OWP liVe Report

OWP liVe REPORT Orchestrating Winning Performance June 2020

Our Purpose Challenging what is and inspiring what could be, we develop leaders who transform organizations and contribute to society. Our Mission Founded by business executives for business executives, we are an independent academic institution with Swiss roots and global reach. We strive to be the trusted learning partner of choice for ambitious individuals and organizations worldwide.

4

Leading with conviction in unpredictable times FOREWORD

5

BeforeMarch, wewere preparing for the 26 th year of our signature program, OrchestratingWinning Performance (OWP), with a careful eye on global developments. OWP is a significant undertaking that brings together the expertise of our facultywith guest speakers and executives in one place to explore the latest research and trends shaping ourworld. Of course, theCOVID-19 pandemic struck hard and IMD, likemost other organizations, closed down for face-to- face business. In lockdown, we challenged ourselves to investigate howwe could connect with our community to continue to deliver programs in an impactful and credibleway. More than ever, we knew leaders like you would need inspiration and fresh ideas to help their organizations navigate the “newnormal”. After all, IMD’s purpose is: “Challengingwhat is and inspiring what could be, we develop leaderswho transformorganizations and contribute to society.” Fromthese deliberations, OWP liVewas created - an innovative, interactive and flexible virtual learning journey that could recreate the intensity of the OWP experience in offices and homes all over theworld.

Thanks to an intense organization-wide effort, in amatter of weeks, wewere able to offer 130 online sessions featuring our faculty’s latest research, outstanding guest speakers, and the opportunity to have courageous conversations and personal coaching. Youwere able to design your own learning journeys fromdifferent pedagogical formats. Based on feedback fromyou, our first OWP liVe audience, we are pleased to report that the experiment was a significant success. In the absence of face-to-face exchange, perhaps themost gratifying revelation for uswas the impressive level of interaction during the program. Far fromhindering communication, the virtual formatmade it possible for amore diverse, global audience to connect. You joined us from43 countries, representing companies from18 industries, sharing your experiences. OWP liVe, staged as some countrieswere easing their lockdowns, presented a timely opportunity to discuss the outlook for a post-COVID-19world. JimSnabe’s observation that we are nowseeing “the difference between purpose-led organizations and those that are focusing on short-termprofits” felt poignant. We knowpurpose has becomemore relevant for companies in recent years, but the pandemic has reinforced the idea that it is possible to dowell by doing good. There is

nowa rarewindowof opportunity to put this thought into action aswe return to business in amuch-changedworld. Indeed, your OWP liVe experience did not endwhenwe closed down our Zoom windows, and it should not. Please remember that neurons that fire together, wire together. Themorewe return towhat we have learned, themore embedded it becomes in our lives. This post-event report is designed to helpwith that process. It features articles coveringOWP liVe sessions to spark reflection and to provide access to insights fromsessions youmay havemissed.We hope you appreciate these additional materials and canmake time to read through the report in the comingweeks.

pioneering program, the success of which will help pave theway for continued hybrid learning in themonths ahead. Thank you also for your important contribution to its success.We look forward to seeing you again very soon, either in person or online.

Sincerely,

Your OWP liVeCo-Directors

Watchhighlightshere:

Thank you for being part of IMD’s first OWP liVe.We are proud to have held this

Professor Jean-François Manzoni IMD President and Nestlé Chaired Professor

Professor Tawfik Jelassi Professor of Strategy and Technology Management

6

6

CONTENTS

7

09

37

49

TOPOF THE AGENDA: COVID-19

RESPONSIBLE LEADERSHIP

STRATEGY

Transforming organizations and inspiring change

Navigating a path to success in a newworld

Sustainable performance for long-term impact

61

75

91

SUSTAINABILITY&SOCIETY

DIGITALWORLD Embracing technology to unlock opportunity

INNOVATION

New ideas to shape the future of business

Maintaining focus during uncertain times

8

"It was great to be able to join as a team coming from different functions, so we could share perspectives to take back to the board. OWP liVe is enriching, challenging and inspirational."

Nuno Viei ra Continuous Improvement Manager, BA Glass PORTUGAL

9

TOP OF THE AGENDA: COVID-19

Navigating a path to success in a new world

10

Renewal, not return: leadership in the time of COVID-19

N E W S F E AT U R E

JIM HAGEMANN SNABE Chairman of Siemens AG & A.P. Moller- Maersk & Vice-Chairman of Allianz SE

Rather than return to how thingswere before, companiesmust leap ahead into a better future, says JimHagemannSnabe. TheCOVID-19 crisis has posed unprecedented challenges for business leaders and reframed the discussion around globalization, climate change and digitalization. But “concerned optimist” JimHagemann Snabe –Chairman at Siemens AG, Chairman at A. P. Moller-Maersk and ViceChairman at Allianz SE– said that if leaders confront outdated assumptions, organizations can dare to chart a new course that will lead to a better future for all. Snabe draws onhis long experience as amanager, including 25 years in the IT industry, to explore the implications for leaders at this critical crossroads. “In aworld that was already undergoing rapid change, the crisis is forcing executives to reflect onwhat kind of society wewant to create,” saidSnabe. “What role should business play in the future?”

