Top tips for 2022 and your C-suite cheat sheet, from BCG
Boston Consulting Group (BCG) has produced new insight from 11 of its leading experts to provide a C-suite cheat sheet for 2022. After two years of turmoil and uncertainty, business leaders are looking to the future and demanding guidance.
BCG says these executives need to navigate multidimensional, evolving and overlapping disruptions caused by the COVID-19 pandemic – think supply chain disruption, the move to remote working, and increased reliance on digital.
The consultants have covered 11 topics that top the C-suite agenda:
- Tackling climate change
- Getting the Most from Artificial Intelligence
- Creating the Future of Work
- Fixing Supply Chains
- Winning the Battle for Consumers
- Managing Through the Pandemic
- Promoting Diversity, Equity, and Inclusion
- Accelerating Innovation
- Harnessing Deep Tech
- Reframing Cybersecurity
- Advancing the Public Good
Let’s dive in to some of those topics in more detail.
To Win the Race to Net Zero, Be Early and Bold
(by Jens Burchardt)
When it comes to how CEOs should think about climate action, I like to quote Anna Borg, the CEO of Vattenfall: “To be early might be challenging, but to be too late will be devastating.”
The world is embarking on one of the biggest transformations in history – the abandonment of fossil fuels. Environmental policymaking, technological development, and shifts in consumer and investor sentiment are all accelerating. But many of us still underestimate the immediacy, pace, and extent of these changes.
For CEOs, it’s time to move – to commit to leading this transformation. Many leaders who were quick to see opportunities in past big global shifts secured windfalls for companies that are still thriving today. Many of those who only saw risks did not survive or their companies have still not recovered.
Indicators suggest the same holds true for environmental sustainability. Research by the World Economic Forum and BCG shows that companies that lead on climate hire better people. They manage to cut costs or generate premiums through emission reduction. They have lower regulatory risk. They pay less for financing. They are – on average – valued higher by the markets. On the flip side, I don’t know of many companies that have lost competitiveness by reducing emissions too ambitiously.
Companies that move early also manage to move their industries. Although talk of collective action was all the rage at the COP26 climate summit, a lot of progress in recent years has actually come through good old competition. When one company ploughs ahead of its competitors, the rest feel compelled to follow.
This is a time like no other for bold leadership. If you don’t already have an ambitious commitment, make one. And be aware that in many industries, leadership means committing to more than what science demands. If you do have one, focus on delivering – by transforming your portfolio and your operations and engaging your supply chain.
Understand AI’s Full Potential Before Moving Forward
(by Francois Candelon)
We are at a major turning point in artificial intelligence. CEOs know that it’s important and are ready to make serious investments. But many don’t really understand what to do with it. To borrow a French saying, it’s like giving a knife to a chicken. Not surprisingly, only around 10% of companies say that they see significant financial returns on their AI investments, according to a recent study we at BCG conducted with MIT Sloan Management Review.
I think the most urgent agenda item for CEOs is to understand AI’s full potential – and what it can do for their business models.
Four basic capabilities make AI exceptionally powerful – especially when connected in new bionic systems with humans. AI can process massive amounts of data in real time. It can provide ultra-granular predictions. It can continuously and autonomously learn and improve. And it can be scaled up at almost zero marginal cost. When combined effectively with human judgment and creativity, AI can revolutionise almost any business process and operating model.
I’ll give you an example from a telecom company we are working with. Telcos typically push out products to consumers through broad marketing campaigns. With AI, they can market to segments of one to deliver the right product, at the right time, through the right channel. Rather than selling to a segmented but faceless customer group, telcos can offer truly individualised packages of services and devices based on data analysis of a household’s needs, usage, and interests. They can also increase their share of wallet by improving the individual’s satisfaction, loyalty, and openness to upselling. We have found that this switch in marketing can boost a telco’s revenue by 10% while cutting costs by 20%. This is massive!
As Spiderman wisely told the world, with great power comes great responsibility. AI is a powerful technology, but it’s just a technology. It requires human oversight to ensure it is not abused or does not lead to potentially adverse, unexpected outcomes. Companies need to make sure developers and executives use AI responsibly and in line with their values. This means it’s urgent that CEOs and executive committees understand the full potential and risks of AI.
Fundamentally Recalibrate Your Organisation’s Relationship with Its People (by Deborah Lovich)
The “war for talent” is over. Talent won. Now organisations need to rethink and recalibrate their relationships with their people. For example, in our global research, we have found that 56% of knowledge workers are open to looking for other positions – and 20% are already looking. The numbers are even higher for digital talent.
Do that many people really want to leave their employers? Time will tell. I believe people want to be loyal to organisations. But they’re looking for more than just a job or a career. COVID-19 has made us realise that we don’t want to live to work. We want to work to live. So we want our work to provide better compensation, more flexibility, and deeper connection to peers, leaders, and purpose.
