What Matters Now

impact ISSUE 18 What matters now 18 December 2020 kearney.com EDITORIAL “Life can only be understood backwards, but it must be lived forwards” SØREN KIERKEGAARD What a year. One, I am sure, many of us would like to forget As always, if you or simply pretend never happened. But, with a new year upon want to discuss us, and as many of us enter further lockdowns in the run-up any of these top- to the holidays, I’d like to take a moment to share a couple of ics in more detail, personal reflections about how this monumental year has re- we are here to talk. shaped the way we think about leadership. Very best seasonal Without a doubt, this pandemic truly exposed our vulnerabil- wishes from Oslo and ities and divisions at every level. It made us question what it I look forward to our con- is about our societies and cultures (including workplace) that tinued collaboration in 2021. creates so much room for inequality, inefficiency and insecurity, and what role better leadership might play in bridging Thank you, these gaps, especially during turbulent times. As I discussed Geir Olsen previously, a crisis is often used by bold leaders as a trigger to explore new ideas and initiatives that over time may prove to be more effective, impactful and sustainable than those that preceded them. Over the past few months, I have had the pleasure to engage with the next generation of leaders who are using empathy as a foundation on which to build connectivity and cohesiveness at a deeper and more personal level than ever before. They ac- knowledge openly, often through the sharing of their own ex- periences, that it’s OK not to be OK, that we’re living in chal- lenging times, and that everyone has their own battles to fight. But they also recognize that they have the opportunity, and a responsibility, to infuse a tone of compassion and gratitude into their company culture, through having open and honest conversations, recognizing and rewarding individual or team contributions, investing in upskilling and reskilling their work- force, and providing the required mental and emotional support mechanisms their team’s need in order to bring their best selves to work each and every day. As author, Margaret Heffernan says, “The only thing we know about the future is that we do not know the future.” But what we do know as a result of this pandemic is that people need to feel safe, seen, supported and inspired. As leaders, we have a responsibility to address this need with full gusto. Let’s use the events of the past year to reflect on the actions we need to take now to ensure our people and organizations thrive in the future. In this week’s Impact we identify 5 trends reshaping our world right now, look at the need for greater resilience in our supply chains, discuss how to double down digitally to be ready for an economic upswing, share our predictions for the future of the GEIR OLSEN credit industry, and outline the profound changes afoot that HEAD OF EUROPE are set to usher in a new era for consumer goods companies. CONNECT WITH GEIR GLOBAL TRENDS 2020 - 2025 TEXT BY ERIK PETERSON The Great Shakeout – Five trends shaping our world It has certainly been a year for the books. COVID-19 has accelerated existing global trends. You only have to A pandemic has shaken the globe, protests look at some of the Council’s global trends from last year for exam- against structural racism have spread ples. Going cashless has become a priority for many countries as internationally, and the world has entered more and more people shop online, the loneliness epidemic has reached new heights as lockdowns and social distancing have be- the worst financial crisis since the Great come the norm, and re-skilling is becoming more important than Depression. As these crises of health, society, ever in the light of sky-high unemployment and as automation ramps and economics converge, we are heading up to offset productivity losses during the pandemic. Amid this up- into a potentially turbulent next five years. heaval, some sectors, businesses, and groups are benefiting while others are being left behind. A “great shakeout”—the unifying theme of the trends we’ve identified for the next five years—is underway, which will reshape the ways in which we live and do business. Though used primarily in business and economics to describe industry consolidation, “shakeout” applies to more than the commercial sector in these unprecedented times. Indeed, we’re seeing increased bankruptcies, mergers, and acquisitions that are likely to pick up 3 speed and cause ripple effects across society. But this is just one as- Stranded segments of society pect of the changes underway. Governments are also embattled fis- cally and monetarily, struggling to support suffering families while undergoing the parallel challenge of building up domestic self-sufficiency to become more resilient for future crises. As governments Over the next five years, growing inequality—exacerbated by COV- become increasingly constrained, individuals and families through- ID-19—will lead to further marginalization of stranded segments of out the world are struggling to make ends meet. As a result, “strand- society, including minorities, low-skilled workers, students, chil- ed segments” will emerge, including minorities, low-skilled workers, dren, working mothers, and others. Reintegrating them will be a students, children, working mothers, and others who are battered by tall order in a weak economic environment, but it behooves gov- the economic and social woes caused by the virus. As these and oth- ernments and businesses to work together to re-skill and reposition er groups feel the acute burden of the coronavirus, food insecurity these important groups in society. will continue to rise in advanced and developing economies. Emerg- ing markets will be particularly vulnerable to this trend given their existing hunger rates and heightened economic woes. It is this con- vergence of world events impacting society right now on which we have based the five most significant trends we believe will most dra- matically reshape the global outlook and operating environment in 4 2021 and beyond. Rise in food insecurity The Five Trends: A global food crisis is on the horizon, with disproportionate down- side implications for emerging markets. Food supplies are tighten- ing due to trade restrictions and COVID-induced production disrup- tions, and incomes are falling amid economic turmoil. The five-year 1 outlook suggests the situation will get worse, resulting in changes in the food industry, widening inequality between countries, and Embattled governments depressed productivity overall. Crises of rising inequality, climate change, and now COVID-19 are converging to place unprecedented levels of fiscal and politi- 5 cal pressure on governments throughout the world. As fiscal defi- Industry consolidations, cits persist through 2025, national governments increasingly con- mergers, and strained by stock of debt and fewer economic policy prerogatives acquisitions will turn to local administrations and the private sector for support to maintain public trust. The economic disruption brought about by the pandemic has weakened finances for businesses across the world. This trend will result in a wave of industry disruption and consolidation as stronger companies acquire weakened rivals, technologies, or assets—with pri- 2 vate equity, big tech, and the energy industry poised for the biggest shakeouts over the next five years. Push to national self-sufficiency The private sector will have a large role to play in combating all these crises, especially given the strain governments will be under to fund greater domestic innovation and manufacturing as economies The pandemic has served as a wake-up call to national governments around the world fight to recover. on the need for self-sufficiency and resilience in the face of crisis. Though the challenges posed by these five trends may seem daunt- As governments move to improve their domestic capabilities in key ing, there is reason for optimism. With periods of great upheaval come sectors—healthcare, technology, food, energy, and manufactur- opportunities for growth, change, and—most importantly— collabora- ing—the private sector may find opportunities for increased collab- tion. The great shakeout is likely to be painful, but if leaders in business oration with government. Too much government intervention, how- and government learn the essential lessons from the pandemic, there’s ever, could stifle innovation in the long run. no reason why the world cannot emerge stronger and more resilient from the experience. To read the full Global Tends 2020-2025 report please click here Connect with Eric OPERATIONS Building resilient supply chains Foreword to an article Before COVID-19, only a few companies distribution, manufacturing, product port- published in MIT Techno - were at the forefront of building a resilient folio/platforms, and financial/working capi- logical Insights Review supply chain. Most were focused on con- tal. The results help the company to set a on 24 November 2020. structing a cost-effective supply chain to new course for long-term supply chain re- deliver products on time with the lowest silience. cost. The pandemic, however, has exposed Since digitalization is a key driver of resil- TEXT BY SUKETU GANDHI AND weaknesses and difficulties in handling dis- ience, a central aspect of the stress test is STEVE MEHLTRETTER ruption—underscoring the imperative to a deep dive into the company’s digital infra- build a supply chain that is resilient. structure and processes at each link of the A resilient supply chain makes more acces- supply chain. The stress test shows not only sible this goal of delivering on-time perfor- where digitalization is sufficient but reveals mance.

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