Today, there is a significant inflection point, much like themoment of change that occurred as Snabe finished his business studies in 1989. “TheBerlinWall fell that year and you could argue that globalizationhad dramatically accelerated,” he said. “Theworldwide webwas invented, creating the digital revolution. This enabled the connecting of people and things inwayswe couldn’t have imagined earlier.” The inflection point that theworld is at currently is themoment to stop and reflect on responsible leadership, andmove forward in away that is beneficial for all people. The leader’s trifecta “Digitalization, geopolitics and climate are the three points on every leader today’s agenda,” explainedSnabe. “COVID-19 comes on top of that and it has changed the dialogue.”

DIGITALIZATION, GEOPOLITICS&CLIMATE on every leader’s agenda today

there is a newparadigmat play. Snabe argued that COVID-19 should be a catalyst under these three dimensions. “Leadersmust realize that the traditional leadershipmodel won’t work anymore,” saidSnabe. “The increased speed of changemeanswe can’tmake detailed plans aswe did before.”

Speaking directly to theCOVID-19 pandemic and its effect onworld

economies, he continued: “Retracting fromglobalizationwould be a bigmistake because globalization is the onlyway to create equal opportunities for everyone on this planet. The better solution is to become more resilient.”

Withmany countries phasing out confinement and reopening for business,

Leadwithdreams Snabe argued that adopting the right kind of leadershipmakes all the difference in times of crisis, and in the post-crisis recovery period. “We need to have an ambition of what our organizations should become,” saidSnabe. “But planning all the details is becoming more andmore counterproductive.” He believed the solutionwas translating strategy into a dream, rather than a plan – a vision of the role that a companywill play in the future: “Your dreammust be one that’s grounded in the purpose of the company, uses its capabilities and puts it into action in a larger context. Inspire people to be part of a journey thatmight require personal change. And that way, youwill unleash human potential,” he asserted. Leadersmust also select key details to focus on – the ones critical for tomorrow’s success. “The leadership challenge is not the accuracy of the plan but finding the areaswherewe don’t have perfect capabilities and need development,” Snabe said.

power fromrenewable energy sources already today. Solar andwind have become cheaper and the only thing holding us back is the assumption that the energy transition isn’t doable.” Althoughhe describes himself as a “concerned optimist”, Snabe posited that we are privileged to be leaders in this pivotal time. “Wewill be able to tell our grandchildren about themoment inhistorywhere everything changed,” saidSnabe. “I believe with this time comes an obligation that the futurewe’re building to is a better future – not just for our companies, but for society.”

“Duringmy time at SAP, we doubled our value in four years by using thismodel of unleashing creativity,” explainedSnabe. “Other industry giants likeSiemens andA.P. Moller-Maersk have boosted creativity in the areas that reallymatter, adding value to their organizations.” Aclimate of change On climate change, Snabe saidwemust also challenge assumptions. For example, the conventional wisdomthat sustainability is a cost factor. “If you assume that sustainability is good business, then suddenly it’s not about how you spend yourmoney,” saidSnabe, “but about howyoumake yourmoney.” While energy consumption is set to double in the next 20 years, Snabe pointed out that the amount of fossil fuel-based energy generationwill shrink: “Coal-based power generation is actuallymore expensive than it’s not about how you spend your money, but about how youmake your money.” “If you assume that sustainability is good business, then suddenly

JIM HAGEMANN SNABE

“We have to deliver in those areas in order to unlock the dreams.”

The good news is that the “Dreams and Details” leadershipmodel works.

12

Digitally advanced organizations have weathered COVID-19 best, but it’s not too late to transform

N E W S F E AT U R E

MICHAEL WADE Director of the IMD Global Center for Digital Business Transformation, Cisco Chair & IMD Professor of Innovation and Strategy

The pandemic has shifted the priorities of digital transformation. Newresearch from IMDhas found that organizations prioritizing innovationhave recorded the best performance throughout the pandemic. Noorganizationhas escaped the impact of thepandemic. Googleanalysis shows that searches for “digital”washigher inApril 2020 thanany previous time, jumping25% fromthepreviousmonthas thepandemic spread. ProfessorMichaelWade and his colleague NikolausObwegeser, Researcher at the IMDGlobal Center for Digital Transformation, have surveyed executives across a diverse range of industries and geographies since early April. Using data fromthe threemonths to June, alongwithnumbers frombefore the pandemic, Wade andObwegeser have explored three questions: • Which organizationswerewell- prepared for the crisis?

Which organizationsmanaged best during the crisis? Howcan organizations leverage the crisis for future learning?

And any companywith a high or very high level of digitalmaturity beforeMarch 2020 was able to leverage this throughout the crisis, while the data showed performance slumps in organizations that entered the crisiswith a low level ofmaturity. Howshouldwe invest now? Themore digital technologies have been leveraged during the crisis, the stronger the organizationhas performed. But that does notmean that organizationswith under-developed digital technology should despair. Borrowing fromaChinese proverb, Obwegeser said: “The best time to plant the digital treewas before the crisis; but the second-best time is now.” There are three types of priorities in digital transformation: survival, cost and innovation. That is: leveraging digital tools for business continuity; using digital technology to reduce costs; or developing newproducts, services or revenue streams.

•

•

The impact has varied Wade andObwegeser ranked industries according to disruption: real estate and constructionwere least affected;media and entertainmentmost.