How to recalibrate? First, listen. Find your happiest people and discover what makes them happy. Find your least happy people and ask them what would make them happy at work and what gets in the way of that. What are their biggest frustrations? Start to reimagine together what work can be.
Next, empower and enable your best people to have the agency and resources to make work better. Sit down with them and ask, “What are your specific ideas? If you could change anything about working here, what would it be? What do you need from me in order to experiment with changes?”
More money is obvious, and compensation already is shooting up. But also figure out what benefits are most important. Education, upskilling, and reskilling are critical as technology changes what skills are needed. Day care and wellness and mental health resources all were put on the table during COVID-19. They need to remain there. Flexibility also matters – not just in terms of place but also time. Our research shows that 76% of employees globally are looking for flex in where they work while 93% want flex in when they work.
This means flex is not just for knowledge workers! Manufacturers need to switch shifts to fit around people’s lives. Have shifts that mirror school hours, for example.
Third, establish a real human connection. Tell yourself, “We are no longer hiring employees. We are building relationships with families. We are taking care of them. We are growing with them, investing in them, and giving them what they need.
Give Cost Squeezing a Breather and Start Investing for Resilience
(by Marc Gilbert)
The COVID-19 pandemic taught everybody a lesson about supply chains. Focusing on cost per unit, being incredibly lean, and perfecting just-in-time worked great in a stable world. But shaving every single penny out of cost catches up with you. It’s time to set aside some of the economics and dedicate more funds to making your supply chain more resilient, because the cost of disruption can far exceed whatever you’re saving.
Where to start? There are a few tactical and immediate things you can do. You can build more inventory by ordering and stocking more. You can develop alternative sources of supply.
But perhaps the most important thing CEOs should do in 2022 is apply new lenses of scrutiny to their capital decisions. CEOs must think more holistically about their manufacturing investments. Cost and access to new markets are important, but CEOs also should assess investments through the lenses of talent, geopolitics, and the climate.
I’m getting a lot more inquiries from companies about mitigating geopolitical risk. We’re seeing more companies looking to re-shore, such as by shifting some production of consumer durables like small home appliances and power tools from Asia to Mexico if those goods are sold in North America. But this will require a slow transition. It will take significant capital investment and a good three to five years to get new factories and suppliers up and running.
CEOs also should start factoring carbon costs into new manufacturing investments. This isn’t top of mind yet for many CEOs, but it should be. The EU is phasing in a system for taxing carbon emissions associated with imported goods, and other nations may follow suit. Also, around 80% of the world’s major companies say they plan to become carbon neutral. So your customers are likely to take a harder look at your carbon footprint. By using a climate lens, you may find it’s better to put a new plant in an area where renewable energy is abundant, rather than a place where you’ll have to burn fossil fuels.
Treat Cyber Attacks as a Business Risk, Not an IT Problem
(by Paul O’Rourke)
Over the past 12 months, we’ve been seeing both an escalating impact and an expanding breadth of cyber attacks. These attacks are moving across organisations, regions, and industries, and the targets are spreading well beyond your IT systems to your operating system, your people, and your value chain.
CEOs need to reframe their approach – from cybersecurity to cyber risk. The mindset today is too focused on vulnerabilities and exposures. Many companies still see cybersecurity as a technology problem, something for the IT department to deal with. The IT function is critical, but the response required is much more than just from IT. Approaching cyber from a risk perspective helps you better prioritise investments for protecting the organisation.
If technology were the only factor, we’d have addressed it by now. Instead, criminals are increasingly targeting organisations through their people. They attack the weakest links. In many cases, organisations have been compromised because an employee clicks on a phishing email or disregards advice to not use the same password for all their accounts. Cyber attacks also target suppliers. If the company is a bank, this could be a software provider. If you’re a retailer, it could be a payments processor or data management firm that’s connected to your organisation. In a world of interconnected supply chains, attacks on one company increasingly impact others as well.
Approaching cybersecurity from an enterprise risk perspective requires a different skill set. It also requires a comprehensive approach that spans technology as well as governance, reporting, oversight, your people, and your supply chain. Indeed, regulators are increasingly focusing on cyber risks within organisations – and are putting the onus and liability on these organisations, and their directors, to manage and govern this risk more effectively.
But it also requires a strategic approach to what you protect. Not all assets are equal. So the most urgent priority is for CEOs to identify their organisation’s crown jewels – assets that, if compromised, will cause the most financial, reputational, regulatory, or operational damage – and overprotect them relative to other assets. If your customer data is a crown jewel, for example, then the impact on the organisation could be material if it’s compromised. So in this instance, the practical response is to ensure your customer data stores are appropriately protected relative to the risk you are facing.