.

Watkins said these qualities have consistently shown up in successful but sometimes controversial wartime leaders throughout history - not just Zelenskyy, but Napoleon, Nelson, Winston Churchill, and Charles de Gaulle. BALANCING ‘LEADERSHIP POLARITIES’ But these qualities won’t be found in “laundry lists” of leadership traits, he added. What matters far more than courage, integrity, inspiration, and vision is the ability to manage “leadership polarities”. These are competing tensions that are unresolvable and must be balanced. The first of six essential polarities is the tension between self-confidence and humility. “When I work with leaders taking on new roles, they often have quite incomplete knowledge and need to get up a learning curve,” said Watkins. “It’s quite dangerous to behave as if they have the answers, as they don’t, but at the same time they need to project a confident curiosity.” More than this, they need to know when (and how) to switch between these two modes of leadership.

The second polarity is singular focus versus multitasking. “Every senior executive I work with is busy, and strong leaders must be able to multitask,” he said. “But at the same time, the ability to get into a ‘flow state’, reduce distractions, and come up with the right approaches is just so absolutely critical.” ‘MOBILIZE THE FIRE WITHIN’ The third polarity is emotional regulation – the ability to generate excitement and show constraint simultaneously. “The most successful leaders tame their natural inclinations to get triggered by things, but at the same time they can mobilize the fire within to help motivate and inspire their people,” he said. The tension between ruthlessness and compassion is the fourth polarity. For example, leaders executing a turnaround strategy may need to make tough decisions like making layoffs to save the wider organization. “The sad reality is sometimes there are these challenging choices to make, said Watkins. “And leaders who hesitate will fail in the end,” Watkins explained.

Fifth is the tension between seizing the initiative and reacting rapidly. “Leaders know when to seize the initiative, when to be the first mover and change the game, but also when to wait for situations to mature. When things ripen, they react decisively,” he explained. Innovation versus imitation is the sixth leadership polarity. Watkins said: “The leaders I work with — almost all are innovative people, they’re generating new ideas, but they are also anchored in the knowledge that you don’t need to reinvent the wheel all the time; imitation can be the way to generate a strategic advantage.”

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“TECHNOLOGY MAY YET HELP US WITH THE CLIMATE ISSUES. GOOD PUBLIC POLICY IS IMPORTANT, TOO. BUT, IN THE END, IT’S LEADERSHIP THAT IS GOING TO MAKE THE DIFFERENCE.”

Watkins added that, while organizations should be bracing for further turbulence ahead, by developing “energetic leadership”, they will be much better prepared to weather the storm. This is the ability of a leader to mobilize and focus the energy of individuals, teams and organizations – in order to achieve goals on a sustainable basis.

“We are heading into challenging times,” said Watkins, “and we can’t be in a state of denial about that reality. Technology may yet help us with the climate issues. Good public policy is important, too. But, in the end, it’s leadership that is going to make the difference.”

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LEADING CUSTOMER-CENTRIC TRANSFORMATIONS research points to three aspects of customer-centricity that many firms fail to get right: the scope, the dynamic nature of the subject, and the diverse capabilities required to succeed. Business Insights There’s a paradox when it comes to customer-centricity: most executives think caring about their customers is important, and many companies see customer-centricity as a key pillar of their growth strategy. And yet many executives rate their firm’s own performance in this area poorly - and end up paying for it. APOSITIVE EFFECT ONPROFITABILITY We’ve been talking about customer-centricity for decades, and the concept is neither difficult to define nor to understand. Furthermore, academic research has repeatedly demonstrated the positive impact that being customer-centric has on financial performance (it has a positive effect on profitability, for instance). So, howcanwe explain this disconnect between such an obviousmanagement imperative and the reality of where firms really are in practice?Our

Many companies take a piecemeal approach to customer-centricity, but it needs to permeate all the dimensions of a business and operating model to deliver financial gains.

FRÉDÉRIC DALSACE Professor of Marketing and Strategy

KATHARINA LANGE Affiliate Professor of Leadership

DIDIER BONNET Affiliate Professor of Strategy and Digital Transformation

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ACTION POINTS

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Make sure you understand that customer-centricity is not only about marketing slogans such as ‘developing offers that customers desire’; this may well only be the starting point. Customer-centricity should also be present in how firms deliver and capture customer value. Tightly couple your customer- centric marketing strategy with digital technology and key leadership behaviors.