However, companieswith prior exposure to disruption performed better during the crisis: “If youhad experienced disruption before the crisis, you could use that as a good training ground for a ‘black swan event’ – something nobody could predict,” explainedObwegeser.

13

Pre-crisis, all threewere roughly equivalent priorities across the organizations surveyed. Frommid-April, survival became the clear priority and innovationwas deprioritized. Bymid-June, however, it was no longer the sole focus and innovation grewas a priority. “Innovation is important at this stage of the crisis, but that doesn’t mean that it’s easy to do.” Innovationmatters evenmid-crisis Organizations that increased their prioritization of innovation – newrevenue streams and businessmodels – had a stronger performance during the crisis. Decreasing the prioritization of innovation led to decreased performance. Actively leveraging digital technology for crisis response is especially important for organizationswithhistorically under- developed tech. “Innovation is important at this stage of the crisis, but that doesn’tmean that it’s easy to do,”Wade noted. “The data suggests that there’s no better time than right now to acceleratewhat you’re doing,” he added, because from

a strategic perspective,many cultural barriers have been removed, thanks to the pandemic and the accompanying economic downturn. “Fromthe individual perspective, barriers have been removed: peoplewho tended to be skeptical about how technologywould affect theirwork have realized that they can work fromhome.”

POLL OF THE SESSION’S OWP liVe PARTICIPANTS How has the pandemic affected your company’s digital transformation?

Accelerated 62%

Significantly accelerated 36%

14

Do this now (it won’t be easy) Moreover, the data suggests that there are big benefits to digital transformation. “Themessage here is: take thewin,”Wade advised. “But don’t necessarily expect the next transformation to go so smoothly. Make sure you’re setting appropriate expectations.” He advised that themost effective transformations have five aspects, known as thePRISMmodel:

PRISMMODEL

Precision – objective clear and precise, often withnumbers associated

Transformation Ambition

Realistic – itmust be achievable

Inclusive – not just for one department or one part of the organization

Precision

Succinct – short, easy to remember and understand

Realistic

Measurable – you know if you’ve achieved it or not

Inclusive

Succinct

Measurable

15

MICHAEL WADE

16

How to shift from leading in-person to leading in a virtual world

ROBERT HOOIJBERG IMD Professor of Organizational Behavior

ProfessorHooijberg explores the dangers and opportunities of leading virtually.

This process can be broken down into four parts.

Introverts can arguably contributemore in the virtual world than they usuallywould, benefitting for instance fromcontributing throughchatsonZoom,WhatsAppandsoon. The reorganization into the virtual space also offers an opportunity to bring out- groupmembersmore into prominence. In the in-personF2F environment, the in- group tended to get the “juicy” assignments in contrast with the out-group that tended to get themore routine assignments and fewer developmental opportunities. The riskwith the transition to virtual leadership is that virtual working canwiden this gap. However, an opportunity also presents itself to bring the out-groupmore “in”: if given the right attention through coaching and interesting assignments, these team members stand to gain prominence and also be better understood. InHooijberg’s view: “You can increase the productivity aswell as the cohesion of a teamsimply by providingmore channels for introverts and by bringing the out-group up, maybe even to the level of the in-group.”

1. Establishing routines The ultimate goal here is to get people to feel a sense of stability throughnew routines.Whereas at the officewe have routines aroundwelcoming each other, having coffee, lunch and even a drink afterwork, these are all gone oncewe go completely virtual. Aswe create newroutines, we canuse this as an opportunity to bring introverts, extroverts, out-groupmembers and in- groupmembers together in different ways, with different routines, in potentiallymore productive and engagingways than before.

Leading in a virtual world as opposed to face-to-face has fourmajor challenges, saidProfessorHooijberg. • Keeping up teamspirit • Holding difficult conversations • Keeping people in the right routine • Themany things the leader can’t see Some real stressors have surfaced aswe havemade the shift to the virtual normal, Hooijberg said, adding that leadersmight even bewondering, “Do I still have a team or am Imanaging a group of individuals?” However, virtual leading also presents opportunities thanks to the newset of tools that comewith it, fromchats to cameras. A leader’s twomain concerns as they grapplewith the shift to leading their team virtually should be (a) creating stability and (b) exploring opportunities. Leaders should go back and forth between the two, and not see the process as linear.

H O W T O L E A D I N A C R I S I S

a creating stability

b exploring opportunities

17

4. Engaging others tofind solutions Once youhave a fairly stable teamsituation, you can engage your teamon exploring new ideas about adding value going forward. Solicit solutions and scenarios, using the “newremote tools” to source ideas, best practices and solutions.

threaded leadership consists of assigning tasks to individuals or small groups that have a clearmandate and decision-making authority. This is especially important in the virtual world aswe do not physically see each otherworking. 3. Showing you care It’s hard to convey empathy via a screen, but we have to find newvirtual ways to establish emotional connections, check teamtemperature and engage people in our organizations. Itmaywell come down to havingmore one-to-onemeetings to establishhowpeople really feel. “One of the ways we have got closer using Zoom is by letting go of some of the formalities; letting the kids or the dog run through has humanized us." Over the past fewmonths, people have found interestingways to remain emotionally connected to their co-workers by having virtual happy hours and coffees, by exchanging jokes, a virtual quiz, having fun facts of the day, and so on.

While F2F, in-person exploration of opportunities builds on joint energy, the virtual exploration allows you to source ideas fromthe far reaches to your and your team’s network.

2. Providing guidance andbeing visible Paradoxically, youhave to provide both more and less guidance and visibility in the virtual world, depending on the area.When it comes to establishing the team’s purpose and goals, identify your team’s purpose, set it jointly, and agree on the key short-term goals. While you always need to have a team purpose and goals, this is evenmore important in the virtual world and especially

when confronting a crisis likeCOVID-19. It ismore important because peoplewill be working towards the purpose and goals without you being able to seewhat they are doing. The purpose and goals shouldmake it clearwhat needs to be done aswell as what you are not going to do. With your team’s purpose and value creation established, you can empower people tomove forwardwith so-called single-threaded leadership. Single-

18 A revolution in adoption, but old digital transformation challenges await O P I N I O N

DIDIER BONNET IMD Affiliate Professor of Strategy and Digital Transformation

We’re all digital workers now, but the COVID-19 effect is unlikely to enable full large-scale digital transformations miraculously. The spectre of future crises should. Arewewitnessingchanges thatwill fizzleout whenwegoback toamore“normal”wayof workingor is thisaprofoundevolution?This is themillion-dollarquestion. accelerated your digital transformation: your CEO, your CDOor COVID-19? There is a genuine perception among some that the pandemic has allowed companies to leapfrog complex, lengthy and arduous stages of digital transformation in amatter of weeks. There is some truth in this. Anyonewho has tried to introduce newdigital tools as part of a transformationwill be all too familiar with the adoption challenges and internal resistance.Well, the pandemic has done what fewexecutives could - and in a fraction of the time. By now, youmay have heard the joke circulating on socialmedia.Who

We all nowuse digital tools becausewe have to and because theywork, whether it is video conferencingmeetingswithZoom, organizingworkwithMicrosoft Teams or sharing files onDropbox. The number of Zoomusers, for example, rocketed from10million inDecember 2019 to 200million in June. Data traffic soared asmuch as 60%during the lockdown - equivalent to a full-year increase in one month.

toolswill last. Adoption at this scale could never have happenedwithout disruption because somany companieswere nervous about the impact on productivity and control on creating devolved, autonomous workforces. Evennow, some remain unconvinced. journey that companies need to undergo to remain competitive in the years ahead. For those companies attempting large-scale transformations across their processes and infrastructure, such as projects involving the Internet of Things, it is likely that the same old challenges and pitfallswill remain all too real aswe ease out of lockdown. What has been clear is that those companies that had already embarked on digital transformation journeys have been better equipped for, and fared better, during the crisis than thosewho had yet tomake any changes. This is perhaps the biggest lesson andmotivation for accelerating transformation. Get ahead before the next crisis strikes. In any case, adoption is just one part of the extensive digital transformation

ZOOMUSERS

10MILLION inDecember 2019 200MILLION in June 2020

The crisis has resulted in one of the great global social experiments of our time, and it is likely that thismass adoption of digital

19

Don’tmistake tools for total transformation. The adoption of newways of working does notmean your company has undergone a digital transformation.

Digital transformations are still necessary. The crisis has shown that even themost tricky parts of transformation can be achieved under the right conditions, but it does not remove the need for deeper transformation inmost industries.

Act nowor live to regret it. There is a unique opportunity to either begin or accelerate digital transformation, harnessing the momentumof forced changes toworking patterns. Companies should seize this chance to enhance their operations before the next crisis hits.

DIDIER BONNET

20 An uncontrolled experiment that will force rapid, massive innovation O P I N I O N

BY PATRICK REINMOELLER IMD Professor of Strategy and Innovation

The pandemic has now lasted long enough to change behaviors - and societies. It will trigger awave of innovationwith a power that we have not seen since the Industrial Revolution. InGreekmythology, Sisyphuswas doomed to push amassive boulder up a steep hill only towatch the boulder slip past himand roll to the bottomwhenever he neared the top.

While companieswere perhaps slowor ill-equipped to embrace center-pushed innovation in recent years, the past few months has seen a step change in attitudes and responsiveness as businesses have scrambled to survive, with innovation pushing the center. Corporate innovation has flipped fromdrag to driver. changed for good.Working fromhome, for example, is here to stay and not just because of the pandemic. It actually suits companies such as Facebook, who have allowed employees towork fromhome indefinitely, even if it is not so practical for the emergency services. Will our cities ever be the same again if vast numbers of workers do not return to fill offices?What will thatmean for our streets and transport systems, designed for large crowds? Perhaps rentswill become affordable in inner cities and newcommunities - togetherwith start-ups -will flood in.We know that innovation is driven by diverse With such rapid, sweeping changes, some of our behavioral andworking patterns have

and dense congregations. In this scenario, it is likely that the consequences of the pandemicwill continue to unleash a torrent of innovation. Innormal times, innovation is conducted in controlled experiments, with cycles of comparison, control, randomization and replication involved in the fine-tuning of new ideas before they go tomarket and seek adoption. Now, everything is part of anuncontrolled experiment, characterized by uncertainty, speed, spontaneity and punctuation. We are living throughmillions of spontaneous experiments on a global scale. Inmicro form, the same rate of innovation took placewhenApple opened up its platforms to third party apps. On a larger scale, think of the experimentation with steamengines during the Industrial Revolution and thenhit the fast forward button. Wewill emerge fromthis period of quick- fire innovation in a very different world. Companies have no choice: theymust innovate or theywill get left behind.