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Be pragmatic: customer-centricity is a journey. Solve your first customer- centric challenge and build momentum from there.

not use digital technology, which brings creativity, connectivity and commitment. And nothing can really happen if one does not start to question key leadership behaviors. Empathy, humility, and courage need to become part of the firm’s DNA in order for the company to make significant progress along the journey to becoming customer-centric.

Nor can firms target their customer-centricity efforts at the level of frontline employees. This is because the root cause of customer issues are usually processes. If you want to maintain, or regain, true customer-centricity at the organizational level, you must do more than empower employees to be nice and courteous in every customer interaction; customer- centricity has to be an integral part of every dimension of the business model: value systemic deficiencies within organizational

conception (desirability), value delivery (feasibility) and value capture (profitability). Customer-centricity is a strategic ‘North star’, and it’s systemic. So, unless you permeate its components in all the dimensions of your business model, it will most likely remain wishful thinking. This, in turn, requires that you integrate digital technology and leadership capabilities into your customer-centric marketing strategy. This is because a firm cannot be truly customer-centric if it does

TRANSLATE PRINCIPLES INTOCONCRETE ACTION Many firms target their customer-centricity efforts at the wrong level in the organization and end up with a piecemeal approach. It often starts at the top. Senior leaders, invariably with good intentions, promote customer- centricity as a motivational slogan (such as “customers are at the center of everything we do”). But these principles rarely translate into concrete action plans that can improve a firm’s performance.

RECOMMENDED READING

FUSE SOFT SKILLS AND DIGITAL FOR CUSTOMER-CENTRICITY ON STEROIDS By Didier Bonnet, Katharina Lange, Frédéric Dalsace (I by IMD, 13 May, 2021)

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More organizations are adopting stakeholder-friendly mandates, but seeking consensus on every choice grinds decision speed to a halt. What is a good level of stakeholder engagement? ARNAUD CHEVALLIER Professor of Strategy Q&A →Leadership STAKEHOLDERS INCORPORATED: MAKINGBETTER BUSINESS DECISIONS WHAT IS YOUR HOT TOPIC? How much managers consider the concerns of their stakeholders when making business decisions depends on a number of factors, including their national and corporate cultures as well as their personality and experience. Over time, these considerations lead managers to develop a decision-making style that often becomes the default that they unconsciously use. However, a one-size-fits-all approach to making decisions will not work. If managers do not engage with stakeholders enough, it can lead to poor decision outcomes and faulty implementation of strategy. Conversely, seeking consensus on every choice grinds decision speed to a halt and may cause stakeholders to feel their time would be better used elsewhere. Ultimately, an ability to engage more or less, depending on the individual situation, is needed.

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ACTION POINTS

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You probably have a default decision-making style that feels most comfortable.

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But you may be better served having different decision-making styles, just as a Swiss Army knife has various blades.

Which decision-making style you chose to use, and with which stakeholders, should not (just) be determined by your innate preference.

RECOMMENDED READING

WHAT IS YOUR SOLUTION? There are more ways of making decisions than whatever style feels natural. Instead of defaulting to their preference, managers should choose the style that best matches the decision at hand. By evaluating the impact and reversibility of a decision, managers can select the decision-making style that will serve them best in a given situation.

WHO HAS THE D?: HOW CLEAR DECISION ROLES ENHANCE ORGANIZATIONAL PERFORMANCE By Paul Rogers and Marcia Blenko (Harvard Business Review, January 2006) THE ROLE OF THE SITUATION IN LEADERSHIP By Victor Vroom and Arthur Jago (American Psychologist, 2007)

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In times of uncertainty, noticing, effectively addressing, and working with emotions in yourself and others will improve business results. SILKE MISCHKE Senior Executive Coach Q&A →Leadership HARNESSING EMOTIONAL INTELLIGENCE TO BOOST LEADERSHIP EFFECTIVENESS WHAT IS YOUR HOT TOPIC? Emotional abilities increase leadership effectiveness, help define leadership style, and contribute to team performance. Leaders who demonstrate emotional empathy are perceived as more effective communicators. By creating an environment of psychological safety — in which people can speak up without fear of being punished or humiliated — such leaders also improve levels of trust in their team. WHY DOES IT MATTER NOW? In times of heightened uncertainty, such as today, it is more important than ever to know how to effectively work and lead with emotions. Highly effective leaders listen to their emotions and include them in their decision-making process. Such leaders demonstrate how being emotionally connected empowers their team to face challenges and outperform in highly complex environments.

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