Before the pandemic,most companies trying to drive innovation could have been forgiven for feeling likeSisyphus on the way up that awful incline. During the crisis, they can rightly feel likeSisyphus on theway down, desperately chased by an accelerating rock.

21

Face-to-face lives on. We could see a hybrid of communication styles as an optimal solution. If a company relied on 80% face-to-face interaction pre-COVID, that may drop to 50-60%. Societal, not just virtual. Whilemany innovations have been digital, there are also huge implications for society. Cities could be redesigned for a new“Generation COVID” that works fromhome, shops online and does not use public transport. Nowor never. If companies struggled to embrace innovation before, the crisis has loosened the shackles out of necessity. Companies should take the hint. It is time to experiment to survive.

When events take over: rapid learning

Controlled Experiments • Comparison • Control • Randomization • Replication Uncontrolled Experiments • Uncertainty • Speed

PATRICK REINMOELLER

• Spontaneity • Punctuation

22 How to use autonomy to create resilience in the face of crisis

D E E P D I V E

HOWARD YU LEGO ® Professor of Management and Innovation MISIEK PISKORSKI IMD Professor of Strategy and Innovation & Dean of South East Asia and Oceania

Companies are succeeding in the pandemic by cutting the pyramid businessmodel and transitioning to a ‘flock of birds’ approach that allows extremeflexibilitywithmicro- enterprises.

has affectedmany companies that have heavily optimized operations in order to eliminatewaste.

“Some companies succeeding nowhave disassembled the pyramid business model and transitioned to a ‘flock of birds’ approach that allows extremeflexibilitywith micro-enterprises,” Yu observed. Haier restored 97%of its production capacity just after the pandemic began, since eachmicro-enterprise thatmakes up the company ismanaged directly and independently. “Theywere able to unleash their entrepreneurial spirit,” said Yu. “Investing in this infrastructure allowedmanagers to be autonomous.” Putting the customer first In times of crisis, customerswill only spend on essentials –whichhas serious implications for growth. “People are reluctant to pay for anything that doesn’t solve their immediate problems,” saidProfessor Piskorski. “My recommendation is to be customer- centric and focus on tackling real problems with real solutions.”

Take for exampleHyundai, which closed in February 2020 beforeCOVID-19 had even become a problem inSouthKorea. “They lacked certain component parts that shipped out of China, so onemissing part shut down thewhole organization,” explained Yu. Yet some organizations escaped unscathed because they had already applied digitalization and analytics in their factories and supply chain. Haier – a supplier of household appliances – has been very resilient during the time of COVIDdue to its organizational design. “They lacked certain component parts that shipped out of China, so onemissing part shut down the whole organization.”

Resilience is the umbrella that allows a company toweather the stormof COVID-19.

But this is easier said than done, according toHoward Yu andMisiekPiskorski.

What are the strategies that lead to resilience?Howhave companies used autonomy to absorb the shocks and bounce forward rather than backward? Professors Yu andPiskorski have taken a close look at howcompanies inAsia, Europe and theUSare beating the devastating economic effects of COVID-19. Discussing key capabilities and different approaches, they reflected on two important factors for success: autonomous advice and autonomous operations.

Disrupting traditionalmodels The interruption of the global supply chain

23

Oneway to apply these principles in a new, digitalmanner is to take a deep dive into your customers’ data. Companies that have done precisely this include Bayer in theCropScience division, where it sells commodities—seeds and fertilizers. . Bayer used extensive data and predictive analytics to provide a newdigital platformfor farmers, which gives precise recommendations to improve yields. "People are reluctant to pay for anything that doesn't solve their immediate problems." Advice of the right kindmatters Another example of using the principle of autonomous advice is in the pharmaceutical world, inwhich companies typically sell patented products that are mostly provided to sick patients. “The question for growth is how to expand by solving patients’ fundamental challenges,” saidPiskorski. “In this case, advice and diagnoses can be provided via data analytics.” Chest scans are just one areawhere manual diagnosis can be easily replaced with basic artificial intelligence. Particularly

with theCOVID-19 crisis, increasing chest scans has allowedmedical workers to quickly determinewho is sick ormost at risk, which is vital to saving lives. “One company created a software solution that just analyzes the data that has already been gathered and allows savings of a large amount ofmoney up front,” Professor Piskorski said. “It is a simple solution that provides tremendous value.” If youbuild it, theywill come In order tomonetize advice, companies need to build up internal capability around AI. “Analytics can be outsourced, but the development of the data strategymust be done inhouse,” saidPiskorski. “You are the only onewho knowswhere youwant to go.” “Step into the shoes of your customers,” advisedPiskorski.What do they struggle withandwhat kindof analyticsdo I need to provide for them?What datado I need todo this? “Introducinghumans into themixalso introducesmassiveamountsof bias. Stay true to themodel andbelieveyouranalytics. If youdon’t, introducea loop toeliminatebias.” Themost important question is:What are customerswilling to pay for?

With the burgeoning of predictive analytics, companiesmust determine exactlywhat type of data they need, and how to get it.

“Step into the shoes of your customers.”

And yet, keeping customers at the forefront cannot take a backseat. “Despite living in aworld of big data andAI, we need to identify the point wherewe can make an impact,” said Yu. “Understanding customers is critical, fromseeking out their pain points to discovering their deepest professional desires.” “Don’t just focus on existing customers,” addedPiskorski, “focus on the ‘want-to-be customers’ – peoplewho are on the verge of using your products or services.”

HOWARD YU

MISIEK PISKORSKI

24 How to take your company from victim to victor Q & A

ARNAUD CHEVALLIER IMD Professor of Strategy

Prioritize effectiveness over efficiency, Professor Chevallier advises leaders navigating the pandemic. Because theCOVID-19 pandemic presents a complex range of challenges, there is no singleway forward for organizations. But by adopting a range of strategicmeasures, businesses can stay afloat in these unpredictable times. Many organizations are paralyzed amid today’s extremeuncertainty.What is the first step to creating a strategy that will take a company fromvictimto victor? The first step to regainingmomentum is to identify the range of possible universes in a relevant and specific time horizon. That might be 12months, or evenmore. Now, imagine not just one possible future, but rather expand it fromworst- to best-case scenario. What does current and future success look like for anorganization? COVID-19 is affecting different organizations in different ways – some

are doingwell, while others are suffering tremendously. The point is that you can have success irrespective of the future that unfolds. Even if a perfect stormappears, you can weather it bymaking the best out of what’s happening to your organization. Success exists even in theworst case:maybe that’s simply avoiding bankruptcy, for example.

Roll out several plans of action initially, but asmore data becomes available and it becomes clearer that some versions of the futurewon’t pan out, adapt. Remove these unnecessary or irrelevant action plans from your arsenal. By narrowing down these possible scenarios, your action planwill becomemore efficient. Youmentioneffectiveness and efficiency. Are these two terms at oddswitheach other? Theremust be a balance between effectiveness and efficiency. Effectiveness is being prepared forwhichever scenario might unfold; it requires thinking broadly and having plans of action for each scenario. However, to be efficient, you would have only one plan andwouldn’t waste resources using others. But as the future, especially in these times, is highly uncertain, you should aimfor effectiveness rather than efficiency – at least at the onset. You knowsomething now, but you’ll know more later, so youmust continuously update your thinking.

Howcan companies respond to the forces that shape the future? Fromamong the plethora of forces out there, you should identify the two or three that are influencing your future themost. Then look at those forces to determine their intensity and inwhich direction they are pushing you.

25

Can youexplain theBoolean versus Bayesian approach andhow that applies to organizations? The idea is tomove away fromaBoolean – i.e. black andwhite – approach to a Bayesian approachwhere there are shades of grey. Bayesian thinking is rooted in probability – one version of the future becomesmore probable even though it remains a grey area. Can yougive anexample of how thismight affect a specific industry? Look at how the aviation industry has been faring since the spread of COVID-19. The CEOof an airlinemight respond to the current situation by assuming peoplewon’t want to travel. Shemight decrease capacity, removing planes that are near retirement fromthefleet to limit cost. But what if the opposite occurs and travel picks up? Alternatively, what if she keeps her fleet ready on the tarmac but lacks willing passengers? To ensure they are prepared, leaders should seek tomap out and understand possible future scenarios in order to anticipatewhich version of the future ismore probable.

Define the future

You can't predict the future, but you can plan for it. Focus on that.

Prepare for the future

Adapt

26 Zombies and fallen angels point to horror recovery

N E W S F E AT U R E

KARL SCHMEDDERS IMD Professor of Finance

IMD'sProfessor of Finance says record corporate debtmeant cash-strapped companieswere dangerously exposed even before the pandemic. However, strong companies could yet profit. The global economic recovery is likely to be slowand painful because far toomany companies entered the pandemic gorged on debt that they could not afford in the first place, according toKarl Schmedders. TheCOVID-19 crisis has shut down economies and drivenup unemployment around theworld, with central banks and governments stepping in to support cash- strapped companies and households.

Professor Schmedders predicted that a raft of underlying corporate problems that had taken root prior to the pandemicwould still trigger a large spike in bankruptcies and dampen any recovery. “Companies are not earning enoughmoney to pay their interest." “Before the crisis, corporate debt was at record levels and the number of zombie companieswas at record levels too.” Schmedders said, citing figures that showed total U.S. corporate debt hitting a high of $10 trillion in 2019. “Interest rateswere lowso that companies were able to refinance themselves. But thiswas not used for R&Dor investment in the future, it was used to a large degree for share buybacks to crank up share prices or to refinance debt.”

“zombie” companies inEurope, according to data fromEulerHermes. Morgan Stanley has estimated that one in sixU.S. companieswas a zombie - a business that cannot afford to pay the interest on its debt. “Companiesarenot earningenoughmoney topay their interest, so they runPonzi schemes- takingonever larger loans topayback theirold loansandsurvive,” Schmedderssaid, inareference to the1920s investment fraudscheme thatused funds fromnewinvestors topayold investors. At the same time, the quality of debt being taken out is low, carriesmore risk and higher borrowing costs. There has been a sharp rise in the number of “fallen angels” - companies that have suffered credit rating downgrades to junk status and cannot accessmoney as cheaply as before. War chests and cheapmoney Fromone perspective, the pandemic has offered a temporary lifeline formany overstretched companies because of the extreme levels of central bank and government support.

The zombie invasion Before the crisis, therewere already 13,000

27

“Central banks are nowmassively buying bonds and lowering interest rates,” he said, warning that thiswas probably exacerbating the underlying problemof corporate addiction to unsustainable levels of debt. Alongside recordU.S. junk bond issuance in April, cash-rich companieswith good credit ratings are also taking advantage of low borrowing costs. “Money is really cheap so they are loading up theirwar chests,” he said. “These companieswho have cashwill be able to invest inR&Dand grow-wewill see a complete divergence.”

What towatch for

Winner takes all Companies that entered the crisis in good shape can access incredibly cheapmoney to invest inR&Dormergers and acquisitions. This could trigger awinner-takes-all scenario. Exit strategy Without derailing the recovery, central banks have to find a credible exit strategy fromthe extraordinary support they have offered to companies through the crisis. Slowrecovery The debt overhang fromrecord levels of borrowing by firms under distresswill limit investment, even in very profitable projects, leading to aweak recovery inmany countries. Waiting for the real economy A sustainable recoverymust be driven by the real economy, not cheapmoney onfinancial markets. However,many consumers are savingmoney due to the uncertain outlook.

KARL SCHMEDDERS

28

Balancing reaction and innovation in a rapidly evolving crisis C A S E S T U D Y

MICHAEL WATKINS IMD Professor of Leadership and Organizational Change

As a leading healthcare ecosystem in the eye of the storm, AtriumHealth’s experience this year teaches us the importance of strategic flexibility, values, and agile leadership in a crisis. COVID-19 has tested even the strongest companies this year, demanding both decisive reaction and rapid innovation. The example of AtriumHealth offers lessons on how to react to immediate threatswhile not losing sight of opportunities to reposition the business to thrive after the crisis. “It requires you to have an organization that can operate in two differentmodes - reaction and reimagination,” saidProfessor Watkins. “Youneed to be both reacting effectively to something themagnitude of theCOVIDcrisis but also in parallel, engaging in an exercise around reshaping and transforming your organization.” Watkins points toU.S.-based healthcare provider AtriumHealth, which employs more than 65,000 people in a not-for- profit ecosystem, as an example of how agile business leadership can guide

companies through themost challenging circumstances.

the latest health authority updates to handle demand froma swiftly growing community of online users. This adoption processwould typically takemanymonths. 3. Preserve core capabilities and culture during retrenchment Companies need to retrench in difficult times. Atrium, likemany firms, had to transfer thousands of employees to remote working andwas then facedwith the decision about furloughing non-active staff. In linewith its caring corporate culture, however, the healthcare business chose to keep staff on, as long as theywerewilling to retrain. “Inmoments of crisis, that’swhen youfind out what your bedrock values are,” saidWoods. “It’s clear that we are not going back to the way things were.”

Here arefive lessons to learn fromAtrium Health: 1. Balance reaction and innovationwith give and take Therewill be timeswhen reaction and retrenchment need to dominate, and times when reimagination and reshaping take the lead. In a crisis, priorities change across shorter time intervals. “Leadersmust work daily to balance those two,” saidAtrium HealthPresident andCEOGeneWoods. 2. React - and innovate -with speed AtriumHealthhad to shut down about 200,000 elective surgery appointments rapidlywhile addressing newsupply chain challenges such as sourcing personal protective equipment. At the same time, therewas a surge in requests fromthe public about the virus.

Within days, Atriumhad innovated to integrateMicrosoft’s healthcare bot with

29

Atriumfocus on priorities for customers, businessmodels, capabilities, investments, alliances, newways of working, leaders, andworkforces. 5. Don’t forget your vision When the sky is falling, itmakes sense to park long-termvisions, but you should not abandon them. Atriumwas partway through its “Destination 2025” planwhen COVID-19 struck. It switched to planning 90-day strategic sprints over a 12- to 18-month timeline, which could then form the new foundations of a longer-term vision.

“Sixmonths fromnow, there is going to be awhole newset of variables and dynamics that we don’t have visibility of now, sowe want to have aflexible enoughmodel and framework to be able to incorporate that into our strategy,”Woods explained.

4. Continue to innovate during reactivation

Hold on to lessons learned during the crisis as you transition backmore to “business as usual.” This could range fromnew- found agility, different ways ofmaking decisions, or newmodes of working. Companies can also leverage crises to accelerate transformation plans based on an assessment of the “next normal”. “It’s clear that we are not going back to the way thingswere,” saidWoods. He points to a reimagination framework that helps

MICHAEL WATKINS

30 Survive disruption through innovation, culture and agility

OMAR TOULAN IMD Professor of Strategy and International Management

Stop innovating?Not an option, saidSwisscomCTO/CIOChristoph Aeschlimann.

saidAeschlimann. “This tested the infrastructure, especially bandwidths.” Tech cycles are accelerating in traditional areas like television, but also in contemporary technologies like cloud- computing andAI. Some technologies at Swisscomaremore than 40 years old, making it imperative to re-evaluate their use and necessity.

fromother players. At the same time, new businessmodels likeNetflixwere attacking the company’smarket share. “To innovate in this international context where scale is important for implementing most ideas,” saidAeschlimann, “wemust knowexactlywherewewant to go andwhat wewant to achieve.” As the dominant provider inSwitzerland, Swisscomholds a vast share of the telephony services pie andwas not concerned about losingmarket share in its own backyard. “Swisscomwill always survive in the local market in telephony services, where regulationsmake it uninteresting for big players,” saidAeschlimann. Secure in its base, the company focused on bridging out – but with specific targets in mind.

H O W T O L E A D I N A C R I S I S

Firms today face unprecedented turbulence, but companies likeSwisscom have been successfully dealingwith  disruptions for decades.   In anOWP liVe “CourageousConversation” session, Professor Toulan explored these challengeswithSwisscomCTO/CIO ChristophAeschlimann.   “Don’t wing it in today’s environment,” said Toulan, adding that preparation is important but flexibility is vital.  1. Put safety first via systems Likemany companies, Swisscomput the health and safety of its employees first during the pandemic.

“Don’t wing it in today’s environment."

“Whenwe compare revenues ten years ago to revenues today, four-fifths are now generatedwith products that didn’t exist ten years ago,” saidAeschlimann. “It’s not an option to stop innovating.” 2. Knowwhere you are andwhere you would like to go Operating in a saturatedmarket, Swisscom’s pricingwas under pressure

“During the confinement, 90%of our on-premise staff became home-based,”

31

3. Createadisruption-proof culture Your organizationmight need to rethink its mandate. Rather than analyzing your vision, take a look at howrebooting your values could reshape your company culture.

5. Alignment is the key to autonomy Swisscomhas an autonomous culture that ensures the company’s success because employees and divisions are alignedwith a clear vision. “Communicate targets throughout the organization,” saidAeschlimann. “Invest heavily in this aspect andmake sure to keep things transparent.” He also saidflowmetrics are important to measure productivity and helpSwisscom push outmorewith fewer people. “Reducingwaste is very hard tomeasure,” he admitted, “but it’s by far the biggest lever we have.” 6. A rigidmasterplanwill fail While the pandemic has affected all aspects of organizational well-being, primarily the bottomline, the next big crisismay test companies’ otherweak spots. Aeschlimann said that by observing megatrends and forecasting via scenario- based thinking and simulations, teams can "Inspect and adapt."

reactmuch fasterwith aflexible approach to planning.

“Inspect and adapt,” he insisted. “You can't prepare properly by using amasterplan; if you do, you are doomed to fail.”

"Reducing waste is very hard tomeasure."

OMAR TOULAN

Swisscomdetermined thatmore soft skills were needed tomanage the continuity of disruption and then set about acquiring them. “Focus onmindset and culture rather than processes and organization,” said theCTO/ CIO. “Build a culture that is able to copewith change.”  4. Agility starts in themind The building block for agility is stability. By preserving a stablemindset in disruptive times, companies naturally becomemore able to bend rather than break. “It’s a balance, but we invest heavily in agile transformation,” explained Aeschlimann. “Accept that the things around you change […] no single truthwill be valid for the next ten years.”

32 The incredible lightness of being: use humor to inspire your team during a crisis

FEENA MAY CEO, The Inspiring Company

FeenaMay’s unique experiences offer powerful lessons onhow teams can navigate a crisiswhenhumor is the glue that reinforces their bond. FeenaMay’s journey to becomingCEO of The InspiringCompany taught her the power that humor canunleash in times of crisis. Having trained as a circus clown at theMoscowStateCircus, she spent 28 yearsworkingwith the International Committee of theRedCross on the frontline in crisis and conflict zones.

withwhichhumour can be deployed in organizational settings.

Stress initiates the adrenaline-fuelled fight, flight or freeze response inus all, which is anathema to a team in crisis. When constrained by fear, the skills required in crisis - creativity, problemsolving, innovation and resolve - become blocked. Researchhas found that humor cannot only reduce stress and improve resilience; it can increase potential creativity and problem- solving skills, too. It also reinforces a sense of trust and competence. This is the space inwhichhumor – that is, theability of leaders to carry themselves witha certain lightness of spirit, kindness andpresence–becomes akey trait that

H O W T O L E A D I N A C R I S I S

“I definehumour as thegift to see life’s absurditieswitha smile, a capacity to laugh at andwith yourself and theability to share thiswithothers. It is a lightness of being that helpsusdeal seriouslywitha crisiswithout it gettingheavy or exhausting,” saidMay. Effective leaders know that when a team gels, anything is possible. They know from experience the agilitywithwhich a secure, well-integrated teamcanhurdle any obstacle. In crisis, however, those dynamics shift. Stress levels increase as issues of job security, personal responsibility and strategic realignment rear their heads. “The power of humour in leading in a crisis is that, as leaders, we open up to other reactions apart fromflight, fight or freeze."

cansecure the team, reaffirmbonds irrespectiveof hierarchy andenable innovation.

“The power of humour in leading in a crisis is that, as leaders, we openup to other reactions apart fromflight, fight, freeze. It is the power to see the opportunity in a crisis rather than the fear. Humor opens the space for this,” explainedMay.

Her subsequent PhD inLeadership cemented her experiential insights relating to the value of humor in times of crisis and clarified her understanding of the precision